Good afternoon, and welcome to DHI Group Inc. Second Quarter 2022 Financial Results. [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 2022 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 2022 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 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 and 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 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 and adjusted earnings per share 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 are available in our earnings release and on our website at dhigroupinc.com in the Investor Relations section. I will now turn the call over to Art Zeile, CEO of DHI Group.

Thank you, Todd. Good afternoon, everyone, and welcome to our fiscal 2022 second quarter earnings conference call. Thank you for joining us today. We are pleased to report another quarter of strong financial results with total bookings growth of 27% year-over-year and total revenue growth of 29% as more employers are using our subscription-based offering. While doing this, we maintain an adjusted EBITDA margin of 21% for the quarter, making us once again a rule of 40 plus company. With the significant supply/demand gap created by the increasing demand for technologists, more employers need access to our growing community of tech campus and our sophisticated tool set to find, attract, engage and hire the highest quality tech professionals. During the second quarter, U.S. employers posted over 1.6 million IT jobs, up 60% year-over-year and 38% from the first quarter according to Information Technology Trade Group, CompTIA, and even in this difficult macro environment, this growing demand for technologists showed no signs of slowing down as U.S. employers posted over 500,000 Open Tech jobs in June alone, up more than 62% year-over-year. At the same time, the unemployment rate for a technologist is near an all-time low of 1.8%, and there are only about 90,000 new computer science graduates entering the workforce each year. With demand for technologists significantly outstripping supply, employers, especially ones that are not specifically tech companies, but have digital initiatives need our subscription-based offering to find and attract the right tech candidates. For those of you that are new to our story, Dice and ClearanceJobs are our two subscription-based offerings. They are both tech-focused career marketplaces that attract the highest quality tech professionals and enable employers to find and engage these skilled candidates as they look to fill the millions of new technology jobs flowing into the…

Thank you, Art, and good afternoon, everyone. Let me go into a bit more detail on our second quarter financial results. We reported total revenue of $37.1 million, which was up 8% sequentially and 29% year-over-year. Total bookings for the quarter were $35.3 million, up 27% year-over-year. Dice revenue was $26.8 million, up 9% sequentially and 30% year-over-year. Dice bookings were $25.6 million, up 27% year-over-year. We ended the quarter with 6,386 Dice recruitment package customers, which is up 17% year-over-year. Our average annual revenue per Dice recruitment package customer was up both sequentially and year-over-year to $14,304. Approximately 90% of Dice is recurring and comes from annual or multiyear contracts. Our Dice revenue renewal rate remained strong during the quarter at 99%, down 4 percentage points from last quarter and up 10 percentage points from last year. Our Dice customer count renewal rate was 85%, down 1 percentage point from last quarter and up 4 percentage points from last year. Our Dice retention rate was 109%. These metrics continue to demonstrate the strength of the tech job market and the value of the Dice products in the recruiting of technology professionals. ClearanceJobs revenue was $10.2 million, up 6% sequentially and 26% year-over-year. Bookings for CJ were $9.7 million, up 27% year-over-year. We ended the second quarter with 1,976 CJ recruitment package customers, which is up 11% year-over-year. Our average annual revenue per CJ recruitment package customer was up 2% over last quarter, and up 12% year-over-year to $18,708. Similar to Dice, approximately 90% of CJ revenue is recurring and comes from annual contracts. Our CJ revenue renewal rate was 99% for the second quarter, down 5 percentage points from last quarter and up 2 percentage points over last year. Our CJ customer count renewal rate was 84%, down 3…

Thank you, Kevin. I'd like to close by once again thanking all of our employees for their hard work this quarter. For determination and dedication to executing our growth plan is certainly paying off. It is a pleasure to be part of such a great team. And with that, we're happy to take your questions.

[Operator Instructions] Our first question will come from Zach Cummins with B. Riley Securities. You may now go ahead.

Yes. Hi, good afternoon, Art and Kevin. Thanks for taking my questions and congrats on a strong quarter.

Yes, we will appreciate that, Zach.

Yes, yes, absolutely. And I know through the month of June, you really haven't seen any slowdown in demand across the technology sector. But just given all the headlines that we've seen across all these tech companies regarding layoffs or slowdowns in hiring. Have you started to see any of that filter through to some of your customers? Or what's kind of the overall feedback you received here now just a month into Q3?

So the good news is that we do not have Robin Hood as a customer. I say that jokingly. Actually, we have not seen any change in bookings performance 1 month in, meaning for the month of July. And very importantly, I think it's notable that we as a company, have less than 1% of our revenue tied to what I consider venture backed or early stage businesses. And even if you look at those businesses that have announced layoffs, I think the number is cumulatively in the tech sector, about 30,000 people have been laid off year-to-date. And as I announced inside of my description of the current state of the business, there were over 500,000 openings in June alone. So these layoffs are certainly being magnified by the media, but they are not really resulting in a change in people's attitude towards hiring tech labor. And we still see a huge supply-demand deficit that is playing out in the market today.

