Good afternoon and welcome to the DHI Group Fourth Quarter and Full Year 2024 Financial Results Conference Call. All participants’ will be in 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 PondelWilkinson Investor Relations. Please go ahead.

Thank you, operator. Good afternoon and welcome to DHI Group's 2024 fourth quarter and full year earnings conference call. With me on today's call are DHI's CEO, Art Zeile; and CFO, Greg Schippers. 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 fourth quarter and full year 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 the 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, free cash flow, 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 fourth quarter earnings conference call. We appreciate your time today as we review our financial performance for the fourth quarter and the full year and provide our outlook for 2025. Let's begin with an overview of our performance and the actions we've taken to strengthen our position moving forward. Despite a 7% revenue decline in 2024, we delivered full year adjusted EBITDA of $35.3 million, a margin of 25%, up from a margin of 24% a year ago. During the year and including our recently announced restructuring, we have reduced our total operating costs by over $10 million, while enhancing our product offerings and strengthening our sales and marketing organization. The savings are approximately evenly split between operating expenses and capitalized development costs. These actions position us well for return to a normal tech hiring environment and increased demand for our solutions. As part of our restructuring conducted three weeks ago, we split our operations into two distinct brands of Dice and ClearanceJobs. This reorganization provides dedicated leadership for each brand, enabling tailored strategies that enable and align with their unique market dynamics and different customer bases. It also establishes a line of business structure that aligns sales, marketing, product, and development functions under a brand leader, while maintaining centralized support for human resources, finance, and technology operations to efficiently manage employees, business systems, and public company obligations. Ultimately, the restructure enhances profitability, while at the same time unlocking greater long-term strategic opportunities for each brand. It also sets us up to provide more specific brand financial reporting this year. Now, let's dig into the current state of the tech labor market, which is a key growth indicator for our business. Encouragingly, we are starting to see green shoots…

Thank you, Art and good afternoon everyone. Before I begin, I want to express how excited I am to take on the role of CFO and how energized I feel about contributing to the growth of this business. I also look forward to building relationships with our shareholders and the analysts who cover DHI. Now, let me take you through our financial results for the quarter. Please note that in the fourth quarter, we reclassified our career events bookings and revenue, which had previously been included in Dice, to allocate them between ClearanceJobs and Dice based on the nature of the event. Bookings and revenue were recast by quarter beginning with the first quarter of 2022 and can be found in our investor presentation, which will be posted to the Investor Relations' tab on the DHI Group website shortly after this call. We reported total revenue of $34.8 million, which was down 7% on a year-over-year basis and down 1% versus the third quarter. Total bookings for the quarter were $32.9 million, down 9% year-over-year. Our total recurring revenue was down 5% for both the fourth quarter and for the full year, and the bookings that drive our recurring revenue were down 11% for the fourth quarter and 6% for the full year. ClearanceJobs revenue was $13.8 million, up 7% year-over-year but down 1% sequentially. Bookings for CJ were $14.2 million, flat year-over-year. We ended the fourth quarter with 1,949 CJ recruitment package customers, which was down 5% on a year-over-year basis and down 2% on a sequential basis. This reduction is attributable to churn with smaller customers, whereas the number of CJ accounts spending greater than $15,000 in annual recurring revenue has increased and is up approximately 15% versus prior year. Our average annual revenue per CJ recruitment package…

Thank you, Greg. I want to thank all of our employees again for their hard work and one team effort this past year. 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] Our first question today is from Zack Cummins with B. Riley FBR. Please go ahead.

Hi, good afternoon, Art and congrats Greg on appointment to the permanent CFO position. Art, I just wanted to ask you about Dice and the business prospects as you're thinking about 2025. It seems like you're assuming a slow and steady recovery as we move throughout the year. I'm just curious what you're hearing from your staffing side of the business versus maybe what you're hearing from the commercial accounts?

