Good day, and welcome to the DHI Group, Inc. Second Quarter 2025 Financial Results Conference Call. Please. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Todd Kehrli with PaondaleWilkinson. Please go ahead, sir.

Thank you, operator. Good afternoon, and welcome to DHI Group's Second Quarter Earnings Conference Call for 2025. Joining me today are DHI's CEO, Art Zeile; and CFO, Greg Schippers. Before I hand the call over to Art, I'd like to address a few quick items. This afternoon, DHI issued a press release announcing its financial results for the second quarter of 2025. 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 described 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, on today's call, management will reference specific financial measures, including adjusted EBITDA, adjusted EBITDA margin, free cash flow and non-GAAP earnings per share, which are not prepared in accordance with U.S. GAAP. Information regarding these non-GAAP measures and reconciliations to the most directly comparable GAAP measures are available in our earnings release, which can be found again on our website at dhigroupinc.com in the Investor Relations section. I'll now turn the call over to Art Zeile, CEO of DHI Group.

Thank you, Todd. Good afternoon, everyone. Thank you for joining us today. I want to begin with a brief overview of DHI Group, who we are, the problems we solve and why our role is more important than ever in today's tech hiring environment. DHI Group owns ClearanceJobs and Dice, which are platforms for finding and engaging with top tech talent, including engineers, software developers, data scientists, cybersecurity experts and more. With over 9 million tech professional profiles on our 2 platforms, we use AI-powered tools and our proprietary skills algorithm to connect employers with the most qualified candidates for their job openings. Unlike generalist job boards, our platforms directly connect employers with highly skilled tech professionals based on each candidate's actual tech skills, making it faster and easier for employers to find the right talent for their specific needs. ClearanceJobs is the go-to platform for finding tech professionals with government security clearances. And Dice is our platform for finding non- cleared tech professionals. Trusted by recruiters who need to cut through the noise and hire top tech talent efficiently, ClearanceJobs and Dice are the secret weapon for smarter, faster tech hiring. Investors often make the mistake -- often mistake us for a staffing and recruiting firm, but we are an essential software tool used by employers and recruiters to find top tech talent for their open positions. Over 6,000 employers and staffing companies subscribe to our 2 SaaS platforms, generating over 90% recurring revenue for DHI. We are excited to add to our list of essential recruiter tools with the acquisition of AgileATS, which we announced this afternoon. AgileATS is the only applicant tracking system in the market designed specifically for the cleared recruiting environment. Unlike generic ATS solutions, it was engineered from the ground up to meet the…

Thank you, Art, and good afternoon, everyone. Jumping right in, we reported total revenue of $32.0 million, which was down 11% on a year-over-year basis and roughly flat compared to the first quarter. Total bookings for the quarter were $27.1 million, down 10% year-over-year. Our total recurring revenue was down 7% compared to the prior year quarter and the bookings that drive our recurring revenue were down 10% for the quarter. ClearanceJobs' revenue was $13.6 million, up 1% year-over-year and up 2% sequentially. Bookings for CJ were $11.6 million, flat year-over-year. We ended the second quarter with 1,868 CJ recruitment package customers, which was down 7% on a year-over-year basis and down 1% 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 increased versus prior year. Also, as Art mentioned, CJ's new business teams were impacted by uncertainty surrounding the federal budget negotiations. Our average annual revenue per CJ recruitment package customer was up 7% year-over-year and up 1% sequentially to $26,000. Approximately 90% of CJ revenue is recurring and comes from annual or multiyear contracts. For the quarter, CJ's revenue renewal rate was 87% and CJ's retention rate was 103%. This solid retention rate demonstrates the continued value CJ delivers in the recruitment of cleared professionals. Dice revenue was $18.4 million, which was down 18% year-over-year and down 3% sequentially. Dice bookings were $15.6 million, down 16% year-over-year. We ended the quarter with 4,365 Dice recruitment package customers, which is down 3% from the last quarter and down 13% year-over-year. Dice revenue renewal rate was up sequentially to 75% for the quarter, and its retention rate was 102%, the highest point in 2 years. The reduction in customer count in Dice's…

Thanks, Greg. I want to thank all of our employees once again for their outstanding work this quarter. It is a pleasure to be part of such a great team. That said, we are happy to answer your questions.

