DHI GROUP, INC. 10-K

Item 8. Financial Statements and Supplementary Data Page DHI Group, Inc. Report of Independent Registered Public Accounting Firm 59 Consolidated Financial Statements Consolidated Balance Sheets as of December 31, 2020 and 2019 61 Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018 62 Consolidated Statements of Comprehensive Income ( Loss) for the years ended December 31, 2020, 2019 and 2018 63 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020, 2019 and 2018 64 Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018 65 Notes to Consolidated Financial Statements 66 58 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of DHI Group, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of DHI Group, Inc. and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 10, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting. Change in Accounting Principle As discussed in Note 7 to the financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of ASU No. 2016-02, Leases , under the modified retrospective method. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Goodwill and Acquired Intangible Assets, Net – Impairment of Goodwill and Dice Trademarks and Brand Name - Refer to Notes 2, 9, and 10 to the financial statements Critical Audit Matter Description The Company determines whether the carrying value of recorded goodwill is impaired on an annual basis or more frequently if indicators of potential impairment exist. If the fair value of the reporting unit is less than its carrying amount, an impairment charge is recorded for the amount the carrying value exceeds the fair value. Fair values are determined by using a combination of a discounted cash flow methodology and a market comparable method. Determining the fair value of a reporting unit is judgmental in nature and requires the use of estimates and key assumptions, particularly assumed discount rates and projections of future operating results, such as forecasted revenues and earnings before interest, taxes, depreciation and amortization (EBITDA) margins. Changes in these assumptions could have a significant impact on either the fair value, the amount of the 59 Table of Contents goodwill impairment charge, or both. The amount of goodwill as of December 31, 2020 was $133.4 million. During 2020, the Company recognized a $23.6 million goodwill impairment charge as the fair value of the reporting unit was lower than its carrying value. The Company determines whether the carrying value of recorded indefinite-lived acquired intangible assets, which consists entirely of the Dice trademarks and brand name, is impaired on an annual basis or more frequently if indicators of potential impairment exist. The impairment review process compares the fair value of the Dice trademarks and brand name to their carrying value. If the carrying value exceeds the fair value, an impairment loss is recorded. The Company utilizes a relief from royalty rate method to value the Dice trademarks and brand name, which involves a significant level of judgment in the assumptions underlying the approach used to determine the fair value, including the revenue growth rate, royalty rate, and discount rate. Changes in these assumptions could have a significant impact on either the fair value, the amount of the trademarks and brand name impairment charge, or both. The amount of acquired intangible assets as of December 31, 2020 was $23.8 million. During 2020, the Company recognized a $15.2 million trademarks and brand name impairment charge as the fair value of the trademarks and brand name was lower than their carrying value. Given the significant judgments made by management to estimate the fair value of the reporting unit and the goodwill impairment charge recorded during the year, performing auditing procedures to evaluate the reasonableness of management’s judgments regarding the business and valuation assumptions utilized in the valuation models, particularly the forecasts of future revenue and EBITDA margins and the selection of the discount rate, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists. In addition, given the determination of the fair values of the Dice trademarks and brand name and the impairment charges recorded during the year required management to make significant estimates and assumptions relating to the forecasts of future revenue and the selection of the royalty and discount rates, performing audit procedures to evaluate the reasonableness of such estimates and assumptions, particularly the forecasts of future revenue and the selection of the discount rate and royalty rate, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the forecasts of future revenues and EBITDA margins and selection of the royalty rate and discount rates used by management to estimate the fair value of the reporting unit and the Dice trademarks and brand name included the following, among others: • We tested the effectiveness of controls over management’s impairment evaluation of the reporting unit and acquired intangible assets, including those controls related to management’s forecasts of future revenues and expenses and selection of the royalty rate and discount rates. • We evaluated management’s ability to accurately forecast future revenues and expenses by comparing actual revenues and expenses to management’s historical forecasts. • We evaluated the reasonableness of management’s revenues and expenses forecast by comparing the forecasts with: ◦ Historical revenues and expenses and forecasted information in industry reports. ◦ Internal communications to management and the Board of Directors. • With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) valuation assumptions (discount rates and royalty rate) by: ◦ Testing the source information underlying the determination of the assumption and testing the mathematical accuracy of the calculation. ◦ Developing a range of independent estimates and comparing those to the assumptions selected by management. /s/ Deloitte & Touche LLP Des Moines, Iowa February 10, 2021 We have served as the Company's auditor since 2005. 60 Table of Contents DHI GROUP, INC. CONSOLIDATED BALANCE SHEETS As of December 31, 2020 and 2019 (in thousands, except per share data) December 31, 2020 December 31, 2019 ASSETS Current assets Cash and cash equivalents $ 7,640 $ 5,381 Accounts receivable, net of allowance for doubtful accounts of $1,182 and $708 20,298 21,158 Income taxes receivable 1,044 2,353 Prepaid and other current assets 4,503 4,180 Total current assets 33,485 33,072 Fixed assets, net 24,544 20,352 Acquired intangible assets 23,800 39,000 Capitalized contract costs 7,734 7,515 Goodwill 133,353 156,059 Deferred income taxes 19 7 Operating lease right-of-use assets 16,405 19,712 Other assets 1,647 2,604 Total assets $ 240,987 $ 278,321 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable and accrued expenses $ 19,426 $ 18,908 Operating lease liabilities 3,410 3,643 Deferred revenue 42,426 50,568 Income taxes payable 123 984 Total current liabilities 65,385 74,103 Long-term debt, net 19,583 9,435 Deferred income taxes 9,936 12,823 Deferred revenue 1,068 1,058 Accrual for unrecognized tax benefits 1,347 1,787 Operating lease liabilities 13,704 16,664 Other long-term liabilities 2,394 1,256 Total liabilities 113,417 117,126 Commitments and contingencies (Note 12) Stockholders’ equity Convertible preferred stock, $.01 par value, authorized 20,000 shares; no shares issued and outstanding — — Common stock, $.01 par value, authorized 240,000; issued 71,233 and 69,509 shares, respectively; outstanding: 51,220 and 53,918 shares, respectively 714 696 Additional paid-in capital 233,554 227,227 Accumulated other comprehensive loss ( 28,519 ) ( 29,248 ) Accumulated earnings 53,971 83,986 Treasury stock, 20,013 and 15,591 shares, respectively ( 132,150 ) ( 121,466 ) Total stockholders’ equity 127,570 161,195 Total liabilities and stockholders’ equity $ 240,987 $ 278,321 See accompanying notes to the consolidated financial statements. 61 Table of Contents DHI GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31, 2020, 2019 and 2018 (in thousands, except per share amounts) For the year ended December 31, 2020 2019 2018 Revenues $ 136,878 $ 149,370 $ 161,570 Operating expenses: Cost of revenues 17,047 16,237 18,344 Product development 16,470 17,216 20,212 Sales and marketing 50,856 55,909 59,721 General and administrative 31,265 31,003 37,589 Depreciation 12,019 9,743 9,280 Amortization of intangible assets — — 482 Impairment of intangible assets 15,200 — — Impairment of goodwill 23,626 — — Disposition related and other costs (Note 15) — 1,700 7,619 Total operating expenses 166,483 131,808 153,247 Other operating income (loss): Gain (loss) on sale of businesses (Note 4) — ( 537 ) 3,369 Total other operating income (loss) — ( 537 ) 3,369 Operating income (loss) ( 29,605 ) 17,025 11,692 Interest expense and other ( 827 ) ( 701 ) ( 2,054 ) Impairment of equity investment ( 2,002 ) — — Other expense — — ( 36 ) Income (loss) before income taxes ( 32,434 ) 16,324 9,602 Income tax expense (benefit) ( 2,419 ) 3,773 2,428 Net income (loss) $ ( 30,015 ) $ 12,551 $ 7,174 Basic earnings (loss) per share $ ( 0.62 ) $ 0.26 $ 0.15 Diluted earnings (loss) per share $ ( 0.62 ) $ 0.24 $ 0.14 Weighted-average basic shares outstanding 48,278 48,739 48,520 Weighted-average diluted shares outstanding 48,278 51,633 49,605 See accompanying notes to the consolidated financial statements. 62 Table of Contents DHI GROUP, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) For the years ended December 31, 2020, 2019, and 2018 (in thousands) For the year ended December 31, 2020 2019 2018 Net income (loss) $ ( 30,015 ) $ 12,551 $ 7,174 Foreign currency translation adjustment 729 1,988 ( 3,906 ) Total other comprehensive income (loss) 729 1,988 ( 3,906 ) Comprehensive income (loss) $ ( 29,286 ) $ 14,539 $ 3,268 See accompanying notes to the consolidated financial statements. 63 Table of Contents DHI GROUP, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY For the years ended December 31, 2020, 2019, and 2018 (in thousands) Convertible Preferred Stock Common Stock Additional Paid-in Capital Treasury Stock Accumulated Earnings Accumulated Other Comprehensive Loss Total Shares Issued Amount Shares Issued Amount Balance at January 1, 2018 — $ — 83,125 $ 831 $ 375,537 $ ( 276,173 ) $ 59,776 $ ( 27,330 ) $ 132,641 Net income 7,174 7,174 Other comprehensive loss ( 3,906 ) ( 3,906 ) Stock based compensation 6,606 6,606 Restricted stock issued 4,087 41 41 Restricted stock forfeited or withheld to satisfy tax obligations ( 440 ) ( 4 ) ( 693 ) ( 697 ) Performance-based restricted stock units eligible to vest 750 8 8 Cumulative-effect of new accounting principle (see Note 2) 4,485 4,485 Unclaimed shareholder liability (Note 13) 980 980 Purchase of treasury stock under stock repurchase plan ( 1,977 ) ( 1,977 ) Balance at December 31, 2018 — — 87,522 876 383,123 ( 278,843 ) 71,435 ( 31,236 ) 145,355 Net income 12,551 12,551 Other comprehensive income 1,988 1,988 Stock based compensation 5,704 5,704 Restricted stock issued 2,258 23 23 Restricted stock forfeited or withheld to satisfy tax obligations ( 560 ) ( 5 ) ( 1,904 ) ( 1,909 ) Performance-based restricted stock units eligible to vest 449 4 4 Performance-based restricted stock units forfeited ( 160 ) ( 2 ) ( 2 ) Retirement of treasury stock (see Note 13) ( 20,000 ) ( 200 ) ( 161,600 ) 161,800 — Purchase of treasury stock under stock repurchase plan ( 2,519 ) ( 2,519 ) Balance at December 31, 2019 — — 69,509 696 227,227 ( 121,466 ) 83,986 ( 29,248 ) 161,195 Net loss ( 30,015 ) ( 30,015 ) Other comprehensive income 729 729 Stock based compensation 6,327 6,327 Restricted stock issued 2,173 22 22 Purchase of treasury stock related to vested restricted and performance stock units ( 430 ) ( 4 ) ( 2,248 ) ( 2,252 ) Performance-based restricted stock units forfeited ( 19 ) — — Purchase of treasury stock under stock repurchase plan ( 8,436 ) ( 8,436 ) Balance at December 31, 2020 — $ — 71,233 $ 714 $ 233,554 $ ( 132,150 ) $ 53,971 $ ( 28,519 ) $ 127,570 See accompanying notes to the consolidated financial statements . 