We've -- that's a great question, Zack. And we've always had this thesis that staffing would have a return to kind of normalcy before our commercial accounts and it seems like that's happening right now. In fact, it seemed like the turning point was really the end of last year when a lot of people were deciding their budgets and it feels a lot more bullish, a lot more positive. I'd say that the one area that feels like it's firming up and stabilizing is both the renewal activity associated with our staffing accounts as well as new business activity. And that is consistent with that SIA report that indicates that we're going to see -- or its forecasting that we're going to see 5% revenue growth for 2025.

Understood. And my one follow-up question is more towards CJ. Just given all the efficiency initiatives within the current administration, any concerns for CJ's prospects as we move throughout the year amidst these different organizations?

That's another great question. A number of our investors have asked us that same question as to what we're hearing about whether or not contract activity will be cut or that there will be a view to reduce the defense budget. Right now, we are not seeing that in terms of the activity levels for CJ new business as well as account renewals. And we do believe that Congress is firmly committed to the existing and enhanced defense budget. So, we haven't seen any direct impact to activities like Dodge, but it remains to be seen, obviously, in the weeks and months to come.

Understood. Well, thanks for taking my questions and congrats on the stabilizing results in Q4.

Really appreciate that, Zack. Thank you.

The next question is from Gary Prestopino with Barrington Research. Please go ahead.

Hi, good afternoon, Art and Greg. A couple of questions here. First of all, in terms of the cash, I'm just looking at it and if you hadn't paid down debt, you used cash throughout the year to pay down debt, I guess, is what I'm getting. And if you hadn't paid down debt, the cash on hand would have been much higher in Q4. Is that kind of a correct assumption?

Yes, we used approximately $6 million of cash to pay down debt and then almost $2 million to repurchase shares under share vestings from our share programs with employees.

All right. And then I guess I'm just having just a little bit of problem reconciling some of this here. You said you've cut your expenses by about $20 million or your expenses including $10 million of OpEx and $10 million of capitalized expenses. I realize in the capitalized expenses, they get amortized over a year or two, right, or two years. But is your P&L not going to feel the full effect of that $10 million decline in operating expenses? Because of why wouldn't it, I guess, is what I'm getting at, that would cause your EBITDA margin to not be a little bit higher?

Yes. No, that makes complete sense, Gary. So, you're correct, it's roughly a 50/50 split between capitalized development costs and OpEx. So, you can think about $20 million of cash savings, but the timing of that flowing through, those savings started with the bigger chunk of it being in 2023 in that restructuring, which was $8 million to $10 million the last two that we did in the middle of last year and then just now we're each call it approximately $5 million in the $4 million to $6 million range for each one. So, you'll see more of those savings coming through in 2025 if you get the full year impact of the cash savings. Otherwise, it was kind of amortized in, if you will, over time because they were staggered over six to eight months in between.

And then, Art, when -- or will you be doing more in-depth segment reporting in terms of either operating income or adjusted EBITDA by brand this year?

Yes, Gary, I'll take one as well. Good question and we do get that a lot since we announced the restructuring. And our intention is to dive into that immediately following actually, our intention is to dive into that immediately following actually our earnings process here. And our finance team will have the goal of getting there in the first half of this year and we'll have more to come on that here in the next couple of months.

Okay, that's great. That's all I need to know. Thank you.

You're welcome.

Thanks, Gary.

The next question is from Max Michaelis with Lake Street Capital Markets. Please go ahead.

Hey, guys. Just a couple from me. Thanks for taking my questions. And Greg, congrats on the promotion.

Thank you.

When we look at bookings in 2025, I know you guys don't expect bookings growth, you do expect clearance jobs growth. But I guess, just wondering if you could help me out a little bit just with Dice contracting 15% in the year. I mean, from current internal, when you guys look out to 2025 and internally when you guys look at bookings growth or decline, whatever you want to call it, I mean, are you expecting an improvement in 2025 from 2024, I guess, on both segments, maybe Dice from the decline of 15% and ClearanceJobs from 4% growth in 2024 or are you kind of just holding back?

