What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-05-05 compared with 2020-11-04 · 91 added, 203 removed, 240 unchanged (55% of the section changed)

20 unchanged sentences

We are a provider of software products, online tools and services that deliver career marketplaces to candidates and employers globally.

DHI’s three brands, Dice, ClearanceJobs and eFinancialCareers, enable recruiters and hiring managers to efficiently

search, match and connect with highly skilled technologists in specialized fields, particularly technology, active government security clearance, and financial services.

DHI’s three brands, Dice, ClearanceJobs and eFinancialCareers, enable recruiters and hiring managers to efficiently search, match and connect with highly skilled technologists in specialized fields, particularly technology, active government security clearance, and financial services.

Professionals find ideal employment opportunities, relevant job advice and personalized data that help manage their technologist lives.

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

At September 30, 2020 and 2019, Dice had approximately 5,300 and 6,100 total recruitment package customers in the U.S., respectively.

The average monthly revenue per U.S.

recruitment package customer was $1,122 and $1,135 for the three and nine months ended September 30, 2020, respectively, and was $1,131 and $1,132 for the three and nine months ended September 30, 2019, respectively.

The decline in the third quarter of 2020 was due to the negative impacts of the COVID-19 pandemic.

At March 31, 2021 and 2020, Dice had approximately 5,200 and 5,850 total recruitment package customers in the U.S., respectively, and the average monthly revenue per U.S.

recruitment package customer was $1,153 for the three months ended March 31, 2020 compared to $1,128 for the three months ended March 31, 2021.

The decline was due to the negative impacts of the COVID-19 pandemic.

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

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

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

A summary of our deferred revenue and backlog as of March 31, 2021, December 31, 2020, and March 31, 2020 are presented in the table below.

Summary of Deferred Revenue and Backlog:

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

Backlog at September 30, 2020 declined $24.1 million and $9.2 million from December 31, 2019 and September 30, 2019, respectively.

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

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

This decrease was partially offset by a backlog increase at ClearanceJobs.

Backlog at March 31, 2021 increased $7.7 million and $3.6 million from December 31, 2020 and March 31, 2020, respectively.

Compared to December 31, 2020, the increase is due to the normal seasonal increase in number of customers that renew in the first quarter and a focus on signing multi-year contracts.

Compared to March 31, 2020, the increase is driven by the focus on multi-year contracts and continued growth at ClearanceJobs.

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

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

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

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

Product Releases

Dice Marketplace Dice IntelliSearch-Based Job Alerts, Dice Private Email, Dice Remote Jobs, Dice Recruiter Profile, Dice Instant Messaging

ClearanceJobs Meetings, ClearanceJobs Video

ClearanceJobs Client Team Dashboard, ClearanceJobs Workflow, ClearanceJobs Favorites, ClearanceJobs Self-Serve BrandAmp, ClearanceJobs Candidate Search and ClearanceJobs Broadcast Message upgrades

eFinancialCareers Messaging, Video and Voice Calling, eFinancialCareers Follow and eFinancialCareers Job Alerts

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

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There have been no material changes to our critical accounting policies as compared to the critical accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

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

Three Months Ended September 30, Increase (Decrease) Percent

Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020

Three Months Ended March 31, Increase (Decrease) Percent

Change Foreign Exchange Impact (2)

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(1) Includes Dice U.S.

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

and Career Events

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

For the three months ended September 30, 2020, we experienced a decrease in revenue of $3.9 million, or 11%.

For the three months ended March 31, 2021, we experienced a decrease in revenue of $4.0 million, or 11%.

Revenue at Dice decreased $3.4 million, or 15%, compared to the same period in 2020 due to the impact of the COVID-19 pandemic driving lower renewal rates year over year.

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Cost of Revenues

Three Months Ended September 30, Decrease Percent

(in thousands, except percentages)

Cost of revenues $ 4,249 $ 4,250 $ (1) — %

Percentage of revenues 12.8 % 11.4 %

Cost of revenues was approximately flat to the same period in 2019.

Increases in compensation costs were offset by an increase in capitalized labor, which decreases operating expenses, and a decrease in consulting costs.

