What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-08-06 compared with 2020-05-06 · 194 added, 94 removed, 230 unchanged (56% of the section changed)

8 unchanged sentences

Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements.

These factors include, but are not limited to, our ability to execute our tech-focused strategy, competition from existing and future competitors in the highly competitive markets in which we operate, failure to adapt our business model to keep pace with rapid changes in the recruiting and career services business, failure to maintain and develop our reputation and brand recognition, failure to increase or maintain the number of customers who purchase recruitment packages, cyclicality or downturns in the economy or industries we serve, the impact of the coronavirus COVID-19 outbreak on our operations and financial results, geopolitical events such as civil unrest in Hong Kong and uncertainty in respect of the regulation of data protection and data privacy, failure to attract qualified professionals to our websites or grow the number of qualified professionals who use our websites, failure to successfully identify or integrate acquisitions, U.S.

and foreign government regulation of the Internet and taxation, our ability to borrow funds under our

revolving credit facility or refinance our indebtedness and restrictions on our current and future operations under such indebtedness.

These factors include, but are not limited to, our ability to execute our tech-

focused strategy, competition from existing and future competitors in the highly competitive markets in which we operate, failure to adapt our business model to keep pace with rapid changes in the recruiting and career services business, failure to maintain and develop our reputation and brand recognition, failure to increase or maintain the number of customers who purchase recruitment packages, cyclicality or downturns in the economy or industries we serve, the impact of the coronavirus COVID-19 outbreak on our operations and financial results, geopolitical events such as civil unrest in Hong Kong and uncertainty in respect of the regulation of data protection and data privacy, failure to attract qualified professionals to our websites or grow the number of qualified professionals who use our websites, failure to successfully identify or integrate acquisitions, U.S.

and foreign government regulation of the Internet and taxation, our ability to borrow funds under our revolving credit facility or refinance our indebtedness and restrictions on our current and future operations under such indebtedness.

These factors and others are discussed in more detail below and in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, under the headings “Risk Factors,” “Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Information contained herein contains certain non-GAAP financial measures.

These measures are not in accordance with, or an alternative for, measures in accordance with U.S.

Such measures presented herein include adjusted earnings before interest, taxes, depreciation, amortization, non-cash stock based compensation expense, impairment, gain or loss on sale of businesses, and other non-recurring income or expense (“Adjusted EBITDA") and Adjusted EBITDA Margin.

Such measures presented herein include adjusted earnings before interest, taxes, depreciation, amortization, non-cash stock based compensation expense, impairment, gain or loss on sale of businesses, and certain other income or expense items, as defined, (“Adjusted EBITDA") and Adjusted EBITDA Margin.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" for definitions of these measures as well as reconciliations to the comparable GAAP measure.

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Recent Developments

In May 2020, the Board of Directors authorized the purchase of up to $5 million of the Company's common stock through May 2021, renewing the Company's prior stock repurchase program.

Under the plan, management has discretion in determining the conditions under which shares may be purchased from time to time.

Our Revenues and Expenses

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We use the simple average of each month to derive the quarterly amount.

At March 31, 2020 and 2019, Dice had approximately 5,850 and 6,100 total recruitment package customers in the U.S., respectively, and the average monthly revenue per U.S.

recruitment package customer increased from $1,134 for the three months ended March 31, 2019 to $1,153 for the three months ended March 31, 2020.

At June 30, 2020 and 2019, Dice had approximately 5,450 and 6,100 total recruitment

package customers in the U.S., respectively, and the average monthly revenue per U.S.

recruitment package customer increased from $1,130 and $1,132 for the three and six months ended June 30, 2019 to $1,131 and $1,142 for the three and six months ended June 30, 2020.

Deferred revenue, as shown on the Condensed Consolidated Balance sheets, reflects customer billings made in advance of services being rendered.

Backlog consists of deferred revenue plus customer contractual commitments not invoiced representing the value of future services to be rendered under committed contracts.

We believe backlog to be an important measure of our business as it

represents our ability to generate future revenue.

A summary of our deferred revenue and backlog as of March 31, 2020, December 31, 2019, and March 31, 2019 are presented in the table below.

We believe backlog to be an important measure of our business as it represents our ability to generate future revenue.

A summary of our deferred revenue and backlog as of June 30, 2020, December 31, 2019, and June 30, 2019 are presented in the table below.

Summary of Deferred Revenue and Backlog:

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(1) Backlog consists of deferred revenue plus customer contractual commitments not invoiced representing the value of future services to be rendered under committed contracts.

Deferred revenue at March 31, 2020 declined $5.5 million from March 31, 2019 primarily due to changes in billing terms while backlog was approximately flat.

Deferred revenue at March 31, 2020 increased $3.9 million from December 31, 2019 and backlog declined $8.3 million.

The deferred revenue increase and the backlog decrease from December 31, 2019 are normal seasonal changes due to a higher concentration of contract renewals surrounding the end of each calendar year and the resulting usage of those contracts.

The decreases were also due to the impacts of the COVID-19 pandemic.