And the first question will come from Zach Cummins with B. Riley Securities.

First question is really just around ClearanceJobs. I mean, can you talk about maybe a little bit of the bookings performance that we saw here in Q2 and the confidence that you see, whether that be just activity in the pipeline or just incremental updates you can give around confidence that bookings can return to growth here in the second half of the year?

Great question, Zach. And I think that the answer is that we did have a choppy second quarter for renewals as well as new business activity for CJ. And it was really a matter of the client psychology around the budget process as well as the after effects of Dodge. Doge was still in like a mode of looking at all government agencies even in the second quarter of this year. I'd have to say that everybody was on pins and needles to figure out whether or not we're going to have a budget that at one point was going to be 8% cost savings or a budget that we landed on, which is a $1.1 trillion budget. And as I reflected in my remarks, worth the equivalent of like 4 years of budget increase in one step. So everybody feels a lot more confident that the environment is much more stable. The psychology of fear and uncertainty is kind of past us at least once the budget was, in fact, approved.

Understood. And just building upon that a bit, I mean, can you speak to your acquisition of AgileATS -- kind of what hole does this plug in the ClearanceJobs platform? And how do you think about this in terms of maybe potentially accelerating either new customer acquisition or maybe even driving better retention and expansion within that existing base?

So great question. I appreciate you asking it. So an ATS, an Applicant Tracking System itself is a direct adjacency to what we do as a sourcing tool. Most of our larger customers have an ATS. Think of that as like SIMS or Greenhouse or Workday, and they are importing data from CJ into that Applicant Tracking System because the Applicant Tracking System is how they essentially schedule and manage their engagement with individual candidates. In this particular case, this is an Applicant Tracking System that was created by the founder of a cleared staffing company when he realized that none of the tools in the environment actually worked for cleared workers and they didn't work for a staffing modality. And he did it from the ground up. He did it in the course of about 4 years. It's gone through multiple evolutions. We're going to combine the 2 products. That's not to say that you have to buy the ATS when you buy CJ, but you can do so at your choice. We believe it is a natural extension for ClearanceJobs. As I indicated in my part of the script, we have an ideal candidate profile setup, and that is cleared companies that have between 10 and 250 FTEs. If you think about that, the ones that do not have an Applicant Tracking System today comprise about half of our clearance jobs total customer population. We think that the price point that it's selling at today is very achievable, which is $7,000 per subscription per year. So we feel very good about how we move forward with this in the future. It does have a number of different government compliance features that are built in so that if you are ever audited as a government contractor, you can immediately show them all of the compliance reports at the audit. It also has a toggle such that if you do not use the ATS for cleared workers, you don't see any of those compliance features. You don't see a field for clearance. And so it can be sold to Dice customers as well. And we fully intend to sell it through our Dice marketplace, which we intend to launch in the first quarter of 2026.

Got it. And just my final question is pivoting over to Dice. Just after all the restructuring actions and realizing that the current environment is still challenging on the tech hiring front, how do you think about just stabilizing that Dice business and maybe the potential time line as we think about continuing to refine that go-to-market motion and driving more consistent execution on that front? So the way that I think about it is that we need to see the demand environment stabilize and improve. We do believe that it has stabilized. As I indicated, if you looked at the track record of CompTIA open tech postings for the first half of this year, it's been kind of a flat lake. It's been around 210,000 open tech job postings month after month, which actually paradoxically may seem negative. But from our perspective, it means that it's stabilizing. There is a question that's still in the market about the overall health of the economy. I think that, that's holding us back a little bit. But we're seeing encouraging signs in the staffing recruiting consulting segment. And if you recall from past conversations, that's the majority of our customers by count and by revenue for Dice. And what I'm speaking to is that CompTIA does a forecast of the tech sector staffing revenue growth each year, and they believe that it's going to be flat or slightly positive this year. Robert Half just announced their revenue growth for their tech segment a couple of weeks back, and they indicated a 4% sequential growth in revenue compared to the first quarter of this year. And that's the first growth the first growth that they have seen since 2021 sequentially. Then the other 2 major staffing firms that have already announced, Kforce indicated a 1.4% sequential growth. That's the first growth that they have seen since the end of 2022. Then finally, Adecco, which is our largest customer for Dice, they announced a very positive quarter in terms of revenue growth for the Americas division. So we're starting to see green shoots. Now that's not a prediction. That's not a forecast. We're not trying to be over our skis at all. But staffing recruiting is the essential customer segment for Dice, and it feels like we've stabilized and there are signs of improvement.