Product Development Expenses

Three Months Ended September 30, Decrease Percent

(in thousands, except percentages)

Product development $ 4,029 $ 4,121 $ (92) (2) %

Percentage of revenues 12.1 % 11.1 %

Product development expenses decreased $0.1 million, or 2%, driven by higher capitalization of internal development costs, which decreases operating expenses.

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

Together, this decreased operating expenses $0.1 million.

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

Sales and Marketing Expenses

Three Months Ended September 30, Decrease Percent

(in thousands, except percentages)

Sales and marketing $ 11,715 $ 13,615 $ (1,900) (14) %

Percentage of revenues 35.2 % 36.6 %

Sales and marketing expenses decreased $1.9 million, or 14% from the same period in 2019.

Sales and marketing had an increase in compensation related costs of $1.0 million.

This increase was offset by $2.0 million in reduced discretionary marketing expenses realized from efficiencies in vendor selection and volumes and a focus on higher yielding marketing investments and a $0.8 million reduction in other operational costs due to the COVID-19 pandemic, including travel and consulting costs.

General and Administrative Expenses

Three Months Ended September 30, Decrease Percent

(in thousands, except percentages)

General and administrative $ 7,402 $ 7,502 $ (100) (1) %

Percentage of revenues 22.3 % 20.2 %

General and administrative expenses decreased $0.1 million, or 1%, primarily due to a decrease in other operational costs of $0.6 million, including recruiting, facilities, professional fees and travel.

The decrease was partially offset by an increase in non-cash stock stock based compensation costs of $0.5 million.

Three Months Ended September 30, Increase Percent

(in thousands, except percentages)

Depreciation $ 2,807 $ 2,415 $ 392 16 %

Percentage of revenues 8.4 % 6.5 %

Depreciation expense increased $0.4 million or 16% from the same period in 2019, in connection with higher headcount driving higher capitalization of internal development costs, which are reflected as purchases of fixed assets in the Condensed Consolidated Statements of Cash Flows.

Impairment of Intangible Assets

Three Months Ended September 30, Increase Percent

(in thousands, except percentages)

Impairment of intangible assets $ 8,000 $ — $ 8,000 — %

Percentage of revenues 24.1 % — %

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

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

As a result of the analysis, the Company recorded an impairment charge of $8.0 million in the third quarter of 2020.

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

Impairment of Goodwill

Three Months Ended September 30, Increase Percent

(in thousands, except percentages)

Impairment of goodwill $ 23,626 $ — $ 23,626 — %

Percentage of revenues 71.1 % — %

During the third quarter of 2020, because of the impacts of the COVID-19 pandemic, the Company performed an interim impairment analysis of goodwill.

As a result of the analysis, the Company recorded an impairment charge of $23.6 million in the third quarter of 2020.

See also Note 9 of the Notes to the Condensed Consolidated Financial Statements.

Operating Income (Loss)

Three Months Ended September 30, Decrease Percent

(in thousands, except percentages)

Revenue $ 33,250 $ 37,176 $ (3,926) (11) %

Operating income (loss) (28,578) 5,273 (33,851) (642) %

Percentage of revenues (85.9) % 14.2 %

Operating loss for the three months ended September 30, 2020 was $28.6 million, a negative margin of 86%, compared to operating income of $5.3 million, a positive margin of 14%, for the same period in 2019, a decrease of $33.9 million.

The decrease in operating income and percentage margin were primarily driven by the impairments of goodwill and intangible assets of $31.6 million in the third quarter of 2020.

Interest Expense and Other

Three Months Ended September 30, Increase Percent

(in thousands, except percentages)

Interest expense and other $ 274 $ 188 $ 86 46 %

Percentage of revenues 0.8 % 0.5 %

Interest expense and other increased $0.1 million, or 46%, compared to the same period in 2019.

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

Three Months Ended September 30,

(in thousands, except

Income (loss) before income taxes $ (28,852) $ 5,085

Income tax expense (benefit) (1,530) 704

Effective tax rate 5.3 % 13.8 %

Our effective tax rate of 5.3% for the three months ended September 30, 2020 differed from the U.S.

statutory rate due to tax expense of $4.2 million from nondeductible impairment charges and due to the allocation of loss between jurisdictions.

The tax rate of 13.8% for the three months ended September 30, 2019 was lower than the statutory rate due to tax benefits of $0.2 million related to the transition tax on the deemed repatriation of foreign earnings and $0.2 million related to the divestiture of businesses.