Backlog at June 30, 2020 declined $17.6 million and $9.1 million from December 31, 2019 and June 30, 2019, respectively.

Compared to December 31, 2019, the decrease is due to the negative impacts of COVID-19 and normal seasonal changes due to a higher concentration of contract renewals surrounding the end of each calendar year and the resulting usage of those contracts.

Compared to June 30, 2019, the decrease is driven by the negative impacts of COVID-19 across all brands, lower renewal rates in the Dice brand, and uncertainty around Brexit and political unrest in Hong Kong negatively impacting eFinancialCareers.

To a lesser extent, we also generate revenue from advertising on our various websites or from lead generation and marketing solutions provided to our customers.

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Lead generation information utilizes advertising and other methods to deliver leads to a customer.

The Company continues to evolve and present new software products and features to attract and engage qualified professionals and match them with employers, such as the Dice TalentSearch powered by IntelliSearch, Dice Candidate Match TM , MyDiceHome, Dice Salary Predictor, Dice Job Search and Job Alerts, ClearanceJobs NextGen, ClearanceJobs Pulse, ClearanceJobs BrandAmp, eFinancialCareers Messaging, Recruiter Profile, Candidate Profile and Job Search platform Our ability to grow our revenues will largely depend on our ability to grow our customer bases in the markets in which we operate by acquiring new customers while retaining a high proportion of the customers we currently serve, and to expand the breadth of services our customers purchase from us.

The Company continues to evolve and present new software products and features to attract and engage qualified professionals and match them with employers.

For example, thus far in 2020, the Company has released Dice Private Email, Dice Remote Jobs, Dice Recruiter Profile, ClearanceJobs Workflow, eFinancialCareers Messaging, Video and Voice Calling, and eFinancialCareers Job Alerts.

During the year ended December 31, 2019, the Company released Dice Candidate MatchTM, Dice Job Search and Job Alerts, ClearanceJobs NextGen, ClearanceJobs Pulse, ClearanceJobs BrandAmp, eFinancialCareers Recruiter Profile, and eFinancialCareers Candidate Profile.

Our ability to grow our revenues will largely depend on our ability to grow our customer bases in the markets in which we operate by acquiring new customers while retaining a high proportion of the customers we currently serve, and to expand the breadth of services our customers purchase from us.

We continue to make investments in our business and infrastructure to help us achieve our long-term growth objectives, such as the innovative products noted above.

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Personnel costs consist of salaries, benefits, and incentive compensation for our employees, including commissions for salespeople.

Personnel costs are categorized in our statement of operations based on each employee’s principal function.

Personnel costs are categorized either in our statement of operations based on each employee’s principal function or those personnel costs incurred during the application development stage of internal use software and website development are recorded as fixed assets and amortized to depreciation expense in the statement of operations over the estimated useful life of the asset.

Marketing expenditures primarily consist of online advertising, brand promotion and lead generation to employers and job seekers.

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There have been no material changes to our critical accounting policies as compared to the critical accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Three Months Ended March 31, 2020 Compared to the Three Months Ended March 31, 2019

Three Months Ended March 31, Increase (Decrease) Percent

Three Months Ended June 30, 2020 Compared to the Three Months Ended June 30, 2019

Three Months Ended June 30, Increase (Decrease) Percent

Change Foreign Exchange Impact (2)

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$ 20,489 $ 23,215 $ (2,726) (12) % $ —

ClearanceJobs 7,107 6,014 1,093 18 % —

eFinancialCareers

6,188 8,130 (1,942) (24) % (207)

ClearanceJobs

Total revenues $ 33,784 $ 37,359 $ (3,575) (10) % $ (207)

(1) Includes Dice U.S.

and Career Events (formerly known as Targeted Job Fairs).

(2) Foreign exchange impact is calculated by determining the increase (decrease) in current period revenues where current period revenues are translated using prior period exchange rates.

For the three months ended June 30, 2020, we experienced a decrease in revenue of $3.6 million, or 10%.

Revenue at Dice decreased $2.7 million, or 12%, compared to the same period in 2019 due to the impact of the COVID-19 pandemic driving lower renewal rates year over year.

Revenues for ClearanceJobs increased $1.1 million, or 18%, as compared to the same period in 2019, primarily driven by continued high demand for professionals with government clearance and consistent product releases and enhancements driving activity on the site.

eFinancialCareers revenue decreased $1.9 million, or 24%, as compared to the same period in 2019 due to the COVID-19 pandemic, uncertainty around Brexit, political unrest in Hong Kong due to the imposition of the security law, and the impacts of foreign currency exchange.

Cost of Revenues

Three Months Ended June 30, Increase Percent

(in thousands, except percentages)

Cost of revenues $ 4,159 $ 3,916 $ 243 6 %

Percentage of revenues 12.3 % 10.5 %

Cost of revenues increased $0.2 million, or 6%, primarily driven by an increase in compensation related costs, partially offset by higher capitalization of internal development costs, which decreases operating expenses.

