Good day, and welcome to the DHI Group Inc. Fourth Quarter and Year-End 2020 Financial Results. All participants will be in a listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Todd Kehrli, MKR Investor Relations. Please go ahead.

Thank you, operator, good afternoon and welcome to DHI Group's fiscal 2020 fourth quarter and year-end 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 would like to cover a few quick items. This afternoon DHI issued a press release announcing its Fiscal 2020 Fourth Quarter and Full-Year Financial Results. This release is available on the Company's website at dhigroupinc.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 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 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 uncertainty 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 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, including Adjusted EBITDA, Adjusted EBITDA margin and, net debt that are not prepared in accordance with US GAAP. Information about and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are available in our earnings release and on our website at dhigroupinc.com in the Investor Relations section. With that, I'll now turn the conference over to Art Zeile, CEO of DHI Group.

Thank you, Todd. Good afternoon everyone and welcome to our Fiscal 2020 Fourth Quarter and Year-End Earnings Conference Call. Thank you for joining us today. I hope that everyone is staying safe and healthy. I'd like to start my comments by providing some detail around how we finished the year and some of the accomplishments we achieved during 2020. After that, I'll provide an update on what we're seeing now and how our efforts this past fiscal year have more effectively positioned us to grow our business going forward. Starting with the fourth quarter, I'm pleased to report that we finished the year with strong bookings for Dice in December and solid performance with continued momentum in January. December and January are our two largest renewal months for Dice and combined they represent almost 30% of our total bookings for Dice in any given year. We also saw our Dice revenue renewal rate increased significantly from 66% last quarter to 75% this quarter with that rate increasing further still towards the end of the quarter. This gives us increased confidence in the rebound for our business as we enter the New Year. Surveys during the fourth quarter from two independent industry research firms, the Staffing Industry Analysts, SIA, and the TechServe Alliance reflect the continuing recovery trend throughout the staffing sector and confidence that tech hiring will continue to rebound in 2021. Also, comp tier using Bureau of Labor Statistics data reported that the tech industry showed job growth of 391,000 positions in December even as the U.S. as a whole lost 140,000 jobs. Several commentators are calling 2021, the year of the great re-hiring. It's clear that the worldwide effort to digitize the new businesses online will require technologists and there is no doubt these efforts will result in…

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 fourth quarter, we reported total revenues of $33.2 million, which was flat with the third quarter and down 12% year-over-year. Dice revenue was $19.4 million in the fourth quarter, down 2% sequentially and 17% year-over-year. We ended the fourth quarter with 5,150 Dice recruitment package customers, which is down 3% sequentially and 14% year-over-year. Our average monthly revenue produced per Dice recruitment package customer was down 2% versus the year-ago quarter to $1,120 or $13,440 on an annual basis. Over 90% of Dice revenue is recurring and comes from recruitment package customers. Our Dice revenue renewal rate was 75% for the fourth quarter, up 9 percentage points from 66% last quarter, but down 6 percentage points year-over-year. Our Dice customer count renewal rate was 68%, up 5 percentage points from last quarter, but down 2 percentage points when compared to the same period last year. As Art mentioned, the tech jobs market continues to show signs of a rebound, especially as it relates to our staffing and recruiting business, which is driving the improvement in our Dice renewal rates. Our client success organization continues to focus on improving its processes around onboarding and ongoing touchpoints that we believe have positively impacted both our customer and revenue renewal rates. ClearanceJobs' fourth quarter revenue was $7.6 million, an increase of 4% sequentially and 15% year-over-year. This continued solid double-digit revenue growth year-over-year is reflective of ClearanceJobs' strong innovative product and competitive differentiation as well as the somewhat insulated market it serves. Fourth quarter revenue for eFinancialCareers was $6.2 million, which was up 1% sequentially but down 23% year-over-year when excluding the impact of foreign exchange rates. In…

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 and throughout this past challenging year. It is a pleasure to be part of such a great team. With that, we're happy to take your questions.

[Operator Instructions] and our first question today will come from Aman Gulani with B. Riley. Please go ahead.

Hey guys, thanks for taking my question. It's nice to see the improvement in renewals. So I wanted to ask about that. Given the trajectory and your pickup in hiring in the tech sector, do you see that momentum continuing into February and March. I mean I know Jan and December are your strongest renewal month, but I figured you've given the pickup in hiring, you think that momentum will continue, and where do you see like the renewal rate being towards the end of the first quarter?

So I can give you my perspective here, Aman and it's great to hear your voice. I just wanted to say that in my opinion, we don't have enough data to really call February obviously just being at the very beginning of February, but it felt like we had a shift at the end of November due to the confidence around the vaccines and so if I look at the entirety of the pandemic period last year, we saw a high correlation between bookings and people's overall confidence, and their confidence I would say markedly increased as a result of the delivery of the vaccines, the approval of the vaccines, the initiation of the distribution of the vaccines. Where I think we should be on a healthy basis over the long term and hopefully Q1 is above 80% revenue renewal rate but Kevin, do you want to add anything, any more context to that.

No, I think you covered it, Art.

Great, thank you. That's helpful. And then this is regarding the potential spin-off of eFinancialCareers, you know you mentioned that you expect that to happen maybe in the second half, but how should we think about the overall margins of the business once that happens?

Yes, Aman. I would say the margins will likely be similar to what we see today, we are actually going through that process right now. Right now, as you would expect eFC does benefit from the infrastructure within the broader Dice DHI organization. So I would not expect a material change in margins for that reason, but it's actually something that we're spending time going through as I mentioned.