Earnings (loss) per Share

Three Months Ended September 30,

(in thousands, except

per share amounts)

Net income $ (27,322) $ 4,381

Weighted-average shares outstanding—diluted 47,955 52,137

Diluted earnings (loss) per share $ (0.57) $ 0.08

Diluted earnings (loss) per share was $(0.57) and $0.08 for the three month periods ended September 30, 2020 and 2019, respectively.

The decrease in earnings (loss) per share was primarily driven by the non-cash impairment charges.

Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September 30, 2019

Nine Months Ended September 30, Increase (Decrease) Percent

Change Foreign Exchange Impact (2)

(in thousands, except percentages)

$ 62,797 $ 69,276 $ (6,479) (9) % $ —

ClearanceJobs 21,333 18,116 3,217 18 % —

eFinancialCareers 19,537 24,263 (4,726) (19) % (183)

Total revenues $ 103,667 $ 111,655 $ (7,988) (7) % $ (183)

(1) Includes Dice U.S.

and Career Events (formerly known as Targeted Job Fairs)

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

We experienced a decrease in revenue of $8.0 million, or 7%.

Revenue at Dice decreased by $6.5 million, or 9%, compared to the same period in 2019, with the COVID-19 pandemic, decrease in recruitment package customers and renewal rates contributing to the overall decrease.

Revenue at ClearanceJobs increased by $3.2 million, or 18%, as compared to the same period in 2019, primarily driven by continued high demand for professionals with government clearance and consistent product releases and enhancements driving activity on the site.

eFinancialCareers revenue decreased by $4.7 million, or 19%, compared to the same period in 2019 primarily due the COVID-19 pandemic, uncertainty around Brexit, and political unrest in Hong Kong.

Cost of Revenues

Nine Months Ended September 30, Increase Percent

Three Months Ended March 31, Increase Percent

(in thousands, except percentages)

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Percentage of revenues 13.2 % 11.4 %

Cost of revenues increased $0.6 million, or 5%, primarily driven by an increase in compensation related costs, partially offset by higher capitalization of internal development costs, which decreases operating expenses.

Together, this increased expense $0.6 million.

Cost of revenues increased $0.1 million, or 3%, driven by an increase of $0.4 million from higher web hosting costs.

This was partially offset by an increase in capitalized labor of $0.2 million, which decreases operating expenses, and a decrease in compensation costs $0.1 million due to lower headcount.

Together, this decreased expense $0.3 million.

Product Development Expenses

Nine Months Ended September 30, Decrease Percent

Three Months Ended March 31, Increase Percent

(in thousands, except percentages)

1 unchanged sentence

Percentage of revenues 12.8 % 11.4 %

Product Development expenses decreased $0.7 million, or 6%, driven by higher capitalization of internal development costs, which decreases operating expenses.

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

Product development was approximately flat to the same period in 2020.

A decrease in capitalized labor of $0.2 million, which increases operating expenses, was offset by a decrease in compensation costs of $0.3 million due to lower headcount.

Together, this decreased expense $0.1 million.

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

The Company also noted a decrease in consulting, travel and other operational costs due to COVID-19 of $0.5 million.

Sales and Marketing Expenses

Nine Months Ended September 30, Decrease Percent

Three Months Ended March 31, Decrease Percent

(in thousands, except percentages)

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Sales and marketing expenses decreased $2.5 million, or 17% from the same period in 2020.

Sales and marketing had an increase in compensation related costs of $3.9 million.

This increase was offset by $5.0 million in reduced discretionary marketing expenses realized from efficiencies in vendor selection and volumes and a focus on higher yielding marketing investments and a $2.1 million reduction in other operational costs due to the COVID-19 pandemic, including travel and consulting.

Sales and marketing decreased $1.2 million as the Company reduced discretionary marketing expenses to track sales activity, decreased $0.5 million in compensation costs from lower headcount, and decreased $0.8 million in other operational costs, including travel and entertainment.

General and Administrative Expenses

Nine Months Ended September 30, Increase Percent

Three Months Ended March 31, Decrease Percent

(in thousands, except percentages)

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Percentage of revenues 23.0 % 23.3 %

General and administrative costs increased $0.8 million, or 4%, primarily due to an increase in compensation related costs of $0.7 million and a $0.8 million increase in non-cash stock based compensation costs.

