Good day, and welcome to the DHI Group, Inc. Third Quarter 2024 Financial Results Conference Call. 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 of MKR Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, and welcome to DHI Group's 2024 third 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 third quarter 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 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 the risks and uncertainties discussed in the company's periodic reports on Form 10-K and 10-Q and the 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. 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 2024 third quarter earnings conference call. We appreciate your time today as we discuss our financial performance for the quarter and provide an update on our outlook. To begin, let's address the current state of the tech labor market, which serves as a key growth indicator for our business. We're starting to see encouraging trends that point to a positive trajectory for tech labor demand. One standout signal is the steady increase in new tech job postings. According to CompTIA, over 610,000 new tech job postings were created in third quarter of 2024, marking a 3% increase year-over-year. Our first positive year-over-year growth in this key metric in over a year. In September, there were 225,000 new tech job postings, marking a 22% increase from the previous year. And the recently released October data shows the addition of 223,000 new tech jobs, representing a 34% year-over-year increase. These numbers are encouraging and I believe highlight that a broader recovery is starting to take place across our industry. Other positive signs are emerging as well, such as the decrease in the tech unemployment rate, which currently stands at 2.6% at the end of October. These positive signals align with the findings from staffing industry analysts, which recently released its fall forecast predicting 5% growth for the tech staffing sector next year. This forecast is based on extensive interviews with staffing and recruiting firms and reflects a collective confidence in improved performance for 2025. Global professional services firm, RGP also recently released research highlighting that U.S. companies' workforce strategy decisions are being influenced by labor market challenges, rising digital transformation spend, and the Fed's recent interest rate cut. Over half, 51% of financial decision makers surveyed expect their company to increase investments…

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 $35.3 million, which was down 6% on a year-over-year basis and down 2% from the prior quarter. Total bookings for the quarter were $28.9 million, down 7% year-over-year. As Art mentioned, our total recurring revenue was down 4% in the third quarter. ClearanceJobs' revenue was $13.4 million, up 6% year-over-year and up 1% sequentially. Bookings for CJ were $12.6 million, up 4% year-over-year. We ended the third quarter with 1,982 CJ recruitment package customers, which was down 4% on a year-over-year basis and 1% sequentially. This slight reduction is attributable to churn with smaller customers, whereas the number of CJ accounts spending greater than $15,000 annual recurring revenue has increased and is up 40% versus prior year Our average annual revenue per CJ recruitment package customer was up 16% year-over-year and up 2% sequentially to $24,762. During the quarter, over 90% of CJ revenue is recurring and comes from annual or multiyear contracts. For the quarter, CJ's revenue renewal rate was 91% and CJ's retention rate was strong at 109%. The outstanding retention rate demonstrates the continued value CJ delivers in the recruitment of cleared professionals. Dice revenue was $21.9 million, which was down 12% year-over-year and 3% sequentially. Dice bookings were $16.3 million, down 15% year-over-year. We ended the quarter with 4,868 Dice recruitment package customers, which is down 3% from last quarter and down 15% year-over-year. This reduction is attributable to churn with smaller customers spending less than $10,000 per year. Our average annual revenue per Dice recruitment package customer was flat sequentially and up 5% year-over-year to $16,330. During the quarter, over 90% of Dice revenue was recurring and came from…

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're happy to answer your questions.

We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Zach Cummins with B. Riley. Please go ahead.

Hi. Good afternoon, Art and Raime. Thanks for taking my questions. And Raime, best of luck in your next opportunity. It was a pleasure working with you. Just starting off, in terms of just renewals with some of your major staffing clients, can you talk about the dynamic with kind of the, say, downtick in the rate that you got in the renewed contract? And do you view that as any sort of risk as you go through this key renewal season over the next couple of quarters?

Well, I think there's always a risk, Zach, and that is an excellent question. I am comforted by the fact that the majority of our churn is still in that category of small business staffing firms. But, however, if a couple, even larger staffing firms decide to diminish their usage of our platform, it does materially change the revenue renewal rate figure. I do think that over the last year, you've seen the revenue renewal on count improve sequentially, kind of consistent with that idea that we've been shaking the tree for so long of these smaller staffing firms that at some point we've shaken them all off. But I still think that it's valid to say we're concerned about the renewals, especially as we go into Q4 and Q1. The large majority of our renewal base or book, you can call it, actually takes place in December and January because most of these larger customers have always asked for their contract to line up with the calendar year. So again, we're concerned about it, but it feels like we're kind of just bumping along the bottom until there's a strong, steady increase in technology demand that everybody can kind of fundamentally take advantage of. We do believe the SIA forecast is a positive signal for us, but we're not necessarily counting on it in terms of any kind of guidance or forecast. But Raime, I'll also ask if you have any additional thoughts on that. I think Raime is on mute, but we'll let her reset.

Thanks, Art. I don't have anything to add, but Zach, wanted to say likewise, it's been a pleasure working together.

Awesome. Well, thanks Raime. And just my follow-up question, Art, is, really geared towards your confidence in returning to bookings growth at some point next year. Obviously, some incrementally positive signals with the overall environment and the staffing industry potentially returning to growth. So just curious of what's driving the confidence that we're getting back to kind of towards the bottom here and returning to growth on the bookings side next year?

