DHI Group, Inc.

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. 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 of Pondo Wilkinson 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 Zaley, and CFO, Greg Squires. 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 Group'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 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 call over to Art Zailey, 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 in 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 clearance jobs. 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. we are starting to see green shoots of increased demand. Revenue renewal rates for both brands improved at the end of the quarter, and we've seen solid new business bookings in our staffing and recruiting business. While the number of new tech job postings is approximately 70% of normal, we believe we are starting the new year off with a positive trajectory. A promising sign of recovery, albeit slowly, is the steady rise in new tech job postings. According to CompTIA, these postings experienced a notable rebound in the second half of 2024 compared to the first half. During the first half of the year, new tech job postings fell 28% year over year, but momentum shifted in the latter half, showing a 12% increase. In December alone, which is traditionally a slow month, more than 165,000 new tech job postings were created, representing a 16% increase year-over-year increase. We believe this trend signals a steady, albeit gradual, recovery is taking shape for the tech hiring demand. Additionally, the tech unemployment rate remained low at approximately 2% in December, highlighting a tight labor market for tech talent. These positive trends align with projections from staffing industry analysts, which forecast a 5% growth in tech staffing hiring or revenue, I should say, in 2025. This follows a 7% decline in 2024 and a 10% drop in 2023, suggesting a shift towards recovery in the tech staffing market. This optimistic outlook was developed through extensive interviews with staffing recruiting firms, reflecting a shared confidence in the industry's improved performance in the year ahead. Another encouraging demand signal comes from Lightcast, which tracks new tech recruiter job postings. In the second half of 2024, tech recruiter job postings increased 22% year over year. An increase in hiring of tech recruiters often precedes a broader rise in demand for tech professionals. As businesses ramp up their investment in technology initiatives, such as AI, Platforms like Clearance Jobs and Dice will be essential tools for employers seeking top tech talent from our database of 9 million tech professionals. We continue to hear success stories from our clients, like Zions Bank Corporation's corporate recruiter who said, being able to search for active and engaged IT candidates is a huge asset. Dice is a must-have tool in your tool belt if you are a technology recruiter. Now, let me dig into our performance during the fourth quarter and what we see ahead for 2025. In the fourth quarter, total revenue declined 7% year over year. Clearance jobs saw an increase of 7%, while DICE saw a decrease of 14%. Excluding transactional revenue, our total recurring revenue declined 5% year over year. Looking at our bookings performance, our total bookings were down 9% year over year in the fourth quarter. Clearance jobs bookings for the fourth quarter was flat year over year. The defense budget continuing resolution and uncertainty due to a possible government shutdown, as well as the change of administration, impeded our CJ bookings. But we believe that a one-party government now favors a more consistent defense contracting environment. Defense spending remains a high priority for Congress, and we believe that CJ will benefit as a result. During the quarter, CJ secured several new customers, including Hughes Network Solutions, Trillion Technology Solutions, and Inovian Solutions. With CJ serving approximately 2,000 of the more than 10,000 employers hiring cleared tech professionals, and over 100 government agencies also in need, there's a significant growth opportunity ahead for CJ. Looking at Dice's business performance, its bookings for the fourth quarter declined 14% year over year due to the budget constraints imposed by employers and staffing firms in 2024. Nevertheless, Dice secured several notable customers this quarter, including VR Horton, the US Bureau of Diplomatic Technology, and General Motors. On the new business front, we continue to focus on recession-resistant sectors like consulting, aerospace defense, healthcare, financial services, and education. In terms of renewals, CJ and Dice revenue renewal rates were 93% and 77%, respectively, and our retention rates for CJ and Dice were 111% and 97%, respectively. On the bottom line, during the fourth quarter, we delivered a 26% adjusted EBITDA margin. slightly down from 27% a year ago. However, as mentioned earlier, our capitalized development expenses declined by 23% year over year, contributing to free cash flow conversion. Now, let me quickly touch on what we're doing to drive increased adoption of our two brands. For clearance jobs, we are preparing to launch CJVerify by the end of the first quarter. As discussed on our last conference call, this product enables individual members to ascertain their government security status for a fee. CJ is also developing a paid candidate subscription service similar to LinkedIn Premium that will offer enhanced functionality beyond the standard candidate experience. We plan to launch this offering by mid-year and, if successful, we'll explore introducing a similar subscription model for Dice. For Dice, our All Jobs initiative continues to fuel job posting growth, driving higher candidate engagement and application activity. In 2024, Dice averaged 1.6 million monthly job applications, marking a 30% year-over-year increase and further reinforcing its position as the leading tech career marketplace. We believe in the virtuous cycle where increased candidate activity attracts more recruiters strengthening our subscriber base. Candidate success on Dice is integral to maintaining a balanced two-sided marketplace and advancing our mission of connecting tech professionals with meaningful careers. A recent candidate testimonial underscores this impact, commenting, I have found all my jobs on Dice. I'd also like to highlight the success of our comprehensive subscription packages, which include unlimited job postings, company pages, and job boosts, not to mention a higher average selling price. Since its launch in November of 2023, 98% of all new business deals were signed in these packages, and 10% of our renewed customer accounts converted to this comprehensive subscription package with an average retention rate of 106%. In 2025, our key product initiative for Dice is a total reimagination of the Dice web store aimed at boosting customer adoption among individual recruiters and small and medium sized businesses in a self-serve manner. Recruiters will be able to purchase individual Dice services directly through our site using a credit card, paving the way for broader market engagement. With over 30 beta customers currently testing the early functionality of the platform today, we are on track to be fully launched by the end of the year. Moving on to guidance. While tech job postings are showing signs of improvement, we anticipate a slow and steady recovery. For the full year 2025, we expect CJ bookings to grow. However, we do not expect total bookings growth to resume until tech hiring normalizes. As a result, we anticipate revenue of $131 to $135 million for the full year. In the first quarter, we expect revenue of $32 to $33 million. As tech hiring gradually improves throughout the year, we anticipate growing demand for our tech hiring solutions driving increased momentum. In the meantime, we are focused on delivering strong profits for our shareholders and are targeting a 24% adjusted EBITDA margin for the full year 2025. As a result, Our board approved a new $5 million stock buyback program a couple of weeks ago, as it believes, as we do, that our shares are trading below their intrinsic value due to the soft tech hiring environment. Before I wrap up, I'm pleased to announce that Greg Skippers is no longer serving as our interim CFO, but has officially been appointed our chief financial officer. As noted during our last earnings call, Greg brings over a decade of experience with DHI Group and has consistently demonstrated exceptional financial expertise in key areas vital to this role, including strategic financial planning, rigorous fiscal oversight, and sound decision making. He has shown outstanding leadership in budget management, operational efficiency optimization, and maintaining the highest standards of financial integrity. Greg's sharp analytical skills, attention to detail, and commitment to transparency make him an excellent choice for this position. I am confident in his abilities and look forward to his continued success in this role. We have strengthened our business over the past year and are well positioned to capitalize on a steadily improving tech hiring environment. We remain committed to delivering greater value for our shareholders and look forward to sharing updates on our progress in the months ahead. With that, I'll hand the call over to Greg to walk you through our financials, and then we'll open up the floor for questions.