Together, this increased expense $0.3 million.

Product Development Expenses

Three Months Ended June 30, Decrease Percent

(in thousands, except percentages)

Product development $ 3,774 $ 4,391 $ (617) (14) %

Percentage of revenues 11.2 % 11.8 %

Product development expenses decreased $0.6 million, or 14%, driven by higher capitalization of internal development costs, which decreases operating expenses.

This was partially offset by an increase in compensation related costs due to higher headcount.

Together, this decreased expense $0.3 million.

The higher capitalization of internal development costs resulted from the Company's continued focus on the design and development of product enhancements and features for the Company's sites.

The Company also noted a decrease in travel and other costs due to COVID-19 of $0.3 million.

Sales and Marketing Expenses

Three Months Ended June 30, Decrease Percent

(in thousands, except percentages)

Sales and marketing $ 12,297 $ 13,774 $ (1,477) (11) %

Percentage of revenues 36.4 % 36.9 %

Sales and marketing expenses decreased $1.5 million, or 11% from the same period in 2019.

Sales and marketing had an increase in compensation related costs of $1.7 million.

This increase was offset by $2.3 million in reduced discretionary marketing expenses realized from efficiencies in vendor selection and volumes and a focus on higher yielding marketing investments and $0.9 million reduction in other operational costs due to the COVID-19 pandemic, including travel and consulting costs.

General and Administrative Expenses

Three Months Ended June 30, Increase Percent

(in thousands, except percentages)

General and administrative $ 8,082 $ 7,790 $ 292 4 %

Percentage of revenues 23.9 % 20.9 %

General and administrative expenses increased $0.3 million, or 4%, primarily due to an increase in compensation related costs.

Three Months Ended June 30, Increase Percent

(in thousands, except percentages)

Depreciation $ 3,019 $ 2,361 $ 658 28 %

Percentage of revenues 8.9 % 6.3 %

Depreciation expense increased $0.7 million or 28% from the same period in 2019, in connection with higher headcount driving higher capitalization of internal development costs, which are reflected as purchases of fixed assets in the Condensed Consolidated Statements of Cash Flows.

Disposition Related and Other Costs

Three Months Ended June 30, Decrease Percent

(in thousands, except percentages)

Disposition related and other costs $ — $ 825 $ (825) (100) %

Percentage of revenues — % 2.2 %

Disposition related and other costs of $0.8 million in 2019 are primarily due to severance and related costs incurred while reorganizing to the tech-focused business.

Operating Income (Loss)

Three Months Ended June 30,

(in thousands, except

Revenue $ 33,784 $ 37,359

Operating income 2,453 3,765

Percentage of revenues 7.3 % 10.1 %

Operating income for the three months ended June 30, 2020 was $2.5 million, a margin of 7%, compared to operating income of $3.8 million, a margin of 10%, for the same period in 2019, a decrease of $1.3 million.

The decrease in operating income and percentage margin were driven by the decrease in revenues, largely due to the impacts of COVID-19, which was partially offset by reductions in operating expenses, primarily related to an increase in capitalized internal development costs and a reduction in discretionary marketing spend.

Interest Expense and Other

Three Months Ended June 30, Decrease Percent

(in thousands, except percentages)

Interest expense and other $ 161 $ 219 $ (58) (26) %

Percentage of revenues 0.5 % 0.6 %

Interest expense and other decreased $0.1 million, or 26%, compared to the same period in 2019.

Interest expense increased $0.1 million year over year, primarily due to the higher weighted-average debt outstanding during the three months ended June 30, 2020 as the Company borrowed on its revolving credit facility in the first quarter of 2020 for liquidity protection during the COVID-19 pandemic.

The increase in interest expense was offset by a $0.2 million gain recognized in the second quarter of 2020 on the sale of the Company's 20% interest in BioSpace.

Three Months Ended June 30,

(in thousands, except

Income before income taxes $ 2,292 $ 3,546

Income tax expense 430 485

Effective tax rate 18.8 % 13.7 %

Our effective tax rate of 18.8% for the three months ended June 30, 2020 differed from the U.S.

statutory rate because of the allocation of income between jurisdictions.

The tax rate of 13.7% for the three months ended June 30, 2019 was lower than the statutory rate due to a tax benefit realized upon the vesting or settlement of share-based compensation awards.

Earnings (loss) per Share

Three Months Ended June 30,

(in thousands, except

per share amounts)

Net income $ 1,862 $ 3,061

Weighted-average shares outstanding—diluted 49,691 51,875

Diluted earnings (loss) per share $ 0.04 $ 0.06

Diluted earnings per share was $0.04 and $0.06 for the three month periods ended June 30, 2020 and 2019, respectively.

The decrease in earnings per share was primarily due to the decrease in revenues driven by COVID-19.

