DHI Group, Inc.

Good afternoon and welcome to the DHI Group first quarter 2023 financial results conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Todd Curley with MKR Investor Relations. Please go ahead.

Thank you, Operator, and good afternoon, everyone, and welcome to DHI Group's 2023 First Quarter Earnings Conference Call. With me on today's call are DHI's CEO, Art Zaley, and CFO, Kevin Bostick. 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 2023 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 they're 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, and adjusted diluted earnings per share that are not prepared in accordance with U.S. GAAP. Information about and reconciliations 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 over to Art Zailey, CEO of DHI Group.

Thank you, Todd. Good afternoon, everyone, and welcome to our 2023 first quarter earnings conference call. Thank you for joining us today. We are pleased to report that we delivered 12% revenue growth in the first quarter as employers continue to use our subscription-based offering to find, attract, engage, and hire the highest quality tech professionals. There continues to be a significant demand for technologists, even in this difficult environment, as companies continue to invest in technology initiatives. During the first quarter, employers in the United States posted job openings for approximately 813,000 tech jobs, and the tech unemployment rate remained near all-time lows at 2.3% in April, with approximately two job openings for every one tech worker looking for employment. Our two subscription-based offerings, Dice and Clearance Jobs, are career marketplaces that are focused on serving the technology job market and feature candidate profiles that incorporate technology-specific skills. Subscribers, which are either staffing and recruiting firms, large enterprises, or government agencies, use our proprietary tech skills mapping taxonomy and search algorithms to find the perfect match for their job posting from our 7.4 million technologist profiles. Now let me dig into the performance of our two brands during the first quarter. Starting with Dice, revenue for the quarter increased 9% year over year. Given the uncertainty inherent in today's economy, we refined our sales strategy as we entered the new year. First, we focused on existing client relationships. Many of our clients have been with us for over 10 years. They know our value proposition. Last year, we developed a customer health score to track multiple engagement KPIs and ensure that clients are seeing the maximum value from our platforms. If a client health score drops, we dive in to diagnose the problem. As a result, our overall Dice revenue renewal and retention rates remain solid at 92% and 105% respectively. The attrition we have seen continues to be concentrated on clients with less than $10,000 in annual spend. These are generally smaller staffing and recruiting firms. The second shift was to be laser focused in our new business team sales targeting efforts. As I like to say to our team, we need to sell to the customers that are buying. We use the Lightcast job analysis data feed to understand in real time which firms have significant tech hiring needs. Four industries are continuing to hire technologists aggressively, even in a recessionary environment. Aerospace defense, business consulting, finance banking, and healthcare. We have asked our new business teams to focus in on these specific verticals. For the quarter, we brought on new clients like Edward Jones, Bechtel, and the Department of Transportation. The third refinement has been to sell to larger, more stable customers. We know that larger clients can ride out a tough economy much more successfully than smaller ones. The positive results of this strategy are seen in our DICE annual contract value, increasing again this quarter by 11% compared to Q1 of 2022. This is a challenging economic environment, but we are building a better go-to-market strategy and ultimately a more valuable company through the changes we have made. Dice bookings grew at 2% year over year during the quarter. Because we maintained a healthy revenue renewal rate, this metric is a reflection of new business sales cycles continuing to be longer than what we'd normally experience in a non-recessionary economy. This makes sense as all CFOs are scrutinizing new vendor spend much more so than they did in the years past. Dice commercial accounts continues to be our most significant growth opportunity. with over 100,000 companies in the United States meeting our ideal customer criteria. The staffing and recruiting industry continues to be a significant growth opportunity for Dice as well, with over 18,000 staffing and recruiting firms operating in the United States. The latest staffing industry analyst forecast for tech staffing spend indicates 5% growth this year, down from last year, but still more than the pre-pandemic annual growth rate. Now let's turn our attention to clearance jobs, where we have two substantial growth opportunities that are less impacted by the current state of the economy. The first is the government contractor market. We currently have approximately 2,000 contractor clients, but we know that over 10,000 cleared employers can use our services. The second growth opportunity is selling clearance jobs subscription offerings directly to the multitude of US government agencies that need highly qualified technologists and are competing against the private sector for these candidates. During the first quarter, our CJ revenue increased 21% year over year, and our revenue renewal and retention rates remain strong at 95% and 109% respectively. We had another solid quarter for bookings, which grew 15% year over year, adding several new clients, including Sienna Corporation, Jaguar Defense, and the Electric Power Research Institute. Now let me quickly touch on what we're doing to drive increased adoption of our two brands. During the quarter, we launched a new feature on Dice called Invite to Apply. With this new feature, recruiters can signal to candidates that they have the right skills for a particular job. We also launched a new feature on Dice called Candidate Match Score. This algorithm looks at a candidate's skills and experience and grades the candidate for the job they are considering. The grading mechanism gives candidates more confidence to apply to a job, and we have already seen our apply rates jump as a result. In a tight labor market, we believe these types of features can improve a recruiter's ability to find and attract the highest quality tech talent. Given the explosion of interest in generative AI, We too started experimenting with ChatGPT to help candidates write a personalized cover letter as part of their application process. DHI Group has implemented artificial intelligence in our platforms for over a decade. In fact, our core search algorithms are based on AI models that we have patented in the US. We also continue to focus on expanding our technologist community through our brand advertising campaigns. These campaigns drove roughly 48,000 new Dice candidate registrations each month during the quarter. As a result, we now have about 6 million Dice members, and they made 1.7 million visits each month to the site. Adding tech professionals to our marketplaces attracts more employers, which in turn makes our platforms more valuable to tech professionals, creating a virtuous circle. We also continue to deliver product innovation and clearance jobs during the first quarter, launching a new feature that allows candidates to raise their hand and express interest in a position. This action is well short of completing an entire application, but is a key signal for recruiters building their candidate pipeline for any job search. Despite being launched late in the quarter, candidates have already used this new feature tens of thousands of times. and we have received very positive feedback from recruiters who are benefiting from it. During the quarter, we also continued to gain traction with Clearance Jobs' enhanced employer profile, which gives employers an advantage by boosting employer branding. While we are still in the early stages of rolling out this offering, we successfully sold several employer profiles in the first quarter, generating incremental revenue for each of these existing customers. We have just rolled out an equivalent enhanced employer profile offering for Dice customers in the second quarter. As I mentioned earlier, we know from our Lighthouse data feed that the aerospace defense vertical continues to be one of the sectors that is hiring tech talent aggressively despite this uncertain economy. As a result, we increased our clearance jobs subscription rate card pricing at the beginning of the year. We expect to benefit from this higher pricing as increased defense spending flows to new projects. Before I turn the call over to Kevin, I want to talk about our expectations for the rest of 2023. We continue to believe that clearance jobs will deliver double-digit bookings and revenue growth. We believe DICE will continue to deliver solid revenue renewal and retention rates, but we'll also likely see extended sales cycles and deferred decision making for new business relationships. With these headwinds to dice new business, we now expect full year DHI group revenue to grow between 5% and 6% year over year. With this in mind, we too plan to be cautious with our spending in this environment and are committed to delivering increased adjusted EBITDA margins as we move through the year. We delivered a 21% adjusted EBITDA margin in the first quarter And we expect that margin to steadily increase each quarter and to reach 25% as we exit the year. So in summary, despite the challenging macroeconomic environment, demand for technologists continues to be significant. And with our industry-leading offerings in our large target markets for both DICE and clearance jobs, we have several levers to drive bookings and revenue growth for years to come. On that note, let me turn the call over to Kevin financials, and then we'll take any questions you may have. Kevin?