64 Table of Contents DHI GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2020, 2019 and 2018 (in thousands) For the year ended December 31, 2020 2019 2018 Cash flows from (used in) operating activities: Net income (loss) $ ( 30,015 ) $ 12,551 $ 7,174 Adjustments to reconcile net income to net cash flows from (used in) operating activities: Depreciation 12,019 9,743 9,280 Amortization of intangible assets — — 482 Deferred income taxes ( 2,918 ) 2,493 2,699 Amortization of deferred financing costs 147 147 342 Stock based compensation 6,327 5,704 6,606 Impairment of intangible assets 15,200 — — Impairment of goodwill 23,626 — — Impairment of equity investment 2,002 — — Change in accrual for unrecognized tax benefits ( 446 ) 107 ( 1,179 ) Gain on sale of equity investment ( 200 ) — — (Gain) loss on sale of businesses — 537 ( 3,369 ) Changes in operating assets and liabilities: Accounts receivable 859 1,694 11,947 Prepaid expenses and other assets ( 1,405 ) ( 904 ) 1,759 Capitalized contract costs ( 175 ) 453 ( 3,236 ) Accounts payable and accrued expenses 139 ( 5,621 ) 1,743 Income taxes receivable/payable 480 ( 338 ) ( 972 ) Deferred revenue ( 8,193 ) ( 4,583 ) ( 18,866 ) Other, net 1,236 940 508 Net cash flows from operating activities 18,683 22,923 14,918 Cash flows from (used in) investing activities: Cash received from sale of businesses, net — 2,683 17,542 Purchases of fixed assets ( 16,104 ) ( 14,188 ) ( 10,053 ) Net cash received from sale of equity investment 200 — — Net cash flows from (used in) investing activities ( 15,904 ) ( 11,505 ) 7,489 Cash flows from (used in) financing activities: Payments on long-term debt ( 26,444 ) ( 28,000 ) ( 31,000 ) Proceeds from long-term debt 36,444 20,000 7,000 Payments under stock repurchase plan ( 8,294 ) ( 2,519 ) ( 1,977 ) Purchase of treasury stock related to vested restricted and performance stock units ( 2,248 ) ( 1,904 ) ( 693 ) Financing costs paid — — ( 504 ) Net cash flows used in financing activities ( 542 ) ( 12,423 ) ( 27,174 ) Effect of exchange rate changes 22 ( 86 ) ( 829 ) Net change in cash and cash equivalents for the period 2,259 ( 1,091 ) ( 5,596 ) Cash and cash equivalents, beginning of period 5,381 6,472 12,068 Cash and cash equivalents, end of period $ 7,640 $ 5,381 $ 6,472 See accompanying notes to the consolidated financial statements. 65 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND PRINCIPAL ACTIVITIES DHI Group, Inc. (“DHI” or the “Company”), a Delaware corporation, was incorporated on June 28, 2005. DHI is a leading provider of data, insights and employment connections through its specialized services for technology professionals and other select online communities. Its mission is to empower tech professionals and organizations to compete and win through expert insights and relevant employment connections. Employers and recruiters use its websites and services to source, hire and connect with the most qualified and highly-skilled tech professionals, while professionals use its websites and services to find ideal employment opportunities, relevant job advice and tailored career-related data. For 30 years, through its predecessor companies, the Company was built on providing employers and professionals with career connections, news, tools and information. The Company serves multiple markets located throughout North America, Europe, the Middle East and the Asia Pacific region. 2. SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation — The consolidated financial statements include the accounts of DHI and its wholly-owned subsidiaries and cost method investment. All intercompany balances and transactions have been eliminated in consolidation. Revenue Recognition — We recognize revenue when control of the promised goods or services is transferred to our customers at an amount that reflects the consideration to which we expect to receive in exchange for those goods or services. Revenue is recognized net of customer discounts ratably over the service period. Billings with customers are based on contractual schedules. Customer billings delivered in advance and payments received in advance of services being rendered are recorded as deferred revenue and recognized over the service period. We generate revenues from the following sources: Recruitment packages. Recruitment package revenues are derived from the sale to recruiters and employers of a combination of job postings and/or access to a searchable database of candidates on Dice, ClearanceJobs, eFinancialCareers and Rigzone (sold the RigLogix portion of the Rigzone business on February 20, 2018 and DHI transferred majority ownership of the remaining Rigzone business to Rigzone management on August 31, 2018). Certain of the Company’s arrangements include multiple performance obligations, which primarily consists of the ability to post jobs and access to a searchable database of candidates. The Company determines the units of accounting for multiple performance obligations in accordance with Topic 606. Specifically, the Company considers a performance obligation as a separate unit of accounting if it has value to the customer on a standalone basis. The Company’s arrangements do not include a general right of return. Services to customers buying a package of available job postings and access to the database are delivered over the same period and revenue is recognized ratably over the length of the underlying contract, typically from one to twelve months. The separation of the package into two deliverables results in no change in revenue recognition since delivery of the two services occurs over the same time period. Advertising revenue. Advertising revenue is recognized over the period in which the advertisements are displayed on the websites or at the time a promotional e-mail is sent out to the audience. Classified revenue. Classified job posting revenues are derived from the sale of job postings to recruiters and employers. A job posting is the ability to list a job on the website for a specified time period. Revenue from the sale of classified job postings is recognized ratably over the length of the contract or the period of actual usage. Data services revenue. Access to the Company’s database of energy industry data is provided to customers for a fee. Data services revenue is recognized ratably over the length of the underlying contract, typically from one to twelve months. The data services business, called RigLogix, was sold on February 20, 2018. Career fair and recruitment event booth rentals. Career fair and recruitment event revenues are derived from renting booth space to recruiters and employers. Revenue from these sales are recognized when the career fair or recruitment event is held. Concentration of Credit Risk— Cash and cash equivalents are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. These deposits may be redeemed upon demand. The Company believes it is not exposed to any significant credit risk. The Company performs ongoing credit evaluations of its customers’ financial condition and generally does not require collateral on accounts receivable. No single customer represents 10% or more of revenues for the years ended December 31, 2020, 2019 and 2018. 66 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Allowance for Doubtful Accounts— The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of DHI’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Statements of Cash Flows— All bank deposits are considered cash and cash equivalents. The supplemental disclosures to the accompanying consolidated statements of cash flows are as follows (in thousands): 2020 2019 2018 Supplemental cash flow information: Interest paid $ 1,100 $ 639 $ 1,807 Taxes paid 457 1,506 2,634 Non-cash investing and financing activities: Capital expenditures on fixed assets included in accounts payable and accrued expenses 110 140 223 Share repurchases included in accounts payable and accrued expenses 141 — — Fixed Assets— Depreciation of equipment, furniture and fixtures, computer software and capitalized website development costs are provided under the straight-line method over estimated useful lives ranging from two to five years. Amortization of leasehold improvements is provided over the shorter of the term of the related lease or the estimated useful life of the improvement. The cost of additions and betterments is capitalized, and repairs and maintenance costs are charged to operations in the periods incurred. Capitalized Software Costs— Capitalized software costs consist of costs to purchase and develop software for internal use. The Company capitalizes certain incurred software development costs in accordance with the Internal Use Software subtopic of the FASB ASC. Costs incurred during the application-development stage for software bought and further customized by outside vendors for the Company’s use and software developed by a vendor for the Company’s proprietary use have been capitalized. Website Development Costs— The Company capitalizes certain costs incurred in designing, developing, testing and implementing enhancements to its websites. These costs are amortized over the enhancement’s estimated useful life, which generally approximates two years. Costs related to the planning and post implementation phases of website development efforts are expensed as incurred. Goodwill and Indefinite-Lived Acquired Intangible Assets— Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. The indefinite-lived acquired intangible assets include the Dice trademarks and brand name. The Company performs a test for impairment of goodwill and indefinite-lived intangible assets annually on October 1, or more frequently if indicators of potential impairment exist, to determine if the carrying value of the recorded asset is impaired. The impairment review process for goodwill compares the fair value of the reporting unit in which goodwill resides to its carrying value. The impairment review process for indefinite-lived intangible assets compares the fair value of the assets to their carrying value. The determination of whether or not the asset has become impaired involves a significant level of judgment in the assumptions underlying the approach used to determine the value of the Company’s reporting units or the intangible asset. Changes in the Company’s strategy and/or market conditions could significantly impact these judgments and require adjustments to recorded amounts of goodwill or indefinite-lived intangible assets. See Notes 9 and 10 for discussion of impairment charges. Capitalized Contract Costs— The Company capitalizes certain contract acquisition costs consisting primarily of commissions paid when contracts are signed. For costs incurred to obtain new business sales contracts, the Company capitalizes and expenses these costs over an average customer life, which was approximately two years as of December 31, 2020. For the remaining sales contracts, the Company capitalizes and expenses these costs over a weighted average contract term, which was approximately one year as of December 31, 2020. See Note 3 for additional contract acquisition cost disclosures. Foreign Currency Translation— For the Company’s foreign operations whose functional currency is not the U.S. dollar, the assets and liabilities are translated into U.S. dollars at current exchange rates. Resulting translation adjustments are reflected as Other Comprehensive Income (Loss). Revenue and expenses are translated at average exchange rates for the period. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are charged to operations as incurred. 