DHI Group, Inc.

Good day and welcome to the DHI Group Incorporated Second Quarter 2025 Financial Results Conference Call. All participants will be in a 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 touchtone phone. And 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 Mr. Todd Curley with Paundale Wilkinson. 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 Zailey, and CFO, Greg Skippers. 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 now turn the call over to Art Zaley, 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 DHIGroup, who we are, the problems we solve, and why our role is more important than ever in today's tech hiring environment. DHIGroup owns Clearance Jobs 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 two 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. Clearance Jobs 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, clearance jobs 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 two 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 Agile ATS, which we announced this afternoon. Agile ATS 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 unique regulatory and compliance requirements of government contractors. Our intent is to integrate Agile ATS into the clearance jobs platform by the fourth quarter, offering a bundled solution to customers who want a seamless end-to-end hiring workflow. Based on our analysis, we believe approximately half of our CJ customers today meet the target profile for this solution. and with over 10,000 employers of cleared tech professionals and a historical average contract value of around $7,000 annually, we see strong recurring revenue potential, both from our existing CJ customer base and from new customers in the broader GovTech market. Now, I would like to provide an overview of our performance this quarter and outline the steps we've taken to improve our position moving forward. First, Looking at the company as a whole, despite an 11% decline in total revenue in the second quarter, we achieved adjusted EBITDA of $8.5 million, with an adjusted EBITDA margin of 27%, well above consensus. From a segment perspective, Clearance Jobs continues to demonstrate its value as a highly profitable and strategically differentiated platform. CJ reported another quarter of strong profitability. with adjusted EBITDA of $6.1 million and an adjusted EBITDA margin of 45%. CJ bookings remained flat year over year as we faced headwinds due to the uncertainty surrounding the federal budget negotiations. But with the first trillion-dollar-plus defense budget ever approved, CJ is well positioned for long-term growth because of its leadership role in the gov tech market. In fact, at a recent client event, one of our top customers said, I wish many of my other vendors had the same level of service and ROI that we get with CJ, reinforcing the indispensable value of CJ to recruiters in the cleared space. As expected, Dice faced a more challenging environment this quarter, with bookings down 16% year over year. The feedback we received from customers was that they continue to be cautious in hiring and spending in general due to the uncertain economic environment. We continue to focus on aligning DICE's cost structure with current market conditions, achieving adjusted EBITDA of $4.2 million and an adjusted EBITDA margin of 23%. Now, let's examine the current state of the tech labor market, which serves as a key indicator of our revenue growth. Since the Federal Reserve began raising interest rates over two years ago, hiring activity has declined across nearly all sectors. National tech job postings are about 70% of what we would consider to be normal volume. According to CompTIA, tech job postings in the second quarter have remained fairly consistent, averaging 208,000 per month, which is about 6% higher year over year. The number of tech job postings appears to be stabilizing rather than declining, despite economic uncertainty. Notably, AI continues to be a key driver of demand for tech professionals. At the beginning of 2024, only about 10% of Dice jobs listed required AI skills. By June of this year, that percentage had increased to over 38%. We are seeing strong demand for roles involving AI solutions, especially among larger companies and consulting firms. As companies keep expanding their use of AI, the need for skilled technologists to effectively implement these projects will only increase. To support this anticipated increase in hiring, platforms like Clearance Jobs and Dice, along with their database of over 9 million tech professionals, will become an essential tool for employers seeking to find, attract, and hire the tech talent they need. Now let's explore our two brands and examine the opportunities each offers as we move forward. Let me start with clearance jobs, our marketplace for professionals with active federal security clearances. As I mentioned earlier, we are very encouraged by positive signs for the defense sector. At $1.1 trillion, the US defense budget for fiscal year 2026 is a 13.4% increase over the previous year's budget. Historically, the defense budget has grown roughly in line with GDP growth rates. Additionally, at the 2025 NATO Summit in The Hague, NATO leaders committed to having all member countries spend 5% of their GDP on defense and security. Traditionally, over 60% of EU defense spending goes to the U.S. military contractors, and we believe the EU will find it difficult to develop weapons manufacturing facilities quickly enough to meet this increased defense investment. These dynamics are promising for clearance jobs. Our team recently analyzed the flow of funds into defense spending from 2010 to today and found it to be a statistically significant predictor of clearance jobs revenue growth. With over 10,000 employers of cleared tech professionals and more than 100 government agencies also needing cleared tech professionals, not to mention the EU opportunity I just outlined, CJ has a significant growth opportunity as government contractors look to staff new projects. Earlier this year, we implemented segment reporting to give investors better transparency into the financial performance of each of our two brands. With that information, it became clear that while Clearance Jobs was operating with very strong margins, Dice was falling below target levels. We knew we had to adjust Dice's cost structure to match current market conditions. At the same time, we were completing a two-year effort to create a brand new Dice platform, which we call DX for digital experience, that allows companies and recruiters to both sign up for a Dice subscription with a credit card and to renew and add products to their existing subscription. Both considerations led us to make the decision to downsize the Dice sales and engineering teams in June. This restructure is expected to save about $15 million annually, including approximately $12 million from operating expense reductions and around $3 million in capitalized development savings. With these changes, we expect a notable improvement in DICE's margins going forward. Looking ahead, even though the past few years have been difficult, we remain optimistic about DHI Group's future. We have proactively taken steps to manage costs invest in new products, and position our brands for growth as market conditions improve. We expect increased defense spending in the US and worldwide to drive CJ's bookings and revenue growth. At the same time, we anticipate Dice will rebound to growth once businesses begin to focus on growth initiatives alongside profitability, and as tech professionals resume their usual pattern of changing jobs every three to four years. We also believe Dice is well positioned to benefit from the growing adoption of AI in U.S. businesses. It will be the tech professionals, those who incorporate generative AI into core business processes, who will lead the next wave of automation, and in turn, drive Dice's growth. And as always, we remain committed to delivering solid profits and robust free cash flow for our shareholders. With that, I'll turn the call over to Greg to walk you through the financial results in more detail.