DHI (DHX) 1 Nov 232023 Q3 Earnings call transcript

Good afternoon, everyone, and welcome to the DHI Group Incorporated Third Quarter 2023 Financial Results Conference Call [Operator Instructions]. Also note today's event is being recorded.At this time, I'd like to turn the floor over to Todd Kehrli of MKR Investor Relations. Sir, please go ahead.

Thank you, operator. Good afternoon, and welcome to DHI Group's 2023 third quarter earnings conference call. I'd call SVP CEO, the of to and today's Julie Zeile; call on a Art DHI's cover Roby, FP&A.Before Julie, me are items. Art DHI's and over few With quick to like I turn a This its XXXX release third afternoon press announcing financial quarter DHI results. issued the website dhigroupinc.com. is release The company's available on at on want call being broadcast on all remind the and parties, be during is management live archived for today's website.I risks This will statements webcast Investor uncertainties. the the everyone that page make Relations interested to that over the company's and will call, internet involve forward-looking Please note call the today's statements that on within for except meaning of information, securities statements constitute federal forward-looking historical may the the laws. these views and actual financial events forward-looking current discussed These from other concerning differ include the differ future are cause any to and XX-Q and uncertainties and forward-looking outcomes performance, from statements filings could company's statements results Form and and results may on Commission. the statements.Factors Exchange the reports risks in materially Securities and DHI actual forward-looking XX-K that in uncertainties with subject and risks periodic reflect contained management's update prepared call, in any EBITDA, accordance with to not or obligation statements.Lastly, GAAP. during margin, forward-looking adjusted today's EBITDA adjusted DHI no financial measures, undertakes share per management are that to referring be adjusted will revise specific including diluted earnings US Investor directly Zeile, I DHI to website call earnings most our you Art measures CEO Information in find release, which non-GAAP that, of now over comparable measures Group. dhigroupinc.com about copy can are at section.With the and of reconciliations of in to the a the GAAP turn available our these Relations on Art?

to we everyone, our earnings financial future and Todd. and third as appreciate We performance our you, quarter Thank outlook. discuss your time today afternoon, XXXX Good call. conference welcome

the uncertainty to in most tech is that the market. plans. First, state no hiring suppress let's There doubt continues economy discuss of the the ongoing

to analysis CompTIA's numbers coincided of indicates positions of of quarter XXX,XXX year-to-date September, net reduction of postings tech with than third positions significantly end and the weigh XXXX.This XXX,XXX the actual for a in lower period pre-pandemic decline average. compared in with the a workforce expansion the of in As [ tech ] economy, previous job same year the the tech across

this The that CEOs of released have downturn While segment most STEM McKinsey for because a platforms ago, from question need that start hiring AI continues accelerate top a remains X% turnaround the forecast and do all is, The our demand and and a recession that the Generative will workers in they Global a our who for weeks on we of of long-term next a recent just priority. predicts the year.We the adding a tech July, will staffing there jobs will Institute on with focused that confidence will at X% be and believe contraction industry sense to confirms will Analysts' few will impact AI is investment in rate in annual more we expansion a In this will collective secular Industry is this trend they This hiring this past in our past to workers a XX% economy. and are with revenue so. consistent investment impact the digitizing grow occur? AI a to theme businesses technology tech return United of year growth their year as U.S. which U.S. see Staffing believes predicted when workforce IT survey we XXXX.McKinsey initiatives, believe that that to say States. actually scenario, KPMG's it study the industries technologists the grow XX% be CEO implementing to XXXX for year bookings, high released