The next question will come from Gary Prestopino with Barrington Research.

Art, you mentioned something about AI driving job postings growth. What percentage of job postings now have AI versus -- you mentioned a number or a percentage. I didn't quite catch it versus where it was a couple of years ago.

So great question. So the reference statistic that I gave was the number of Dice jobs that required one or more AI skills inside of the job posting itself. You know that the job posting has minimum requirements and the preferred requirements. So at the beginning of last year, about 10% of our job postings on Dice required at least one AI skill. As of June of this year, that percentage became 36%. A full 1/3 of the job postings on our site require AI skills. It's that big of a surge. Now I personally think that a lot of CEOs and CFOs are both encouraging AI adoption inside of their companies, but also taking a watchful look at the rest of their competitive environment to see what everybody else is doing. So we have this surge, but it's also an environment where even the question of what AI means to their particular businesses is playing out real time. But I do believe that we will see an ever-increasing number of job postings that require AI skills because the trend line is dramatic. And you can go to our July 2025 Dice jobs report, and you'll see the graph and it's up and to the right. I can't -- I don't see it plateauing.

Okay. And then shifting to AgileATS, a couple of questions here. First of all, did this company have any revenues to speak of?

Yes, although it's in the order of less than $1 million. And what we found is that they did not have a sales and marketing team. So think of it as the founder really focused on creating a solution for his own internal use and then selling it by word-of-mouth referral. And we believe that having the embedded 1,900 ClearanceJobs customers, most of which are fitting that ideal candidate profile, we will be the sales engine for the success of AgileATS for the future. And again, as I kind of mentioned in my last comment to Zach Cummins, -- we also have the ability to sell this into our Dice customer set as well. And we believe, nevertheless, that it should be integrated with ClearanceJobs because it is focused primarily on finding and managing a cleared professional recruitment process. But again, we can flip a switch and take off all of those compliance features that don't apply to folks that aren't in the government, GovCon, GovTech space.

Okay. Will this in the back half of the year, diminish CJ's EBITDA margins given that there's minimal revenue? I'd assume there's got to be some expenses associated with it. So you got to get some revenue up and running here. Is that kind of a safe assumption to make?

Gary, this is Greg. Good talking with you. There really won't be a meaningful amount of revenue in the second half of the year. It will start to flow in more in 2026. But that said, the purchase price is one thing, but that isn't going to impact our margin from an EBITDA perspective. And there won't be a meaningful amount of costs associated with it either. So I wouldn't expect anything really to change the trajectory of CJ's margin for the second half of the year. -- over time, we do expect it to be incremental and accretive to CJ, though.

Right. So it's basically a SaaS software platform, right?

Yes. Yes. It's really a technology acquisition for the actual technology and software.

Okay. And you said it was like something like $7,000 per seat? Or do you just sell one license to an entire company and they use it across the spectrum across the enterprise?

So we do sell it by the seat and the $7,000 per year reference price was the average of what they were selling to date across their existing customer base. And so we just want to use that as a simple average, but you can actually even go on to the site itself. The pricing is freely available to look at in terms of what it costs per seat or a bundle of seats. So I would say we are anticipating that we can continue forward at least selling each individual deal at the $7,000 per year level.

Okay. And then if you could, because I'm a little fuzzy on what this thing does. Could you just kind of give us a very simple real-life explanation as to how this works with your clients, what it does for your clients?