It's kind of interesting. We pointed out some data points that we feel fundamentally show that the trend is going in the right direction. I would also take a step back and say the bigger picture is that the tech industry fundamentally has grown at 3% to 4% per year, meaning the tech workforce itself pretty much for the last 25-years, with the exception of 2001, which was the dot-com implosion, 2008 which is the Great Recession and also 2020, which is COVID. So for us to see this kind of a condition of kind of underperformance in the tech workforce is unusual. I think that we do need to see two things fundamentally change so that they drive our demand. The first is growth initiatives. And I think that there are going to be more growth initiatives. There's a lot of talk about growth initiatives. Growth initiatives definitely require people. The other thing that propels our business is voluntary attrition. And over the last 1.5 years, most technology workers have been reluctant to move because they view the economy with suspicion. And so nevertheless, what we're picking up from a lot of tech recruiters, including some of our own inside of DHI Group, is that there is this almost damn ready to break kind of concept that is ready to play out. So I feel like there is a lot of reasons for optimism for 2025.

Understood. Well, thanks for taking my questions and best of luck with the rest of the quarter.

Thanks so much, Zach. We really appreciate it.

The next question comes from Kevin Liu with K. Liu & Company. Please go ahead.

Hi, good afternoon, guys. Just a quick question on kind of Q4 here and kind of the bookings expectations. Maybe if you could give us some commentary on the early trends you've seen in terms of renewal activity this quarter outside of staffing, how are renewals going with your typical enterprise customer base? And how do you expect that to kind of flow into the new year since Q1 is also a pretty big renewal quarter?

Hi, Kevin. This is Raime. Yes, looking forward to Q4, we expect Q4 to look very similar to what we saw in Q3 for both Dice and CJ. We are seeing, as Art mentioned, some green shoots, but we were conservative, I would say, with our Q4 outlook. I think now that the Fed is signaling and has made 2 rate reductions, and we're also seeing the election in the rear view mirror, it remains to be seen when we're going to start seeing the bookings activity uptick and what we'll see. But the way that we've projected Q4 is fairly in line with Q3.

I appreciate the color there. And as we think to the new year and kind of the prospects for renewed bookings growth here, how does that impact how you want to manage margins as we go into '25? Any sense for your willingness to invest ahead of the curve to drive that renewed growth? Or do you need to see some kind of changed trend on the booking side before we start to up the marketing expense again?

Yes. I would say, from my perspective, we're -- we intend to be cautious. And we would need to see that actual bookings demand take place before we made significant incremental investments in, for example, sales resources. So I think right now, we're poised to take advantage of that upswing with the capacity that we have and the sales team itself. There is the opportunity also to essentially spend more on marketing qualified leads. Again, we would want to see evidence that, that trend is, in fact, in place that we can really count on so that we can maintain our margins.

Great. I really appreciate you taking the questions and Raime good luck in the new role.

Thanks so much, Kevin.

The next question comes from Max Michaelis with Lake Street. Please go ahead.

Hey, guys. Thanks for taking my question. I just want to go back to the Q4 bookings guide here. If we look at that, and I think you mentioned it's going to be similar to Q3. But in terms of segment breakdown, I mean, does this -- the way I'm interpreting it, is this like expecting a further degradation in the Dice segment when we look at this 8% to 10% contraction year-over-year for bookings? Or am I thinking about that wrong?

Yes. I would say, again, it's very similar. So we break our business into thinking about renewal rates and then thinking about new business. And our expectations for Q4 are similar to what we saw in Q3. For Dice specifically, we do have a handful of large multiyear customers who initiated their contracts in the 2021-2022 time frame, and they're renewing at slightly lower levels as they've evaluated their need with this tech hiring environment. So it's not churn necessarily. It is slight contraction. And this is a healthy reset, and we expect positive growth as the tech hiring continues to grow in the next year, and top-ups. As you recall, we've historically talked about top-ups in previous strong environments, and we anticipate that happening with those accounts over time.

Okay and we look out into 2025 in this -- and your comments on how we expect bookings growth. I mean, is that like a second half '25? Like ClearanceJobs continues to stay positive, but then Dice starts to creep up towards that positive, maybe breakeven, 1% growth in the second half of 2025? Is that how we should think about it? Or can you kind of break that down a little bit for me?

Yes. We will, in upcoming quarters, provide more clear guidance on 2025. But I think that the way you're thinking about it is a reasonable perspective in that we expect continued growth in CJ, and we expect incremental improvements with Dice.

And then I guess just kind of more of a 30,000-foot question here. I mean, just kind of given the bookings trend and where we're going into 2025, I mean, is there anything out in the market that we can go after maybe in terms of buying, maybe on the M&A side and maybe vertical specific or maybe platform? Is there anything out in the market that you guys have been looking at as a potential M&A target? Or kind of what are your thoughts there?

Sure. I mean I'd have to say that we really haven't thought about acquisitions for quite some time, thinking that we would fundamentally make sure that we are getting the maximum performance out of our current platforms, both CJ and Dice. I don't foresee any particular acquisition opportunity on the horizon that would take us away from that strategy, quite frankly. I do think that, ironically, a lot of the opportunities in the private markets are actually higher multiples and wouldn't necessarily make sense for us right now.

All righty. Thanks for taking my questions.

Thank you very much, Max. Appreciate it.

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, 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 the management team, please reach out to Todd Kehrli at MKR, and he will help arrange a meeting for us. Thanks, everyone, for your interest in DHI Group, and have yourself a great day.

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