Got it, thanks. And then last question for me. Can you talk about how the new administration might impact as there's a job market for individuals who have security clearance? Do you see the new Biden administration as an overall positive for ClearanceJobs?

I personally think that it's neutral. I think that Biden is strong on security and is in favor of a strong and healthy military budget. There is a view that he might have to look for places to cut budget because of his additional visionary plans for what he wants to do with the climate and other things, but I can't personally see that coming from the military budget. I do think, just his years of service inside of the Senate in various committees' kind of has put them in a position where he is strong on the military for the United States.

Okay, thank you. I'll pass it on.

Thanks, Aman. Appreciate the time today.

[Operator Instructions] Our next question will come from Josh Vogel with Sidoti. Please go ahead.

Hey Josh. Good afternoon, Art and Kevin. How are you guys?

Great, thanks.

I'm good. Thank you. Understanding that you continued to operate into an Adjusted EBITDA margin around 20% and you don't expect any material changes to margins once eFC is spun-off, so is it fair to assume given the expected step-up in revenue in the second half of the year at Dice and CJ and the operating leverage that's built into your model that we can see a step-up in the Adjusted EBITDA margin as well, perhaps like to those mid 20% levels that we saw in parts of 2018.

Yes, Josh. I would say, partly true; however, our goal, as we get more momentum on the booking side and we have KPI's supporting an increase in spend for sales and marketing that we will continue to invest in that part of our business that is a direct expense and a hit to margin. So as we continue to see the bookings grow and the benefits to revenue, we do anticipate that we will continue to invest in the business at least in the near term.

Okay and that kind of leads into my next question thinking about budgeting '21 and when you think about investments in product development as well as internal engineers in headcount. How should we think about that relative to prior years?

Yes, I would say that would generally I would expect that to be flat with prior years as Art mentioned 2019-2020 was really the year of product, product improvement, and product innovation across the brands. This year is really around the investment in sales and marketing.

I think we've also critical mass with our engineering team to so we feel like we're in a good shape for the size of that team.

Great and kind of a random question. Thinking about CJ and in nature of a contract that is signed directly with the government agency any different when you're using a third party, is the margin profile different at all. What about to end the renewal process, is it different for direct government work versus when you're working with a third party. I know it's a huge whitespace opportunity that you're tapping into so I'm just curious about the general dynamics there.

So I would say we aren't seeing any difference in margins and that's because ultimately, we are selling to the government write-off of rate card and so there is the opportunity to discount from rate card, but it's kind of a thin band and so we're not seeing anything substantial between pricing for the government and pricing for military contractors.

Okay. And this one just kind of out there, you do quarterly surveys, you have all this information at your fingertips with regard to who needs what type technologists and where and when, the salaries and I was just wondering, is there you're an opportunity here for you to monetize this data and if so, how would you do that?

We can talk to that, but not enough. I would say that is kind of a future state for us being able to really say that, just because we've been operating for 30 years, we've been watching people, the full candidate base of 9 million inside of our database evolve and see how they actually interact with jobs, there might be something in that data that allows us to essentially better inform clients as how to represent themselves with job postings, but we haven't really cracked the code on that yet. That's something in the future I'd say.

Okay, great and just last one. Is there a notable seasonality around renewal rates for CJ and eFC, I know with Dice what it is, so I'm just curious with the others?

Yes, they're similar I would say in that neighborhood of high 20s, 30% so pretty much the same cycle as what we see at Dice.

Okay, great but it's nice to see the improvements in the business especially as Q4 progressed and I thank you guys for taking my questions.

Thank you very much, Josh. Really appreciate it.

And our next question will come from Bill Dezellem with Tieton Capital. Please go ahead.

Thank you. Your cost of revenues was up in the fourth quarter versus last year and yet revenues were down, down slightly. What, what led to that disconnect?

Yes, so there what we did within our cost of revenue is what we call our client success organization, which is the people who have ongoing conversations with all of our accounts, they have quarterly business meetings with them, they're checking in, they're looking at their statistics, et cetera., and so as we made that comment that that client success organization, we brought in new leadership and there is a lot more touchpoints with our customers and so that is, that is expensed and so that comes on to our revenue on to our income statement sorry in advance of actually seeing the benefit of that bill. As we talked about, we actually did see improvements in our customer and revenue renewal rates in the fourth quarter and we think some of that, a lot of that is driven by that improved client success organization, but you're seeing that expense prior to seeing the benefits of the revenue.

Great, thank you and then secondarily, a remedial question what leads to the change in Dice average monthly revenue per customer. Is that simply a function of the size of the customer and the number of seats that they're buying and discounts and therefore it's a mix issue or is there some other factor?

Now, it is really a mix issue. It basically comes down to the 5100 customers, we have 5200 customers we have and their size, what they're buying and just, it's an average across all of them and so coming down 2 percentage points is simply we may just have had a couple of additional smaller customers sign up this particular period or the bigger customers then increase, but it is, it's just broadly across our entire portfolio and I would say, with a 2% swing I think from our perspective, that is, I don't want to say immaterial, but it's not something right now that we are worried about I mean clearly we do want to grow the size of our average contract with our customers and we think we're in a position to do that.

Great, thank you, Kevin.

Absolutely.

[Operator Instructions] This will conclude the question-and-answer session. I'd like to turn the conference back over to management for any closing remarks.

So we greatly appreciate everybody's attention to our performance results for not only the fourth quarter but also 2020 as a whole. We're very excited about the future for DHI Group, and look forward to keeping you informed of our progress each quarter this year. So, thank you all.

Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.