Yes. I will tell you that it's almost like a CRM but in use by a recruiter. So think of it as a number of columns. And in each of those columns, you're tracking candidates for a particular job posting that you have. The first column says identified candidate. The second column says first e-mail outreach. The third column says first contact with the candidate. So you're moving candidates along in a pipeline so that they get to the end result of saying, yes, I'm ready to take your offer letter. But it literally is a pipeline for recruiters.

Okay. That helps because I was just trying to -- I was having difficulty trying to understand what the functionality was here.

Absolutely, Gary. app.

Your next question will come from Kevin Liu with K. Liu & Company LLC.

I wanted to start with CJ and kind of the selling environment as you see it moving forward. With obviously, the budget increase in place, do you think you could start to see benefits as early as Q3 here? Or would you wait until kind of the next government fiscal year to really start to see some acceleration on the new bookings front?

So that's a great question. And I'd say that we should be able to see an improvement in even Q3 because it will change the mentality of the customers. in the sense that they have more confidence of their future. Now we know that our best bet of getting new ClearanceJobs customers is if the system actually takes that budget and essentially puts it to bid and then announces awards. In fact, in that particular case, when a new award is delivered to a contractor, they're very urgently looking for a number of cleared workforce professionals. We see them literally asking for tens, dozens, hundreds of cleared professionals at the same time because many of these contracts are built on a time and material basis, meaning that you don't really -- you don't have the opportunity to build the government until you have the people do the work. So you want the people in the seat to do the work. That's the real I would say, strongest benefit of the ClearanceJobs platform. But I think for existing customers, they will feel more confident even moving into Q3 and Q4 because this debate as to where the budget would land is behind us.

Understood. That's helpful. And then just on the Dice side of things, you guys touched on the 2 large contracts that went away. Was that the kind of main driver for ARPU being down year-over-year for Dice? Or have you seen other instances where customers are either kind of downsizing engagements or other sorts of impacts to the average revenue per customer number?

Yes. You're right. That was -- that is a big driver, 2 distinct customers. The renewal rate jumped up a bit in the quarter. So that is a positive and the retention rate was pretty good for the customers that did stay at 102% for the quarter. So there are some positive signs, and Art mentioned, I think, a little momentum with our staffing and recruiting businesses and the consulting businesses. So the bigger driver was definitely those 2 customers.

Got it. And then maybe just lastly on Dice as well. You guys mentioned kind of the new platform being launched. Can you just talk about the timing for when that work was completed or is expected to be completed and kind of what you expect the benefits to be over the longer term?

Sure. That's a great question. Like I said in my portion of the remarks, it's called digital experience. We've been working on it for 2 years with multiple teams. It allows for individual recruiters or companies to go to the Dice site and literally put in a credit card and start using Dice immediately. Now I will tell you that we launched this approximately a week ago, and it is now being launched in kind of a traditional product fashion where 10% of the page views get to see this capability, then it's going to move up to 20%, 50% and then 100%. So you're not going to be able to see it 100% of the time for a couple of weeks. And we're still essentially getting the feedback from customers that use the site. But we think it's a revolutionary capability for Dice. Dice has always been a product that you had to go to a salesperson to get any aspect of the value proposition of Dice. So we are now allowing people to buy Dice from scratch using a credit card, like I said, going straight to the site, just like a lot of modern SaaS experiences. And we are moving approximately 90% of our customers to this platform over the course of the second half of the year. So once they get there, they're going to be able to renew themselves. They're going to be able to upsell themselves because they're going to see all the other products in the product catalog. And they're also going to be triggered with certain opportunities. Like, for example, if you see that a job has been in place for 45 days, meaning that you're having a difficult time finding the right candidates for that job. We're going to say, try a boost. And a boost for us is the same thing as a sponsored ad in Google's nomenclature. So you essentially go to the top of the sort order for searches when candidates make a search for that particular title or that particular skill set. So we're going to be able to use the platform in a much more thoughtful way to create upsell opportunities.

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

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, myself, Greg, anybody else, please reach out to Todd Kehrli, and he will assist in arranging a meeting. Thank you, and have yourself a great day.

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