Six Months Ended June 30, 2020 Compared to the Six Months Ended June 30, 2019

Six Months Ended June 30, Increase (Decrease) Percent

Change Foreign Exchange Impact (2)

(in thousands, except percentages)

$ 42,974 $ 46,361 $ (3,387) (7) % $ —

ClearanceJobs 14,007 11,796 2,211 19 % —

eFinancialCareers 13,436 16,322 (2,886) (18) % (337)

Total revenues $ 70,417 $ 74,479 $ (4,062) (5) % $ (337)

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(2) Foreign exchange impact is calculated by determining the increase (decrease) in current period revenues where current period revenues are translated using prior period exchange rates.

For the three months ended March 31, 2020, we experienced a decrease in revenue of $0.5 million, or 1%.

Revenues for ClearanceJobs increased by $1.1 million, or 19%, as compared to the same period in 2019, primarily driven by continued high demand for professionals with government clearance and consistent product releases and enhancements driving activity on the site.

eFinancialCareers revenue decreased by $0.9 million, or 12%, as compared to the same period in 2019 due to the COVID-19 pandemic, uncertainty around Brexit, political unrest in Hong Kong, and the impacts of foreign currency exchange.

Revenue at Dice decreased by $0.7 million, or 3%, compared to the same period in 2019 as renewal rates decreased year over year.

We experienced a decrease in revenue of $4.1 million, or 5%.

Revenue at Dice decreased by $3.4 million, or 7%, compared to the same period in 2019, with the COVID-19 pandemic, decrease in recruitment package customers and renewal rates contributing to the overall decrease.

Revenue at ClearanceJobs increased by $2.2 million, or 19%, as compared to the same period in 2019, primarily driven by continued high demand for professionals with government clearance, and consistent product releases and enhancements driving activity on the site.

eFinancialCareers revenue decreased by $2.9 million, or 18%, compared to the same period in 2019 primarily due the COVID-19 pandemic, uncertainty around Brexit, political unrest in Hong Kong, and the negative impact of foreign currency exchange.

Cost of Revenues

Three Months Ended March 31, Increase Percent

Six Months Ended June 30, Increase Percent

(in thousands, except percentages)

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Percentage of revenues 11.8 % 10.4 %

Cost of revenues increased $0.4 million, or 9%, primarily driven by an increase in compensation related costs of $0.6 million and technology infrastructure costs of $0.1 million, which was partially offset by higher capitalization rates of internal development costs of $0.3 million, which decreases operating expenses.

Cost of revenues increased $0.6 million, or 8%, primarily driven by an increase in compensation related costs, partially offset by higher capitalization of internal development costs, which decreases operating expenses.

Together, this increased expense $0.6 million.

Product Development Expenses

Three Months Ended March 31, Decrease Percent

Six Months Ended June 30, Decrease Percent

(in thousands, except percentages)

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Percentage of revenues 11.3 % 11.5 %

Product development expenses decreased slightly year over year, which included an increase in compensation related costs, offset by increased capitalization rates of internal development costs, which decreases operating expenses.

Product Development expenses decreased $0.6 million, or 8%, driven by higher capitalization of internal development costs, which decreases operating expenses.

This was partially offset by an increase in compensation related costs due to higher headcount.

Together, this decreased expense $0.3 million.

The higher capitalization of internal development costs resulted from the Company's continued focus on the design and development of product enhancements and features for the Company's sites.

The Company also noted a decrease in travel and other costs due to COVID-19 of $0.3 million.

Sales and Marketing Expenses

Three Months Ended March 31, Increase Percent

Six Months Ended June 30, Decrease Percent

(in thousands, except percentages)

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Percentage of revenues 38.1 % 37.7 %

Sales and marketing expenses increased $0.3 million, or 2% from the same period in 2019.

Sales and marketing increased primarily due to an increase in compensation related costs of $1.6 million.

This increase was partially offset by $0.7 million in reduced discretionary marketing expenses realized from efficiencies in vendor selection and volumes and a focus on higher yielding marketing investments and $0.5 million decrease in commissions.

Sales and marketing expenses decreased $1.2 million, or 4% from the same period in 2019.

Sales and marketing had an increase in compensation related costs of $2.9 million.

This increase was offset by $2.9 million in reduced discretionary marketing expenses realized from efficiencies in vendor selection and volumes and a focus on higher yielding marketing investments and $1.2 million reduction in other operational costs due to the COVID-19 pandemic, including travel, consulting, and training.

General and Administrative Expenses

Three Months Ended March 31, Increase Percent

Six Months Ended June 30, Increase Percent

(in thousands, except percentages)

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Percentage of revenues 23.6 % 21.1 %

General and administrative expenses increased $0.6 million, or 8%, primarily due to an increase in compensation related costs of $0.4 million and a $0.3 million increase in non-cash stock based compensation related to the CFO transition.

Three Months Ended March 31, Increase Percent

General and administrative costs increased $0.9 million, or 6%, primarily due to an increase in compensation related costs of $0.8 million and a $0.3 million increase in non-cash stock stock based compensation cost related to the CFO transition.

These increases were partially offset by lower consulting, travel and other costs.