Yes. So, we are expecting, as we mentioned kind of on the call here that we do expect some growth at CJ and continues to have strong demand and with the government having one political party kind of in charge will help with the Defense budget, getting that certainty in place. But Dice -- yes, Dice continues, we're not expecting anything and we're not budgeting for anything to improve in the market at this point. We're staying on the conservative side of that. That said, from a year-over-year basis as you go through the year, we do expect some improvement throughout the four quarters of 2025 on a year-over-year basis in bookings.

Okay. That's it for me guys. Thanks.

Thanks Max.

[Operator Instructions] The next question is from Kevin Liu with K. Liu & Company. Please go ahead.

Hey, good afternoon guys. Maybe just to revisit the CJ part of the business. Wanted to clarify whether you guys feel you have any exposure today to either the Department of Education or other agencies that may potentially be on the chopping block here or if all of your exposure there is primarily tied to Defense budget activity?

That's a great question, Kevin. And I would say that we really don't have any exposure from the kind of non-cleared agencies that are operating. I would say it's always the intelligence community and those that are associated with Defense that are interested and have the wherewithal and the ability to directly license with ClearanceJobs. So, if you think of it this way that if there are major changes with that with the intelligence community agencies like CIA, FBI, DIA, NSA that could affect us. But otherwise, we're not necessarily exposed to the broader number of agencies that operate under the government. And that's not to say that we're out of the woods or that they won't be targeting those agencies, but it seems less likely, though not impossible.

Got it. No, I appreciate that. And just as it relates to Dice, I'm wondering as we look at your forecast for revenue for the year, what are the expectations around kind of the non-recurring portion of the business versus the recurring? And then just related to that with kind of the new Dice story coming out, what exactly is kind of different about what you guys are introducing there versus what you've done historically?

I'll take the first part of that, Kevin. So, from a recurring and non-recurring business, so that's basically our annual packages on the recurring side. We don't -- we're not anticipating improvement in that transactional or non-recurring business in 2025. If the tech recruiting market really picks up, as we mentioned, then do we have the opportunity for some upside there, but it's -- at this point, we're not seeing it. And so we're going to project out that we're similar to how we were in 2024. And just for purposes of kind of what that relates, it's about 90% recurring and less than 10% non-recurring and we project that into 2025 as well.

Yes. And Kevin, I'll follow-up by saying that we believe that those transactional products are generally associated with hiring urgency. So, if we do see those transactional products become more needed by our customer base, that would be a very good thing because it would say that the market is tightening significantly and people are having a harder time finding tech talent. The second part of your question is a good one. What are we envisioning for Dice's -- its future and how we want to reestablish its brand? We are embracing this idea of a new Dice web store. It's been a development that's been underway for at least a year, probably more like a year and a half when you think about the planning period. And it will embrace what's called product-led growth. It will allow individual recruiters to, for example, buy a subscription package on their own using a credit card. They'll be able to, in the future, buy a number of profile views if they have a real problematic position and they're trying to find more résumés to fulfill that position. And the hope is that by getting a taste of Dice, they'll convince their HR leader that they need a larger subscription for the whole team. So, it's kind of a way of getting a foot in the door for new organizations that we can't necessarily talk to every day just because we have limited sales capacity.

Yes, makes sense. And then just lastly for me, as we think about kind of the marketing spend for this year, is it expected to be pretty steady throughout the year or are there certain periods where you expect it to be more pronounced than others?

Yes. So, I could tell you that marketing spend is seasonal in a sense. We know that recruiters and candidates are taking vacations in the summertime. They're also enjoying the holidays in November and December. And we tailor the spend in those two periods downward as a result because we're just not going to see the eyeballs that we expected through our regular digital marketing campaign effort.

Got it. That's all for me. Good luck as you guys make your way through this year.

Well, I really appreciate it, Kevin. Thank you.

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, Gary and thank you for all of you 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 wonderful day and week.

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