revenue X% revenue is business That increased year-over-year. have manner, staffing large Dice was quarter. third year-over-a which firms, improve scrutiny. offerings we one-time me we new significantly bookings hire ClearanceJobs, result pipeline X% from XX%. million for to continue their X.X Our our offerings, for the our industry by up the environment by and a Dice one-time over to to are subscription margin.Now well necessary X% return, total wait provide attract enterprises dual The best said revenue renewals will of and a job quarter, transactional as let hiring adjusted during with quarters, efficient our and our in lower decrease X revenue go-to-market while and our quarter dig in of excluding year. reflection during our technologists and teams product find, more new performance year-over-year continue doing increased openings and recruiting In to the uncertain see decreased the leading we of faced smaller the engine several transactional revenue, candidate economic lower our in the volume the government and that for tools profiles.While EBITDA recurring intense tech Dice that, significantly so the total evidenced business agencies declined profitable more revenue time.Having past all into while as as CJ revenue, was

laser-focused needs we business include the consulting, industries roadmaps to However, by likely on be Those to financial remain with less right healthcare, significant are list, verticals services, new because now, aerospace, education. economy. impacted technology those hiring and their the tech

group, for Fortune to clients staffing vertical, CJ also new as as new the XXX well resources the shift where year-over-year. and Cornell it University recruiting Idaho several business National to Hogan team.They several Lovells clients law X% launched Dice ClearanceJobs this secured includes Laboratory. quarter, quarter on focus continue including -- Engineering pilots increased are bookings which the companies. with We business the buying, new piloted

in was payment to behind third to quarter, delaying and government the a of the contractors.In in implied with reengage CJ last mentioned affected negotiations threat and more ceiling quarter, see we we the significant contractors government us. issue manner debt its agencies this military expected to by As start QX

However, of activity worried payments suspension the shutdown. their potential government shutdown during a as contractors looming about suppressed the

a than was Technical this, Security Information As fiscal expect we expected. the our quarter for volume The rates quarter. third new during Systems, Global professionals revenue CJ impact in budget defense account less of tech renewal and difficult secured and corresponding impacted Despite cleared the Orbital.We this fill XXXX the them.Moving Loft our to demand result, on positively year the management. including bookings to several projects CJ environment government economic the larger growth clients quarter Corporation to

were and quarter, and For respectively. XXX%, for rates renewal XX%, the Dice CJ respectively. XX% Retention our rates for Dice revenue and were quarter and ClearanceJobs the XX%

these last of a difficult last and during impacted of I of clients pattern third of job renewal year consumption quarters comparison ran the tech out and lower which mentioned postings, quarter, created As consistent to a are to which our we seeing for top-up has their metrics.This number our with return second profile views customers a many in our rates. had year, subscriptions

larger and more in concentrated with impacted was previous attrition be our accounts year less quarters, clients been with continues spend $XX,XXX environment to than customer have than smaller by that than onto notably the earnings. a macroeconomic but Our larger us.Moving

quarter, our from a In improved which team was that announced our up reduction full and benefit saw third organizational adjusted structure year, the XX% a restructuring we in this which delivered EBITDA operating we quarter, third XX% earlier a streamlined ago. XX% year the the significantly the we of During included workforce margins. margin,

have While right restructuring it more do profitable reduce expected to the always we cost headcount, manner.The capitalize talent to that of us in generate place is is annual on to opportunity difficult of the and are to efficient million. $XX savings million a approximately confident to ahead $X in a and decision so we

strengthening to our our third better the offerings leading market industry to quarter, large we penetrate During product continue on opportunities. focus

Dice, the we and profiles technologists the through can through those respective form it helps postings. with For candidates, each Connections their relevant their Technologist current a attract right of person easier recruiters list release network other recruiters pipeline their see connections to future a connections and with for Dice dashboard.Connecting now and making build ]. [ announced of of

released follow has Dice This CJ is innovation may of ago as already and an been several to last feature a show you with our a ability they Dice Following feature formal quarters over months. a new excellent the of process. of They application allows and third the example deployment. used wave in fast to hundreds times the of quarter, thousands use and with through a engage close Interest. feature interest This a that Expressed hand candidate their a a called also experience, if of job likes the candidate.As for announced the CJ recall, without going recruiter testbed this directly couple

and Expressed after participate Mobile App new Interest to that feature This and Candidate the several network. success times on is for the available have same for in represents download on mobile first its is a channel now the It of native expect cleared thousands store. Apple platform.For comes app CJ's already the been years of X.X app development. has ClearanceJobs, candidates downloaded engagement our We Dice