Six Months Ended June 30, Increase Percent

(in thousands, except percentages)

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Percentage of revenues 8.9 % 6.4 %

Depreciation expense increased $0.8 million or 34% from the same period in 2019, in connection with higher headcount and a higher capitalization rate of internal development costs, which are reflected as purchases of fixed assets in the Consolidated Statements of Cash Flows.

Depreciation expense increased $1.5 million, or 31%, from the same period in 2019, in connection with higher headcount driving higher capitalization of internal development costs, which are reflected as purchases of fixed assets in the Condensed Consolidated Statements of Cash Flows.

Impairment of Intangible Assets

Three Months Ended March 31, Increase Percent

Six Months Ended June 30, Increase Percent

(in thousands, except percentages)

Impairment of intangible assets $ 7,200 $ — $ 7,200 n.m.

Impairment of intangible assets $ 7,200 $ — $ 7,200 — %

Percentage of revenues 10.2 % — %

The Company has an indefinite-lived acquired intangible asset related to the Dice trademark and brand name.

During the first quarter of 2020, because of the impacts of the COVID-19 pandemic, the Company performed an interim impairment analysis of the Dice trademark and brand name.

As a result of the analysis, the Company recorded an impairment charge of $7.2 million.

The Company has an indefinite-lived acquired intangible asset related to the Dice trademarks and brand name.

During the first quarter of 2020, because of the impacts of the COVID-19 pandemic, the Company performed an interim impairment analysis of the Dice trademarks and brand name.

As a result of the analysis, the Company recorded an impairment charge of $7.2 million in the first quarter of 2020.

See also Note 8 of the Notes to the Condensed Consolidated Financial Statements.

Disposition Related and Other Costs

Three Months Ended March 31, Decrease Percent

Six Months Ended June 30, Decrease Percent

(in thousands, except percentages)

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Percentage of revenues — % 2.3 %

Disposition related and other costs of $0.9 million in 2019 are primarily due to severance and related costs incurred while reorganizing to the tech-focused business.

Operating Income (Loss)

Three Months Ended March 31,

The disposition related and other costs of $1.7 million for the six months ended June 30, 2019, as described in Note 13 to the Condensed Consolidated Financial Statements, are primarily due to severance and related costs incurred while reorganizing the Tech-focused business.

Operating Income

Six Months Ended June 30,

(in thousands, except

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Percentage of revenues (4.0) % 9.9 %

Operating loss for the three months ended March 31, 2020 was $5.3 million, a negative margin of 14%, compared to operating income of $3.6 million, a margin of 10%, for the same period in 2019, a decrease of $8.8 million.

The decrease in operating income and percentage margin were driven by the impairment of intangible assets and increases in depreciation expense and compensation related costs.

Operating loss for the six months ended June 30, 2020 was $2.8 million, a negative margin of 4%, as compared to operating income of $7.4 million, a margin of 10%, for the same period in 2019.

The decrease in operating income and percentage margin were primarily driven by lower revenues from the impacts of COVID-19, impairments of intangible assets and equity investment, and increases in depreciation and compensation related costs.

This was partially offset by lower sales and marketing and disposition related and other costs.

Interest Expense and Other

Three Months Ended March 31, Increase Percent

Six Months Ended June 30, Increase Percent

(in thousands, except percentages)

Interest expense and other $ 183 $ 105 $ 78 74 %

Interest expense $ 344 $ 324 $ 20 6 %

Percentage of revenues 0.5 % 0.4 %

Interest expense increased $0.1 million, or 74%, primarily due to the higher weighted-average debt outstanding during the three months ended March 31, 2020 as the Company borrowed on its revolving credit facility for liquidity protection during the COVID-19 pandemic.

Interest expense and other was flat to the same period in 2019.

Interest expense increased $0.2 million year over year, primarily due to the higher weighted-average debt outstanding during the six months ended June 30, 2020 as the Company borrowed on its revolving credit facility in the first quarter of 2020 for liquidity protection during the COVID-19 pandemic.

The increase in interest expense was offset by a $0.2 million gain recognized in the second quarter of 2020 on the sale of the Company's 20% interest in BioSpace.

Impairment of Equity Investment

Three Months Ended March 31, Increase Percent

Six Months Ended June 30, Increase Percent Change

(in thousands, except percentages)

Impairment of equity investment $ 2,002 $ — $ 2,002 n.m.

Impairment of equity investment $ 2,002 $ — $ 2,002 — %

Percentage of revenues 2.8 % 0.0 %

During the three months ended March 31, 2020, due to the impacts from the COVID-19 pandemic, the Company determined the value of its 7.6% interest in a leading tech skills assessment company to be zero.

During the first quarter of 2020, due to the impacts from the COVID-19 pandemic, the Company determined the value of its 7.6% interest in a leading tech skills assessment company to be zero.

Accordingly, the Company recorded an impairment charge of $2.0 million during the first quarter of 2020.

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands, except

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Effective tax rate 8.8 % 33.9 %

Our effective tax rate of 11.9% for the three months ended March 31, 2020 was lower than the U.S.

