Good afternoon, and welcome to the DHI Group’s Fiscal 2021 Second Quarter Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Todd Kehrli of MKR Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, and welcome to DHI Group’s fiscal 2021 second quarter earnings 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 2021 second quarter financial results. The 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 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, including adjusted EBITDA, adjusted EBITDA margin, adjusted earnings per share, and net debt that 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 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 call over to Art Zeile, CEO of DHI Group.

Thank you, Todd. Good afternoon, everyone, and welcome to our fiscal 2021 second quarter earnings conference call. Thank you for joining us today. Before we begin, I want to remind everyone that we completed the spinoff of a majority of our eFinancialCareers business on June 30 to the eFC management team. With the disposition of eFC, DHI is now solely focused on the technology career marketplace in the United States through our two brands, Dice and ClearanceJobs. We believe this focus will allow us to accelerate our bookings and revenue growth and further drive product excellence in both our remaining platforms. Turning to Dice and CJ. I will provide highlights of the quarter, and then I’ll dig deeper into our sales performance and our expectations for increased revenue growth in the second half of the year. I’m pleased to report another strong quarter of bookings for DHI. Our bookings strengthened across all teams throughout the quarter, and we ended the period with total bookings growth of 23% year-over-year. As a result of our strong bookings performance, DHI returned to total revenue growth year-over-year, a quarter earlier than expected and for the first time in several years. The second quarter represents a revenue inflection point for DHI Group as we have turned the corner and are now on an upward revenue growth trajectory. We created the industry-leading online marketplace for matching companies with the highest quality tech professionals and with enterprises focused on tech enabling their businesses, we are poised to benefit from the millions of new technologists’ jobs expected over the next five years. Now let me dig into our brands and their performance during the quarter and where we see them heading this fiscal year. Let’s start with Dice, which is our largest opportunity for revenue growth. Tech job…

Thank you, Art, and good afternoon, everyone. As Art mentioned, we spun off 60% of the eFC business to eFC management on June 30 and retained a 40% equity stake, which is recorded as an asset of $3.6 million on the DHI balance sheet. As a result of this transaction, for all periods presented, eFC will be shown as discontinued operations and will no longer be consolidated with DHI’s operating results. Bookings, revenue, and operating expenses, along with deferred revenue and our committed contract backlog that we will be discussing today, include the continuing operations of the business, which are the Dice and ClearanceJobs brands. Lastly, the assets and liabilities of eFC for prior periods will be shown as separate line items on the balance sheet. With that summary, let me move into the financial results. For the second quarter, we reported total revenue of $28.7 million, which was up 4% year-over-year. Total bookings for the quarter was $27.9 million, an increase of 23% year-over-year. Dice revenue was $20.6 million in the second quarter, up 8% sequentially and flat year-over-year. Dice bookings were $20.2 million, up 25% year-over-year. We ended the second quarter with 5,441 Dice recruitment package customers, which is up 5% sequentially and flat year-over-year. Our average monthly revenue per Dice recruitment package customer was effectively flat, both sequentially and year-over-year at $1,124 or $13,488 on an annual basis. Over 90% of Dice revenue is recurring and comes from annual contracts. Our Dice revenue renewal rate was 89% for the second quarter, up 7 percentage points from 82% last quarter and up 28 percentage points year-over-year. Our Dice customer count renewal rate was 81%, up 10 percentage points from last quarter and up 23 percentage points when compared to the same period last year. These metrics continue to…

Thank you, Kevin. I invite you all to join us on Wednesday, September 8 for DHI’s 2021 Virtual Investor Day. We’ll issue a press release shortly with details on how to attend this two-hour event. I’d like to close by once again thanking all our employees for their hard work over the past several quarters. Your determination and dedication to executing our growth plan is unmatched. It is a pleasure to be part of such a great team. With that, we’re happy to take your questions.

We’ll now begin the question-and-answer session. [Operator Instructions] The first question comes from Josh Vogel of Sidoti. Please go ahead.

Thank you. Good afternoon, Art and Kevin.

Hey Josh.

It’s certainly nice to see the strong performance ahead of schedule there. So a couple of questions. I wanted to start without the – I don’t want to call it a distraction but without eFC around, does that change your go-to-market strategy at all? And could you also talk about how this move frees up resources to focus entirely on enhancements and rollouts to Dice and just internal resources in general, and should it ultimately lead to some leverage and operating efficiencies?

So I think it’s exactly as you described. Without eFC and the complexity of eFC, recognizing that it operates across 18 different countries in four different languages and multiple sales teams, I think we have the ability to be much more focused in our approach for territory management inside of the United States across Dice and ClearanceJobs. I do believe that now we can take the full leverage of our engineering and product teams and bring them to bear just for Dice and CJ alone. So that was part of the strategy, quite frankly. And as I’ve explained in past conference calls, we do believe that the financial sector is going to be under duress at least in the UK and Hong Kong, the two major markets that are eFC’s territories for quite some time to come. So we think that all in all, we made the right decision to make the separation effective on the June 13. And now we do have that real focus on technology as a sector, the United States as a geography and making sure that we really get to product excellence for both Dice and CJ.

I appreciate those insights. Thank you. You mentioned hiring, I think it was 16 or 18 total in the sales efforts year-to-date, I was just curious about expectations in the back half of the year. And then maybe when we think about internal investments going forward whether they’re targeted headcount additions, more on the marketing side, I’m curious – well, two-part. I apologize. One, of the sales reps that you hired year-to-date, how are they performing relative to expectations? It sounds pretty good, but I just wanted to hear more thoughts on that. And secondly, how should we think about the sales and marketing operating expense line? Should it get back to the quarterly run rate we were seeing in 2019 or would still remain below that?

So let me cover off the first part of your question, Josh, and then I’ll leave Kevin to answer the question about how to think about sales as an expense. But I can tell you that the sales team members that we’ve brought on board are definitely meeting and exceeding expectations. Generally speaking, for a quota-bearing sales rep, the ramp time is nine months. So they are not expected to get to full quota attainment until that ninth month, but everybody is doing marvelously well. And so when I think about the remainder of the year, we’re actually continuing to add sales reps. We’ve added a number of marketing resources already this year and have a pretty stable marketing team. We’re also looking for a lot of technologists ourselves. And so if you go to the DHI Group Careers page, you’d find that roughly speaking, we’re looking for dozens of people right now largely in technology but continuously in sales as well. So, Kevin, I’ll let you speak to the sales expense item.

Yes. And thanks for your questions, Josh. So the way we look at the business, our expectation or goal is to be roughly at a 20% adjusted EBITDA margin. And so with that, we think areas like cost of revenue, product, and G&A will remain generally flat or consistent with prior periods. And so as revenue grows, that’s going to give us an opportunity to continue to invest in sales and marketing, and it will be a combination of both new salespeople and increased third-party marketing spend. And ultimately, the amount of people we can hire and the spend that we can make in marketing is really driven by our desire to be at about that 20% EBITDA margin. So we do expect sales and marketing line to increase and that’s – we kind of manage that number so that our total costs result in EBITDA of roughly 20%.

Understood. I appreciate that. And is that – 20% goal, is that a 2021 target because then once we do see the revenue starting to flow through and there’s inherently more leverage in the model – understanding that you’re offset somewhat by internal investments. But can that adjusted EBITDA margin get back to pre-pandemic levels? Is that something that we should be expecting next year and certainly beyond?

Yes. Yes. And I would say, from our perspective, it’s towards the end of next year and then beyond. Our goal right now is to make our investments in sales and marketing to drive that top – to drive bookings, which manifest itself in top line revenue growth kind of call it, three to six months out, so one, two quarters out. And so our business model clearly has operating margin. And so we would expect EBITDA expansion to occur 12, 18 months, and beyond. But at least in the near-term, we’re really focused on making those investments. But clearly, we’ve got the ability to achieve margins that other HCM and other SaaS companies have in the marketplace.

All right. Great. Thank you for that. Shifting gears a little bit, really impressive bookings performance. I’m just curious when we were looking at last year, I know you made changes with customers and prospects to offering monthly or quarterly type of contracts. I’m just curious about the breakdown we saw in Q2 and mostly annual, are they short-term, are you seeing more multi-year come in? I’m just curious about that mix.

Yes, Josh, we definitely are seeing more multi-year contracts and that’s what you see when you look at our total contracted backlog being up significantly whereas our short-term backlog is up a smaller percentage. So you have that 26% versus the 14%. That difference is really those multi-year contracts that we’ve been signing over the past year or so. So we are definitely getting traction in those multi-year contracts.

And I would add that your question about the payment terms remains stable. Roughly about 70% of our contracts are signed such that they are paid upfront within net 30 terms.

All right. Great. And just lastly, and I’ll hop back in the queue. Just any comments around booking trends through the first five weeks of the quarter relative to how you said it was build month – it was building month-to-month through Q2, so I’m curious how the first 5 weeks are looking? Thank you.

Still very strong across all of our teams. And obviously, as we should be, we’re concerned about the Delta variant but we’re not seeing any kind of response by our customers that would indicate that they are slowing their hiring based on what’s happening right now. So all is good for right now for the first five weeks.

Sounds great. Well, thank you, guys for taking my questions.

Thank you, Josh.

The next question comes from Zach Cummins of B. Riley FBR. Please go ahead.

Great. Hi, good afternoon. Thanks for taking my questions. And congrats on really strong results. Yes, Josh really asked a lot of the questions that I really wanted to touch on. But I mean, in terms of the renewal rates on the revenue side for Dice, can you just talk about some of the aspects that drove the nice jump up we saw here sequentially, and is this something that you think can be a sustainable level in terms of revenue retention for Dice moving forward?

Yes. I’ll speak to both those points, and then I’ll ask Kevin to add along his comments. I would say that what we’re seeing is there’s obviously a very high demand for hiring right now, and I think it’s a pent-up demand associated with suppression in 2020. But I would tell you, we also see the additive effect of putting in auto renewal language in our contracts as a standard back in May of 2020. So that auto renewal language comes with an escalator provision. And that’s helping us as well as a tailwind. But it’s both, I would say, the environment as well as the fact that the auto renewal language now gives us a lot of leverage in our discussions with clients.

Yes. And the only thing I would add on that, Zach, is we also have been continuing to improve our account management team by way of things like instituting quarterly business reviews. At one point it was the top 100 customers, now it’s the top 200, and it continues to expand. So our touch points with our customers are becoming more frequent. And we’re – it’s not only touchpoints, but it’s also making sure that all of the new features that we develop they know how to use those, they’re aware of them, they’re using our tool. So we’ve restructured that account management group probably about a year ago where we changed the way they interact with our customer, and we’ve seen some really positive benefits through that as well.

Understood. That’s helpful. And just final question for me. I mean, can you give us a little more insight into the product roadmap for both Dice and ClearanceJobs as we go forward from here?

Absolutely. So with Dice, I would say that we are continuously deepening what we consider to be the marketplace core features, meaning talent search as the most important value proposition inside of our site. It’s our matching technologies, the ability to essentially put in a full job posting and have the best possible matches against the candidates in our database, but also other parts of the experience associated with the recruiter and the individual candidate profiles. This next quarter, we’re spending a lot of time with ATS integrations. So we’re going to be able to announce several partnerships that we have with ATS’ where there’s a deeper integration with the Dice database. And then with ClearanceJobs, ClearanceJobs legitimately in my opinion is about three years ahead of the rest of the market including Dice. And they continue to focus on, I would say, video enablement as a core kind of stepping stone to the future and a stepping stone to attract the right kind of candidates. So we are going to see a lot more video content creation inside of the CJ platform because that’s what the world is used to these days, and that’s especially important for certain age cohorts that we want to attract. So I think that those are the top-level ways that I would describe our product road map for both Dice and CJ. But it’s a very exciting time and I’d tell you that Dice is continuously following the successes that we see in CJ. So CJ still essentially is our testbed for innovation. Very excited about all the different progress that they’ve made over the last 18 months to 24 months.

Understood. That’s great to hear. Well, thanks again for taking my questions. And congrats again on a strong quarter.

Thank you.

Thank you so much. Appreciate that.

This concludes our question-and-answer session. I would like to turn the conference back over to Art Zeile for any closing remarks.

Thank you very much, everyone, for your interest in DHI Group, and thanks for joining our call today. Have yourself a wonderful remainder of the week.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.