career most What that to that in more XXXX. is Financial positions.Until is determined there to and addition businesses DHI demand solved announce more responsibilities next We're M&A thrilled have team secular Leeby the week, more than XXth workers earlier business taking investment earnings companies varying a tools named is industries announced for the respected, strategy to by products DHI expect summary, Top that including our results a and Newsweek's for improving focus trend XXX were tax, of in short-term, have have times during employees. increased entire and companies also our from and DHI sales right the then, environment us tech Officer. to us she prestigious than X named efficient Loved their our introducing across with It operations, her call forward economic appreciated. a difficult versatile to guidance. XXX,XXX in And enable any quarter, and will ranked set on the treasury challenges and take Workplaces roles. proud and to turn testament improves, of me also FP&A, our this the direct remains the the and financials was Raime profitable we on employees And are may surveying inspired and for as in in more we on find we'll our Group look will Chief so Raime but additional their impressed technology The open let professionals list for then United the as new to third start list was we States. where list.Lastly, responsibility million with through We in early over to and our hire manner.On we economy created execution to in where companies her in XX her size while workplace which Most from functions, our technology operations, you been the initiatives, Julie, her have. continue continue the long-term overall.The to note, doing Julie? for employees financial that multitude who you feel of about as DHI take all skill the recognizes workforces attract, questions after impacting call.In a December, adding this tough

Thank Art, everyone. you, afternoon, good and

X% reported results financial Dice X% total the was Total down, XX% our year-over-year. through the a year-over-year for million $XX.X you We sequential revenue basis. of and on take customers, which down $XX.X is quarter X% $XX.X down for $XX.X quarter. million, bookings were me both million, year-over-year.Dice Let was million, from quarter quarter ended was down and and X,XXX We year-over-year. which bookings which the down XX% X% recruitment down package with down XX% revenue sequentially last Dice year-over-year. were

$XX.X for up retention the from and average was basis CJ's X% Dice quarter XX% revenue $XX.X were million, with XX%. a or was recurring million, renewal year-over-year. customers, ended $XX,XXX. on contracts.For flat Dice CJ sequentially We recruitment to and which rate revenue package X% ClearanceJobs per X% X% annual X,XXX up third of down was X% sequential Bookings rate our was recruitment quarter, multi-year our year-over-year. Our and the annual XX% up and year-over-year. and was package Approximately, comes sequentially, year-over-year XX% revenue Dice up customer is revenue

last from over Our XX% CJ's customer package average of quarter revenue X% per annual revenue up recruitment year-over-year CJ $XX,XXX.Approximately XX% up annual recurring contracts. and was and is to comes

rate renewal to rate the rate CJ's For in CJ's continued CJ's the operating expenses. rate quarter, was outstanding XX% up of retention demonstrates revenue recruitment retention CJ delivers sequentially. and renewal value cleared and professional.Turning strong the at both rate The revenue retention was were XXX%.

were million expenses quarter quarter. $XX.X ago million when Third the to $XX.X operating to year down in compared X%

restructuring includes in quarter This $XXX,XXX charges.

interest full XX%, and generate Our included annual approximately recognize gain cost $X third sold associated major a quarter a reduced the operating million we of million our $X.X to of expenses XX% with reduction from quarter by reflect approximately a ownership the a of interest for which restructuring, our in $XX million.During savings is ownership savings of cost and workforce our to of a quarter, to expected portion $XXX,XXX, which eFinancialCareers XX%.

$X.X before we For on income $XXX,XXX the had taxes income of tax quarter, of expense million.

impairment executive the compensation normal of XX% expected investment.We rate $X.X evaluation rate primarily $X Our recorded million the of related income on deduction net an allowance to diluted tax or for from to per share. limitations and of quarter due differed the our

had to year the XX% X per share quarter, in to to cash a $X.X the from was outstanding period. From to the loss net prior from was $XX quarter $X.X end and diluted from Diluted XX% the the $X compared outstanding $XXX,XXX prior Adjusted ago.Operating in the $X.X year were of compared quarter. operations million, due total quarter. the a at margin Adjusted million the to the second was $X.X for diluted $X.X $X.X a flow of the debt year XX.X in in under for economic the million and we or in of perspective, at reduction prior we million $X.X of liquidity EBITDA $X.X XX.X quarter of in shares quarter. $XX the a for million the quarter the of quarter compared for year cash flow million margin prior The our for severance quarter decreased of debt or quarter, paid uncertain third lower earnings share. end quarter third revolver.Total the reported $XXX,XXX million compared increased million For $XXX bookings per the million million million cash year third current XX% environment. to

the business. leverage the Deferred target to of the was quarter million, the Xx year. continue down We $XX.X at approximately for from third of quarter revenue X% last end

backlog was million of quarter third the up from Our quarter was in total the of third million, at of the committed an of is was million end XX% million contract backlog, the $XX.X $X.X the million prior more XX or at end X% increase $XX.X increase year-over-year. $XXX.X quarter, backlog end of quarter, at X% the Long-term which from year. the the or or was that last end of revenue to the an be recognized months $X.X year.Short-term

programs. quarter, the we purchase During share under not buyback shares did our

have to under at purchased of for $XXX,XXX ].Year-to-date we program. $X.XX settings million average XXX,XXX [ However, approximately repurchase we $XX.X share shares an related per price million repurchased our for stock employee shares X.X

runs remained in began the program quarter. of million $XX the at at current Of million the the through -- our authorized, first $XX XXXX. program million end under the the reminder, $X.X a February As end quarter and

to As the Art current team. mentioned, our business continues economic impact uncertainty new

and As paying such, we year. to our EBITDA for range and down expect in flow XXXX of to we as now continue of we closely grow the to expenses total cash will environment, X% focus manage balance revenue year-over-year.Given generation full-year our this the flat on current debt the

industries for quarter, on which XX%.To across profitable their a as fourth execution Art. investment our so while drive increased to industry environment and current in with the call improving companies our offerings margins the impacting turn our the technology of we For economy initiatives, me let EBITDA expect is will demand meantime, we we doing and hiring and growth, continue approximately up, while the wrap In adjusted expect efficient to the are go-to-market in leading more our products focused improves. services that, back manner.And all

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

comes B. from first today Our Zach Cummins Instructions] question from [Operator Riley.

a Ethan to is can further in the there? Dice greatest Cummins. for in Widell are in the Zach uptick This experiencing To little speak the with And what quarter? pressure you start, churn areas calling

at of to we're that I are seeing more customers generally and I've quarters they're leave apt just elevated what is the of would us, profile say systemically same a those churn churn that examined that rate. smaller pattern we've And firms. staffing in past described our more

are XX that in of condition. so, at seeing, between an And firms that's I risk what uncertain anywhere this at we're pace. They firms but higher that as And staffing employees. think are economic and a say, most these the are X kind of would

what hiring then what's the business current And managers the focus And environment? in for new tech from you are the hearing team?

hiring the But interesting right X at end thing that now, current we States it general, XXXX but a that would job a more of we've now, will there's generally it. AI tech implement downshift understand I month. of acknowledgment is we now AI order environment, again, for the say models down say, fundamentally that this United published And XXX,XXX hiring terms of look postings. to dramatically X tech had acknowledged number slowed the environment pretty of right as the tech other Generative monthly and and has in the that XXX,XXX workers in solutions. demand to that So in need non-aberrational postings. pre-pandemic economy. right most I'd for XXX,XXX to Generative reshape after across longer-term days say job there seen let's see about business widespread that's or -- significant preparing situation a In year month, is our are the We acknowledges any report in like days on the horizon September, would the job specifically shows, business tech postings.So -- a about CompTIA particular will normal in executives we tech of

squeeze third And one. a in then I if can

shutdown? Of course, potential you'll what that the running the are near-term? the from you ClearanceJobs expectations uncertainties impact do anticipate government see a an for in And

third The in see over answer government cycle definitely ClearanceJobs the November.We shutdown.The They speaking, middle And of that radically, contractors we that the slow thousands generally XX-plus especially new It literally go fear into of that's that point that know we question in that there change officers revenue up, of ultimately establishing there contract government, anticipate officers closer all tens government that if to paid. of that conservatism date. get last of the thing other we matter affect will is terms happening managing to years. furloughed. are quarter be can get we're think associated contracts or same for historically a the and will do still that first contract do the -- their dramatically contracts the of paid the pretty military getting continue for we flow delayed it in and happens cash would is thing they're has I for but would the did that going caught grow, the government with to they double-digit sales say is are is see the the the done we to range. unless and to closer as that shutdown that politics -- probably part does

shutdown. contracts into would that the So impairment the That's can't have we projects new to other see launch that can't you amendments existing essentially if a government you scenario. goes in any and

from Eric question Street. comes Martin from next June Lake Our

expectation contraction what's economic and growth XX% the X% the the What's when headwinds then just Yes, your characterized this I to bookings CJ, rate? your know And recall of on up sort Dice of I seem DHI. is QX? the wanted I for you would And on caught to QX the versus CJ year-over-year rate of curious QX. was to bookings to growth disappointing. Dice or of slightly QX in focus XXXX expectation

we're new activity. going the Dice. for we are, customer And renewal that to bookings of see see but combination also say course, decline rate, rates contracts, to continue business a negative of a I'd meaning Well, a for that bookings existing

we specifically business customers. are time smaller still shaking I business new think rates because, renewal are firms an new And around recruiting commercial for impairment staffing the And you'd that's mark base. seeing XX% to the out recruiting bookings.We still our Dice we're of an our staffing going improvement, customer over accounts' those slightly are that from again, say, course some team. to hover still seeing the of with

CJ what extended last to because Dice least are shutdown as paid, So qualitative fact specifically, jury -- to I or or to short going waiting a give not a pretty they're about at in QX I an going where shutdown, be looming saw mechanism QX whether that is is happened and hope one. for Ethan, of that decline month I described the that that we this whether in my sense do get is going from the talked scenario think year there's of we last bookings to or least activity expect different. you still and is we down just anytime a answer who not to contractor slowed at dramatically in there it the that there the be that. the that I the exists, a out, government contractors last see government happens.And behind to caller, year

shutdown. CJ business but continuing still find those need ClearanceJobs, of is absolutely that the I their forward the believe So such vital folks with new that are a bookings affected platforms, tool existing to government professionals when is are even there cleared prospect that they

on -- QX will something I I we in to me guess got is to worse maybe too comfortable versus trend. -- bookings I expect -- that kind my of sense get point any on. guess there hoping it's putting things not was you're from You a that -- don't But troughing halfway the QX? of there fine a

we're performance through bit saw feel qualitatively, in say I little going right now. would I a QX, than bookings trough QX like the worse but we

Most -- the that pickup is, our decrease termination why in we're but course, of not biggest I of one in year activity. our either bring think not I seeing a or is seeing And their seasonality. have the QX that's of QX biggest reason about contracts talk last in customers for dates activity, QX of of of bookings. year we're this I a significant the quarters to X renewable January. our point out wanted And December why of versus

I guess the ARPU XX%. on the of contracts, then Dice up of up increase? is kind CJ that about driven much price X% seat about versus and How

say a out spend probably less annual would these I of count. increase hard But are that the ones are shaking tree is our dropping price would entirely. that, currently that that pretty The than in stable say the less in we're ones that almost $XX,XXX also customer customers. are I

that also -- ARPU average terms look so, we And makes figure. to the of get in we difference that mechanically how

choosing XX% are where a… for is renew, contracts It's the seats? if don't fewer it to renew Dice that it Or for not they then going? alternative they [indiscernible]? of are the now just And What's

are cohort again, very, renewing found, the not Dice we've this small What firms. licenses, are very their and customers is of they that effectively

that improve. demand of past. generally in for the their gone business out either they've as not suspended the getting on expense essentially They're the lot or orders certain staff [ to side had their they've waiting customers So environment to ] structure a they've they're of

XX% work And on EBITDA then it's -- the margin. the adjusted lastly, good

the imply on is for an the cuts? given margin adjusted also XX% or stable of Does Or EBITDA further restructuring for cost any kind outlook structure the -- You've relatively that now? QX.

do The almost this digital We campaign changes -- make to the time. cost marketing daily. structure in point at is ability stable have literally marketing

ability we that here that, where moving in forward. say use so significant to have a our we want would from expense to I it be structure But as lever. And is general,

your when getting forward she on look in I with to starts CFO Congrats her candidate, December. connecting

And Liu comes from our Kevin & next question K. from Company. Liu

here. the with trajectory bookings growth to wanted I start Dice just

been top-up wouldn't wondering bookings? up the that periods, about impact as big drag of renewal and talked naturally you of over your here. stronger if topping past typical And the can quarters You of into clients kind move X the abate then of that's quantify since way kind you kind then? generally a Any is impact more be how on

I think that's going looking Julie ask the that's to a respond these She's and I'm deep trends. to great at one been that. question, and to hit

to you speak that? Julie, do So to want

Yes.

So renewal was ] the rates up recruiting firms. impacted customers the quarter, customers staffing was our our But was points topping impacted and drag a so to it [ our our talking again, renewal few rate smaller also larger our probably rate. percentage before, by of by Art a as for overall on returning. each That not -- renewal was

more work usual kind frames, go the do And Or those kind through it of time since QX renewal to as and away? to does that typically just are -- QX relates impact period, of you guys have headwind still? top-up that

year. and goes say the -- quarter That headwind would that third of up -- I Yes. customers we third away. topping that, saw second in last more the of

normalized the demand that today. is that contracts so seeing to we And as customers go our and we're forward have behind their moving us

[ for those and And funnel sort look declines your as top qualified as marketing Dice Or then you back marketing your well you kind at pair and seen as continued both just of ClearanceJobs, have any on investments? of of you just of the ] to some leads, there the have grow?

the job in part coincident general. the I'd see I of of mix. tech qualified seen for demand accounts less steady say postings would pretty say commercial with state leads although marketing we've lower we a leads, as that that marketing qualified

that think on risk I that recruiting leads, view business year with both that, but say the and is in And qualified because leads means to that come It and have decided recruiting directly. we we've marketing amount.And proportionately, consistent in, service, them. a use this all staffing seen a that to teams, means staff So lot more the come the of talking companies person their Dice total less accounts leads same the we're is not about when it that payroll staffing commercial recruiting the more new frequently team. the

kind mentioned in year. SIA positive to you of kind Art, And growth for forecast return IT the staffing of next a

the I As look still some that whether and to to of and account you about elsewhere or renew start forecast the want know early team out, commercial investments, of it's would are you you kind here, either in in guys the how thinking business?

Yes.

that is forecast I sorry, they But more adjusted ball so don't have it does. for XXXX. I'm like right would positive XXXX think crystal -- upward we their any anybody have now, say I that obviously, than to the -- else see

Now really was team, for last growth accounts general. with I for the a for our a driver in that us big view growth said, big and driver commercial that as future year

I and think come would rate to I Dice that we growth for to what be commercial economic once normal accounts see demand back interest consider we a So improve.

And today's ending be for we'll I'd to any turn the management like ladies to question-and-answer floor and gentlemen, with session. remarks. over back that, closing

you, today. you thank Well, everyone Jamie, for and joining us for -- thank

day. in have everyone, Kehrli, DHI about speak company Group, reach please would meeting. will and he out or your for help Todd a As always, interest to you like management, have our if a with great Thanks, any questions and to arrange

conference Ladies We today's call for and presentation. and conclude joining. you gentlemen, thank we'll with that,

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