These increases were partially offset by reductions in other operational costs of $0.7 million due to the COVID-19 pandemic, including consulting, recruiting, facilities and travel.

Nine Months Ended September 30, Increase Percent

General and administrative expenses decreased $1.1 million, or 12%, primarily due to a decrease in other operational costs of $0.6 million, including recruiting, professional fees, travel, and a sales tax refund, combined with a decrease in compensation costs of $0.5 million driven by lower headcount and the prior year Chief Financial Officer transition.

Three Months Ended March 31, Increase Percent

(in thousands, except percentages)

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Percentage of revenues 12.6 % 8.9 %

Depreciation expense increased $1.9 million, or 26%, from the same period in 2019, in connection with higher headcount driving higher capitalization of internal development costs, which are reflected as purchases of fixed assets in the Condensed Consolidated Statements of Cash Flows.

Depreciation expense increased $0.8 million or 26% from the same period in 2020, in connection with increasing internal development costs during 2019 and 2020, which are reflected as purchases of fixed assets in the Condensed Consolidated Statements of Cash Flows, and depreciated after being placed in service.

Impairment of Intangible Assets

Nine Months Ended September 30, Increase Percent

Three Months Ended March 31, Decrease Percent

(in thousands, except percentages)

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

During the first and third quarters of 2020, because of the impacts of the COVID-19 pandemic, the Company performed interim impairment analyses of the Dice trademarks and brand name.

As a result of the analysis, the Company recorded impairment charges totaling $15.2 million during the nine months ended September 30, 2020.

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

Impairment of Goodwill

Nine Months Ended September 30, Increase Percent

(in thousands, except percentages)

Impairment of goodwill $ 23,626 $ — $ 23,626 — %

Percentage of revenues 22.8 % — %

During the third quarter of 2020, because of the impacts of the COVID-19 pandemic, the Company performed an interim impairment analysis of goodwill.

As a result of the analysis, the Company recorded an impairment charge of $23.6 million in the third quarter of 2020.

During the first quarter of 2020, because of the impacts of the COVID-19 pandemic, the Company performed an interim impairment analysis of

the Dice trademarks and brand name.

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

See also Note 7 of the Notes to the Condensed Consolidated Financial Statements.

Disposition Related and Other Costs

Nine Months Ended September 30, Decrease Percent

(in thousands, except percentages)

Disposition related and other costs $ — $ 1,700 $ (1,700) (100) %

Percentage of revenues — % 1.5 %

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

Operating Income (Loss)

Nine Months Ended September 30, Decrease Percent

Three Months Ended March 31, Increase Percent

(in thousands, except percentages)

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Percentage of revenues 1.5 % (14.3) %

Operating loss for the nine months ended September 30, 2020 was $31.4 million, a negative margin of 30%, as compared to operating income of $12.6 million, a positive margin of 11%, for the same period in 2019.

The decrease in operating income and percentage margin were primarily driven by the non-cash impairments of goodwill and intangible assets of $38.8 million in the 2020 period, partially offset by the disposition and related costs of $1.7 million in the 2019 period.

Operating income for the three months ended March 31, 2021 was $0.5 million, a positive margin of 2%, compared to operating loss of $5.3 million, a negative margin of 14%, for the same period in 2020, an increase of $5.7 million.

The increase in operating income and percentage margin was primarily driven by the impairment of intangible assets of $7.2 million in the first quarter of 2020.

Interest Expense and Other

Nine Months Ended September 30, Increase Percent

Three Months Ended March 31, Increase Percent

(in thousands, except percentages)

1 unchanged sentence

Percentage of revenues 0.6 % 0.5 %

Interest expense and other increased $0.1 million, or 21%, from the same period in 2019.

Interest expense increased $0.3 million, primarily due to the higher weighted-average debt outstanding during the nine months ended September 30, 2020 as the Company borrowed on its revolving credit facility in the first quarter of 2020 for liquidity protection during the COVID-19 pandemic.

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

Interest expense and other was approximately flat to the same period in 2020.

Impairment of Equity Investment

Nine Months Ended September 30, Decrease Percent Change

Three Months Ended March 31, Increase Percent

(in thousands, except percentages)

1 unchanged sentence

Percentage of revenues — % (5.5) %

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

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

Nine Months Ended September 30,

During the three months ended March 31, 2020, due to the impacts from the COVID-19 pandemic, the Company determined

the value of its 7.6% interest in a leading tech skills assessment company to be zero.

Accordingly, the Company recorded an

impairment charge of $2.0 million during the first quarter of 2020.

Unrealized gain on equity security

Three Months Ended March 31, Increase Percent

(in thousands, except percentages)

Unrealized gain on equity security $ 2,513 $ — $ 2,513 — %

Percentage of revenues 7.7 % — %

During the three months ended March 31, 2021, the Company recognized a $2.5 million unrealized gain on an equity security investment.

The unrealized gain was related to a minority interest representing less than 1% of the common stock of a technology company that became publicly traded during the first quarter of 2021 after filing an initial public offering.

See also Note 5 of the Notes to the Condensed Consolidated Financial Statements.

Three Months Ended March 31,

(in thousands, except

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Effective tax rate 5.2 % 11.9 %

Our effective tax rate of 5.8% for the nine months ended September 30, 2020 was lower than the U.S.

statutory rate due to tax expense of $4.8 million from nondeductible impairment charges;

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

Our effective tax rate of 5.2% for the three months ended March 31, 2021, was lower than the U.S.

statutory rate due to a $0.5 million tax benefit from the release of a valuation allowance related to our capital loss carryforward.

The tax rate of 11.9% for the three months ended March 31, 2020, differed from the statutory rate due to a tax deficiency of $0.4 million related to the vesting or settlement of share-based compensation awards;

tax expense of $0.6 million from the nondeductible impairment of an equity investment;

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

The tax rate of 25.5% for the nine months ended September 30, 2019 exceeded the statutory rate due to a tax deficiency of $0.4 million related to the vesting or settlement of share-based compensation awards.

Earnings per Share

Nine Months Ended September 30,

Earnings (loss) per Share

Three Months Ended March 31,

(in thousands, except

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Diluted earnings (loss) per share $ 0.05 $ (0.13)

Diluted earnings (loss) per share was $(0.66) and $0.18 for the nine months ended September 30, 2020 and 2019, respectively.

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

Diluted earnings (loss) per share was $0.05 and $(0.13) for the three month periods ended March 31, 2021 and 2020, respectively.

The increase in earnings per share was primarily driven by the unrealized gain on equity securities in 2021 and the impairment charge in 2020.

Liquidity and Capital Resources

8 unchanged sentences

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

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

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

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

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

10 unchanged sentences

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

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

Nine Months Ended September 30,

A reconciliation of Adjusted EBITDA for the three months ended March 31, 2021 and 2020 follows (in thousands):

Three Months Ended March 31,

Reconciliation of Net Income (loss) to Adjusted EBITDA:

4 unchanged sentences

Non-cash stock based compensation 1,758 1,796

Loss on sale of business — 537

Disposition related and other costs — 1,700

Legal contingencies and related fees — 163

Impairment of intangible assets — 7,200

Impairment of goodwill 23,626 —

Impairment of equity investment — 2,002

Gain on sale of equity investment (200) —

Unrealized gain on equity security (2,513) —

Disposition costs 602 —

Severance and related costs 315 518

Other (18) (61)

Adjusted EBITDA $ 7,269 $ 7,517

8 unchanged sentences

Change in deferred revenue (9,351) (4,382)

Disposition related and other costs — 1,700

Legal contingencies and related fees — 163

Disposition costs 602 —

Severance and related costs 315 518

1 unchanged sentence

Adjusted EBITDA $ 7,269 $ 7,517

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

Nine Months Ended September 30,

A reconciliation of Adjusted EBITDA Margin for the three months ended March 31, 2021 and 2020 follows (in thousands):

Three Months Ended March 31,

Revenues $ 32,633 $ 36,633

1 unchanged sentence

Adjusted EBITDA Margin 22 % 21 %

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

Nine Months Ended September 30,

We have summarized our cash flows for the three months ended March 31, 2021 and 2020 (in thousands).

Three Months Ended March 31,

Cash from operating activities $ 6,424 $ 2,933

2 unchanged sentences

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

At September 30, 2020, we had cash of $26.8 million compared to $5.4 million at December 31, 2019.

Cash held by foreign subsidiaries totaled approximately $2.6 million and $1.9 million at September 30, 2020 and December 31, 2019, respectively.

At March 31, 2021, we had cash of $7.3 million compared to $7.6 million at December 31, 2020.

Cash held by foreign subsidiaries totaled approximately $3.5 million and $3.1 million at March 31, 2021 and December 31, 2020, respectively.

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

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

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

In addition, we had $70.0 million in borrowing capacity under our $90.0 million Credit Agreement at March 31, 2021, subject to certain availability limits including our consolidated leverage ratio, which generally limits borrowings to 2.5 times annual adjusted EBITDA levels, as defined in the Credit Agreement.

We believe that our existing U.S.

4 unchanged sentences

Operating Activities

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

Net cash flows from operating activities were $14.4 million and $19.0 million for nine month periods ended September 30, 2020 and 2019, respectively.

Net cash flows from operating activities were $6.4 million and $2.9 million for three month periods ended March 31, 2021 and 2020, respectively.

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

Cash provided by operating activities during the 2020 period decreased $4.6 million compared to the same period of 2019 primarily due to lower billings to customers resulting from the COVID-19 pandemic, partially offset by cost savings implemented by the Company in response to the COVID-19 pandemic.

Cash provided by operating activities during the 2021 period increased $3.5 million compared to the same period of 2020 primarily due to strong billings to and collections from customers.

Investing Activities

Cash used in investing activities during the nine month period ended September 30, 2020 was $12.3 million compared to $7.7 million used in the same period of 2019.

Cash used in investing activities in the nine month period ended September 30, 2020 increased from the comparable 2019 period due to higher capitalization of internally developed software of $2.2 million and $2.5 million lower receipts from the sale of businesses and equity investments.

Cash used in investing activities during the three month period ended March 31, 2021 was $3.7 million compared to $4.3 million used in the same period of 2020.

Cash used in investing activities in the three month period ended March 31, 2021 decreased from the comparable 2020 period due to lower internal development costs, primarily driven by lower headcount.

Financing Activities

Cash provided by financing activities during the nine month period ended September 30, 2020 was $19.3 million, primarily driven by $27.0 million of net proceeds on long-term debt, partially offset by $7.7 million related to share repurchases.

Cash used during the nine month period ended September 30, 2019 was $13.1 million, primarily driven by $10.0 million of net repayments on long-term debt and $3.1 million related to share repurchases.

Cash used in financing activities during the three month period ended March 31, 2021 was $3.0 million and was driven by share repurchases.

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

Credit Agreement

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

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

As of March 31, 2021, the Company was in compliance with all of the financial covenants under the Credit Agreement.

Refer to Note 9 in the Notes to the Condensed Consolidated Financial Statements.

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Commitments and Contingencies

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

The following table presents certain minimum payments due and the estimated timing under contractual obligations with minimum firm commitments as of March 31, 2021:

Payments Due By Period

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

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

As of March 31, 2021, we had $20.0 million outstanding under our Credit Agreement.

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

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

Assuming an interest rate of 2.19% (the rate in effect on September 30, 2020) on our current borrowings, interest payments are expected to be approximately $0.2 million for the remainder of 2020, and approximately $0.8 million per year in 2021-2023.

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

Assuming an interest rate of 1.88% (the rate in effect on March 31, 2021) on our current borrowings, interest payments are expected to be approximately $0.3 million for the remainder of 2021, approximately $0.4 million for 2022, and approximately $0.3 million for 2023.

As of March 31, 2021, we had approximately $1.4 million of unrecognized tax benefits as liabilities, and it is uncertain if or when such amounts may be settled.

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

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

Included in the balance of unrecognized tax benefits at March 31, 2021 are $1.4 million of tax benefits that, if recognized, would affect the effective tax rate.

The Company believes it is reasonably possible that as much as $0.3 million of its unrecognized tax benefits may be recognized in the next twelve months.

Impact of COVID-19 on our Business

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

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

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

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

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

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

This year, the COVID-19 pandemic has led to a reduction in recruitment activity.

In 2020, the COVID-19 pandemic led to a reduction in recruitment activity.

If recruitment activity continues to slow in the industries in which we operate during 2021 and beyond, our revenues and results of operations will be negatively impacted.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis