Good day, and welcome to the DHI Group First Quarter 2024 Financial Results Conference Call. (Operator Instructions) Please note today's 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 2024 First Quarter Earnings Conference Call. With me on today's call are DHI's CEO, Art Zeile and CFO, Raime Leeby. 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 2024 first 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 the federal securities laws. 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 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 non-GAAP earnings per share that are not prepared in accordance with U.S. GAAP. Information about and reconciliation of these non-GAAP measures to the most directly comparable GAAP measures are available in our earnings release, a copy of which you can find on our website at dhigroupinc.com in the Investor Relations section. With that, I'll now turn the call over to Art Zeile, CEO of DHI Group.

Thank you, Todd. Good afternoon, everyone, and welcome to our 2024 first quarter earnings conference call. We appreciate your time today as we discuss our financial performance and provide an update on our outlook. First, let's discuss the state of the tech labor market, which is one of the main growth drivers for our business. While we suffered from a slump in hiring demand last year, the first 3 months of 2024 have been more promising with tech job postings increasing from a low point of 142,000 in December to 191,000 in March as reported by CompTIA. The pre-pandemic average was 300,000 job postings per month in 2019, so we aren't back to normal yet, but we see small signs of improvement. We are also seeing an increase in the demand for AI skilled professionals as Corporate America starts to implement generative AI in their business models. 16% of all of our job postings in March contained AI-related skills, which is a significant uptick year-over-year. We are also seeing that consulting companies like Deloitte, Accenture, IBM and others, are hiring tech professionals at elevated rates, indicating that large firms are actively prototyping and piloting AI solutions. Tech is the second largest long-term occupational growth trend in the United States behind healthcare and is projected to grow twice as fast as the overall U.S. workforce with the U.S. becoming a more digital economy over time. As businesses accelerate their investment in technology initiatives, including the implementation of Gen AI, they will need our subscription-based offerings and proprietary search algorithms to find the perfect match for their job posting from our over 8 million technologist profiles. Our clients have seen increased success in attracting and hiring top tech talent using our platform. One example is M.C. Dean, a leading provider for mission-critical…

Thank you, Art, and good afternoon, everyone. Jumping right in, let me take you through our financial results for the quarter. We reported total revenue of $36 million, which was down 7% on a year-over-year basis and 3% versus the prior quarter. Total bookings for the quarter were $48.8 million, down 9% year-over-year. As Art mentioned, our total recurring revenue was down 2% for the first quarter. Dice revenue was $23.2 million, which was down 14% year-over-year and down 6% sequentially. Dice bookings were $32 million, down 15% year-over-year. We ended the quarter with 5,250 Dice recruitment package customers, which is down 4% from last quarter and down 15% year-over-year. Our average annual revenue per Dice recruitment package customer was up 1% sequentially and up 2% year-over-year to $15,997. During the quarter, over 90% of Dice revenue was recurring and came from annual or multiyear contracts. For the quarter, our Dice revenue renewal rate was 82%, up from 78% in the fourth quarter, and our Dice retention rate was 100%, up from 97% in the fourth quarter. ClearanceJobs revenue was $12.8 million, up 10% year-over-year and up 2% sequentially. Bookings for CJ were $16.8 million, up 5% year-over-year. We ended the first quarter with 2,032 CJ recruitment package customers, which was down 2% on a year-over-year basis and 1% sequentially. This slight reduction is attributable to churn with smaller customers. Our average annual revenue per CJ recruitment package customer was up 12% year-over-year and up 5% sequentially to $23,050. During the quarter, over 90% of CG revenue is recurring and comes from annual or multiyear contracts. For the quarter, CJ's revenue renewal rate was 98% and CJ's retention rate was strong at 115%. The outstanding retention rate demonstrates the continued value CJ delivers in the recruitment of cleared professionals. Turning…

Thank you, Raime. I'd like to thank all of our employees again for their hard work this past quarter. It is a pleasure to be part of such a great team. With that, we are happy to answer your questions.

(Operator Instructions) Today's first question comes from Zach Cummins with B. Riley.

Ethan Widell phoning in for Zach Cummins. Just one on my end. Could you give a little incremental color maybe on your bundling strategy with Dice and CJ? Are there any gives and takes there that you can point to?

Yes. We mentioned that virtually all of our new business deals were booked in this manner, and it was almost close to 100%. And I would say that we have found that this combination of unlimited job postings, so there's no more concept of job slots which is endemic to our industry, as well as job boosts and a company page, in combination really drives success for our customers. We're really pleased with the penetration rate if you will associated with those new business bookings. We did see a large number of our existing accounts also move to this subscription bundle, and nevertheless, not at the same level as almost 100%. I think that's because it is a little bit higher in terms of the before -- the after price compared to the before price when you move to this package. You get a lot more value, but it's a little bit more expensive.

Our next question comes from Max Michaelis with Lake Street Capital Markets.

First one is just on your bookings outlook for improvement and then returning to total growth for the second half of the year. If we think about that from a segment level, Dice and ClearanceJobs, what are you implying for I guess segment growth? Dice was down 15% this quarter. Are you assuming a lower contracting Dice rate and then ClearanceJobs growth rate improving? Or should we expect Dice bookings to return to growth in the second half?

Sure. I can take that one. When we think about Q1 '24, it's still a difficult comparison versus prior year as Q1 '23 was still very strong related to the macro tech hiring environment. Including in our transactional bookings and revenue a year prior. We do expect the bookings year-on-year to show progressive improvement as booking comps ease throughout the year. And we are seeing stabilization and strengthening in our renewal and retention rates across both brands. And as Art just discussed our subscription packages, we're seeing additional interest in those packages as well that's fueling new business. From a brand-specific perspective, we are expecting strengthening throughout the year in both brands.

Okay. And then I guess my next question would be, if we look at this new pricing bundle, and it's good to see that ATVs are up quarter-over-quarter, will you guys be sharing an actual ATV number as well as I guess retention numbers for this new price bundling product? Like help us get an idea what kind of growth we're actually seeing on a contract value standpoint.

That's something that we're actively debating as to whether or not we're going to break that out separately, but I can appreciate the fact that everybody is interested in understanding the performance of the bundles themselves. We'll definitely take that under consideration.

All right. Sounds good. And I guess last one, and I'll jump back into queue, it's good to see that tech postings are up, so 191 from 142 in December. I guess how did that trend through April and I guess now into May? It's still early May, but I guess April?

Ultimately, we get that report about 3 to 5 business days into a new month, so we do have the benefit of April. April was just about the same level as March, a little bit below that. I'd say in a comparative way it's statistically insignificant. It's flat with March. We're still seeing that level of new tech job postings. I do think it is interesting that a pretty considerable amount, meaning the 16% figure, are associated with AI, and that's climbing month-over-month. I didn't mention it because I wanted to use March as kind of our baseline for comparison purposes. But April, we kicked up to 17% of all of our jobs, including AI skills. We're definitely seeing this trend towards more AI-related job activity.

(Operator Instructions) Our next question comes from Kevin Liu with K. Liu & Company, LLC.

Maybe just continuing the AI discussion here, could you talk a little bit about how much AI is kind of driving interest into the Dice platform from a customer standpoint? And then anything you guys are doing on your end to really capitalize on that?

I think that's a great question, Kevin. And I can tell you that we are seeing a lot of interest in terms of activity on our site associated with our AI job articles as well as the 2 reports that we issued last month. We have a report that's geared towards informing clients as to how they can attend to the question of how to recruit AI candidates or AI skilled candidates. And then we also have a report that really features what a candidate should think about in terms of their career and how to make sure that they have the right AI skills for the future. We put out these 2 long-format e-books, and we've seen a tremendous amount of interest as a result.

That's good to hear. And maybe just going back to the question on kind of your confidence for renewed bookings growth in the second half year. What are you seeing in terms of pipeline leads, etc., that kind of give you confidence in that outlook? And then maybe specific to the CJ side of the equation, obviously, the threat of government shutdown has had impact in some quarters, but we've seen that growth rate bounce around. But ultimately, would you expect that to be kind of I don't know, 10% plus growth for you guys? Or are there things in the environment that would still limit that side of the business?

Yes. I can speak to all of the above. I can tell you that we do believe the pipeline is improving month over month, week over week for that matter. We feel like there are signals ahead that still give us confidence for the second half of the year. I can also tell you that one clear signal is that Kforce and Robert Half, specifically the technology division of Robert Half, has indicated guidance for growth again. That is very good for us to believe that what we're seeing in terms of our pipeline is also what other staffing recruiting firms at least are looking at and seeing in their pipelines. I can tell you that we believe CJ should be booking in double-digit growth range. We do believe it was suppressed by the kind of uncertainty in government funding of the defense budget. That has clearly passed in March. I would say we also feel bullish about a tailwind really existing associated with the fiscal year 2023 defense budget. If you remember, that budget actually went up by 10%. All of the projects, the awards, have not been worked into the system as a result of that budget. I think there will be years of that kind of call it a golf ball going through the snake if you will because of the size of that increase in budget and what it means for projects.

All right. That's good to hear. And then just lastly for me, to capitalize on kind of all these opportunities and get back to the positive growth in the second half, could you just talk about the trajectory of sales and marketing spending? Is there a lot of incremental investments that's needed on either of those aspects?

Sure. Hi, Kevin, this is Raime. The sales and marketing spend is down year-on-year based on the restructuring that we did in 2023 in addition to what I mentioned earlier related to the efficiencies in our marketing campaigns. At this point, we believe our Q1 sales and marketing spend is roughly what we're anticipating throughout the year in terms of sales and marketing spend. And we think that's the right level to position us for growth as well as investments in the future, yet maintaining that 24% EBITDA target that we're hitting in Q1 and anticipate hitting throughout the year.

And I would go one step further, Kevin, to say that we don't view this recovery in terms of tech job interest to be a V-shape recovery. It's going to be a long, slow, steady recovery. We're not planning to add significantly or incrementally to the sales team in terms of headcount. We do have the ability to moderate our B2C, meaning B the candidates kind of spend, so that we can be very cautious as we see activity levels shift on our platforms. There's mechanisms that we have to maintain that spend pretty effectively, and most importantly, we don't anticipate a larger team.

And ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to management for closing remarks.

Well, thank you, Operator, and thank you all for joining us today. As always, if you have any questions about our company or would like to speak with management, please reach out to Todd, and he will help arrange a meeting. Thank you for your interest in DHI Group, and have a great day.

Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.