DHI GROUP, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this report. See also our consolidated financial statements and the notes thereto and the section entitled “Note Concerning Forward-Looking Statements” in our Annual Report on Form 10-K for the year ended December 31, 2020. Information contained herein contains forward-looking statements. You should not place undue reliance on those statements because they are subject to numerous uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Forward-looking statements include, without limitation, information concerning our possible or assumed future results of operations. These statements often include words such as “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or similar expressions. These statements are based on assumptions that we have made in light of our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to execute our tech-focused strategy, competition from existing and future competitors in the highly competitive markets in which we operate, failure to adapt our business model to keep pace with rapid changes in the recruiting and career services business, failure to maintain and develop our reputation and brand recognition, failure to increase or maintain the number of customers who purchase recruitment packages, cyclicality or downturns in the economy or industries we serve, the impact of the coronavirus COVID-19 outbreak on our operations and financial results, geopolitical events such as the uncertainty surrounding the UK's departure from the European Union (EU) and civil unrest in Hong Kong, uncertainty in respect of the regulation of data protection and data privacy, failure to attract qualified professionals to our websites or grow the number of qualified professionals who use our websites, failure to successfully identify or integrate acquisitions, U.S. and foreign government regulation of the Internet and taxation, our ability to borrow funds under our revolving credit facility or refinance our indebtedness and restrictions on our current and future operations under such indebtedness. These factors and others are discussed in more detail below and in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, under the headings “Risk Factors,” “Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Information contained herein contains certain non-GAAP financial measures. These measures are not in accordance with, or an alternative for, measures in accordance with U.S. GAAP. Such measures presented herein include adjusted earnings before interest, taxes, depreciation, amortization, non-cash stock based compensation expense, impairment, gain or loss on sale of businesses, and certain other income or expense items, as defined, (“Adjusted EBITDA") and Adjusted EBITDA Margin. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" for definitions of these measures as well as reconciliations to the comparable GAAP measure. You should keep in mind that any forward-looking statement made by us herein, or elsewhere, speaks only as of the date on which it is made. New risks and uncertainties come up from time to time, and it is impossible to predict these events or how they may affect us. We have no obligation to update any forward-looking statements after the date hereof, except as required by federal securities laws. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy and information statements and other material information concerning us are available free of charge on the Investors page of our website at www.dhigroupinc.com . Our reports filed with the SEC are also available by visiting http://www.sec.gov . 21 Table of Contents Overview We are a provider of software products, online tools and services that deliver career marketplaces to candidates and employers in the United States. DHI’s brands, Dice and ClearanceJobs, enable recruiters and hiring managers to efficiently search, match and connect with highly skilled technologists in specialized fields, particularly technology and active government security clearance. Professionals find ideal employment opportunities, relevant job advice and personalized data that help manage their technologist lives. In online recruitment, we specialize in employment categories in which there has been a long-term scarcity of highly skilled, highly qualified professionals relative to market demand, specifically technologists who work in a variety of industries or have active government security clearances. Our websites serve as online two-sided marketplaces where employers and recruiters source and connect with prospective employees, and where technologists find relevant job opportunities, data and information to further their careers. Our websites offer job postings, news and content, career development and recruiting services tailored to the specific needs of the professional community that each website serves. Majority ownership and control of DHI's eFinancialCareers ("eFC") business, which provides career websites to the financial services industry and has operations in the United Kingdom, Continental Europe, Asia, the Middle East and North America, was transferred to eFC management on June 30, 2021. Recent Developments On June 30, 2021, the Company transferred majority ownership and control of its eFC business to eFC's management. The Company retained a 40% common share interest. As a result, all ongoing DHI operations, which include the Dice and ClearanceJobs brands, are in the United States subsequent to June 30, 2021. Our Revenues and Expenses We derive the majority of our revenues from customers who pay fees, either annually, quarterly or monthly, to post jobs on our websites and to access our searchable databases of resumes. Our fees vary by customer based on the number of individual users of our databases of resumes, the number and type of job postings and profile views purchased and the terms of the packages purchased. Our Company sells recruitment packages that can include access to our databases of resumes and job posting capabilities. We believe the key metrics that are material to an analysis of our businesses are our total number of Dice and ClearanceJobs recruitment package customers and the revenue, on average, that these customers generate. The tables below detail this customer data. As of June 30, Recruitment Package Customers: 2021 2020 Dice 5,441 5,450 ClearanceJobs 1,784 1,652 For the three months ended June 30, For the six months ended June 30, Average Monthly Revenue per Recruitment Package Customer 1 : 2021 2020 2021 2020 Dice $ 1,124 $ 1,131 $ 1,126 $ 1,142 ClearanceJobs 1,394 1,353 1,384 1,328 (1) Calculated by dividing recruitment package customer revenue by the daily average count of recruitment package customers during each month, adjusted to reflect a thirty day month. The simple average of each month is used to derive the amount for the three and six month periods.. Dice had 5,441 recruitment package customers as of June 30, 2021, which was approximately flat year over year while average revenue per recruitment package customer declined for the three and six month periods. The decline was due to the COVID-19 pandemic, which drove lower renewal rates throughout 2020 and negatively impacted revenue into 2021. ClearanceJobs had 1,784 recruitment package customers as of June 30, 2021 compared to 1,652 as of June 30, 2020 and average revenue per recruitment package customer increased for the three and six month periods. The increases for ClearanceJobs were due to 22 Table of Contents continued high demand for professionals with government clearance and consistent product releases and enhancements driving activity on the site. Deferred revenue, as shown on the Condensed Consolidated Balance sheets, reflects customer billings made in advance of services being rendered. Backlog consists of deferred revenue plus customer contractual commitments not invoiced representing the value of future services to be rendered under committed contracts. We believe backlog to be an important measure of our business as it represents our ability to generate future revenue. A summary of our deferred revenue and backlog is presented in the table below. Deferred Revenue and Backlog: 6/30/2021 12/31/2020 6/30/2020 Deferred Revenue $ 43,188 $ 36,582 $ 40,351 Contractual commitments not invoiced 31,890 27,849 19,029 Backlog 1 $ 75,078 $ 64,431 $ 59,380 (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 June 30, 2021 increased $10.6 million and $15.7 million from December 31, 2020 and June 30, 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 June 30, 2020, the increase is driven by bookings growth at both Dice and ClearanceJobs and the focus on multi-year contracts. 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. Advertisements include various forms of rich media and banner advertising, text links, sponsorships, and custom content marketing solutions. Lead generation information utilizes advertising and other methods to deliver leads to a customer. The Company continues to evolve and present new software products and features to attract and engage qualified professionals and match them with employers. Product Releases 2021 2020 Dice Marketplace, Dice TalentSearch Social Data Refresh Dice IntelliSearch-Based Job Alerts, Dice Private Email, Dice Remote Jobs, Dice Recruiter Profile, Dice Instant Messaging ClearanceJobs Meetings, ClearanceJobs Video, Team Recruiting ClearanceJobs Client Team Dashboard, ClearanceJobs Workflow, ClearanceJobs Favorites, ClearanceJobs Self-Serve BrandAmp, ClearanceJobs Candidate Search and ClearanceJobs Broadcast Message upgrades Our ability to grow our revenues will largely depend on our ability to grow our customer bases in the markets in which we operate by acquiring new customers while retaining a high proportion of the customers we currently serve, and to expand the breadth of services our customers purchase from us. We continue to make investments in our business and infrastructure to help us achieve our long-term growth objectives, such as the innovative products noted above. Other material factors that may affect our results of operations include our ability to attract qualified professionals that become engaged with our websites and our ability to attract customers with relevant job opportunities. The more qualified professionals that use our websites, the more attractive our websites become to employers and advertisers, which in turn makes them more likely to become our customers, resulting positively on our results of operations. If we are unable to continue to attract qualified professionals to engage with our two-sided marketplaces, our customers may no longer find our services attractive, which could have a negative impact on our results of operations. Additionally, we need to ensure that our websites remain relevant in order to attract qualified professionals to our websites and to engage them in high-value tasks, such as posting resumes and/or applying for jobs. 23 Table of Contents The largest components of our expenses are personnel costs and marketing and sales expenditures. Personnel costs consist of salaries, benefits, and incentive compensation for our employees, including commissions for salespeople. Personnel costs are categorized either in our statement of operations based on each employee’s principal function or those personnel costs incurred during the application development stage of internal use software and website development are recorded as fixed assets and amortized to depreciation expense in the statement of operations over the estimated useful life of the asset. Marketing expenditures primarily consist of online advertising, brand promotion and lead generation to employers and job seekers. Critical Accounting Policies 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 June 30, 2021 Compared to the Three Months Ended June 30, 2020 Revenues Three Months Ended June 30, Increase (Decrease) Percent Change 2021 2020 (in thousands, except percentages) Dice (1) $ 20,583 $ 20,489 $ 94 — % ClearanceJobs 8,138 7,107 1,031 15 % Total revenues $ 28,721 $ 27,596 $ 1,125 4 % (1) Includes Dice U.S. and Career Events For the three months ended June 30, 2021, we experienced an increase in revenue of $1.1 million, or 4%. Revenue at Dice increased $0.1 million, or 0%, compared to the same period in 2020. Dice renewal rates and new business activity improved from the prior year quarter along with consistently increasing customer counts since the third quarter of 2020, which drives additional revenue in future periods. Revenues for ClearanceJobs increased $1.0 million, or 15%, as compared to the same period in 2020, primarily driven by continued high demand for professionals with government clearance and consistent product releases and enhancements driving activity on the site. Cost of Revenues Three Months Ended June 30, Increase Percent Change 2021 2020 (in thousands, except percentages) Cost of revenues $ 3,593 $ 3,499 $ 94 3 % Percentage of revenues 12.5 % 12.7 % Cost of revenues increased $0.1 million, or 3%, driven by an increase of $0.2 million from higher web hosting costs and a decrease in capitalized labor of $0.1 million, which increases operating expenses. Together, these increased expense $0.3 million. These increases were partially offset by lower headcount and utility costs. Product Development Expenses Three Months Ended June 30, Increase Percent Change 2021 2020 (in thousands, except percentages) Product development $ 3,510 $ 3,401 $ 109 3 % Percentage of revenues 12.2 % 12.3 % Product development increased $0.1 million, or 3%, driven by an increase in consulting costs of $0.3 million and a decrease in capitalized labor of $0.6 million, which increases operating expenses. Together, these increased expense $0.9 million. These increases were partially offset by lower headcount of $0.8 million. 24 Table of Contents Sales and Marketing Expenses Three Months Ended June 30, Increase Percent Change 2021 2020 (in thousands, except percentages) Sales and marketing $ 10,151 $ 9,564 $ 587 6 % Percentage of revenues 35.3 % 34.7 % Sales and marketing expenses increased $0.6 million, or 6% from the same period in 2020. This increase was driven by a $0.4 million increase in discretionary marketing expenses as customer activity rebounded and a $0.2 million increase in operational costs, including travel and entertainment. General and Administrative Expenses Three Months Ended June 30, Increase Percent Change 2021 2020 (in thousands, except percentages) General and administrative $ 6,939 $ 6,904 $ 35 1 % Percentage of revenues 24.2 % 25.0 % General and administrative expenses were flat with the prior year. Stock based compensation expense increased approximately $0.4 million compared to the prior year due to higher achievement against targets for the Company's performance-based restricted stock units, while bad debt expense, professional fees and other operational costs decreased from the prior year. Together, these changes left general and administrative expenses flat with the prior year. Depreciation Three Months Ended June 30, Increase Percent Change 2021 2020 (in thousands, except percentages) Depreciation $ 4,040 $ 2,573 $ 1,467 57 % Percentage of revenues 14.1 % 9.3 % Depreciation expense increased $1.5 million or 57% from the same period in 2020 in connection with increasing internal development costs during 2019 and 2020 that were then placed in service, primarily in late 2020, and depreciated. Internal development costs are reflected as purchases of fixed assets in the Condensed Consolidated Statements of Cash Flows. Operating Income (Loss) Three Months Ended June 30, Decrease Percent Change 2021 2020 (in thousands, except percentages) Revenue $ 28,721 $ 27,596 $ 1,125 4 % Operating income (loss) 488 1,655 (1,167) (71) % Percentage of revenues 1.7 % 6.0 % Operating income for the three months ended June 30, 2021 was $0.5 million, a margin of 1.7%, compared to operating income of $1.7 million, a margin of 6.0%, for the same period in 2020, a decrease of $1.2 million. The decrease in operating income and percentage margin was primarily driven by the increase in depreciation expense, partially offset by higher revenues. 25 Table of Contents Interest Expense and Other Three Months Ended June 30, Decrease Percent Change 2021 2020 (in thousands, except percentages) Interest expense and other $ 87 $ 161 $ (74) (46) % Percentage of revenues 0.3 % 0.6 % Interest expense and other decreased $0.1 million, from the same period in 2020 due to lower debt outstanding. Unrealized loss on equity security Three Months Ended June 30, Decrease Percent Change 2021 2020 (in thousands, except percentages) Unrealized loss on equity security $ (674) $ — $ (674) — % Percentage of revenues (2.3) % — % The unrealized loss on equity security relates 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 6 of the Notes to the Condensed Consolidated Financial Statements. Income Taxes Three Months Ended June 30, 2021 2020 (in thousands, except percentages) Income (loss) before income taxes $ (273) $ 1,494 Income tax expense (benefit) (61) 332 Effective tax rate 22.3 % 22.2 % Our effective tax rate for both periods differed from the U.S. statutory rate due to state income taxes and the allocation of income (loss) between jurisdictions. Income (loss) from discontinued operations, net of tax Three Months Ended June 30, Decrease Percent Change 2021 2020 (in thousands, except percentages) Income (loss) from discontinued operations, net of tax $ (29,999) $ 700 $ (30,699) (4,386) % Percentage of revenues (104.4) % 2.5 % During the three months ended June 30, 2021, the Company transferred majority ownership of its eFC business and has recorded it as a discontinued operation. As a result, the Company recognized a $30.0 million loss during the three months ended June 30, 2021. The loss was comprised of $28.1 million related to the reclassification of currency translation adjustments and $5.2 million from the removal of eFC's net assets. The loss was partially offset by the recording of an equity investment of $3.6 million and eFC's earnings during the three months ended June 30, 2021. Income from discontinued operations for the three months ended June 30, 2020 represents eFC's earnings during the period. 26 Table of Contents Earnings (loss) per Share Three Months Ended June 30, 2021 2020 (in thousands, except per share amounts) Income (loss) from continuing operations $ (212) $ 1,162 Weighted-average shares outstanding—diluted 47,227 49,691 Diluted earnings (loss) per share - continuing operations $ — $ 0.02 Income (loss) from discontinued operations $ (29,999) $ 700 Weighted-average shares outstanding—diluted 47,227 49,691 Diluted earnings (loss) per share - discontinued operations $ (0.64) $ 0.01 Net income (loss) $ (30,211) $ 1,862 Weighted-average shares outstanding—diluted 47,227 49,691 Diluted earnings (loss) per share $ (0.64) $ 0.04 Diluted earnings (loss) per share from continuing operations was zero and $0.02 for the three months ended June 30, 2021 and 2020, respectively. The decrease was driven by the increase in depreciation expense and the unrealized loss on equity security, partially offset by higher revenues. Diluted earnings (loss) per share was $(0.64) and $0.04 for the three month periods ended June 30, 2021 and 2020, respectively. The decrease was driven by lower diluted earnings per share from continuing operations and the loss from discontinued operations. Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020 Revenues Six Months Ended June 30, Increase (Decrease) Percent Change 2021 2020 (in thousands, except percentages) Tech-focused Dice (1) $ 39,634 $ 42,974 $ (3,340) (8) % ClearanceJobs 15,763 14,007 1,756 13 % Total revenues $ 55,397 $ 56,981 $ (1,584) (3) % (1) Includes Dice U.S. and Career Events We experienced a decrease in revenue of $1.6 million, or 3%. Revenue at Dice decreased by $3.3 million, or 8%, compared to the same period in 2020 as the COVID-19 pandemic drove lower renewal rates throughout 2020, which negatively impacted revenue into 2021. Revenue at ClearanceJobs increased by $1.8 million, or 13%, as compared to the same period in 2020, primarily driven by continued high demand for professionals with government clearance and consistent product releases and enhancements driving activity on the site. Cost of Revenues Six Months Ended June 30, Increase Percent Change 2021 2020 (in thousands, except percentages) Cost of revenues $ 7,295 $ 6,983 $ 313 4 % Percentage of revenues 13.2 % 12.3 % 27 Table of Contents Cost of revenues increased $0.3 million, or 4%, primarily driven by an increase of $0.5 million from higher costs associated with web hosting and cloud computing. These costs were partially offset by a decrease in compensation related and other costs of $0.2 million. Product Development Expenses Six Months Ended June 30, Decrease Percent Change 2021 2020 (in thousands, except percentages) Product development $ 7,112 $ 7,142 $ (30) — % Percentage of revenues 12.8 % 12.5 % Product Development expenses were flat with the same period in 2020. Within product development, the Company experienced a $1.3 million decrease in headcount related costs, which were offset by a decrease in capitalized labor, which increased expense $0.9 million, and an increase in consulting costs of $0.3 million. Sales and Marketing Expenses Six Months Ended June 30, Decrease Percent Change 2021 2020 (in thousands, except percentages) Sales and marketing $ 19,922 $ 21,112 $ (1,190) (6) % Percentage of revenues 36.0 % 37.1 % Sales and marketing expenses decreased $1.2 million, or 6% from the same period in 2020. The decrease was primarily driven by a reduction in discretionary marketing spend of $0.6 million, a $0.4 million decrease in operational costs, including travel, entertainment, and consulting, and a $0.1 million decrease in compensation related costs. General and Administrative Expenses Six Months Ended June 30, Decrease Percent Change 2021 2020 (in thousands, except percentages) General and administrative $ 13,093 $ 14,119 $ (1,026) (7) % Percentage of revenues 23.6 % 24.8 % General and administrative costs decreased $1.0 million, or 7%, from the same period in 2020. The decrease was primarily driven by a decrease in compensation related costs of $0.6 million, a decrease in bad debt expense of $0.3 million, and a decrease in professional fees of $0.2 million. Depreciation Six Months Ended June 30, Increase Percent Change 2021 2020 (in thousands, except percentages) Depreciation $ 7,671 $ 5,340 $ 2,331 44 % Percentage of revenues 13.8 % 9.4 % Depreciation expense increased $2.3 million, or 44%, from the same period in 2020, in connection with increasing internal development costs during 2019 and 2020 that were then placed in service, primarily in late 2020, and depreciated. Internal development costs are reflected as purchases of fixed assets in the Condensed Consolidated Statements of Cash Flows. 28 Table of Contents Impairment of Intangible Assets Six Months Ended June 30, Decrease Percent Change 2021 2020 (in thousands, except percentages) Impairment of intangible assets $ — $ 7,200 $ (7,200) (100) % Percentage of revenues — % 12.6 % The Company has an indefinite-lived acquired intangible asset related to the Dice trademarks and brand name. During the first quarter of 2020, because of the impacts of the COVID-19 pandemic, the Company performed an interim impairment analysis of the Dice trademarks and brand name. As a result of the analysis, the Company recorded an impairment charge of $7.2 million during the six months ended June 30, 2020. See also Note 8 of the Notes to the Condensed Consolidated Financial Statements. Operating Income (Loss) Six Months Ended June 30, Increase Percent Change 2021 2020 (in thousands, except percentages) Revenue $ 55,397 $ 56,981 $ (1,584) (3) % Operating income (loss) 304 (4,915) 5,219 (106) % Percentage of revenues 0.5 % (8.6) % Operating income for the six months ended June 30, 2021 was $0.3 million, a margin of 0.5%, compared to an operating loss of $4.9 million, a negative margin of 8.6% for the same period during 2020. The increase was primarily due to the $7.2 million impairment of the Dice trademark and brand name that occurred during the 2020 period while the 2021 period was impacted by higher depreciation expense. Interest Expense and Other Six Months Ended June 30, Decrease Percent Change 2021 2020 (in thousands, except percentages) Interest expense and other $ 282 $ 349 $ (67) (19) % Percentage of revenues 0.5 % 0.6 % Interest expense and other decreased $0.1 million, or 19%, compared to the same period in 2020 due to lower debt outstanding. Impairment of Equity Investment Six Months Ended June 30, Increase Percent Change 2021 2020 (in thousands, except percentages) Impairment of equity investment $ — $ (2,002) $ 2,002 (100) % Percentage of revenues 0.0 % (7.0) % 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. Six Months Ended June 30, Increase Percent Change 2021 2020 (in thousands, except percentages) Unrealized gain on equity security $ 1,839 $ — $ 1,839 — % Percentage of revenues 6.4 % — % 29 Table of Contents The unrealized gain on equity security relates 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 6 of the Notes to the Condensed Consolidated Financial Statements. Income Taxes Six Months Ended June 30, 2021 2020 (in thousands, except percentages) Income (loss) before income taxes $ 1,861 $ (7,266) Income tax expense (benefit) 61 (893) Effective tax rate 3.3 % 12.3 % Our effective tax rate for the six months ended June 30, 2021, was lower than the U.S. statutory rate due to a $0.4 million tax benefit from the release of a valuation allowance related to our capital loss carryforward. The tax rate for the six months ended June 30, 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; and tax expense of $0.4 million from the nondeductible impairment of an equity investment. Income (loss) from discontinued operations, net of tax Six Months Ended June 30, Decrease Percent Change 2021 2020 (in thousands, except percentages) Income (loss) from discontinued operations, net of tax $ (29,340) $ 1,685 $ (31,025) (1,841) % Percentage of revenues (53.0) % 3.0 % During the six months ended June 30, 2021, the Company transferred majority ownership of its eFC business and has recorded it as a discontinued operation. As a result, the Company experienced a loss from discontinued operations, net of tax, of $29.3 million during the six months ended June 30, 2021. The loss was comprised of $28.1 million related to the reclassification of currency translation adjustments and $5.2 million from the removal of eFC's net assets. The loss was partially offset by the recording of an equity investment of $3.6 million and eFC's earnings during the six months ended June 30, 2021. Income from discontinued operations for the six months ended June 30, 2020 represents eFC's earnings during the period. Earnings (loss) per Share Six Months Ended June 30, 2021 2020 (in thousands, except per share amounts) Income (loss) from continuing operations $ 1,800 $ (6,373) Weighted-average shares outstanding—diluted 48,854 48,781 Diluted earnings (loss) per share - continuing operations $ 0.04 $ (0.13) Income (loss) from discontinued operations $ (29,340) $ 1,685 Weighted-average shares outstanding—diluted 48,854 48,781 Diluted earnings (loss) per share - discontinued operations $ (0.60) $ 0.03 Net income (loss) $ (27,540) $ (4,688) Weighted-average shares outstanding—diluted 48,854 48,781 Diluted earnings (loss) per share $ (0.56) $ (0.10) 30 Table of Contents Diluted earnings (loss) per share from continuing operations was $0.04 and ($0.13) for the six months ended June 30, 2021 and 2020, respectively. The increase was driven by the unrealized gain on equity security in the 2021 period and the impairment charge in the 2020 period, partially offset by lower revenues and higher depreciation expense. Diluted earnings (loss) per share was $(0.56) and $(0.10) for the six months ended June 30, 2021 and 2020, respectively. The decrease was driven by the loss from discontinued operations, partially offset by higher diluted earnings per share from continuing operations. Liquidity and Capital Resources Non-GAAP Financial Measures We have provided certain non-GAAP financial measures as additional information for our operating results. These measures are not in accordance with, or an alternative for, measures in accordance with U.S. GAAP and may be different from similarly titled non-GAAP measures reported by other companies. We believe the presentation of non-GAAP measures, such as Adjusted EBITDA and Adjusted EBITDA margin, provides useful information to management and investors regarding certain financial and business trends relating to our financial condition and results of operations. Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP metrics used by management to measure operating performance. Management uses Adjusted EBITDA as a performance measure for internal monitoring and planning, including preparation of annual budgets, analyzing investment decisions and evaluating profitability and performance comparisons between us and our competitors. 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, 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. We present Adjusted EBITDA as a supplemental performance measure because we believe that this measure provides our Board, management and investors with additional information to measure our performance, provide comparisons from period to period and company to company by excluding potential differences caused by variations in capital structures (affecting interest expense) and tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses), and to estimate our value. We understand that although Adjusted EBITDA is frequently used by securities analysts, lenders and others in their evaluation of companies, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our liquidity or results as reported under GAAP. Some limitations are: • Adjusted EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; • Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; • Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments on our debt; • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and 31 Table of Contents • Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. To compensate for these limitations, management evaluates our liquidity by considering the economic effect of excluded expense items independently, as well as in connection with its analysis of cash flows from operations and through the use of other financial measures, such as capital expenditure budget variances, investment spending levels and return on capital analysis. Adjusted EBITDA Margin is computed as Adjusted EBITDA divided by Revenues. 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 six months ended June 30, 2021 and 2020 follows (in thousands): Six Months Ended June 30, 2021 2020 Reconciliation of Net Income (loss) to Adjusted EBITDA: Net income (loss) $ (27,540) $ (4,688) Interest expense 373 545 Income tax expense (benefit) 61 (893) Depreciation 7,671 5,340 Non-cash stock based compensation 3,438 3,133 Impairment of intangible assets — 7,200 Impairment of equity investment — 2,002 Unrealized gain on equity security (1,839) — Gain on sale of equity investment — (200) Severance and related costs 1,311 913 Loss (income) from discontinued operations, net of tax 29,340 (1,685) Other (90) 3 Adjusted EBITDA $ 12,725 $ 11,670 Reconciliation of Operating Cash Flows to Adjusted EBITDA: Net cash provided by operating activities $ 19,298 $ 10,020 Interest expense 373 545 Amortization of deferred financing costs (74) (74) Income tax expense (benefit) 61 (893) Deferred income taxes 951 804 Change in accrual for unrecognized tax benefits (82) 18 Change in accounts receivable (3,556) (2,765) Change in deferred revenue (7,118) 4,041 Discontinued operations results (3,593) (3,633) Severance and related costs 1,311 913 Changes in working capital and other 5,154 2,694 Adjusted EBITDA $ 12,725 $ 11,670 32 Table of Contents A reconciliation of Adjusted EBITDA Margin for the six months ended June 30, 2021 and 2020 follows (in thousands): Six Months Ended June 30, 2021 2020 Revenues $ 55,397 $ 56,981 Adjusted EBITDA $ 12,725 $ 11,670 Adjusted EBITDA Margin 23 % 20 % Cash Flows We have summarized our cash flows for the six months ended June 30, 2021 and 2020 (in thousands). Six Months Ended June 30, 2021 2020 Cash from operating activities $ 19,298 $ 10,020 Cash used in investing activities $ (9,773) $ (8,205) Cash from (used in) financing activities $ (9,270) $ 20,401 We have financed our operations primarily through cash provided by operating activities and borrowings under our revolving credit facility. At June 30, 2021, we had cash of $7.9 million compared to $4.5 million at December 31, 2020. Liquidity 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 $74.0 million in borrowing capacity under our $90.0 million Credit Agreement at June 30, 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 cash and cash equivalents, cash generated from our continuing operations and available borrowings under our Credit Agreement will be sufficient to satisfy our currently anticipated cash requirements through at least the next 12 months and the foreseeable future thereafter. However, it is possible that one or more lenders under the Credit Agreement may refuse or be unable to satisfy their commitment to lend to us, we may violate one or more of our covenants or financial ratios contained in our Credit Agreement or we may need to refinance our debt and be unable to do so. In addition, our liquidity could be negatively affected by a decrease in demand for our products and services and the ability of our customers to pay for current or future services, including from the potential ongoing impact of the COVID-19 pandemic. We may also make acquisitions and may need to raise additional capital through future debt financings or equity offerings to the extent necessary to fund such acquisitions, which we may not be able to do on a timely basis or on terms satisfactory to us or at all. 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, unrealized gain on equity security, loss from sale of business, loss on disposition of discontinued operations, and the effect of changes in working capital. Net cash flows from operating activities were $19.3 million and $10.0 million for six month periods ended June 30, 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 2021 period increased $9.3 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 six month period ended June 30, 2021 was $9.8 million compared to $8.2 million used in the same period of 2020. Cash used in investing activities in the six month period ended June 30, 2021 increased from the comparable 2020 period due to cash retained in the eFC business and lower internal development costs, primarily driven by lower headcount and development activities dedicated to the transfer of the eFC business. Financing Activities Cash used in financing activities during the six month period ended June 30, 2021 was $9.3 million and was driven by $4.0 million of net repayments on long-term debt and $5.3 million related to share repurchases. Cash from financing activities during the six month period ended June 30, 2020 was $20.4 million, primarily due to $27.0 million of net proceeds on long-term debt, partially offset by $6.6 million related to share repurchases. 33 Table of Contents 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 the Second Amended and Restated Credit Agreement as further amended in June 2021 (the "Credit Agreement"), which matures in November 2023, and replaced the previously existing credit agreement dated November 2015. The June 2021 amendment modified the credit agreement to allow for the disposition of the eFC business. The Credit Agreement provides for a revolving loan facility of $90 million, with an expansion option up to $140 million, as permitted under the terms of the Credit Agreement. Borrowings under the Credit Agreement bear interest, at the Company’s option, at a LIBOR rate or base rate plus a margin. The margin ranges from 1.75% to 2.50% on LIBOR loans and 0.75% to 1.50% on base rate loans, determined by the Company’s most recent consolidated leverage ratio. The Company incurs a 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. 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; 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 June 30, 2021, the Company was in compliance with all of the financial covenants under the Credit Agreement. Refer to Note 10 in the Notes to the Condensed Consolidated Financial Statements. The obligations under the Credit Agreement are guaranteed by two of the Company's U.S. based wholly-owned subsidiaries and secured by substantially all of the assets of the Borrowers and the guarantors. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. Commitments and Contingencies The following table presents certain minimum payments due and the estimated timing under contractual obligations with minimum firm commitments as of June 30, 2021: Payments Due By Period Total Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years (in thousands) Credit Agreement $ 16,000 $ — $ 16,000 $ — $ — Operating lease obligations 11,397 1,258 5,154 3,911 1,074 Total contractual obligations $ 27,397 $ 1,258 $ 21,154 $ 3,911 $ 1,074 We make commitments to purchase advertising from online vendors which we pay for on a monthly basis. We have no significant long-term obligations to purchase a fixed or minimum amount with these vendors. Our principal commitments consist of obligations under operating leases for office space and equipment and long-term debt. As of June 30, 2021, we had $16.0 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. See Note 10 “Indebtedness” in our Condensed Consolidated Financial Statements for additional information related to our Credit Agreement. 34 Table of Contents 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 1.88% (the rate in effect on June 30, 2021) on our current borrowings, interest payments are expected to be approximately $0.2 million for the remainder of 2021, approximately $0.3 million for 2022, and approximately $0.3 million for 2023. As of June 30, 2021, we had approximately $1.0 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 June 30, 2021 are $1.0 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”) 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. 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. We expect the pandemic may continue to negatively impact our financial performance in the coming months, but, based on information currently available, we are not anticipating a significant long-term impact on our business and operations, results of operations, financial condition, cash flows, liquidity and capital and financial resources. However, the situation is uncertain and rapidly changing. The Company cannot at this time predict the ultimate impact that the COVID-19 pandemic will have on its financial condition and operations. In an effort to protect the health and safety of our employees, we have taken action to adopt social distancing policies at our office locations, including working from home and the temporary closure of our locations where necessary. We may have to take further actions that we determine are in the best interests of our employees or as required by federal, state, or local authorities. The impact of the COVID-19 pandemic continues to unfold. The extent of the pandemic’s effect on our operational and financial performance will depend in large part on future developments, which cannot be predicted with confidence at this time. Future developments include the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the further development of additional treatments or vaccines, and the resumption of widespread economic activity. While we expect the pandemic will continue to negatively impact our financial performance in the coming months, due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we may not be able to predict the likely impact of the COVID-19 pandemic on our future operations. Cyclicality The labor market and certain of the industries that we serve have historically experienced short-term cyclicality. However, we believe that online career websites continue to provide economic and strategic value to the labor market and industries that we serve. Any slowdown in recruitment activity that occurs could negatively impact our revenues and results of operations. For instance, the COVID-19 pandemic resulted in a slowdown of recruiting activity in 2020, which negatively impacted our business. Alternatively, a decrease in the unemployment rate or a labor shortage, including as a result of an increase in job turnover, generally means that employers (including our customers) are seeking to hire more individuals, which would generally lead to more job postings and database licenses and have a positive impact on our revenues and results of operations. Based on historical trends, improvements in labor markets and the need for our services generally lag behind overall economic improvements. Additionally, there has historically been a lag from the time customers begin to increase purchases of our recruitment services and the impact to our revenues due to the recognition of revenue occurring over the length of the contract, which can be several months to over a year. From time to time, we see market slowdowns, which can lead to lower demand for recruiting technologists and financial and security cleared professionals. 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.