Our effective tax rate of 8.8% for the six months ended June 30, 2020 was lower than the U.S.

statutory rate due to a tax deficiency of $0.5 million related to the vesting or settlement of share-based compensation awards;

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and a tax benefit of $0.2 million from the expiration of the statute of limitations in certain foreign jurisdictions.

The tax rate of 54.5% for the three months ended March 31, 2019 exceeded the statutory rate due to tax deficiency of $0.7 million related to the vesting or settlement of share-based compensation awards and tax expense of $0.4 million for the transition tax on the deemed repatriation of foreign earnings.

Earnings (loss) per Share

Three Months Ended March 31,

The tax rate of 33.9% for the six months ended June 30, 2019 exceeded the statutory rate due to a tax deficiency of $0.4 million related to the vesting or settlement of share-based compensation awards;

and tax expense of $0.4 million from the transition tax on the deemed repatriation of foreign earnings.

Earnings per Share

Six Months Ended June 30,

(in thousands, except

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Diluted earnings (loss) per share $ (0.10) $ 0.09

Diluted earnings (loss) per share was $(0.13) and $0.03 for the three month periods ended March 31, 2020 and 2019, respectively.

Diluted earnings (loss) per share was $(0.10) and $0.09 for the six months ended June 30, 2020 and 2019, respectively.

The decrease in earnings (loss) per share was primarily driven by the impairment charges during 2020.

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The Company also uses this measure to calculate amounts of performance based compensation under the senior management incentive bonus program.

Adjusted EBITDA represents net income plus (to the extent deducted in calculating such net income) interest expense, income tax expense, depreciation and amortization, non-cash stock based compensation, losses resulting from certain dispositions outside the ordinary course of business including prior negative operating results of those divested businesses, certain writeoffs in connection with indebtedness, impairment charges with respect to long-lived assets, expenses incurred in connection with an equity offering or any other offering of securities by the Company, extraordinary or non-recurring non-cash expenses or losses, transaction costs in connection with the credit agreement, deferred revenues written off in connection with acquisition purchase accounting adjustments, writeoff of non-cash stock based compensation expense, severance and retention costs related to dispositions and reorganizations of the Company, and losses related to legal claims and fees that are unusual in nature or infrequent, minus (to the extent included in calculating such net income) non-cash income or gains, interest income, business interruption insurance proceeds, and any income or gain

resulting from certain dispositions outside the ordinary course of business, including prior positive operating results of those divested businesses, and gains related to legal claims that are unusual in nature or infrequent.

and losses related to legal claims and fees that are unusual in nature or infrequent, minus (to the extent included in calculating such net income) non-cash income or gains, interest income, business interruption insurance proceeds, and any income or gain resulting from certain dispositions outside the ordinary course of business, including prior positive operating results of those divested businesses, and gains related to legal claims that are unusual in nature or infrequent.

We also consider Adjusted EBITDA, as defined above, to be an important indicator to investors because it provides information related to our ability to provide cash flows to meet future debt service, capital expenditures and working capital requirements and to fund future growth.

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Adjusted EBITDA and Adjusted EBITDA Margin are not measurements of our financial performance under GAAP and should not be considered as an alternative to revenue, net income, operating income, cash provided by operating activities, or any other performance measures derived in accordance with GAAP as a measure of our profitability or liquidity.

A reconciliation of Adjusted EBITDA for the three months ended March 31, 2020 and 2019 follows (in thousands):

Three Months Ended March 31,

A reconciliation of Adjusted EBITDA for the three months ended June 30, 2020 and 2019 follows (in thousands):

Six Months Ended June 30,

Reconciliation of Net Income (loss) to Adjusted EBITDA:

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Interest expense 541 326

Income tax expense (885) 1,899

Income tax expense (benefit) (455) 2,384

Depreciation 6,272 4,786

Non-cash stock based compensation 3,411 3,078

Loss on sale of business — 537

Disposition related and other costs — 1,700

2 unchanged sentences

Impairment of equity investment 2,002 —

Gain on sale of equity investment (200) —

Severance and related costs 1,217 —

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Amortization of deferred financing costs (74) (74)

Income tax expense (885) 1,899

Income tax expense (benefit) (455) 2,384

Deferred income taxes 804 (95)

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Adjusted EBITDA $ 15,303 $ 17,621

A reconciliation of Adjusted EBITDA Margin for the three months ended March 31, 2020 and 2019 follows (in thousands):

Three Months Ended March 31,

A reconciliation of Adjusted EBITDA Margin for the six months ended June 30, 2020 and 2019 follows (in thousands):

Six Months Ended June 30,

Revenues $ 70,417 $ 74,479

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Adjusted EBITDA Margin 22 % 24 %

We have summarized our cash flows for the three months ended March 31, 2020 and 2019 (in thousands).

Three Months Ended March 31,

We have summarized our cash flows for the six months ended June 30, 2020 and 2019 (in thousands).

Six Months Ended June 30,

Cash from operating activities $ 10,020 $ 14,375

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We have financed our operations primarily through cash provided by operating activities and borrowings under our revolving credit facility.