67 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Advertising Costs— The Company expenses advertising costs as they are incurred. Advertising expense for the years ended December 31, 2020, 2019 and 2018 was $ 12.7 million, $ 20.1 million and $ 26.7 million, respectively. Income Taxes— The Company recognizes deferred taxes by the asset and liability method. Under this method, deferred income taxes are recognized for differences between the financial statement and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. The primary sources of temporary differences are stock-based compensation, amortization and impairment of intangible assets, and depreciation of fixed assets. Stock-Based Compensation— The Company has a plan to grant equity awards to certain employees and directors of the Company and its subsidiaries. See Note 16. Fair Value of Financial Instruments— The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximate their fair values. The Company’s long-term debt consists of borrowings under its credit facility. See Note 5 for fair value disclosures. Risks and Uncertainties— The Company is subject to the risks, expenses and uncertainties frequently encountered by companies in the rapidly evolving markets for online products and services. These risks include the failure to develop and extend the Company’s online service brands, the rejection of the Company’s services by consumers, vendors and/or advertisers, the inability of the Company to maintain and increase the levels of traffic on its online services, as well as other risks and uncertainties. In the event that the Company does not successfully execute its business plan, certain assets may not be recoverable. Use of Estimates— The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. DHI’s significant estimates include the useful lives and valuation of fixed assets and intangible assets, goodwill, the income tax valuation allowance, and the assumptions used to value the Performance-Based Restricted Stock Units (“PSUs”) of the Company. Earnings per Share— The Company follows the Earnings Per Share topic of the FASB ASC in computing earnings per share (“EPS”). Basic EPS is calculated by dividing net income by the weighted average number of shares outstanding. When the effects are dilutive, diluted earnings per share is calculated using the weighted average number of shares outstanding, and the dilutive effect of stock-based compensation awards as determined under the treasury stock method. Certain stock awards were excluded from the computation of diluted (loss) earnings per share due to their anti-dilutive effect. See Note 20. New Accounting Pronouncements— In May 2014, FASB issued ASU No. 2014-09 ("Topic 606"), Revenue from Contracts with Customers. Topic 606 supersedes the revenue recognition requirements in Accounting Standards Codification Topic 605, Revenue Recognition, and requires entities to measure and recognize revenue and the related cash flows it expects to be entitled for the transfer of promised goods or services to customers and requires an entity to recognize the incremental costs of obtaining a contract with a customer as an asset if the entity expects to recover those costs over time. Topic 606 became effective for reporting periods beginning after December 15, 2017. Topic 606 provides companies with two implementation methods. Companies can choose to apply the standard retrospectively to each prior reporting period presented (full retrospective application) or retrospectively with the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings of the annual reporting period that includes the date of initial application (modified retrospective application). The Company has chosen the modified retrospective application method and implemented Topic 606 effective January 1, 2018. The Company has determined that the January 1, 2018 cumulative effect to its revenue streams was an increase of approximately $ 0.2 million to deferred revenues, and the cumulative effect to its contract acquisition costs was an increase to contract acquisition cost assets of approximately $ 6.1 million, with a net after tax increase to retained earnings of approximately $ 4.5 million. The cumulative impact on contract acquisition costs was computed based on contracts in force as of December 31, 2017 using average commission rates on both new business sales to be amortized over approximately two years and the remaining sales contracts to be amortized over approximately one year. See Note 3 to the Notes to the Consolidated Financial Statements. In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new standard aims to improve existing U.S. GAAP and will change certain aspects of accounting for equity investments, financial instruments, financial liabilities, and presentation and 68 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS related disclosures. The updated standard became effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company adopted the new standard in the first quarter of 2018, and has determined the adoption did not have a material impact on its consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases . The new standard has requirements on how to account for leases by both the lessee and the lessor and adds clarification for what constitutes a lease, among other items. The updated standard becomes effective for fiscal years beginning after December 15, 2018 and interim periods the following year, with early adoption permitted. The new standard must be applied using a modified retrospective transition. In July 2018, the FASB issued updated guidance which allows an additional transition method to adopt the new standard at the adoption date, as compared to the beginning of the earliest period presented, and recognize a cumulative-effect adjustment to the beginning balance of retained earnings in the period of adoption. DHI implemented the new standard effective January 1, 2019 and elected to recognize a cumulative effect adjustment to the beginning balance of retained earnings in the period of adoption. Adoption of this standard resulted in a right-of-use asset of $ 17.2 million, net of accrued rent and lease exit costs, and related operating lease liability of $ 18.0 million being established on the Company's balance sheet on January 1, 2019, with no cumulative-effect adjustment to retained earnings. Right-of-Use ("ROU") assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the obligation to make payments arising from the lease. The Company has implemented processes and tools to assist in the ongoing lease data collection and analysis, and has updated accounting policies and internal controls as a result of adopting this standard. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . ASU 2016-13 changes how entities will account for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance replaces the current "incurred loss" model with an "expected loss" model that requires consideration of a broader range of information to estimate expected credit losses over the lifetime of a financial asset. ASU 2016-13 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2022 for Smaller Reporting Companies. The Company is evaluating the expected impact of this standard on its consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurements (Topic 820), Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement . This standard removes, modifies, and adds certain disclosure requirements for fair value measurements. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted the new standard on January 1, 2020. The adoption of ASU 2018-13 did not have a material impact on its consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. The new standard requires entities that are customers in cloud computing arrangements to defer implementation costs if they would be capitalized by the entity in software licensing arrangements under the internal-use software guidance. ASU No. 2018-15 is effective for fiscal years beginning after December 15, 2019 and interim periods within those years. The amendments allow either a retrospective or prospective approach to all implementation costs incurred after adoption. The Company adopted this standard, effective January 1, 2020, under the prospective approach, and capitalized implementation costs are included in other assets on the Company's balance sheet. In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes , which eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating taxes during interim quarters and the recognition of deferred tax liabilities for outside basis differences. This guidance also simplifies aspects of accounting for franchise taxes, specifies the timing for recognizing certain income tax effects of changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is evaluating the expected impact of this standard on its consolidated financial statements. 3. REVENUE RECOGNITION The Company recognizes revenue when control of the promised goods or services is transferred to our customers at an amount that reflects the consideration to which we expect to receive in exchange for those goods or services. Revenue is recognized net of customer discounts ratably over the service period. Customer billings delivered in advance of services being rendered are recorded as deferred revenue and recognized over the service period. The Company generates revenue from recruitment packages, advertising, classifieds, data services, and career fair and recruitment event booth rentals. 69 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Disaggregation of revenue Our brands serve various economic professions, such as technology, financial, hospitality (the Hcareers business was sold on May 22, 2018), and energy (sold the RigLogix portion of the Rigzone business on February 20, 2018 and transferred majority ownership of the remaining Rigzone business to Rigzone management on August 31, 2018). The following table provides information about disaggregated revenue by brand and includes a reconciliation of the disaggregated revenue with reportable segments (in thousands): For the Year Ended December 31, 2020 2019 2018 Tech-focused Other Total Tech-focused Other Total Tech-Focused Other Total Dice (1) $ 82,190 — $ 82,190 $ 92,527 $ — $ 92,527 $ 94,438 $ — $ 94,438 ClearanceJobs 28,977 — 28,977 24,745 — 24,745 21,086 — 21,086 eFinancial Careers 25,711 — 25,711 32,098 — 32,098 33,758 — 33,758 Dice Europe (2) — — — — — — 2,976 — 2,976 Rigzone (3) — — — — — — — 3,771 3,771 Hcareers (3) — — — — — — — 5,329 5,329 BioSpace (3) — — — — — — 212 212 Total $ 136,878 $ — $ 136,878 $ 149,370 $ — $ 149,370 $ 152,258 $ 9,312 $ 161,570 (1) Includes Dice U.S. and Career Events. (2) The Company ceased Dice Europe operations on August 31, 2018. (3) The Company sold the RigLogix portion of the Rigzone business on February 20, 2018 and transferred majority ownership of the remaining Rigzone business to Rigzone management on August 31, 2018. Hcareers was sold on May 22, 2018 and the Company transferred majority ownership of BioSpace to BioSpace management on January 31, 2018. Contract Balances The following table provides information about opening and closing balances of receivables and contract liabilities from contracts with customers as required under Topic 606 (in thousands): As of December 31, 2020 As of December 31, 2019 Receivables $ 20,298 $ 21,158 Short-term contract liabilities (deferred revenue) 42,426 50,568 Long-term contract liabilities (deferred revenue) 1,068 1,058 We receive payments from customers based upon contractual billing schedules; accounts receivable is recorded when customers are invoiced per the contractual billing schedules. As the Company's standard payment terms are less than one year, the Company elected the expedient, where applicable. As a result, the Company did not consider the effects of a significant financing component. Contract liabilities include customer billings delivered in advance of performance under the contract, and associated revenue is realized when services are rendered under the contract. Receivables increase due to customer billings and decrease by cash collected from customers. Contract liabilities increase due to customer billings and are decreased as performance obligations are satisfied under the contracts. The Company recognized the following revenues as a result of changes in the contract liability balances in the respective periods (in thousands): 70 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31, 2020 Year Ended December 31, 2019 Year Ended December 31, 2018 Revenue recognized in the period from: Amounts included in the contract liability at the beginning of the period $ 50,438 $ 54,825 $ 75,967 Transaction price allocated to the remaining performance obligations Under the guidance of Topic 606, the following table includes estimated deferred revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period (in thousands): 2021 2022 2023 Total Tech-focused $ 42,426 $ 1,033 $ 35 $ 43,494 Contract acquisition costs We are required to capitalize certain contract acquisition costs consisting primarily of commissions paid when contracts are signed. As allowed for by the practical expedient, the Company is using a portfolio approach for contract acquisition costs, which allows the new revenue guidance to be applied to a portfolio of contracts with similar characteristics. As a result, the Company has applied the portfolio approach to new business contracts and recurring or remaining business contracts. The Company reasonably expects that the effects of applying the portfolio approach would not differ materially from applying Topic 606 at the individual contract level. As of January 1, 2018, the date we adopted Topic 606, we capitalized $ 6.1 million in contract acquisition costs related to contracts that were not completed. The cumulative effect for contract acquisition costs was computed based on contracts in force as of December 31, 2017 using the average commission rates on both new business sales contracts, to be amortized over approximately two years, and the remaining sales contracts to be amortized over approximately one year. For costs incurred to obtain new business sales contracts, we will record these costs over an average customer life, which was determined using customer renewal rates; for the remaining sales contracts, we will record these costs over the weighted average contract term. The Company recorded $ 11.5 million, $ 11.8 million and $ 10.1 million of expense related to the amortization of contract acquisition costs during the years ended December 31, 2020, 2019 and 2018, respectively, and there was no impairment loss incurred. 4. SALE OF BUSINESSES The Company transferred a majority ownership of the Rigzone business to Rigzone management on August 31, 2018. The Company retained a 40 % common share interest in Rigzone. The Company incurred approximately $ 0.4 million in selling costs and recognized a $ 0.4 million loss on sale in the third quarter of 2018. The Company sold the Hcareers business on May 22, 2018 for $ 16.5 million and incurred approximately $ 1.5 million in selling costs, with $ 1.7 million of the purchase price placed in escrow, to be released twelve months after the closing date, subject to the terms and conditions of the transaction agreement, including certain contingencies. Net cash proceeds of $ 14.0 million were received on the date of sale of Hcareers. As a result of the sale, a $ 0.8 million loss was recognized in the second quarter of 2018. During the second quarter of 2019, the escrow of $ 1.7 million and working capital terms and related contingencies were finalized resulting in the Company recording an additional loss on sale of $ 0.5 million and receiving cash of $ 0.7 million from the escrow and $ 0.2 million from working capital. The Company sold the RigLogix portion of the Rigzone business on February 20, 2018 for $ 4.2 million and incurred approximately $ 0.6 million in selling costs. $ 0.4 million of the purchase price was placed in escrow, which was released to the Company in the first quarter of 2019. As a result of the sale, a $ 4.6 million gain was recognized in the first quarter of 2018. The gain on sale exceeded net proceeds as liabilities transferred in the transaction exceeded assets, primarily due to deferred revenues of $ 1.2 million. The Company transferred a majority ownership of the BioSpace business to BioSpace management on January 31, 2018. The Company retained a preferred share interest in BioSpace, Inc., representing a 20 % diluted interest. The Company incurred approximately $ 0.3 million in selling costs and recognized a $ 0.5 million loss on sale during the year ended December 31, 2018. 71 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company sold the Health eCareers business on December 4, 2017 for $ 15.0 million. $ 1.5 million of the purchase price was placed in escrow, which was released to the Company in the second quarter of 2019. 5. FAIR VALUE MEASUREMENTS The FASB ASC topic on Fair Value Measurements and Disclosures defines fair value, establishes a framework for measuring fair value and requires certain disclosures for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. As a basis for considering assumptions, a three-tier fair value hierarchy is used, which prioritizes the inputs used in measuring fair value as follows: • Level 1 – Quoted prices for identical instruments in active markets. • Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations, in which all significant inputs are observable in active markets. • Level 3 – Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The carrying amounts reported in the Consolidated Balance Sheets for cash and cash equivalents, accounts receivable, other assets, accounts payable and accrued expenses and long-term debt approximate their fair values. The fair value of the long-term debt was estimated using present value techniques and market based interest rates and credit spreads. The estimated fair value of long-term debt is based on Level 2 inputs. Certain assets and liabilities are measured at fair value on a non-recurring basis. These assets include investments (included in other assets), goodwill and intangible assets which resulted from prior acquisitions. Items valued using such internally generated valuation techniques are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be some significant inputs that are readily observable. Such instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances, for example, when there is evidence of impairment. Impairment —The Company performs annual impairment tests for goodwill and the Dice trademarks and brand name as of October 1 of each year or more frequently if indicators of potential impairment exist. See Notes 9 and 10 of the Notes to Consolidated Financial Statements. The Company evaluates the carrying value of equity investments at each reporting period as described in Note 6 of the Notes to the Consolidated Financial Statements. 6. INVESTMENTS At January 1, 2018, the Company held preferred stock representing a 10.0 % interest in the fully diluted shares of a leading tech skills assessment company. During 2018, the skills assessment company completed an additional equity offering, lowering DHI's total interest to 7.6 %. The Company did not adjust the recorded value of the investment because the shares issued under the new share offering were not similar to the Company's share rights. The Company has elected the measurement alternative in accordance with FASB ASC 321, Investments - Equity Securities. As of December 31, 2019, it was not practicable to estimate the fair value of the preferred stock as the shares are not traded. Accordingly, the investment was carried at its original cost of $ 2.0 million and was included in the other assets section of the Condensed Consolidated Balance Sheets. During the year ended December 31, 2020, based on the investment's historical cash burn rate, uncertainty of its ability to meet revenue and cash flow projections, current liquidity position, lack of access to additional capital, and impacts from the COVID-19 pandemic, the Company determined the value to be zero. Accordingly, the Company recorded an impairment charge of $ 2.0 million during the first quarter of 2020. On January 31, 2018, the Company transferred a majority ownership of the BioSpace business to BioSpace management with zero proceeds received from the transfer, while retaining a 20 % preferred share interest in the BioSpace business. At the time of sale, the fair value of the investment was estimated to be zero. During the second quarter of 2020, the Company sold its 20 % interest in BioSpace to BioSpace management for $ 0.2 million. Accordingly, the Company recognized a $ 0.2 million gain on sale, which was included in interest expense and other on the Consolidated Statements of Operations. Rigzone is a website dedicated to delivering online content, data , and career services in the oil and gas industry in North America, Europe, the Middle East, and Asia Pacific. Oil and gas companies, as well as companies that serve the energy industry, use Rigzone to find talent for roles such as petroleum engineers, sales, professionals with energy industry expertise 72 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS and skilled tradesmen. On August 31, 2018, the Company transferred a majority ownership of the Rigzone business to Rigzone management, while retaining a 40 % common share interest, with zero proceeds received from the transfer. The Company agreed to provide $ 0.4 million of funding to the Rigzone business, which was recorded in accounts payable and accrued expenses on the consolidated balance sheets as of December 31, 2018. The Company has no further funding requirements to the Rigzone business. The Company has evaluated the 40 % common share investment in the Rigzone business and has determined the investment meets the definition and criteria of a variable interest entity ("VIE"). The Company evaluated the VIE and determined that the Company does not have a controlling financial interest in the VIE, as the Company does not have the power to direct the activities of the VIE that most significantly impact the VIE's economic performance. The common share interest is being accounted for under the equity method of accounting as the Company has the ability to exercise significant influence over Rigzone. As accumulated earnings of the VIE have been approximately zero since the date of transfer, the investment continues to be recorded at cost, which was zero at December 31, 2020. 7. LEASES On January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842), applying the modified retrospective transition. Periods beginning after January 1, 2019 will be presented under Topic 842, while prior period amounts will not be adjusted and continue to be reported under the accounting standards in effect prior to January 1, 2019. The Company has operating leases for corporate office space and certain equipment. The leases have terms from one year to eight years, some of which include options to renew the lease, and are included in the lease term when it is reasonably certain that the Company will exercise the option. No leases include options to purchase the leased property. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We do not have any lease agreements with related parties. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Based on the present value of the lease payments for the remaining lease term of the Company's existing leases, the Company recorded operating ROU assets of $ 17.2 million and operating lease liabilities of $ 18.0 million as of January 1, 2019. Operating lease ROU assets and liabilities commencing after January 1, 2019 are recognized at commencement date based on the present value of lease payments over the lease term. When readily available, the Company uses the implicit rate in determining the present value of the lease payments. When leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on information available at the commencement of the lease, including the lease term. Because the implicit rate in each lease is not available, the Company used its incremental borrowing rate to determine the present value of lease payments. Leases with an initial term of 12 months or less are not recorded on the balance sheet. All operating lease expense is recognized on a straight-line basis over the lease term. The component of lease cost were as follows (in thousands): Year Ended December 31, 2020 Year Ended December 31, 2019 Operating lease cost* $ 4,059 $ 4,265 Sublease income ( 1,018 ) ( 1,322 ) Total lease cost $ 3,041 $ 2,943 *Includes short-term and variable lease costs, which are immaterial. Supplemental cash flow information related to leases was as follows (in thousands): Year Ended December 31, 2020 Year Ended December 31, 2019 Cash paid for amounts included in measurement of lease liabilities: Operating cash flows from operating leases $ 4,315 $ 4,632 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 292 $ 7,434 Supplemental balance sheet information related to lease was as follows (in thousands, except lease term and discount): 73 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31, 2020 Year Ended December 31, 2019 Operating lease right-of-use assets $ 16,405 $ 19,712 Operating lease liabilities - current 3,410 3,643 Operating lease liabilities - non-current 13,704 16,664 Total operating lease liabilities $ 17,114 $ 20,307 Weighted average remaining lease term Operating leases 4.9 years 5.9 years Weighted average discount rate Operating leases 4.0 % 4.0 % As of December 31, 2020, future operating lease payments were as follows: (in thousands): Operating Leases 2021 $ 4,040 2022 3,780 2023 3,554 2024 3,073 2025 3,016 2025 and Thereafter 1,521 Total lease payments 18,984 Less imputed interest ( 1,870 ) Total $ 17,114 As of December 31, 2020, the Company has no additional operating or finance leases that have not yet commenced. 8. FIXED ASSETS, NET Fixed assets, net consist of the following as of December 31, 2020 and 2019 (in thousands): 2020 2019 Computer equipment and software $ 5,397 $ 6,869 Furniture and fixtures 2,525 2,934 Leasehold improvements 3,320 3,593 Capitalized development costs 48,515 35,925 59,757 49,321 Less: Accumulated depreciation and amortization ( 35,213 ) ( 28,969 ) Fixed assets, net $ 24,544 $ 20,352 9. ACQUIRED INTANGIBLE ASSETS, NET As a result of the sale of Hcareers (sold May 22, 2018), the Company disposed of all its remaining unamortized acquired intangible assets. Acquired intangible assets disposed of in conjunction with the sale had costs of $ 12.9 million and accumulated amortization of $ 6.7 million. Therefore, as of December 31, 2020 and 2019, the net value of all finite-lived acquired intangible assets was zero. 74 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Considering the recognition of the Dice brand, its long history, awareness in the talent acquisition and staffing services market, and the intended use, the remaining useful life of the Dice.com trademarks and brand name was determined to be indefinite. We determine whether the carrying value of recorded indefinite-lived acquired intangible assets is impaired on an annual basis or more frequently if indicators of potential impairment exist. The impairment review process compares the fair value of the indefinite-lived acquired intangible assets to its carrying value. If the carrying value exceeds the fair value, an impairment loss is recorded. As of December 31, 2020 and 2019, the Company had an indefinite-lived acquired intangible asset of $ 23.8 million and $ 39.0 million, respectively, related to the Dice trademarks and brand name. The annual impairment test for the Dice trademarks and brand name is performed on October 1 of each year. During the first quarter of 2020, because of the initial impacts of the COVID-19 pandemic and its potential impact on future earnings and cash flows that are attributable to the Dice trademarks and brand name, the Company performed an interim impairment analysis. As a result of the analysis, the Company recorded an impairment charge of $ 7.2 million during the first quarter of 2020. During the third quarter of 2020, the impacts of the COVID-19 pandemic continued and the Company's projected earnings and cash flows that are attributable to the Dice trademarks and brand name declined as compared to the projections used in the March 31, 2020 analysis. As a result, the Company performed an interim impairment analysis as of September 30, 2020, which resulted in the Company recording an additional impairment charge of $ 8.0 million during the three month period ended September 30, 2020. Revenues attributable to the Dice trademarks and brand name for the fourth quarter of 2020 and estimated future results as of December 31, 2020 have exceeded the projections used in the September 30, 2020 analysis. As a result, the Company believes it is not more likely than not that the fair value of the Dice trademarks and brand name is less than the carrying value as of December 31, 2020. Therefore, no quantitative impairment test was performed as of December 31, 2020. No impairment was recorded during the years ended December 31, 2019 and 2018. The projections utilized in the March 31 and September 30, 2020 analyses included a decline in revenues caused by the COVID-19 pandemic that are attributable to the Dice trademarks and brand name for the year ended December 31, 2020 compared to the year ended December 31, 2019. The September 30, 2020 analysis included a further decline in revenues caused by the COVID-19 pandemic that are attributable to the Dice trademarks and brand name for the year ending December 31, 2021 compared to the year ended December 31, 2020 and then increasing to rates approximating industry growth projections, although peaking at rates slightly lower than in the March 31, 2020 analysis. The Company’s ability to achieve these revenue projections may be impacted by, among other things, uncertainty related to COVID-19, competition in the technology recruiting market, challenges in developing and introducing new products and product enhancements to the market and the Company’s ability to attribute value delivered to customers. Cash flows that are attributable to the Dice trademarks and brand name were projected to decline for the year ended December 31, 2020 compared to the year ended December 31, 2019 as a result of the lower revenue, but partially offset by reductions to operating expenses. Operating expenses, excluding impairments, utilized in the March 31 and September 30, 2020 analyses were projected to decline for the year ended December 31, 2020 as compared to the year ended December 31, 2019, including a reduction in operating margin. The March 31, 2020 analysis included modest operating margin improvements during the year ending December 31, 2021 and beyond while the September 30, 2020 analysis included a small reduction in operating margin during the year ending December 31, 2021 and then increasing modestly. If future cash flows that are attributable to the Dice trademarks and brand name are not achieved, the Company could realize an impairment in a future period. In the March 31, 2020 and September 30, 2020 analyses, the Company utilized a relief from royalty rate method to value the Dice trademarks and brand name using a royalty rate of 5.0 % and 4.0 %, respectively, based on comparable industry studies and a discount rate of 17.5 % and 15.5 %, respectively. The decline in the royalty rate is due to revenue declines and impacts of the COVID-19 pandemic and the decline in the discount rate is primarily due to the lower projections, as compared to the March 31, 2020 analysis. The determination of whether or not indefinite-lived acquired intangible assets have become impaired involves a significant level of judgment in the assumptions underlying the approach used to determine the value of the indefinite-lived acquired intangible assets. Fair values are determined using a profit allocation methodology which estimates the value of the trademark and brand name by capitalizing the profits saved because the company owns the asset. We consider factors such as historical performance, anticipated market conditions, operating expense trends and capital expenditure requirements. Changes in our strategy, uncertainty related to COVID-19, and/or changes in market conditions could significantly impact these judgments and require adjustments to recorded amounts of intangible assets. If projections are not achieved, the Company could realize an impairment in the foreseeable future. 75 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. GOODWILL The following table shows the carrying amount of goodwill by segment as of December 31, 2020 and 2019 and the changes in goodwill for the years then ended (in thousands): Goodwill at January 1, 2019 $ 153,974 Foreign currency translation adjustment 2,085 Goodwill at December 31, 2019 $ 156,059 Foreign currency translation adjustment 920 Impairment ( 23,626 ) Goodwill at December 31, 2020 $ 133,353 The amount of goodwill as of December 31, 2020 allocated to the Tech-focused reporting unit was $ 133.4 million. The annual impairment test for the Tech-focused reporting unit is performed on October 1 of each year. During the first quarter of 2020, because of the initial impacts of the COVID-19 pandemic and its potential impact on future earnings and cash flows for the reporting unit, the Company performed an interim impairment analysis of goodwill. The results of the analysis indicated that the fair value of the Tech-focused reporting unit was not substantially in excess of the carrying value as of March 31, 2020. The percentage by which the estimated fair value exceeded carrying value for the Tech-focused reporting unit at March 31, 2020 was less than 1%. During the third quarter of 2020, the impacts of the COVID-19 pandemic continued and the Company's projected earnings and cash flows for the Tech-focused reporting unit declined as compared to the projections used in the March 31, 2020 analysis. As a result, the Company performed an interim impairment analysis as of September 30, 2020, which resulted in the Company recording an impairment charge of $ 23.6 million during the three month period ended September 30, 2020. Results for the Tech-focused reporting unit for the fourth quarter of 2020 and estimated future results as of December 31, 2020 have exceeded the projections used in the September 30, 2020 analysis. As a result, the Company believes it is not more likely than not that the fair value of the reporting unit is less than the carrying value as of December 31, 2020. Therefore, no quantitative impairment test was performed as of December 31, 2020. No impairment was recorded during the years ended December 31, 2019 and 2018. Revenue projections for the Tech-focused reporting unit declined compared to the projections used in the March 31, 2020 analysis due to the continued impacts of the COVID-19 pandemic. The September 30, 2020 analysis included a further decline in revenues attributable to the Tech-focused reporting unit for the year ending December 31, 2021 compared to the year ended December 31, 2020 and then increasing to rates approximating industry growth projections, although peaking at rates slightly lower than in the March 31, 2020 analysis. The Company’s ability to achieve these revenue projections may be impacted by, among other things, the length and impacts of the COVID-19 pandemic, competition in the technology recruiting market, challenges in developing and introducing new products and product enhancements to the market and the Company’s ability to attribute value delivered to customers. Cash flows attributable to the Tech-focused reporting unit declined for the year ended December 31, 2020 compared to the year ended December 31, 2019 as a result of the lower revenue, but partially offset by reductions to operating expenses. Operating expenses, excluding impairments, utilized in the March 31 and September 30, 2020 analyses have declined for the year ending December 31, 2020 as compared to the year ended December 31, 2019, including a reduction in operating margin. The March 31, 2020 analysis included modest operating margin improvements during the year ending December 31, 2021 and beyond while the September 30, 2020 analysis included a small reduction in operating margin during the year ending December 31, 2021 and then increasing modestly. The discount rate applied for the Tech-focused reporting unit in the September 30, 2020 analysis was 14.5 %, compared to 16.5 % at March 31, 2020. The decline in the discount rate is primarily due to the lower projections, as compared to the March 31, 2020 analysis. An increase to the discount rate applied or reductions to future projected operating results could result in future impairment of the Tech-focused reporting unit’s goodwill. It is reasonably possible that changes in judgments, assumptions and estimates the Company made in assessing the fair value of goodwill could cause the Company to consider some portion or all of the goodwill of the Tech-focused reporting unit to become impaired. In addition, a future decline in the overall market conditions, uncertainty related to COVID-19, political instability, and/or changes in the Company’s market share could negatively impact the estimated future cash flows and discount rates used to determine the fair value of the reporting unit and could result in an impairment charge in the foreseeable future. 76 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The determination of whether or not goodwill has become impaired is judgmental in nature and requires the use of estimates and key assumptions, particularly assumed discount rates and projections of future operating results, such as forecasted revenues and earnings before interest, taxes, depreciation and amortization margins and capital expenditure requirements. Fair values are determined either by using a discounted cash flow methodology or by using a combination of a discounted cash flow methodology and a market comparable method. The discounted cash flow methodology is based on projections of the amounts and timing of future revenues and cash flows, assumed discount rates and other assumptions as deemed appropriate. Factors such as historical performance, anticipated market conditions, operating expense trends and capital expenditure requirements are considered. Additionally, the discounted cash flows analysis takes into consideration cash expenditures for product development, other technological updates and advancements to the websites and investments to improve the candidate databases. The market comparable method indicates the fair value of a business by comparing it to publicly traded companies in similar lines of business or to comparable transactions or assets. Considerations for factors such as size, growth, profitability, risk and return on investment are analyzed and compared to the comparable businesses and adjustments are made. A market value of invested capital of the publicly traded companies is calculated and then applied to the entity’s operating results to arrive at an estimate of value. 11. INDEBTEDNESS Credit Agreement —In November 2018, the Company, together with Dice Inc. (a wholly-owned subsidiary of the Company) and its wholly-owned subsidiary, Dice Career Solutions, Inc. (collectively, the “Borrowers”), entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”), which matures in November 2023, and replaces the previously existing credit agreement dated November 2015. The Credit Agreement provides for a revolving loan facility of $ 90 million, with an expansion option up to $ 140 million, as permitted in the Credit Agreement. Borrowings under the Credit Agreement bear interest, at the Company’s option, at a LIBOR rate or a 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 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. Interest expense on long-term debt for the years ended December 31, 2020, 2019, and 2018 was $ 1.1 million, $ 0.9 million, and $ 1.9 million, respectively. The Credit Agreement contains various customary affirmative and negative covenants and also contains certain financial covenants, including a consolidated leverage ratio and a consolidated interest coverage ratio. Borrowings are allowed under the Credit Agreement to the extent the consolidated leverage ratio, calculated on a pro forma basis, is equal to or less than 2.50 to 1.00 . Negative covenants include restrictions on incurring certain liens; making certain payments, such as stock repurchases and dividend payments; making certain investments; making certain acquisitions; making certain dispositions; and incurring additional indebtedness. Restricted payments are allowed under the Credit Agreement to the extent the consolidated leverage ratio, calculated on a pro forma basis, is equal to or less than 2.00 to 1.00 , plus an additional $ 5.0 million of restricted payments. 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 December 31, 2020, the Company was in compliance with all of the financial covenants under the Credit Agreement. The obligations under the Credit Agreement are guaranteed by two of the Company’s wholly-owned subsidiaries, and secured by substantially all of the assets of the Borrowers and the guarantors and stock pledges from certain of the Company’s foreign subsidiaries. The amounts borrowed as of December 31, 2020 and 2019 are as follows (dollars in thousands): 77 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020 December 31, 2019 Amounts borrowed: Revolving credit facility $ 20,000 $ 10,000 Less: deferred financing costs, net of accumulated amortization of $319 and $172 ( 417 ) ( 565 ) Total borrowed $ 19,583 $ 9,435 Available to be borrowed under revolving facility $ 70,000 $ 80,000 Interest rates: LIBOR rate loans: Interest margin 2.00 % 1.75 % Actual interest rates 2.19 % 3.56 % Commitment Fee 0.35 % 0.30 % There are no scheduled payments until maturity of the Credit Agreement in November 2023. 12. COMMITMENTS AND CONTINGENCIES Litigation The Company is subject to various claims from taxing authorities, lawsuits and other complaints arising in the ordinary course of business. The Company records provisions for losses when claims become probable and the amounts are reasonably estimable. Although the outcome of these legal matters cannot be determined, it is the opinion of management that the final resolution of these matters will not have a material adverse effect on the Company’s financial condition, operations or liquidity. During the first quarter of 2018, the Company recorded a $ 1.0 million liability related to a class action lawsuit regarding the applicability of provisions of the Fair Credit Reporting Act (the "FCRA") to one of our products. The lawsuit was brought by Ian Douglas, individually, as a representative of the class and on behalf of the general public, against DHI Group, Inc. and Dice Inc. asserting six claims under the FCRA that the Company’s Open Web profiles are “consumer reports” and Dice is a “consumer reporting agency” under the FCRA, including claims pursuant to the private right of action in 15 U.S.C. Section 1681n for alleged willful violations of the FCRA. The action was originally filed in a federal district court on July 26, 2017, but as a part of the settlement process, the action was re-filed in the Superior Court of Santa Clara County, California (Case No. 18CV331732). The recorded liability reflected a settlement, which was subject to a final judgment, and was paid in the third quarter of 2019. The settlement resolved all remaining claims subject to the lawsuit, and final judgment approving the settlement was entered on July 24, 2020. Tax Contingencies The Company operates in a number of tax jurisdictions and is routinely subject to examinations by various tax authorities with respect to income taxes and indirect taxes. The determination of the Company’s worldwide provision for taxes requires judgment and estimation. The Company has reserved for potential examination adjustments to our provision for income taxes and accrual of indirect taxes in amounts which the Company believes are reasonable. 13. EQUITY TRANSACTIONS Stock Repurchase Plans — The Company's Board of Directors ("Board") approved a stock repurchase program that permits the Company to repurchase its common stock. Management has discretion in determining the conditions under which shares may be purchased from time to time. The following table summarizes the Stock Repurchase Plans approved by the Board of Directors: May 2018 to May 2019 May 2019 to May 2020 May 2020 to May 2021 Approval Date May 2018 April 2019 May 2020 Authorized Repurchase Amount of Common Stock $ 7 million $ 7 million $ 5 million 78 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2020, the value of shares available to be purchased under the current plan was $ 1.1 million. During the years ended December 31, 2020, 2019 and 2018, purchases of the Company’s common stock pursuant to Stock Repurchase Plans were as follows: Year Ended December 31, 2020 2019 2018 Shares repurchased [1] 3,548,265 848,760 1,086,420 Average purchase price per share [2] $ 2.38 $ 2.97 $ 1.82 Dollar value of shares repurchased (in thousands) $ 8,436 $ 2,519 $ 1,977 Unsettled shares repurchased [3] 63,451 4,310 26,337 [1] No shares of our common stock were purchased other than through a publicly announced plan or program. [2] Average price paid per share includes costs associated with the repurchases. [3] Included in the number of shares repurchased above The Company's Board approved the retirement of 20 million shares of treasury stock during the first quarter of 2019 and, as a result, the Company reduced additional paid in capital by $ 161.6 million and Common Stock by $ 0.2 million during the quarter. The value of treasury stock retired was computed based on the average repurchase price of all treasury shares as of March 31, 2019, which was $ 8.09 per share. Convertible Preferred Stock— The Company has 20 million shares of convertible preferred stock authorized, with a $ 0.01 par value. No shares have been issued and outstanding since prior to our initial public offering in 2007. The rights, preferences, privileges and restrictions granted to and imposed on the convertible preferred stock are as set forth below. The Company currently has no preferred stock outstanding. The Company’s amended and restated certificate of incorporation permits the terms of any preferred stock to be determined at the time of issuance. Dividend provisions The preferred stockholders would be entitled to dividends only when dividends are paid to common shareholders. In the event of a dividend, the holders of the preferred shares would be entitled to share in the dividend on a pro rata basis, as if their shares had been converted into shares of common stock. Conversion rights Any holder of preferred stock has the right, at its option, to convert the preferred shares into shares of common stock at a ratio of one preferred stock share for one common stock share. The holders of 66 2 / 3 % of all outstanding preferred stock have the right at any time to require all the outstanding shares of preferred stock to be converted into an equal number of shares of common stock. Voting rights include the right to vote at a special or annual meeting of stockholders on all matters entitled to be voted on by holders of common stock, voting together as a single class with the common stock. There are no redemption rights associated with the preferred stock. Liquidation rights Upon the occurrence of liquidation, the holders of the preferred shares shall be paid in cash for each share of preferred stock held, out of, but only to the extent of, the assets of the Company legally available for distribution to its stockholders, before any payment or distribution is made to any shareholders of common stock . The liquidation value is $ 2.17 per share, subject to adjustments for stock splits, stock dividends, combinations, or other recapitalizations of the preferred stock. Dividends— No dividends were declared during the years ended December 31 2020, 2019 or 2018. Our Credit Agreement limits our ability to declare and pay dividends. Refer to Note 11 “Indebtedness.” Unclaimed Shareholder Liability— Prior to the third quarter of 2018, other long-term liabilities included $ 1.0 million due to former shareholders of the Company under a Joint Plan of Reorganization that was agreed to by the Company and two of its creditors, and confirmed by the U.S. Bankruptcy Court of the Southern District Court of New York on June 24, 2003. During the third quarter of 2018, the Company concluded the unclaimed amounts were no longer due and payable and further, such 79 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS amounts represent additional equity of the Company. Accordingly, the Company reclassified $ 1.0 million from other long-term liabilities to additional paid-in capital during the third quarter of 2018. 14. ACCUMULATED OTHER COMPREHENSIVE LOSS FASB ASC topic on Comprehensive Income establishes standards for the reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. This statement requires that all items that are required to be recognized as components of comprehensive income be reported in a financial statement with the same prominence as other financial statements. The Company had no amounts reclassified out of accumulated other comprehensive income for the years ended December 31, 2020, 2019, and 2018. The foreign currency translation adjustments impact comprehensive income. Accumulated other comprehensive income (loss), net consists of the following components, net of tax (in thousands): Year Ended December 31, 2020 2019 2018 Foreign currency translation: Balance at beginning of year $ ( 29,248 ) $ ( 31,236 ) $ ( 27,330 ) Translation adjustments 729 1,988 ( 3,906 ) Balance at end of year $ ( 28,519 ) $ ( 29,248 ) $ ( 31,236 ) 15. DISPOSITION RELATED AND OTHER COSTS In May 2017, the Company announced plans to divest a number of its online professional communities to achieve greater focus and resource allocation toward its core tech-focused business. The planned divestitures included: BioSpace (transferred majority ownership to BioSpace management on January 31, 2018 and sold the remaining interest during the second quarter of 2020), Hcareers (sold May 22, 2018), and Rigzone (sold the RigLogix portion of the Rigzone business on February 22, 2018 and transferred majority ownership of the remaining Rigzone business to Rigzone management on August 31, 2018). Additionally, the Company ceased the Dice Europe operations on August 31, 2018 and vacated certain offices during 2018. In connection with the planned divestitures and reorganization to the tech-focused strategy, the Company incurred certain costs, including severance and retention, lease exit, business closure, professional fees related to activist shareholders, search, financial advisory, and legal services, and other costs to further these strategic objectives. The activities associated with disposition related and other costs were substantially completed during the year ended December 31, 2019. The following table displays a roll forward of the disposition related and other costs and related liability balances (in thousands): Accrual at December 31, 2019 Expense Cash Payments Accrual at December 31, 2020 Severance and retention $ 145 $ — $ ( 145 ) $ — Lease exit and related asset impairment costs 365 — ( 117 ) 248 Total disposition related and other costs $ 510 $ — $ ( 262 ) $ 248 Accrual at December 31, 2018 Expense Cash Payments Accrual at December 31, 2019 Severance and retention $ 1,089 $ 1,258 $ ( 2,202 ) $ 145 Professional fees and other costs 1,271 442 ( 1,713 ) — Lease exit and related asset impairment costs 947 — ( 582 ) 365 Total disposition related and other costs $ 3,307 $ 1,700 $ ( 4,497 ) $ 510 80 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Accrual at December 31, 2017 Expense Cash Payments Non-cash Impairment Accrual at December 31, 2018 Severance and retention $ 1,237 $ 3,191 $ ( 3,339 ) $ — $ 1,089 Professional fees and other costs 825 2,914 ( 2,468 ) — 1,271 Lease exit and related asset impairment costs — 1,514 ( 399 ) ( 168 ) 947 Total disposition related and other costs $ 2,062 $ 7,619 $ ( 6,206 ) $ ( 168 ) $ 3,307 16. STOCK BASED COMPENSATION Under the 2012 Omnibus Equity Award Plan, the Company has granted stock options, restricted stock and Performance-Based Restricted Stock Units (“PSUs”) to certain employees and directors. The Company records expense based upon the number of awards outstanding with no estimate for forfeitures. The Company recorded stock based compensation expense of $ 6.3 million, $ 5.7 million, and $ 6.6 million during the years ended December 31, 2020, 2019, and 2018, respectively. At December 31, 2020, there was $ 9.0 million of unrecognized compensation expense related to unvested awards, which is expected to be recognized over a weighted-average period of approximately 1.3 years. In connection with the employment agreement for the Company's new Chief Executive Officer, the Company granted, as Inducement Grants Under NYSE Rule 303A.08, 1,750,000 restricted stock units during the second quarter of 2018 and 750,000 performance based restricted stock units during the fourth quarter of 2018 to the Company's new Chief Executive Officer. Restricted Stock— Restricted stock is granted to employees of the Company and its subsidiaries, and to non-employee members of the Company’s Board. These shares are part of the compensation plan for services provided by the employees or Board members. The closing price of the Company’s stock on the date of grant is used to determine the fair value of the grants. The expense related to the restricted stock grants is recorded over the vesting period as described below. There was no cash flow impact resulting from the grants. The restricted stock vests in various increments either quarterly or on the anniversaries of each grant, subject to the recipient’s continued employment or service through each applicable vesting date. Vesting occurs over one year for Board members and over two to four years for employees. A summary of the status of restricted stock awards as of December 31, 2020, 2019, and 2018 and the changes during the periods then ended is presented below: Year Ended December 31, 2020 2019 2018 Shares Weighted- Average Fair Value at Grant Date Shares Weighted- Average Fair Value at Grant Date Shares Weighted- Average Fair Value at Grant Date Non-vested at beginning of the period 3,994,787 $ 2.46 4,518,932 $ 2.32 2,393,257 $ 5.48 Granted 2,172,550 $ 2.67 2,257,940 $ 2.72 4,087,342 $ 1.68 Forfeited ( 430,136 ) $ 2.81 ( 560,375 ) $ 2.75 ( 439,750 ) $ 4.20 Vested ( 1,859,348 ) $ 2.58 ( 2,221,710 ) $ 2.36 ( 1,521,917 ) $ 5.03 Non-vested at end of period 3,877,853 $ 2.49 3,994,787 $ 2.46 4,518,932 $ 2.32 PSUs— PSUs are granted to employees of the Company and its subsidiaries. These shares are granted under two compensation agreements that are for services provided by the employees. The first agreement expired and was terminated during the first quarter of 2020. 81 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Under the second agreement, the fair value of the PSUs are measured at the grant date fair value of the award, which was determined based on an analysis of the probable performance outcomes. The performance period is over one year and is based on the achievement of bookings targets during the years ended December 31, 2020 and 2019, as defined in the agreement. The earned shares will then vest over a three year period, one-third on each of the first, second, and third anniversaries of the grant date, or if later, the date the Compensation Committee certifies the performance results with respect to the performance period. For the performance period ending December 31, 2020, as a result of the COVID-19 pandemic and its impact on the overall economy, the bookings targets were modified during the third quarter of 2020. Accordingly, the Company remeasured the awards. As of December 31, 2020, there were 1,352,438 unvested shares related to the second agreement. There were no cash flow impact resulting from the grants. A summary of the status of PSUs as of December 31, 2020, 2019, and 2018 and the changes during the periods then ended, is presented below: Year Ended December 31, 2020 2019 2018 Shares Weighted- Average Fair Value at Grant Date Shares Weighted- Average Fair Value at Grant Date Shares Weighted- Average Fair Value at Grant Date Non-vested at beginning of the period 1,664,650 $ 2.53 1,255,000 $ 3.45 760,003 $ 6.92 Granted 911,460 $ 2.65 837,150 $ 2.54 750,000 $ 1.58 Forfeited ( 695,628 ) $ 3.26 ( 427,500 ) $ 5.26 ( 255,003 ) $ 8.27 Vested ( 528,044 ) $ 1.88 — $ — — $ — Non-vested at end of period 1,352,438 $ 2.50 1,664,650 $ 2.53 1,255,000 $ 3.45 Stock Options— The fair value of each option grant is estimated using the Black-Scholes option-pricing model using the weighted-average assumptions in the table below. This valuation model requires the Company to make assumptions and judgments about the variables used in the calculation, including the fair value of the Company’s common stock, the expected life (the period of time that the options granted are expected to be outstanding), the volatility of the Company’s common stock, a risk-free interest rate and expected dividends. The expected life of options granted is derived from historical exercise behavior. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury rates in effect at the time of grant. The stock options vest 25% after one year, beginning on the first anniversary date of the grant, and 6.25% each quarter following the first anniversary. There was no cash flow impact resulting from the grants. No stock options were granted during the years ended December 31, 2020, 2019, and 2018. A summary of the status of options previously granted as of December 31, 2020, 2019, and 2018, and the changes during the periods then ended is presented below: Year Ended December 31, 2020 Options Weighted-Average Exercise Price Aggregate Intrinsic Value Options outstanding at January 1 190,000 $ 8.28 $ — Forfeited ( 80,000 ) $ 9.48 — Options outstanding at December 31 110,000 $ 7.40 $ — Exercisable at December 31 110,000 $ 7.40 $ — 82 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31, 2019 Options Weighted-Average Exercise Price Aggregate Intrinsic Value Options outstanding at January 1 327,000 $ 8.35 $ — Forfeited ( 137,000 ) $ 8.46 — Options outstanding at December 31 190,000 $ 8.28 $ — Exercisable at December 31 190,000 $ 8.28 $ — Year Ended December 31, 2018 Options Weighted-Average Exercise Price Aggregate Intrinsic Value Options outstanding at January 1 1,101,875 $ 9.28 $ — Forfeited ( 774,875 ) $ 9.67 — Options outstanding at December 31 327,000 $ 8.35 $ — Exercisable at December 31 327,000 $ 8.35 $ — The weighted-average remaining contractual term of options exercisable at December 31, 2020 is 0.2 years. T he following table summarizes information about options outstanding as of December 31, 2020: Options Outstanding Options Exercisable Exercise Price Number Outstanding Weighted- Average Remaining Contractual Life Number Exercisable (in years) $ 7.00 - $ 7.99 100,000 0.1 100,000 $ 8.00 - $ 8.99 10,000 0.8 10,000 110,000 110,000 83 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 17. INCOME TAXES Deferred tax assets (liabilities) included in the balance sheet as of December 31, 2020 and 2019 are as follows (in thousands): 2020 2019 Deferred tax assets: Net operating loss carryforward $ 389 $ — Capital loss carryforward 5,225 5,044 Allowance for doubtful accounts 255 150 Provision for accrued expenses and other, net 1,577 792 Stock-based compensation 1,872 2,162 Deferred revenue 127 211 Tax credit carryforward 258 146 9,703 8,505 Less valuation allowance 5,343 5,072 Deferred tax asset, net of valuation allowance 4,360 3,433 Deferred tax liabilities: Acquired intangibles ( 6,187 ) ( 10,253 ) Depreciation of fixed assets ( 6,327 ) ( 4,288 ) Capitalized contract costs ( 1,763 ) ( 1,708 ) Deferred tax liability ( 14,277 ) ( 16,249 ) Net deferred tax liability $ ( 9,917 ) $ ( 12,816 ) Recognized in Consolidated Balance Sheets: Deferred tax asset 19 7 Deferred tax liability ( 9,936 ) ( 12,823 ) Net deferred tax liability $ ( 9,917 ) $ ( 12,816 ) The Company had deferred tax assets of $ 0.4 million at December 31, 2020 related to net operating loss carryforwards; $ 5.2 million and $ 5.0 million, respectively, at December 31, 2020 and 2019 related to capital loss carryforwards; and $ 0.3 million and $ 0.1 million, respectively, at December 31, 2020 and 2019 related to tax credit carryforwards. The net operating loss carryforward period is indefinite. The capital losses expire in 2023 through 2025. The tax credits expire in 2029. The Company has recorded valuation allowances of $ 5.3 million and $ 5.1 million, respectively, at December 31, 2020 and 2019 in order to measure only the portion of the deferred tax assets which are more likely than not to be realized. Income (loss) before income taxes are as follows (in thousands): 2020 2019 2018 United States $ ( 5,628 ) $ 10,882 $ 762 Foreign ( 26,806 ) 5,442 8,840 Income (loss) before income taxes $ ( 32,434 ) $ 16,324 $ 9,602 84 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Tax expense (benefit) for the years ended December 31, 2020, 2019 and 2018 is as follows (in thousands): 2020 2019 2018 Current income tax expense (benefit): Federal $ 244 $ 524 $ ( 1,299 ) State 173 72 ( 119 ) Foreign 82 684 1,570 Current income tax expense 499 1,280 152 Deferred income tax expense (benefit): Federal ( 2,025 ) 1,660 1,387 State ( 461 ) 539 104 Foreign ( 432 ) 294 785 Deferred income tax expense (benefit) ( 2,918 ) 2,493 2,276 Income tax expense (benefit) $ ( 2,419 ) $ 3,773 $ 2,428 A reconciliation between the tax expense at the federal statutory rate and the reported income tax expense is summarized as follows: Year Ended December 31, 2020 2019 2018 Federal statutory rate $ ( 6,811 ) $ 3,428 $ 2,016 Gain (loss) on sale of businesses ( 42 ) 84 ( 6,111 ) Stock-based compensation 482 380 2,112 Nondeductible impairment 5,274 — — State taxes, net of federal effect ( 315 ) 467 ( 38 ) Difference between foreign and U.S. rates 32 ( 192 ) ( 102 ) Change in accrual for unrecognized tax benefits ( 437 ) 107 ( 1,179 ) U.S. tax on global intangible low-taxed income, net of credits — 84 229 Executive compensation 323 147 126 Currency translation gains (losses) ( 278 ) ( 67 ) 219 U.S. transition tax on foreign earnings — 140 368 Research and development tax credits ( 530 ) ( 557 ) ( 481 ) Change in valuation allowances ( 30 ) 12 5,117 Other ( 87 ) ( 260 ) 152 Income tax expense (benefit) $ ( 2,419 ) $ 3,773 $ 2,428 Effective tax rate 7.5 % 23.1 % 25.3 % H.R.1, commonly known as the Tax Cuts and Jobs Act (“TCJA”), was signed into law in December 2017. In the year ended December 31, 2018, the Company completed its analysis of the impact of the TCJA on its liability for the one-time transition tax on the deemed repatriation of undistributed earnings from foreign subsidiaries. The Company recognized an adjustment on the basis of revised foreign earnings computations and additional guidance issued by U.S. federal and state tax authorities, resulting in tax expense of $ 0.4 million. In the year ended December 31, 2019, the Company increased its transition tax liability to reflect further guidance issued by tax authorities, resulting in tax expense of $ 0.1 million. An uncertain tax position represents the Company’s expected treatment of a tax position taken in a filed tax return, or planned to be taken in a tax return not yet filed, that has not been reflected in measuring income tax expense for financial reporting purposes. At December 31, 2020 and 2019, the Company has recorded a liability of $ 1.3 million and $ 1.8 million, respectively, which consists of unrecognized tax benefits of $ 1.2 million and $ 1.4 million, respectively, and estimated accrued interest and penalties of $ 0.1 million and $ 0.4 million, respectively. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. During the years ended December 31, 2020, 2019 and 2018, interest expense (income) and penalties recorded in the Consolidated Statements of Operations were $( 214,000 ), $ 94,000 and $( 61,000 ), respectively. 85 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Following is a reconciliation of the amounts of unrecognized tax benefits, net of tax and excluding interest and penalties, for the years ended December 31, 2020, 2019 and 2018 (in thousands): 2020 2019 2018 Unrecognized tax benefits—beginning of period $ 1,434 $ 1,422 $ 2,539 Increases in tax positions related to current year 134 163 330 Increases in tax positions related to prior year — 41 — Decreases in tax positions related to prior year — — ( 9 ) Settlements with taxing authorities — — ( 838 ) Lapse of statute of limitations ( 360 ) ( 192 ) ( 600 ) Unrecognized tax benefits—end of period $ 1,208 $ 1,434 $ 1,422 The foregoing table indicates unrecognized tax benefits, net of tax and excluding interest and penalties. The balance of gross unrecognized benefits was $ 1.3 million, $ 1.5 million, and $ 1.5 million at December 31, 2020, 2019 and 2018, respectively. If the unrecognized tax benefits at December 31, 2020, 2019 and 2018 were recognized in full, tax benefits of $ 1.3 million, $ 1.8 million and $ 1.7 million, respectively, would affect the effective tax rate. The Company files income tax returns in the U.S. and various foreign jurisdictions. The Company is generally no longer subject to examinations by U.S. federal tax authorities for tax years prior to 2017, or by U.S. state and foreign authorities for tax years prior to 2016. The Company believes it is reasonably possible that as much as $ 0.4 million of its unrecognized tax benefits may be recognized by the end of 2021 as a result of a lapse of the statute of limitations. 18. EMPLOYEE SAVINGS PLAN The Company has a savings plan (the “Savings Plan”) that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under the Savings Plan, participating employees may defer a portion of their pretax earnings, up to the Internal Revenue Service annual contribution limit. The Company contributed $ 1.6 million, $ 1.4 million, and $ 1.3 million for the years ended December 31, 2020, 2019 and 2018, respectively, to match employee contributions to the Savings Plan. 19. SEGMENT INFORMATION Beginning in 2019, the Company has had a single reportable segment, Tech-focused, which includes the Dice, ClearanceJobs, and eFinancialCareers services, as well as corporate related costs. The Company allocates resources and assesses financial performance on a consolidated basis, as all services pertain to the Company's Tech-focused strategy. Prior to 2019, the Company had other services and activities that individually were not significant in relation to consolidated revenues, operating income or total assets. These include Hcareers (sold May 22, 2018), Rigzone (sold the RigLogix portion of the Rigzone business on February 20, 2018 and transferred majority ownership of the remaining Rigzone business to Rigzone management on August 31, 2018) , and Biospace (majority ownership transferred to BioSpace management on January 31, 2018) services, which are recorded in the "Other" category. The Company’s current foreign operations are comprised of the Dice Europe (ceased operations on August 31, 2018) operations and a portion of the eFinancialCareers and Rigzone services (sold the RigLogix portion of the Rigzone business on February 20, 2018 and transferred majority ownership of the remaining business to Rigzone management on August 31, 2018), which operate in Europe, the financial centers of the gulf region of the Middle East, and Asia Pacific. The Company's foreign operations also included Hcareers (sold May 22, 2018), which operated in Canada. Revenue and long-lived assets by geography, as presented in the tables below, are based on the location of each of the Company's subsidiaries. 86 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table shows the segment information (in thousands and recast for the change in reportable segments): 2020 2019 2018 By Segment: Revenues: Tech-focused $ 136,878 $ 149,370 $ 152,258 Other — — 9,312 Total revenues $ 136,878 $ 149,370 $ 161,570 Depreciation: Tech-focused $ 12,019 $ 9,743 $ 9,001 Other — — 279 Total depreciation $ 12,019 9,743 $ 9,280 Amortization: Tech-focused $ — $ — $ — Other — — 482 Total amortization $ — $ — $ 482 Operating income (loss): Tech-focused $ ( 29,605 ) $ 17,025 $ 7,280 Other — — 4,412 Operating income ( 29,605 ) 17,025 11,692 Interest expense and other ( 827 ) ( 701 ) ( 2,054 ) Other expense ( 2,002 ) — ( 36 ) Income (loss) before income taxes $ ( 32,434 ) $ 16,324 $ 9,602 Capital expenditures: Tech-focused $ 16,104 $ 14,188 $ 10,060 Other — — 221 Total capital expenditures $ 16,104 $ 14,188 $ 10,281 2020 2019 2018 By Geography: Revenues: United States $ 113,202 $ 119,882 $ 121,097 United Kingdom 12,767 17,343 22,356 EMEA, APAC and Canada (1) 10,909 12,145 18,117 Non-United States 23,676 29,488 40,473 Total revenues $ 136,878 $ 149,370 $ 161,570 (1) Europe (excluding United Kingdom), the Middle East and Africa (“EMEA”) and Asia-Pacific (“APAC”). Revenues from Canada ceased May 22, 2018 upon the sale of the Company's Hcareers business. 87 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of As of March 31, December 31, December 31, December 31, 2020 2019 2020 2019 Long-lived assets 2: United States $ 33,838 $ 30,260 United Kingdom 6,277 8,307 EMEA and APAC (1) 834 1,497 Non-United States 7,111 9,804 Total long-lived assets $ 40,949 $ 40,064 (1) Europe (excluding United Kingdom), the Middle East and Africa (“EMEA”) and Asia-Pacific (“APAC”). (2) Long-lived assets include fixed assets and lease right of use assets. 20. EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share (“EPS”) is computed based on the weighted-average number of shares of common stock outstanding. Diluted EPS is computed based on the weighted-average number of shares of common stock outstanding plus common stock equivalents assuming exercise of stock options, where dilutive. The following is a calculation of basic and diluted earnings per share and weighted-average shares outstanding (in thousands, except per share amounts): 2020 2019 2018 Income (loss) from continuing operations—basic and diluted $ ( 30,015 ) $ 12,551 $ 7,174 Weighted-average shares outstanding—basic 48,278 48,739 48,520 Add shares issuable from stock-based awards — 2,894 1,085 Weighted-average shares outstanding—diluted $ 48,278 $ 51,633 $ 49,605 Basic earnings (loss) per share $ ( 0.62 ) $ 0.26 $ 0.15 Diluted earnings (loss) per share $ ( 0.62 ) $ 0.24 $ 0.14 88 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 21. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following is a summary of unaudited quarterly results of operations for 2020 and 2019: For the Three Months Ended March 31 June 30 September 30 December 31 (in thousands, except per share amounts) 2020 Revenues $ 36,633 $ 33,784 $ 33,250 $ 33,211 Total operating expenses 41,883 31,331 61,828 31,441 Operating income (loss) $ ( 5,250 ) $ 2,453 $ ( 28,578 ) $ 1,770 Net income (loss) $ ( 6,550 ) $ 1,862 $ ( 27,322 ) $ 1,995 Basic earnings (loss) per common share $ ( 0.13 ) $ 0.04 $ ( 0.57 ) $ 0.04 [1] Diluted earnings (loss) per common share $ ( 0.13 ) $ 0.04 $ ( 0.57 ) $ 0.04 [1] 2019 Revenues $ 37,120 $ 37,359 $ 37,176 $ 37,715 Total operating expenses 33,528 33,057 31,903 33,320 Other operating income (loss) $ — $ ( 537 ) $ — $ — [2] Operating income $ 3,592 $ 3,765 $ 5,273 $ 4,395 Net income $ 1,588 $ 3,061 $ 4,381 $ 3,521 Basic earnings per common share $ 0.03 $ 0.06 $ 0.09 $ 0.07 [1] Diluted earnings per common share $ 0.03 $ 0.06 $ 0.08 $ 0.07 [1] [1] The sum of the quarter may not equal the full year amount. [2] Escrow and working capital terms and related contingencies were finalized regarding the Hcareers's sale resulting in an additional loss on the sale. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None.