Understood. That's helpful. And can you talk about more of your investments in both brand awareness campaigns and also on the lead generation side. It seems like it's been going pretty well thus far. So just any more insight into your plans for potential spending here in Q3 or the back half of the year?

Yes. Great questions, and we will continue to actually increase our spend associated with marketing qualified lead production as well as these brand awareness campaigns. As I mentioned, the second version of these brand awareness campaigns just literally rolled out at the end of June. So we're assessing their performance, generally speaking, we put these particular advertisements, whether they're static images or their videos on a multitude of channels and we gauge receptivity the actual click-through rate. And so we're studying that now to kind of make sure that we have a plan of attack for the second half of the year, but we fully intend to increase our marketing spend in the second half of 2022.

Understood. And final question for me is more so around capital allocation. I know you've been prioritizing share buybacks here in the first half of the year. So can you just give us a sense of how you're thinking about spending your excess cash flow here in the back half?

Yes. I don't think -- Zach, this is Kevin. I don't think our philosophy has changed. We will continue to evaluate investment in CapEx and investment in -- or buying back our shares really as the two opportunities for uses of cash. As you know, we did make an investment in the news in Q3 of last year. So we will continue to look at opportunities that could accelerate parts of our business. But I would say our capital allocation philosophy has not changed, over the last couple of quarters, and we don't anticipate that changing for the balance of this year.

Understood. Well, thanks for taking my questions, and good luck with the upcoming quarter.

We will appreciate that, Zach.

Thank you.

Thank you.

Our next question will come from Max Michaelis with Lake Street. You may now go ahead.

Hey, guys. Great quarter.

Hi, Max.

My -- one of my questions here is just on the guide. So if we just -- if I just make it easy here, we go to Q3, you guided for $37 million to $38 million. So we take the midpoint on that at $37.5 million, and then take the midpoint on your full year guide of $146 million. It's kind of modeling out for Q3, Q4 revenue to be essentially flat. Can you kind of go into what's maybe slowing down or if there's any room for upside on that guide?

Well, I would say we look at the opportunity ahead of us, and we try to have a balanced view of what are some of the upsides and what are some of the pressures. While 90% of our revenue is recurring and comes from annual subscription contracts, there is some revenue that is shorter term in nature that we're continuing to keep an eye on. But with that, I think that we still remain very encouraged by Q3 and Q4. We've done very well with bookings that on an amortized basis will flow into Q3 and Q4. But I think ultimately, our perspective is, let's have a balanced view as we enter into Q3 and Q4 with some of the headwinds that have been discussed.

Okay. Thank you, guys. And then just my second question here is on renewal rates. I know you mentioned that it dropped down around 4% from 104 last year -- or 103 last quarter to 99 this quarter. Are you expecting to remain stable throughout the year? Or are you expecting to jump back up maybe into the exceed a 100%?

So ultimately, as we discussed this even last quarter, we thought that being over 100% was kind of an aberration and that best-in-class SaaS-based business model maintained revenue renewal rates in the 90s. And so that's what we intend to do from this point forward. But I also ask on to add any kind of insight you might have.

No, I think it's hard to look at any individual quarter because there may be some unique anomalies. I think when we look at the trend overall, to Art's point, we think on a customer count basis, mid-80s, revenue renewal rate in total will be mid-90s, which then would show retention on those customers who are renewing of greater than 100%. So it will move up and down a couple of percentage points any quarter. But I don't think there's any difference in trend that we've seen relative to the last couple of quarters.

Okay. Thank you. And then just my last one, just going back to building out your sales force here. You mentioned that you did increase, I believe, the head count in the sales department. Can I get a number for that? And like what you guys expect to hire out throughout the rest of the year?

So, in general, we're going to track to hire approximately 5 net new individuals each quarter. We overshot that goal in the first quarter of this year. We're approximately there in the second quarter. We intend to maintain that same hiring trend for the remainder of this year, meaning 5 in third quarter, 5 in the fourth quarter. We believe that -- by doing so, we're increasing our quarter capacity by approximately 20%, and that's a healthy place to be when you think about the nature of our business model and growing the business at 20% plus rates.

Okay. Thank you., guys. That’s it for me.

Thank you [indiscernible] Max. Really appreciate it.

Our next question will come from Anja Soderstrom with Sidoti. You may now go ahead.

Yes, thank you for taking my question and congratulations on another great quarter. I have a follow-up to start on that renewal rate. What's driving the lumpiness in that?

What's driving the renewal rate itself?

No sort of the lumpiness that you were over 100% last quarter and this quarter, you're 99% and what's driving that?

I would say that, as I indicated in the last question that was asked by Max, that in Q1, we felt like having a revenue renewal rate above 100% was aberrational, what drove it was a one-time transactional non-subscription based activity that were sold into packages in the first quarter. And so we don't want to forecast that, that's going to happen forever. I think that there was a pent-up demand going into 2022 for technology hiring in general. And so people took on additional services and additional add-ons to their natural subscription contracts because they wanted to figure out new ways to get to the end result, which is those technology professionals coming on board.

Okay. Thank you. That was helpful. And then given how strong your business is and the demand, what kind of pricing power do you have and opportunities with price increases?

That's a great question. I can tell you that we have studied pricing over the last year. We had the advantage of using an outside consultant for quite a period of time. We are in the midst of reformulating our rate card. We plan to essentially roll that very cautiously in the second half of this year, making sure that the pricing meets the needs of our intended client relationships. And so again, we think we do have pricing power to a certain degree because of the nature of the supply demand imbalance inside of the tech market. And the fact that we are a good tool for essentially delivering on the proposition of hiring tech professionals.

Okay. Thank you. And I understand with your rule of 40, you will sort of ramp up your marketing spend with a higher revenue. So what kind of conversion rate do you have and what kind of visibility do you have in how that being effectful and how we can sort of expect that to impact the revenue growth in the coming years?

So we actually look at it as a matter of supporting the new business team. There is a calculation that we do every single quarter. For that matter, we do it every single month in which we determine how many closed one deals should come from marketing qualified leads. And so we ramp up that number each quarter according to the expansion of the new business team itself. As I indicated in my answer to Max, we are increasing that team by five new sales reps each quarter. So if you think about it, we're trying to add marketing qualified leads to support those new five members, but we're also supporting the existing team. So it's an ever-growing budget. And we're seeing good conversion. We're not seeing any kind of change, I would say, substantially in the quality of the leads, the conversion of leads to close on deals.

Okay.

And I will jump in with one additional comment on top of Art's, which is we spend a fair bit of time looking at the lifetime value of a customer over the customer acquisition cost, which is a common ratio used in the software and technology space. And our target is to be above 3.3:1. We are seeing that. It moves a little bit every month, every quarter based on kind of the lag between spending that dollar and when that lead comes to fruition and becomes a contract. But we do ensure that our marketing spend has the appropriate ROI attached to it. And in our industry, that LTV to CAC ratio is a common way of looking at it.

Okay. Thank you. That was all for me.

Thank you, Anja.

Our next question will come from Kevin Liu with K. Liu & Company LLC. You may now go ahead.

Hi. Good afternoon, guys. I wanted to start with the kind of the Dice bookings outlook here. Certainly, you have a big opportunity in white space on the commercial side of things. We've seen the net new customer adds over 100 this quarter, was up over 200 the prior quarter. Just wondering, as you look at your pipeline today, should we expect bookings to be more driven by kind of the volume of customers adding? Or is there some -- or are you seeing kind of customer adds not being development metric, but more so kind of the size of the customers you're landing with?

So we've actually increased the size of annual contract value associated with Dice and ClearanceJobs, every quarter over the last four quarters. That's a good news part of the story. However, I'd say that in the case of Dice, very specifically, we will see growth in bookings by creating new relationships. So you should see that customer count grow continuously over the course of time.

Got it. And then maybe just on the marketing spend, can you talk about kind of the efficiencies you're seeing on that spend, meaning on a per unit basis, whether it's per net new MQL or even new candidate to your platform? Are you seeing that metrical steady? Or are you actually seeing even more efficiency and you're getting better returns on that dollar?

It's actually holding steady. I would say that our team has done an enormous wonderful job of driving down the cost per market and qualified lead over the last 2 years, but I think that we've hit kind of like the efficiency point, where it's just underneath $100 per market and qualified lead. And so we see that number bounce in the 90s, but there's no real substantial improvement that I can foresee in the future.

Understood. And then just lastly for me. In terms of kind of the 40,000 plus profiles you're adding each month, can you just talk a little bit about how that's manifesting and kind of better value for your customers and whether that creates that opportunity to increase pricing specifically, are you seeing kind of fill rates for some of the open positions on Dice move higher?

Yes. There's just no question that adding additional members to our community makes the community more valuable to the clients. And the clients have a lot of different ways that they look at return on investment for the platform. But I'd say one of the most basic ones is the number of applies per position, and that grows as you grow the community. It is correlated. So you're absolutely right in your logic.

Got it. And then actually, just one last one on the expense side. The G&A expense line kind of jumped up a bit sequentially and year-over-year. Can you talk about if there was anything one-time or unusual in there, if that's kind of the appropriate run rate as we move forward?

I would say in G&A, we kind of bounce around a little bit because we don't amortize expenses. But I would say that, that's a good run rate at least for the rest of the year as we think about our expenses. There may be a few one-time items in there, but there may be some one-times going forward as well. But I don't think it's -- it would be materially different than what you're seeing.

All right. Thank you for taking the questions and congrats on a strong quarter.

Really appreciate it, Kevin.

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. And before I want -- before we actually wrap up, I want you to all know that DHI management will be hosting its second Annual Virtual Analyst and Investor Day on September 8. So we will be putting out a press release tomorrow with more details around when that's going to take place within the day. We hope that you could all join us as we provide a lot more detail on our growth plans for DHI. And thanks everyone for your interest in DHI Group, and have yourself a wonderful day.

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