At March 31, 2020, we had cash of $27.8 million compared to $5.4 million at December 31, 2019.

Cash held by foreign subsidiaries totaled approximately $2.1 million and $1.9 million at March 31, 2020 and December 31, 2019, respectively.

At June 30, 2020, we had cash of $27.5 million compared to $5.4 million at December 31, 2019.

Cash held by foreign subsidiaries totaled approximately $2.7 million and $1.9 million at June 30, 2020 and December 31, 2019, respectively.

Cash and cash equivalent balances and cash generation in the United States, along with the unused portion of our revolving credit facility, are sufficient to maintain liquidity and meet our obligations without being dependent on cash and earnings from our foreign subsidiaries.

Our principal internal sources of liquidity are cash and cash equivalents, as well as the cash flow that we generate from our operations.

In addition, we had $53.0 million in borrowing capacity under our $90.0 million Credit Agreement at March 31, 2020, subject to certain availability limits including our consolidated leverage ratio, which generally limits borrowings to 2.5 times annual adjusted EBITDA levels, as defined in the Credit Agreement.

In addition, we had $53.0 million in borrowing capacity under our $90.0 million Credit Agreement at June 30, 2020, subject to certain availability limits including our consolidated leverage ratio, which generally limits borrowings to 2.5 times annual adjusted EBITDA levels, as defined in the Credit Agreement.

We believe that our existing U.S.

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Net cash flows from operating activities primarily consist of net income adjusted for certain non-cash items, including depreciation, amortization, changes in deferred tax assets and liabilities, stock based compensation, impairments, and the effect of changes in working capital.

Net cash flows from operating activities were $2.9 million and $3.2 million for the three month periods ended March 31, 2020 and 2019, respectively.

Net cash flows from operating activities were $10.0 million and $14.4 million for six month periods ended June 30, 2020 and 2019, respectively.

Cash inflow from operations is driven by earnings and is dependent on the amount and timing of billings and cash collection from our customers.

Cash provided by operating activities during the 2020 period decreased $0.3 million compared to the same period of 2019 primarily due to the timing of income tax payments and payments to vendors, partially offset by higher income before non-cash charges.

Cash provided by operating activities during the 2020 period decreased $4.4 million compared to the same period of 2019 primarily due to lower billings to customers resulting from the COVID-19 pandemic.

Investing Activities

During the three month period ended March 31, 2020, cash used in investing activities was $4.3 million compared to $3.1 million in the same period in 2019.

Cash used in investing activities in the three month period ended March 31, 2020 increased from the comparable 2019 period due to higher capitalization rates of internally developed software.

During the six month period ended June 30, 2020, cash used in investing activities was $8.2 million compared to $3.6 million in the same period in 2019.

Cash used in investing activities in the six month period ended June 30, 2020 increased from the comparable 2019 period due to higher capitalization of internally developed software of $2.1 million and $2.5 million lower receipts from the sale of businesses and equity investments.

Financing Activities

Cash provided by financing activities during the three month period ended March 31, 2020 was $24.0 million, primarily due to $27.0 million of net proceeds on long-term debt, partially offset by $3.0 million related to share repurchases.

Cash used during the three month period ended March 31, 2019 of $2.0 million was primarily due to $1.0 million of net repayments on long-term debt and $1.0 million related to share purchases.

Cash provided by financing activities during the six month period ended June 30, 2020 was $20.4 million, primarily due to $27.0 million of net proceeds on long-term debt, partially offset by $6.6 million related to share repurchases.

Cash used during the three month period ended June 30, 2019 of $9.5 million was primarily due to $8.0 million of net repayments on long-term debt and $1.5 million related to share repurchases.

Credit Agreement

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The Credit Agreement provides for a revolving loan facility of $90 million, with an expansion option up to $140 million, as permitted under the terms of the Credit Agreement.

The Company borrowed $18 million to repay, in full, all outstanding indebtedness, including accrued interest, under the previous credit agreement and to pay certain costs associated with the Credit Agreement.

Unamortized debt issuance costs of $0.2 million were recorded to interest expense at the time of reduction.

Borrowings under the Credit Agreement bear interest, at the Company’s option, at a LIBOR rate or base rate plus a margin.

The margin ranges from 1.75% to 2.50% on LIBOR loans and 0.75% to 1.50% on base rate loans, determined by the Company’s most recent consolidated leverage ratio.

The Company incurs a fee on any unused capacity under the revolving loan facility.

The Company incurs a commitment fee ranging from 0.30% to 0.45% on any unused capacity under the revolving loan facility, determined by the Company’s most recent consolidated leverage ratio.

The facility may be prepaid at any time without penalty.

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The Credit Agreement also provides that the payment of obligations may be accelerated upon the occurrence of customary events of default, including, but not limited to, non-payment, change of control, or insolvency.

As of March 31, 2020, the Company was in compliance with all of the financial covenants under the Credit Agreement.

As of June 30, 2020, the Company was in compliance with all of the financial covenants under the Credit Agreement.

Refer to Note 10 in the Notes to the Condensed Consolidated Financial Statements.

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Commitments and Contingencies

The following table presents certain minimum payments due and the estimated timing under contractual obligations with minimum firm commitments as of March 31, 2020:

The following table presents certain minimum payments due and the estimated timing under contractual obligations with minimum firm commitments as of June 30, 2020:

Payments Due By Period

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Our principal commitments consist of obligations under operating leases for office space and equipment and long-term debt.

As of March 31, 2020, we had $37.0 million outstanding under our Credit Agreement.

As of June 30, 2020, we had $37.0 million outstanding under our Credit Agreement.

Interest payments are due at varying, specified periods (to a maximum of three months) based on the type of loan (LIBOR or base rate loan) we choose.

“Indebtedness” in our Condensed Consolidated Financial Statements for additional information related to our Credit Agreement.

See Note 10 “Indebtedness” in our Condensed Consolidated Financial Statements for additional information related to our Credit Agreement.

Future interest payments on our Credit Agreement are variable due to our interest rate being based on a LIBOR rate or a base rate.

Assuming an interest rate of 2.75% (the rate in effect on March 31, 2020) on our current borrowings, interest payments are expected to be approximately $0.8 million in 2020, and approximately $1.0 million per year in 2021-2023.

As of March 31, 2020, we had approximately $1.7 million of unrecognized tax benefits as liabilities, and it is uncertain if or when such amounts may be settled.

Assuming an interest rate of 2.19% (the rate in effect on June 30, 2020) on our current borrowings, interest payments are expected to be approximately $0.4 million for the remainder of 2020, and approximately $0.8 million per year in 2021-2023.

As of June 30, 2020, we had approximately $1.8 million of unrecognized tax benefits as liabilities, and it is uncertain if or when such amounts may be settled.

Related to the unrecognized tax benefits considered permanent differences, we have also recorded a liability for potential penalties and interest.

Included in the balance of unrecognized tax benefits at March 31, 2020 are $1.7 million of tax benefits that if recognized, would affect the effective tax rate.

Included in the balance of unrecognized tax benefits at June 30, 2020 are $1.8 million of tax benefits that if recognized, would affect the effective tax rate.

The Company believes it is reasonably possible that as much as $0.5 million of its unrecognized tax benefits may be recognized in the next twelve months.

Impact of COVID-19 on our Business

The spread of the coronavirus disease 2019 (“COVID-19”) during the first quarter of 2020 has caused an economic downturn on a global scale, as well as significant volatility in the financial markets.

The spread of the coronavirus disease (“COVID-19”) during the first half of 2020 has caused an economic downturn on a global scale, as well as significant volatility in the financial markets.

In March 2020, the World Health Organization declared the spread of the COVID-19 virus a pandemic.

While we believe the pandemic has had certain impacts on our business, we do not believe there has been, nor are we anticipating, a material impact from the effects of the pandemic on our business and operations, results of operations, financial condition, cash flows, liquidity and capital and financial resources.

COVID-19 has slowed recruitment activity for our businesses in recent months as employers have slowed hiring, which has reduced our revenues and operating cash flows.

We expect the pandemic will continue to negatively impact our financial performance in the coming months, but, based on information currently available, we are not anticipating a significant long-term impact on our business and operations, results of operations, financial condition, cash flows, liquidity and capital and financial resources.

However, the situation is uncertain and rapidly changing.

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Future developments include the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the development of treatments or vaccines, and the resumption of widespread economic activity.

Due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we are unable to predict with any confidence the likely impact of the COVID-19 pandemic on our future operations.

While we expect the pandemic will continue to negatively impact our financial performance in the coming months, due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we may not be able to predict the likely impact of the COVID-19 pandemic on our future operations.

The labor market and certain of the industries that we serve have historically experienced short-term cyclicality.

However, we believe that online career websites continue to provide economic and strategic value to the labor market and industries that we serve.

Any slowdown in recruitment activity that occurs could negatively impact our revenues and results of operations, including any slowdown caused by the COVID-19 pandemic.

Any slowdown in recruitment activity that occurs could negatively impact our revenues and results of operations.

The COVID-19 pandemic has resulted in a slowdown of recruiting activity in recent months, which has negatively impacted our business.

Alternatively, a decrease in the unemployment rate or a labor shortage, including as a result of an increase in job turnover, generally means that employers (including our customers) are seeking to hire more individuals, which would generally lead to more job postings and database licenses and have a positive impact on our revenues and results of operations.

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From time to time, we see market slowdowns, which can lead to lower demand for recruiting technology, financial and security cleared professionals.

The COVID-19 pandemic may lead to a reduction in recruitment activity.

If recruitment activity slows in the industries in which we operate during 2020 and beyond, our revenues and results of operations could be negatively impacted.

In recent months, the COVID-19 pandemic has led to a reduction in recruitment activity.

If recruitment activity continues to slow in the industries in which we operate during 2020 and beyond, our revenues and results of operations will be negatively impacted.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis