DHI GROUP, INC. 10-K

Item 8. Financial Statements and Supplementary Data Page DHI Group, Inc. Report of Independent Registered Public Accounting Firm 54 Consolidated Financial Statements Consolidated Balance Sheets as of December 31, 202 1 and 2 02 0 56 Consolidated Statements of Operations for the years ended December 31, 202 1 , 20 20 and 20 19 57 Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 202 1 , 20 20 and 2 019 58 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 202 1 , 20 20 and 20 19 59 Consolidated Statements of Cash Flows for the years ended December 31, 202 1 , 20 20 and 20 19 60 Notes to Consolidated Financial Statements 61 53 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of DHI Group, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of DHI Group, Inc. and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 11, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate. Discontinued Operations - Transfer of majority interest in eFinancialCareers– Refer to Notes 1 and 4 to the financial statements Critical Audit Matter Description On June 30, 2021, the Company transferred majority ownership and control of its eFinancialCareers business (“eFC”) to eFC management, while retaining a 40% common share interest (the “eFC Transaction”). As a result, eFC was deconsolidated as of June 30, 2021 and is reflected as a discontinued operation. The deconsolidation and related evaluation of the loss of control required significant accounting judgments. This required a high degree of auditor judgment and increased level of effort when performing audit procedures to evaluate the reasonableness of management’s judgments. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the deconsolidation of eFC included the following, among others: • We tested the effectiveness of controls over the accounting and reporting for significant non-recurring transactions, which included the deconsolidation of eFC. • With the assistance of firm specialists having expertise in consolidation accounting, we evaluated management’s accounting judgments related to the deconsolidation of eFC. • We evaluated the presentation and disclosure of the eFC Transaction in the financial statements. 54 Table of Contents Goodwill – Refer to Notes 2, 4 and 11 to the financial statements Critical Audit Matter Description The Company determines whether the carrying value of recorded goodwill is impaired on an annual basis or more frequently if indicators of potential impairment exist. If the fair value of the reporting unit is less than its carrying amount, an impairment charge is recorded for the amount the carrying value exceeds the fair value. Fair values are determined by using a combination of a discounted cash flow methodology and a market comparable method. Determining the fair value of a reporting unit is judgmental in nature and requires the use of estimates and key assumptions, particularly assumed discount rates and projections of future operating results, such as forecasted revenues and earnings before interest, taxes, depreciation and amortization (EBITDA) margins. Changes in these assumptions could have a significant impact on the determination of fair value. On June 30, 2021, the Company transferred a majority interest of eFC, which was part of the Tech-focused reporting unit, to eFC management. In order to account for the eFC Transaction and allocate the reporting unit goodwill, the Company performed an interim valuation analysis to determine the fair value of eFC and the continuing business as of June 30, 2021. The Company allocated $5.3 million and $128.1 million of goodwill to eFC and the continuing business, respectively, using a relative fair value approach. Given the significant judgments made by management to determine the relative fair value of, and goodwill allocated to, eFC and the continuing business, performing auditing procedures to evaluate the reasonableness of management’s judgments regarding the business and valuation assumptions utilized in the valuation models, particularly the forecasts of future revenue and EBITDA margins and the selection of the discount rates, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the forecasts of future revenues and EBITDA margins and selection of the discount rates used by management to estimate the fair value of eFC and the continuing business included the following, among others: • We tested the effectiveness of controls over management’s determination of the fair value of eFC and the continuing business, including controls related to management’s forecasts of future revenues and EBITDA margins and selection of the discount rates. • We tested the allocation of goodwill to eFC and the continuing business based on the weighting of the relative fair value. • We evaluated the reasonableness of management’s forecasts of future revenues and EBITDA margins by comparing the forecasts with: ◦ Historical revenues and EBITDA margins and forecasted information in industry reports. ◦ Internal communications to management and the Board of Directors. • With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) valuation assumptions, including the discount rates, by: ◦ Testing the source information underlying the determination of the assumption and testing the mathematical accuracy of the calculation. ◦ Developing a range of independent estimates and comparing those to the assumptions selected by management. /s/ Deloitte & Touche LLP Des Moines, Iowa February 11, 2022 We have served as the Company's auditor since 2005. 55 Table of Contents DHI GROUP, INC. CONSOLIDATED BALANCE SHEETS As of December 31, 2021 and 2020 (in thousands, except per share data) December 31, 2021 December 31, 2020 ASSETS Current assets Cash and cash equivalents $ 1,540 $ 4,542 Accounts receivable, net of allowance for doubtful accounts of $733 and $1,001 18,385 16,134 Income taxes receivable 354 533 Prepaid and other current assets 4,177 4,101 Current assets of discontinued operations — 8,175 Total current assets 24,456 33,485 Fixed assets, net 20,581 23,033 Capitalized contract costs 9,131 6,189 Operating lease right-of-use assets 6,888 10,804 Investments 3,769 — Investments, at fair value 3,000 — Acquired intangible assets 23,800 23,800 Goodwill 128,100 128,100 Other assets 1,853 1,378 Non-current assets of discontinued operations — 14,198 Total assets $ 221,578 $ 240,987 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable and accrued expenses $ 15,859 $ 15,308 Deferred revenue 45,217 35,547 Operating lease liabilities 2,388 2,075 Current liabilities of discontinued operations — 12,455 Total current liabilities 63,464 65,385 Deferred revenue 929 1,035 Operating lease liabilities 6,982 9,371 Long-term debt, net 22,730 19,583 Deferred income taxes 9,315 9,765 Accrual for unrecognized tax benefits 785 941 Other long-term liabilities 1,011 2,049 Non-current liabilities of discontinued operations — 5,288 Total liabilities 105,216 113,417 Commitments and contingencies (Note 13) Stockholders’ equity Convertible preferred stock, $.01 par value, authorized 20,000 shares; no shares issued and outstanding — — Common stock, $.01 par value, authorized 240,000; issued 73,584 and 71,233 shares, respectively; outstanding: 48,756 and 51,220 shares, respectively 738 714 Additional paid-in capital 241,854 233,554 Accumulated other comprehensive loss ( 61 ) ( 28,519 ) Accumulated earnings 24,229 53,971 Treasury stock, 24,828 and 20,013 shares, respectively ( 150,398 ) ( 132,150 ) Total stockholders’ equity 116,362 127,570 Total liabilities and stockholders’ equity $ 221,578 $ 240,987 See accompanying notes to consolidated financial statements. 56 Table of Contents DHI GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31, 2021, 2020 and 2019 (in thousands, except per share amounts) For the year ended December 31, 2021 2020 2019 Revenues $ 119,903 $ 111,167 $ 117,272 Operating expenses: Cost of revenues 15,088 14,286 13,533 Product development 16,020 14,887 14,703 Sales and marketing 43,701 39,693 42,702 General and administrative 28,583 26,625 25,827 Depreciation 16,344 10,259 8,428 Impairment of intangible assets — 15,200 — Impairment of goodwill — 22,607 — Impairment of right-of-use asset 1,919 — — Disposition related and other costs (Note 16) — — 1,414 Total operating expenses 121,655 143,557 106,607 Loss on sale of business (Note 6) — — ( 537 ) Operating income (loss) ( 1,752 ) ( 32,390 ) 10,128 Income from equity method investment 190 — — Interest expense and other ( 667 ) ( 831 ) ( 703 ) Impairment of investment — ( 2,002 ) — Gain on investment 1,198 — — Income (loss) before income taxes ( 1,031 ) ( 35,223 ) 9,425 Income tax expense (benefit) ( 629 ) ( 2,826 ) 2,794 Income (loss) from continuing operations ( 402 ) ( 32,397 ) 6,631 Income (loss) from discontinued operations, net of tax ( 29,340 ) 2,382 5,920 Net income (loss) $ ( 29,742 ) $ ( 30,015 ) $ 12,551 Basic earnings (loss) per share - continuing operations $ ( 0.01 ) $ ( 0.67 ) $ 0.14 Diluted earnings (loss) per share - continuing operations $ ( 0.01 ) $ ( 0.67 ) $ 0.13 Basic earnings (loss) per share - discontinued operations $ ( 0.63 ) $ 0.05 $ 0.12 Diluted earnings (loss) per share - discontinued operations $ ( 0.63 ) $ 0.05 $ 0.11 Basic earnings (loss) per share $ ( 0.64 ) $ ( 0.62 ) $ 0.26 Diluted earnings (loss) per share $ ( 0.64 ) $ ( 0.62 ) $ 0.24 Weighted-average basic shares outstanding 46,333 48,278 48,739 Weighted-average diluted shares outstanding 46,333 48,278 51,633 See accompanying notes to consolidated financial statements. 57 Table of Contents DHI GROUP, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) For the years ended December 31, 2021, 2020 and 2019 (in thousands) For the year ended December 31, 2021 2020 2019 Net income (loss) $ ( 29,742 ) $ ( 30,015 ) $ 12,551 Other comprehensive income (loss): Foreign currency translation adjustment 395 729 1,988 Cumulative translation adjustments reclassified to the Statements of Operations 28,063 — — Total other comprehensive income (loss) 28,458 729 1,988 Comprehensive income (loss) $ ( 1,284 ) $ ( 29,286 ) $ 14,539 See accompanying notes to consolidated financial statements. 58 Table of Contents DHI GROUP, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY For the years ended December 31, 2021, 2020, and 2019 (in thousands) Convertible Preferred Stock Common Stock Additional Paid-in Capital Treasury Stock Accumulated Earnings Accumulated Other Comprehensive Loss Total Shares Issued Amount Shares Issued Amount Shares Amount Balance at January 1, 2019 — $ — 87,522 $ 876 $ 383,123 34,126 $ ( 278,843 ) $ 71,435 $ ( 31,236 ) $ 145,355 Net income 12,551 12,551 Other comprehensive income 1,988 1,988 Stock based compensation 5,704 5,704 Restricted stock issued 2,258 23 23 Restricted stock forfeited or withheld to satisfy tax obligations ( 560 ) ( 5 ) 616 ( 1,904 ) ( 1,909 ) Performance-based restricted stock units eligible to vest 449 4 4 Performance-based restricted stock units forfeited ( 160 ) ( 2 ) ( 2 ) Retirement of treasury stock (Note 14) ( 20,000 ) ( 200 ) ( 161,600 ) ( 20,000 ) 161,800 — Purchase of treasury stock under stock repurchase plan 849 ( 2,519 ) ( 2,519 ) Balance at December 31, 2019 — — 69,509 696 227,227 15,591 ( 121,466 ) 83,986 ( 29,248 ) 161,195 Net loss ( 30,015 ) ( 30,015 ) Other comprehensive income 729 729 Stock based compensation 6,327 6,327 Restricted stock issued 2,173 22 22 Purchase of treasury stock related to vested restricted and performance stock units ( 430 ) ( 4 ) 874 ( 2,248 ) ( 2,252 ) Performance-based restricted stock units forfeited ( 19 ) — — Purchase of treasury stock under stock repurchase plan 3,548 ( 8,436 ) ( 8,436 ) Balance at December 31, 2020 — — 71,233 714 233,554 20,013 ( 132,150 ) 53,971 ( 28,519 ) 127,570 Net loss ( 29,742 ) ( 29,742 ) Other comprehensive income 395 395 Cumulative translation adjustments reclassified to the Statements of Operations 28,063 28,063 Stock based compensation 8,303 8,303 Restricted stock issued 2,267 23 ( 5 ) 18 Performance-based restricted stock units eligible to vest 813 8 8 Restricted stock forfeited or withheld to satisfy tax obligations ( 685 ) ( 7 ) 2 666 ( 2,073 ) ( 2,078 ) Performance based restricted stock forfeited or withheld to satisfy tax obligations ( 44 ) — 244 ( 907 ) ( 907 ) Purchase of treasury stock under stock repurchase plan 3,905 ( 15,268 ) ( 15,268 ) Balance at December 31, 2021 — $ — 73,584 $ 738 $ 241,854 24,828 $ ( 150,398 ) $ 24,229 $ ( 61 ) $ 116,362 See accompanying notes to consolidated financial statements . 59 Table of Contents DHI GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2021, 2020 and 2019 (in thousands) For the year ended December 31, 2021 2020 2019 Cash flows from (used in) operating activities: Net income (loss) $ ( 29,742 ) $ ( 30,015 ) $ 12,551 Adjustments to reconcile net income to net cash flows from (used in) operating activities: Depreciation 17,118 12,019 9,743 Deferred income taxes ( 569 ) ( 2,918 ) 2,493 Amortization of deferred financing costs 147 147 147 Stock based compensation 8,303 6,327 5,704 Impairment of intangible assets — 15,200 — Impairment of goodwill — 23,626 — Impairment of right-of-use asset 1,919 — — Impairment of investment — 2,002 — Change in accrual for unrecognized tax benefits ( 156 ) ( 446 ) 107 Income from equity method investment ( 190 ) — — Gain on sale of investment ( 1,198 ) ( 200 ) — Loss on sale of businesses — — 537 Loss on disposition of discontinued operations 30,203 — — Changes in operating assets and liabilities: Accounts receivable ( 1,102 ) 859 1,694 Prepaid expenses and other assets ( 1,032 ) ( 1,405 ) ( 904 ) Capitalized contract costs ( 2,990 ) ( 175 ) 453 Accounts payable and accrued expenses ( 1,520 ) 139 ( 5,621 ) Income taxes receivable/payable 261 480 ( 338 ) Deferred revenue 10,075 ( 8,193 ) ( 4,583 ) Other, net ( 946 ) 1,236 940 Net cash flows from operating activities 28,581 18,683 22,923 Cash flows from (used in) investing activities: Cash transferred with discontinued operations ( 3,195 ) — — Cash received from sale of business, net — — 2,683 Cash paid for investment ( 3,000 ) — — Cash received from sale of investments 1,198 200 — Purchases of fixed assets ( 14,307 ) ( 16,104 ) ( 14,188 ) Net cash flows used in investing activities ( 19,304 ) ( 15,904 ) ( 11,505 ) Cash flows from (used in) financing activities: Payments on long-term debt ( 11,000 ) ( 26,444 ) ( 28,000 ) Proceeds from long-term debt 14,000 36,444 20,000 Payments under stock repurchase plan ( 15,409 ) ( 8,294 ) ( 2,519 ) Purchase of treasury stock related to vested restricted and performance stock units ( 2,978 ) ( 2,248 ) ( 1,904 ) Net cash flows used in financing activities ( 15,387 ) ( 542 ) ( 12,423 ) Effect of exchange rate changes 10 22 ( 86 ) Net change in cash and cash equivalents for the period ( 6,100 ) 2,259 ( 1,091 ) Cash and cash equivalents, beginning of period 7,640 5,381 6,472 Cash and cash equivalents, end of period $ 1,540 $ 7,640 $ 5,381 See accompanying notes to consolidated financial statements. 60 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND PRINCIPAL ACTIVITIES DHI Group, Inc. (“DHI” or the “Company”), a Delaware corporation, was incorporated on June 28, 2005. DHI is a leading provider of data, insights and employment connections through its specialized services for technology professionals and other select online communities. Its mission is to empower tech professionals and organizations to compete and win through expert insights and relevant employment connections. Employers and recruiters use its websites and services to source, hire and connect with the most qualified and highly-skilled tech professionals, while professionals use its websites and services to find ideal employment opportunities, relevant job advice and tailored career-related data. For over 30 years, through its predecessor companies, the Company was built on providing employers and professionals with career connections, news, tools and information. On June 30, 2021, the Company transferred majority ownership and control of its eFinancialCareers ("eFC") business to eFC's management, while retaining a 40 % common share interest. The eFC business was significant to the Company and the transfer was considered to be a strategic shift from the financial services industry and from the geographies eFC serves that had a major effect on the Company's operations. As a result, the eFC business was deconsolidated from the Company's consolidated financial statements as of June 30, 2021 and is reflected as a discontinued operation in the Consolidated Balance Sheets and the Consolidated Statements of Operations for all periods presented. The historical Consolidated Statements of Comprehensive Income (Loss), Stockholders’ Equity and Cash Flows have not been revised to reflect the effects of the transfer of control of eFC. For further information on discontinued operations, see Note 4, “Discontinued Operations.” Unless noted otherwise, discussion in the notes to the consolidated financial statements pertain to continuing operations . The Company allocates resources and assesses financial performance on a consolidated basis, as all services pertain to the Company's Tech-focused strategy. As a result, t he Company has a single reportable segment, Tech-focused, which now includes only the Dice and ClearanceJobs brands, as well as corporate related costs. All operations are in the United States and the Company no longer has revenues and long-lived assets, which includes fixed assets and lease right of use assets, outside of the United States. 2. SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation — The consolidated financial statements include the accounts of DHI and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Investments in companies that are not consolidated are included in the Company's consolidated financial statements as described in notes 4 and 8 to the consolidated financial statements. Revenue Recognition — We recognize revenue when control of the promised goods or services is transferred to our customers at an amount that reflects the consideration to which we expect to receive in exchange for those goods or services. Revenue is recognized net of customer discounts ratably over the service period. Billings with customers are based on contractual schedules. Customer billings delivered in advance and payments received in advance of services being rendered are recorded as deferred revenue and recognized over the service period. We generate revenues from the following sources: Recruitment packages. Recruitment package revenues are derived from the sale to recruiters and employers of a combination of job postings and/or access to candidate profiles on Dice and ClearanceJobs. Certain of the Company’s arrangements include multiple performance obligations, which primarily consists of the ability to post jobs and access to candidate profiles. The Company determines the units of accounting for multiple performance obligations in accordance with Topic 606. Specifically, the Company considers a performance obligation as a separate unit of accounting if it has value to the customer on a standalone basis. The Company’s arrangements do not include a general right of return. Services to customers buying a package of available job postings and access to candidate profiles are delivered over the same period and revenue is recognized ratably over the length of the underlying contract, typically from one to twelve months. The separation of the package into two deliverables results in no change in revenue recognition because delivery of the two services occurs over the same time period. Advertising revenue. Advertising revenue is recognized over the period in which the advertisements are displayed on the websites or at the time a promotional e-mail is sent out to the audience. 61 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Classified revenue. Classified job posting revenues are derived from the sale of job postings to recruiters and employers. A job posting is the ability to list a job on the website for a specified time period. Revenue from the sale of classified job postings is recognized ratably over the length of the contract or the period of actual usage. Career fair and recruitment event booth rentals. Career fair and recruitment event revenues, both live and virtual, are derived from renting booth space to recruiters and employers. Revenue from these sales are recognized when the career fair or recruitment event is held. Concentration of Credit Risk— Cash and cash equivalents are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. These deposits may be redeemed upon demand. The Company believes it is not exposed to any significant credit risk. The Company performs credit evaluations of its customers’ financial condition as needed and does not require collateral on accounts receivable. No single customer represents 10% or more of revenues for the years ended December 31, 2021, 2020 and 2019. Allowance for Doubtful Accounts— The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of DHI’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Statements of Cash Flows— All bank deposits are considered cash and cash equivalents. The supplemental disclosures to the accompanying consolidated statements of cash flows are as follows (in thousands): 2021 2020 2019 Supplemental cash flow information: Interest paid $ 825 $ 1,100 $ 639 Taxes paid 393 457 1,506 Non-cash investing and financing activities: Capital expenditures on fixed assets included in accounts payable and accrued expenses 144 110 140 Share repurchases included in accounts payable and accrued expenses — 141 — Fixed Assets— Depreciation of equipment, furniture and fixtures, computer software and capitalized website development costs are provided under the straight-line method over estimated useful lives ranging from two to five years. Amortization of leasehold improvements is provided over the shorter of the term of the related lease or the estimated useful life of the improvement. The cost of additions and improvements is capitalized, and repairs and maintenance costs are charged to operations in the periods incurred. Capitalized Software Costs— Capitalized software costs consist of costs to purchase and develop software for internal use. The Company capitalizes incurred software development costs in accordance with the Internal Use Software subtopic of the FASB ASC. Costs incurred during the application-development stage for software bought and further customized by outside vendors for the Company’s use and software developed by a vendor for the Company’s proprietary use have been capitalized. These costs are amortized over the software’s estimated useful life, which generally approximates two years. Website Development Costs— The Company capitalizes certain costs incurred in designing, developing, testing and implementing enhancements to its websites. These costs are amortized over the enhancement’s estimated useful life, which generally approximates two years. Costs related to the planning and post implementation phases of website development efforts are expensed as incurred. Capitalized Contract Costs— The Company capitalizes certain contract acquisition costs consisting primarily of commissions paid when contracts are signed. For costs incurred to obtain new business sales contracts, the Company capitalizes and expenses these costs over an average customer life, which was approximately two years as of December 31, 2021. For the remaining 62 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS sales contracts, the Company capitalizes and expenses these costs over a weighted average contract term, which was approximately one year as of December 31, 2021. See note 5 for additional disclosures. Leases— We determine if an arrangement is a lease at inception. The Company primarily has operating leases for corporate office space and certain equipment. Operating lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. When readily available, the Company uses the implicit rate in determining the present value of the lease payments. When leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on information available at the commencement of the lease, including the lease term. Because the implicit rate in each lease is not available, the Company used its incremental borrowing rate to determine the present value of lease payments. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Variable components of the lease payments, such as utilities and maintenance, are expensed as incurred and are not included in determining the present value. Operating lease expense is recognized on a straight- line basis over the lease term. Equity Method Investment— The Company has a 40 % non-controlling common share interest in the eFC and Rigzone businesses as the Company does not have the ability to direct the activities of the businesses that most significantly impact their economic performance. The 40 % common share interest is being accounted for under the equity method of accounting as the Company does have the ability to exercise significant influence over the businesses. The recorded value is adjusted based on the Company's proportionate share of the businesses net income and is recorded three months in arrears. See note 8 for additional disclosures. Goodwill and Indefinite-Lived Acquired Intangible Assets— Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. The indefinite-lived acquired intangible assets include the Dice trademarks and brand name. The Company performs a test for impairment of goodwill and indefinite-lived intangible assets annually on October 1, or more frequently if indicators of potential impairment exist, to determine if the carrying value of the recorded asset is impaired. The impairment review process for goodwill compares the fair value of the reporting unit in which goodwill resides to its carrying value. The impairment review process for indefinite-lived intangible assets compares the fair value of the assets to their carrying value. The determination of whether or not the asset has become impaired involves a significant level of judgment in the assumptions underlying the approach used to determine the value of the Company’s reporting units or the intangible asset. Changes in the Company’s strategy and/or market conditions could significantly impact these judgments and require adjustments to recorded amounts of goodwill or indefinite-lived intangible assets. See Notes 10 and 11 for discussion of impairment charges. Foreign Currency Translation— For the Company’s foreign operations, which entirely related to eFC prior to June 30, 2021, whose functional currency is not the U.S. dollar, the assets and liabilities are translated into U.S. dollars at current exchange rates. Resulting translation adjustments are reflected as Other Comprehensive Income (Loss). Revenue and expenses are translated at average exchange rates for the period. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are charged to operations as incurred. Translation adjustments subsequent to June 30, 2021 relate to the Company's equity method investment in eFC. Advertising Costs— The Company expenses advertising costs as they are incurred. Advertising expense for the years ended December 31, 2021, 2020 and 2019 was $ 12.5 million, $ 10.9 million and $ 17.0 million, respectively. Income Taxes— The Company recognizes deferred taxes by the asset and liability method. Under this method, deferred income taxes are recognized for differences between the financial statement and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. The primary sources of temporary differences are stock-based compensation, amortization and impairment of intangible assets, depreciation of fixed assets, and capitalized contract costs. Stock-Based Compensation— The Company has a plan to grant equity awards to certain employees and directors of the Company and its subsidiaries. See Note 17 for additional disclosures. Fair Value of Financial Instruments— The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximate their fair values. The Company’s 63 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS long-term debt consists of borrowings under its credit facility. Investments consist of promissory notes and common share ownership interests in businesses. See Notes 3 and 12 for additional disclosures. Risks and Uncertainties— The Company is subject to the risks, expenses and uncertainties frequently encountered by companies in the rapidly evolving markets for online products and services. These risks include the failure to develop and extend the Company’s web sites and brands, the rejection of the Company’s services by consumers, vendors and/or advertisers, the inability of the Company to maintain and increase the levels of traffic on its web sites, as well as other risks and uncertainties. In the event that the Company does not successfully execute its business plan, certain assets may not be recoverable. Use of Estimates— The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. DHI’s significant estimates include the useful lives and valuation of fixed assets and intangible assets, goodwill, lease right-of-use assets, income taxes, and the assumptions used to value the Performance-Based Restricted Stock Units (“PSUs”) of the Company. Earnings per Share— The Company follows the Earnings Per Share topic of the FASB ASC in computing earnings per share (“EPS”). Basic EPS is calculated by dividing income from continuing operations, income from discontinued operations, and net income by the weighted average number of shares outstanding. When the effects are dilutive, diluted earnings per share is calculated using the weighted average number of shares outstanding, and the dilutive effect of stock-based compensation awards as determined under the treasury stock method. Certain stock awards were excluded from the computation of diluted earnings per share due to their anti-dilutive effect. See Note 20 for additional disclosures. New Accounting Pronouncements— In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . ASU 2016-13 changes how entities will account for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance replaces the current "incurred loss" model with an "expected loss" model that requires consideration of a broader range of information to estimate expected credit losses over the lifetime of a financial asset. ASU 2016-13 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2022 for Smaller Reporting Companies. The Company is evaluating the expected impact of this standard on its consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. The new standard requires entities that are customers in cloud computing arrangements to defer implementation costs if they would be capitalized by the entity in software licensing arrangements under the internal-use software guidance. ASU No. 2018-15 is effective for fiscal years beginning after December 15, 2019 and interim periods within those years. The amendments allow either a retrospective or prospective approach to all implementation costs incurred after adoption. The Company adopted this standard, effective January 1, 2020, under the prospective approach, and capitalized implementation costs are included in other assets on the Company's balance sheet. In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes , which eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating taxes during interim quarters and the recognition of deferred tax liabilities for outside basis differences. This guidance also simplifies aspects of accounting for franchise taxes, specifies the timing for recognizing certain income tax effects of changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company adopted this standard on January 1, 2021, and the adoption did not have a material effect on the Company's consolidated financial statements. 3. FAIR VALUE MEASUREMENTS The FASB ASC topic on Fair Value Measurements and Disclosures defines fair value, establishes a framework for measuring fair value and requires certain disclosures for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. As a basis for considering assumptions, a three-tier fair value hierarchy is used, which prioritizes the inputs used in measuring fair value as follows: 64 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS • Level 1 – Quoted prices for identical instruments in active markets. • Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations, in which all significant inputs are observable in active markets. • Level 3 – Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, other assets, accounts payable and accrued expenses and long-term debt approximate their fair values. Investments, current, are carried at fair value using values available on a public exchange based on a Level 1 input. Investments, non-current that are carried at fair value use a discounted cash flow technique based on the probability of one or more possible outcomes, based on Level 3 inputs, which inputs and fair value did not change during the year ended December 31, 2021. The fair value of long-term debt was estimated using present value techniques and market based interest rates and credit spreads. The estimated fair value of long-term debt is based on Level 2 inputs. Certain assets and liabilities are measured at fair value on a non-recurring basis. These assets include equity investments, operating lease right-of-use assets, and goodwill and intangible assets which resulted from prior acquisitions. Items valued using such internally generated valuation techniques are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be some significant inputs that are readily observable. Such instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances, for example, when there is evidence of impairment. On June 30, 2021, the Company transferred majority ownership and control of its eFC business to eFC's management, while retaining a 40 % common share interest. The Company valued its 40 % interest in eFC utilizing a combination of a discounted cash flow and a market approach. The discounted cash flow included declining revenues for the years ending December 31, 2021 and 2022 as compared to the year ended December 31, 2020 and then increasing moderately. The discounted cash flow also included operating margin declines for the year ending December 31, 2022 compared to the year ending December 31, 2021 and then increasing moderately. The Company utilized a discount rate of 19.0 %. The market approach included the analysis of data from transactions on guideline companies and applied multiples of those transactions to eFC's results Impairment —The Company performs annual impairment tests for goodwill and the Dice trademarks and brand name as of October 1 of each year or more frequently if indicators of potential impairment exist. See notes 10 and 11 for additional disclosures. The Company evaluates the carrying value of equity investments at each reporting period as described in note 8. 4. DISCONTINUED OPERATIONS As further described in Note 1, on June 30, 2021, the Company transferred majority ownership and control of its eFC business to eFC's management, while retaining a 40 % common share interest. As a result, we have reflected eFC's financial results as discontinued operations in the consolidated balance sheets and the consolidated statements of operations for all periods presented. 65 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The assets and liabilities classified as discontinued operations on the consolidated balance sheets were as follows (in thousands): December 31, 2020 Cash and cash equivalents $ 3,098 Accounts receivable, net 4,164 Income taxes receivable 511 Prepaid and other current assets 402 Current assets of discontinued operations 8,175 Fixed assets, net 1,511 Capitalized contract costs 1,545 Goodwill 5,253 Deferred income taxes 19 Operating lease right-of-use assets 5,601 Other assets 269 Non-current assets of discontinued operations 14,198 Total assets of discontinued operations $ 22,373 Accounts payable and accrued expenses $ 4,118 Operating lease liabilities 1,335 Deferred revenue 6,879 Income taxes payable 123 Current liabilities of discontinued operations 12,455 Deferred income taxes 171 Deferred revenue 33 Accrual for unrecognized tax benefits 406 Operating lease liabilities 4,333 Other long-term liabilities 345 Non-current liabilities of discontinued operations 5,288 Total liabilities of discontinued operations $ 17,743 66 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The results of discontinued operations on the consolidated statements of operations were as follows (in thousands): For the year ended December 31, 2021 2020 2019 Revenues $ 12,130 $ 25,711 $ 32,098 Operating expenses ( 10,821 ) ( 22,926 ) ( 25,201 ) Operating income 1,309 2,785 6,897 Loss on disposition of discontinued operations (1) ( 30,203 ) — — Other income 1 4 2 Income (loss) before income taxes ( 28,893 ) 2,789 6,899 Income tax expense 447 407 979 Net income (loss) $ ( 29,340 ) $ 2,382 $ 5,920 (1) 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 month period ended June 30, 2021. Depreciation, fixed asset purchases and other significant non-cash items related to discontinued operations were as follows (in thousands): For the year ended December 31, 2021 2020 2019 Depreciation $ 774 $ 1,760 $ 1,315 Purchases of fixed assets $ 447 $ 225 $ 2,052 Cash paid for amounts included in measurement of lease liabilities: Operating cash flows from operating leases $ 804 $ 1,520 $ 1,469 5 . REVENUE RECOGNITION The Company recognizes revenue when control of the promised goods or services is transferred to our customers at an amount that reflects the consideration to which we expect to receive in exchange for those goods or services. Revenue is recognized net of customer discounts ratably over the service period. Customer billings delivered in advance of services being rendered are recorded as deferred revenue and recognized over the service period. The Company generates revenue from recruitment packages, advertising, classifieds, and virtual and live career fair and recruitment event booth rentals. Disaggregation of revenue Our brands primarily serve the technology and security cleared professions. The following table provides information about disaggregated revenue by brand (in thousands): For the Year Ended December 31, 2021 2020 2019 Dice (1) $ 86,257 $ 82,190 $ 92,527 ClearanceJobs 33,646 28,977 24,745 Total $ 119,903 $ 111,167 $ 117,272 (1) Includes Dice U.S. and Career Events. 67 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Contract Balances The following table provides information about opening and closing balances of receivables and contract liabilities from contracts with customers as required under Topic 606 (in thousands): As of December 31, 2021 As of December 31, 2020 Receivables $ 18,385 $ 16,134 Short-term contract liabilities (deferred revenue) 45,217 35,547 Long-term contract liabilities (deferred revenue) 929 1,035 We receive payments from customers based upon contractual billing schedules; accounts receivable is recorded when customers are invoiced per the contractual billing schedules. As the Company's standard payment terms are less than one year, the Company elected the expedient, where applicable. As a result, the Company did not consider the effects of a significant financing component. Contract liabilities include customer billings delivered in advance of performance under the contract, and associated revenue is realized when services are rendered under the contract. Receivables increase due to customer billings and decrease by cash collected from customers. Contract liabilities increase due to customer billings and are decreased as performance obligations are satisfied under the contracts. The Company recognized the following revenues as a result of changes in the contract liability balances in the respective periods (in thousands): Year Ended December 31, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019 Revenue recognized in the period from: Amounts included in the contract liability at the beginning of the period $ 35,692 $ 42,309 $ 45,511 Transaction price allocated to the remaining performance obligations Under the guidance of Topic 606, the following table includes estimated deferred revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period (in thousands): 2022 2023 2024 Total Tech-focused $ 45,217 $ 830 $ 99 $ 46,146 6. SALE OF BUSINESSES The Company sold the Hcareers business on May 22, 2018. During the second quarter of 2019, the related escrow of $ 1.7 million and working capital terms and contingencies were finalized. This resulted in the Company recording an additional loss on sale of $ 0.5 million and receiving cash of $ 0.7 million from the escrow and $ 0.2 million from working capital. The Company sold the RigLogix portion of the Rigzone business on February 20, 2018. In the first quarter of 2019, the related escrow of $ 0.4 million was released to the Company. The Company sold the Health eCareers business on December 4, 2017. In the second quarter of 2019, the related escrow of $ 1.5 million was released to the Company. 7. LEASES The Company has operating leases for corporate office space and certain equipment. The leases have terms from one year to eight years , some of which include options to renew the lease, and are included in the lease term when it is reasonably certain that the Company will exercise the option. 68 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The components of lease cost were as follows (in thousands): Year Ended December 31, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019 Operating lease cost* $ 2,277 $ 2,551 $ 2,785 Sublease income ( 543 ) ( 1,018 ) ( 1,322 ) Total lease cost $ 1,734 $ 1,533 $ 1,463 *Includes short-term and variable lease costs, which are immaterial. Supplemental cash flow information related to leases was as follows (in thousands): Year Ended December 31, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019 Cash paid for amounts included in measurement of lease liabilities: Operating cash flows from operating leases $ 2,299 $ 4,315 $ 4,632 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ — $ 292 $ 7,434 Supplemental balance sheet information related to leases was as follows (in thousands, except lease term and discount): Year Ended December 31, 2021 Year Ended December 31, 2020 Operating lease right-of-use assets $ 6,888 $ 10,804 Operating lease liabilities - current 2,388 2,075 Operating lease liabilities - non-current 6,982 9,371 Total operating lease liabilities $ 9,370 $ 11,446 Weighted average remaining lease term Operating leases 3.6 years 4.6 years Weighted average discount rate Operating leases 3.8 % 3.9 % The Company reviews its ROU assets for impairment if indicators of impairment exist. The impairment review process compares the fair value of the ROU asset to its carrying value. If the carrying value exceeds the fair value, an impairment loss is recorded. During the year ended December 31, 2021, due to the continuing impacts of COVID-19 on the real estate markets and its impact on the future cash flows attributable to its ROU assets, the Company recorded an impairment charge of $ 1.9 million. No impairment was recorded during the years ended December 31, 2020 and 2019. 69 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2021, future operating lease payments were as follows: (in thousands): Operating Leases 2022 $ 2,703 2023 2,451 2024 1,965 2025 1,946 2026 992 Thereafter 82 Total lease payments 10,139 Less imputed interest ( 769 ) Total $ 9,370 As of December 31, 2021, the Company has no additional operating or finance leases that have not yet commenced. No leases include options to purchase the leased property. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We do not have any lease agreements with related parties. 8. INVESTMENTS Investments, Current, at Fair Value Through its predecessor companies, the Company owned a minority interest representing less than 1% of the common stock of a technology company that completed an initial public offering ("IPO") and became publicly traded during the first quarter of 2021. Prior to the IPO, the Company had elected the measurement alternative in accordance with FASB ASC 321, Investments – Equity Securities. As of December 31, 2020, it was not practicable to estimate the fair value of its interest because there were no observable transactions for the investment. Accordingly, the investment was carried at its original cost, less impairments, which resulted in a carrying value of zero as of December 31, 2020. The investment was accounted for as an equity security, with realized and unrealized gains and losses included in earnings. During the third quarter of 2021, the investment was sold for $ 1.2 million. Accordingly, the recorded value as of December 31, 2021 was zero. A realized gain of $ 1.2 million has been recorded for the year ended December 31, 2021. Investments, Non-current, at Fair Value During the third quarter of 2021, the Company invested $ 3.0 million through a subordinated convertible promissory note (the "Note") of $ 3.0 million with a values-based career destination company that allows the next generation workforce to search for jobs at companies whose people, perks and values align with their unique professional needs. The Note earns interest at 6.00 % and matures at the earlier of a Qualified Financing, as described in the Note, or settled in cash on or after August 20, 2022, at the option of the Company. Upon a Qualified Financing, the Company will convert its investment into shares of preferred stock at 80 % of the per share value in the Qualified Financing. The investment is recorded as a trading security at fair value with realized and unrealized gains and losses included in earnings. The Note is recorded at $ 3.0 million as of December 31, 2021 and there was no gain or loss included in earnings during the year ended December 31, 2021. Investments, Non-current Rigzone is a website dedicated to delivering online content, data, and career services in the oil and gas industry in North America, Europe, the Middle East, and Asia Pacific. Oil and gas companies, as well as companies that serve the energy industry, use Rigzone to find talent for roles such as petroleum engineers, sales professionals with energy industry expertise and skilled tradesmen. On August 31, 2018, the Company transferred a majority ownership and control of the Rigzone business to Rigzone management, while retaining a 40 % common share interest. The Company has evaluated the 40 % common share interest in the Rigzone business and has determined the investment meets the definition and criteria of a variable interest entity ("VIE"). The Company evaluated the VIE and determined that the Company does not have a controlling financial interest in the VIE, as the Company does not have the power to direct the activities of the VIE that most significantly impact the VIE's economic performance. The common share interest is being accounted for under the equity method of accounting as the 70 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Company has the ability to exercise significant influence over Rigzone. As accumulated earnings of the VIE have been approximately zero since the date of transfer, the investment is recorded at zero at December 31, 2021. As further described in Notes 1 and 4, on June 30, 2021, the Company transferred majority ownership and control of its eFC business to eFC's management, while retaining a 40 % common share interest with zero proceeds received from the transfer. The Company incurred approximately $ 0.1 million in selling costs and recognized a $ 30.2 million loss on the transfer in the second quarter of 2021, which included a $ 28.1 million charge related to accumulated foreign currency loss that was previously a reduction to equity. eFC is a financial services careers website, operating websites in multiple markets in four languages mainly across the United Kingdom, Continental Europe, Asia, the Middle East and North America. Professionals from across many sectors of the financial services industry, including asset management, risk management, investment banking, and information technology, use eFC to advance their careers. The Company has evaluated the 40 % common share interest in the eFC business and has determined the investment meets the definition and criteria of a variable interest entity ("VIE"). The Company evaluated the VIE and determined that the Company does not have a controlling financial interest in the VIE, as the Company does not have the power to direct the activities of the VIE that most significantly impact the VIE's economic performance. The common share interest is being accounted for under the equity method of accounting as the Company has the ability to exercise significant influence over eFC. The investment was recorded at its fair value on June 30, 2021, the date of transfer, which was $ 3.6 million. The Company's equity in net assets of eFC as of June 30, 2021 was $2.2 million. The difference between the Company's recorded value and its equity in net assets of eFC is amortized against the recorded value of the investment in accordance with ASC 323 Investments - Equity Method and Joint Ventures . The amortization was not material for the year ended December 31, 2021. The recorded value is further adjusted based on the Company's proportionate share of eFC's net income and is recorded three months in arrears. During the fourth quarter of 2021, the Company recorded $ 0.2 million of income related to its proportionate share of eFC's net income, net of currency translation adjustments and amortization of the basis difference. At January 1, 2018, the Company held preferred stock representing a 10.0 % interest in the fully diluted shares of a tech skills assessment company. During 2018, the skills assessment company completed an additional equity offering, lowering DHI's total interest to 7.6 %. The Company did not adjust the recorded value of the investment because the shares issued under the new share offering were not similar to the Company's share rights. As of December 31, 2019 it was not practicable to estimate the fair value of the preferred stock as the shares are not traded. The investment was carried at its original cost of $ 2.0 million and was included in the other assets section of the consolidated balance sheets. During the three months ended March 31, 2020, based on the investment's historical cash burn rate, uncertainty of its ability to meet revenue and cash flow projections, current liquidity position, lack of access to additional capital, and impacts from the COVID-19 pandemic, the Company determined the value to be zero. Accordingly, the Company recorded an impairment charge of $ 2.0 million during the first quarter of 2020. As of December 31, 2021, there have been no additional shares issued that were similar to the Company's share rights and the investment is recorded at zero as of December 31, 2021. On January 31, 2018, the Company transferred a majority ownership of the BioSpace business to BioSpace management, while retaining a 20 % preferred share interest in the BioSpace business. During the second quarter of 2020, the Company sold its 20 % interest in BioSpace to BioSpace management for $ 0.2 million. At the time of sale, the recorded value of the investment was zero. Accordingly, the Company recognized a $ 0.2 million gain on sale, which was included in interest expense and other on the consolidated statements of operations. 9. FIXED ASSETS, NET Fixed assets, net consist of the following as of December 31, 2021 and 2020 (in thousands): 2021 2020 Computer equipment and software $ 4,654 $ 4,680 Furniture and fixtures 2,446 2,227 Leasehold improvements 1,817 1,817 Capitalized development costs 51,245 44,332 60,162 53,056 Less: Accumulated depreciation and amortization ( 39,581 ) ( 30,023 ) Fixed assets, net $ 20,581 $ 23,033 71 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. ACQUIRED INTANGIBLE ASSETS, NET Considering the recognition of the Dice brand, its long history, awareness in the talent acquisition and staffing services market, and the intended use, the remaining useful life of the Dice.com trademarks and brand name was determined to be indefinite. We determine whether the carrying value of recorded indefinite-lived acquired intangible assets is impaired on an annual basis or more frequently if indicators of potential impairment exist. The impairment review process compares the fair value of the indefinite-lived acquired intangible assets to its carrying value. If the carrying value exceeds the fair value, an impairment loss is recorded. As of December 31, 2021 and 2020, the Company had an indefinite-lived acquired intangible asset of $ 23.8 million related to the Dice trademarks and brand name. The annual impairment test for the Dice trademarks and brand name is performed on October 1 of each year. During the first and third quarters of 2020, because of the initial impacts of the COVID-19 pandemic and its potential impact on future earnings and cash flows that are attributable to the Dice trademarks and brand name, the Company recorded an impairment charge of $ 7.2 million and $ 8.0 million, respectively. No impairment was recorded during the years ended December 31, 2021 and 2019. The projections utilized in the October 1, 2021 analysis included increasing revenues at rates approximating industry growth projections. The Company’s ability to achieve these revenue projections may be impacted by, among other things, uncertainty related to COVID-19, competition in the technology recruiting market, challenges in developing and introducing new products and product enhancements to the market and the Company’s ability to attribute value delivered to customers. The October 1, 2021 analysis included operating margins during the year ending December 31, 2021 that approximate operating margins for the year ended December 31, 2020 and then increasing modestly. If future cash flows that are attributable to the Dice trademarks and brand name are not achieved, the Company could realize an impairment in a future period. The Company's operating results attributable to the Dice trademarks and brand name through December 31, 2021 and projections of future results have met or exceeded those included in the projections utilized in the October 1, 2021 analysis. In the October 1, 2021 analysis, the Company utilized a relief from royalty rate method to value the Dice trademarks and brand name using a royalty rate of 4.0 % based on comparable industry studies and a discount rate of 12.5 %. The determination of whether or not indefinite-lived acquired intangible assets have become impaired involves a significant level of judgment in the assumptions underlying the approach used to determine the value of the indefinite-lived acquired intangible assets. Fair values are determined using a profit allocation methodology which estimates the value of the trademark and brand name by capitalizing the profits saved because the company owns the asset. We consider factors such as historical performance, anticipated market conditions, operating expense trends and capital expenditure requirements. Changes in our strategy, uncertainty related to COVID-19, and/or changes in market conditions could significantly impact these judgments and require adjustments to recorded amounts of intangible assets. If projections are not achieved, the Company could realize an impairment in the foreseeable future. 11. GOODWILL The following table shows the carrying amount of goodwill as of December 31, 2021 and 2020, and the changes in goodwill for the years then ended (in thousands): Goodwill at January 1, 2020 $ 150,707 Impairment ( 22,607 ) Goodwill at December 31, 2020 $ 128,100 Activity during 2021 — Goodwill at December 31, 2021 $ 128,100 Accumulated impairment losses at December 31, 2021 and 2020 was $ 22.6 million. Goodwill as of December 31, 2021 and 2020, which was allocated to the Tech-focused reporting unit, was $ 128.1 million. There were no changes to goodwill during the year ended December 31, 2021. During the third quarter 2020, because of the impacts of the COVID-19 pandemic and its potential impact on future earnings and cash flows for the reporting unit, the Company recorded an impairment charge of $ 22.6 million. On June 30, 2021, the 72 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Company transferred a majority interest of its eFC business, which was part of the Tech-focused reporting unit, to management. As a result, the Company performed an interim impairment analysis of goodwill. The annual impairment test for the Tech-focused reporting unit is performed on October 1 of each year. The results of the impairment tests indicated that the fair value of the Tech-focused reporting unit was substantially in excess of the carrying value as of June 30, 2021 and October 1, 2021. Results for the Tech-focused reporting unit for the fourth quarter of 2021 and estimated future results as of December 31, 2021 have exceeded the projections used in the October 1, 2021 analysis. As a result, the Company believes it is not more likely than not that the fair value of the reporting unit is less than the carrying value as of December 31, 2021. Therefore, no quantitative impairment test was performed as of December 31, 2021. No impairment was recorded during the years ended December 31, 2021 and 2019. The projections utilized in the October 1, 2021 analysis included increasing revenues at rates approximating industry growth projections. The Company’s ability to achieve these revenue projections may be impacted by, among other things, uncertainty related to COVID-19, competition in the technology recruiting market, challenges in developing and introducing new products and product enhancements to the market and the Company’s ability to attribute value delivered to customers. The October 1, 2021 analysis included operating margins during the year ending December 31, 2021 that approximate operating margins for the year ended December 31, 2020 and then increasing modestly. If future cash flows that are attributable to the Tech-focused reporting unit are not achieved, the Company could realize an impairment in a future period. The discount rate applied for the Tech-focused reporting unit in the October 1, 2021 analysis was 11.5 %. An increase to the discount rate applied or reductions to future projected operating results could result in future impairment of the Tech-focused reporting unit’s goodwill. It is reasonably possible that changes in judgments, assumptions and estimates the Company made in assessing the fair value of goodwill could cause the Company to consider some portion or all of the goodwill of the Tech-focused reporting unit to become impaired. In addition, a future decline in the overall market conditions, uncertainty related to COVID-19, and/or changes in the Company’s market share could negatively impact the estimated future cash flows and discount rates used to determine the fair value of the reporting unit and could result in an impairment charge in the foreseeable future. The determination of whether or not goodwill has become impaired is judgmental in nature and requires the use of estimates and key assumptions, particularly assumed discount rates and projections of future operating results, such as forecasted revenues and earnings before interest, taxes, depreciation and amortization margins and capital expenditure requirements. Fair values are determined either by using a discounted cash flow methodology or by using a combination of a discounted cash flow methodology and a market comparable method. The discounted cash flow methodology is based on projections of the amounts and timing of future revenues and cash flows, assumed discount rates and other assumptions as deemed appropriate. Factors such as historical performance, anticipated market conditions, operating expense trends and capital expenditure requirements are considered. Additionally, the discounted cash flows analysis takes into consideration cash expenditures for product development, other technological updates and advancements to the websites and investments to improve the candidate databases. The market comparable method indicates the fair value of a business by comparing it to publicly traded companies in similar lines of business or to comparable transactions or assets. Considerations for factors such as size, growth, profitability, risk and return on investment are analyzed and compared to the comparable businesses and adjustments are made. A market value of invested capital of the publicly traded companies is calculated and then applied to the entity’s operating results to arrive at an estimate of value. Changes in our strategy and/or market conditions could significantly impact these judgments and require adjustments to recorded amounts of goodwill. 12. INDEBTEDNESS Credit Agreement —In November 2018, the Company, together with Dice Inc. (a wholly-owned subsidiary of the Company) and its wholly-owned subsidiary, Dice Career Solutions, Inc. (collectively, the “Borrowers”), entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”), which matures in November 2023, and replaces the previously existing credit agreement dated November 2015. The Credit Agreement provides for a revolving loan facility of $ 90 million, with an expansion option up to $ 140 million, as permitted in the Credit Agreement. Borrowings under the Credit Agreement bear interest, at the Company’s option, at a LIBOR rate or a base rate plus a margin. The margin ranges from 1.75 % to 2.50 % on LIBOR loans and 0.75 % to 1.50 % on base rate loans, determined by the Company’s most recent consolidated leverage ratio. The Company incurs a commitment fee ranging from 0.30 % to 0.45 % on any unused capacity under the revolving loan facility, determined by the Company's most recent consolidated leverage ratio. 73 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The facility may be prepaid at any time without penalty. Interest expense on long-term debt for the years ended December 31, 2021, 2020, and 2019 was $ 0.8 million, $ 1.1 million, and $ 0.9 million, respectively. The Credit Agreement contains various customary affirmative and negative covenants and also contains certain financial covenants, including a consolidated leverage ratio and a consolidated interest coverage ratio. Borrowings are allowed under the Credit Agreement to the extent the consolidated leverage ratio, calculated on a pro forma basis, is equal to or less than 2.50 to 1.00 . Negative covenants include restrictions on incurring certain liens; making certain payments, such as stock repurchases and dividend payments; making certain investments; making certain acquisitions; making certain dispositions; and incurring additional indebtedness. Restricted payments are allowed under the Credit Agreement to the extent the consolidated leverage ratio, calculated on a pro forma basis, is equal to or less than 2.00 to 1.00 , plus an additional $ 5.0 million of restricted payments. The Credit Agreement also provides that the payment of obligations may be accelerated upon the occurrence of customary events of default, including, but not limited to, non-payment, change of control, or insolvency. As of December 31, 2021, the Company was in compliance with all of the financial covenants under the Credit Agreement. The obligations under the Credit Agreement are guaranteed by two of the Company’s U.S. based wholly-owned subsidiaries, and secured by substantially all of the assets of the Borrowers and the guarantors. The amounts borrowed as of December 31, 2021 and 2020 are as follows (dollars in thousands): December 31, 2021 December 31, 2020 Amounts borrowed: Revolving credit facility $ 23,000 $ 20,000 Less: deferred financing costs, net of accumulated amortization of $467 and $319 ( 270 ) ( 417 ) Total borrowed $ 22,730 $ 19,583 Available to be borrowed under revolving facility $ 67,000 $ 70,000 Interest rates: LIBOR rate loans: Interest margin 1.75 % 2.00 % Actual interest rates 1.88 % 2.19 % Commitment Fee 0.30 % 0.35 % There are no scheduled payments until maturity of the Credit Agreement in November 2023. 13. COMMITMENTS AND CONTINGENCIES Litigation The Company is subject to various claims from taxing authorities, lawsuits and other complaints arising in the ordinary course of business. The Company records provisions for losses when claims become probable and the amounts are reasonably estimable. Although the outcome of these legal matters cannot be determined, it is the opinion of management that the final resolution of these matters will not have a material adverse effect on the Company’s financial condition, operations or liquidity. Tax Contingencies The Company operates in a number of tax jurisdictions and is routinely subject to examinations by various tax authorities with respect to both income and indirect taxes. The determination of the Company’s worldwide provision for taxes requires judgment and estimation. The Company has reserved for potential examination adjustments to our provision for income taxes and accrual of indirect taxes in amounts which the Company believes are reasonable. 74 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. EQUITY TRANSACTIONS Stock Repurchase Plans — The Company's Board of Directors ("Board") approved a stock repurchase program that permits the Company to repurchase its common stock. Management has discretion in determining the conditions under which shares may be purchased from time to time. The following table summarizes the Stock Repurchase Plans approved by the Board of Directors: May 2018 to May 2019 May 2019 to May 2020 May 2020 to May 2021 (1) Feb 2021 to Jun 2022 (2) Approval Date May 2018 April 2019 May 2020 February 2021 Authorized Repurchase Amount of Common Stock $ 7 million $ 7 million $ 5 million $ 20 million (1) During the first quarter of 2021, the Company completed its purchases under the plan, which consisted of 2.2 million shares for $ 5.0 million, effectively ending the plan prior to its original expiration date. (2) During the second quarter of 2021, the Company amended its $ 8.0 million stock repurchase program approved in February 2021 and allowed for the purchase of an additional $ 12.0 million of our common stock through June 2022, bringing total authorized purchases under the plan to $ 20.0 million. As of December 31, 2021, the value of shares available to be purchased under the current plan was $ 5.8 million. During January 2022, the Company repurchased approximately 742,000 shares for $ 4.3 million under the current plan. Purchases of the Company's common stock pursuant to the Stock Repurchase Plans were as follows: Year Ended December 31, 2021 2020 2019 Shares repurchased (1) 3,905,050 3,548,265 848,760 Average purchase price per share (2) $ 3.92 $ 2.38 $ 2.97 Dollar value of shares repurchased (in thousands) $ 15,323 $ 8,436 $ 2,519 (1) No shares of our common stock were purchased other than through a publicly announced plan or program. (2) Average price paid per share includes costs associated with the repurchases. There were 48,260 , 63,451 and 4,310 unsettled shares as of December 31, 2021, 2020 and 2019, respectively. The Company's Board approved the retirement of 20 million shares of treasury stock during the first quarter of 2019 and, as a result, the Company reduced additional paid in capital by $ 161.6 million and Common Stock by $ 0.2 million during the quarter. The value of treasury stock retired was computed based on the average repurchase price of all treasury shares as of March 31, 2019, which was $ 8.09 per share. Convertible Preferred Stock— The Company has 20 million shares of convertible preferred stock authorized, with a $ 0.01 par value. No shares have been issued and outstanding since prior to our initial public offering in 2007. The rights, preferences, privileges and restrictions granted to and imposed on the convertible preferred stock are as set forth below. The Company currently has no preferred stock outstanding. The Company’s amended and restated certificate of incorporation permits the terms of any preferred stock to be determined at the time of issuance. Dividend provisions The preferred stockholders would be entitled to dividends only when dividends are paid to common shareholders. In the event of a dividend, the holders of the preferred shares would be entitled to share in the dividend on a pro rata basis, as if their shares had been converted into shares of common stock. Conversion rights Any holder of preferred stock has the right, at its option, to convert the preferred shares into shares of common stock at a ratio of one preferred stock share for one common stock share. The holders of 66 2 / 3 % of all outstanding preferred stock have the right at any time to require all the outstanding shares of preferred stock to be converted into an equal number of shares of common stock. Voting rights include the right to vote at a special or annual meeting of stockholders on all matters entitled to be voted on by holders of common stock, voting together as a single class with the common stock. There are no redemption rights associated with the preferred stock. 75 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Liquidation rights Upon the occurrence of liquidation, the holders of the preferred shares shall be paid in cash for each share of preferred stock held, out of, but only to the extent of, the assets of the Company legally available for distribution to its stockholders, before any payment or distribution is made to any shareholders of common stock . The liquidation value is $ 2.17 per share, subject to adjustments for stock splits, stock dividends, combinations, or other recapitalizations of the preferred stock. Dividends— No dividends were declared during the years ended December 31, 2021, 2020 or 2019. Our Credit Agreement limits our ability to declare and pay dividends. See note 12 for additional disclosures. 15. ACCUMULATED OTHER COMPREHENSIVE LOSS FASB ASC topic on Comprehensive Income establishes standards for the reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. This statement requires that all items that are required to be recognized as components of comprehensive income be reported in a financial statement with the same prominence as other financial statements. During the year ended December 31, 2021, the Company had $ 28.1 million of currency translation adjustments reclassified to the Statements of Operations related to the removal of eFC's net assets. The Company had no amounts reclassified out of accumulated other comprehensive income for the years ended December 31, 2020, and 2019. The foreign currency translation adjustments impact comprehensive income. Accumulated other comprehensive income (loss), net consists of the following components, net of tax (in thousands): Year Ended December 31, 2021 2020 2019 Foreign currency translation: Balance at beginning of year $ ( 28,519 ) $ ( 29,248 ) $ ( 31,236 ) Foreign currency translation adjustment 395 729 1,988 Cumulative translation adjustments reclassified to the Statements of Operations 28,063 — — Balance at end of year $ ( 61 ) $ ( 28,519 ) $ ( 29,248 ) 16. DISPOSITION RELATED AND OTHER COSTS In May 2017, the Company announced plans to divest a number of its online professional communities to achieve greater focus and resource allocation toward its core tech-focused business. The planned divestitures were completed in 2018 and included BioSpace, Hcareers, and Rigzone. The Company also ceased the Dice Europe operations in 2018 and vacated certain offices. In connection with the planned divestitures and reorganization to the tech-focused strategy, the Company incurred certain costs, including severance and retention, lease exit, business closure, professional fees related to activist shareholders, search, financial advisory, and legal services, and other costs to further these strategic objectives. The activities associated with disposition related and other costs were substantially completed during the year ended December 31, 2019. Disposition related and other costs were zero for the years ended December 31, 2021 and 2020 and were $ 1.4 million for the year ended December 31, 2019. 17. STOCK BASED COMPENSATION Under the 2012 Omnibus Equity Award Plan, the Company has granted stock options, restricted stock and Performance-Based Restricted Stock Units (“PSUs”) to certain employees and directors. The Company records expense based upon the number of awards outstanding with no estimate for forfeitures. Stock based compensation disclosures within this footnote include expense and shares related to the eFC business. The Company recorded stock based compensation expense of $ 8.3 million, $ 6.3 million, and $ 5.7 million during the years ended December 31, 2021, 2020, and 2019, respectively. At December 31, 2021, there was $ 9.8 million of unrecognized compensation expense related to unvested awards, which is expected to be recognized over a weighted-average period of approximately 1.3 years. Restricted Stock— Restricted stock is granted to employees of the Company and its subsidiaries, and to non-employee members of the Company’s Board. These shares are part of the compensation plan for services provided by the employees or Board 76 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS members. The closing price of the Company’s stock on the date of grant is used to determine the fair value of the grants. The expense related to the restricted stock grants is recorded over the vesting period as described below. There was no cash flow impact resulting from the grants. The restricted stock vests in various increments either quarterly or on the anniversaries of each grant, subject to the recipient’s continued employment or service through each applicable vesting date. Vesting occurs over one year for Board members and over two to four years for employees. A summary of the status of restricted stock awards as of December 31, 2021, 2020, and 2019 and the changes during the periods then ended is presented below: Year Ended December 31, 2021 2020 2019 Shares Weighted- Average Fair Value at Grant Date Shares Weighted- Average Fair Value at Grant Date Shares Weighted- Average Fair Value at Grant Date Non-vested at beginning of the period 3,877,853 $ 2.49 3,994,787 $ 2.46 4,518,932 $ 2.32 Granted 2,267,683 $ 2.98 2,172,550 $ 2.67 2,257,940 $ 2.72 Forfeited ( 684,976 ) $ 2.73 ( 430,136 ) $ 2.81 ( 560,375 ) $ 2.75 Vested ( 2,088,728 ) $ 2.43 ( 1,859,348 ) $ 2.58 ( 2,221,710 ) $ 2.36 Non-vested at end of period 3,371,832 $ 2.80 3,877,853 $ 2.49 3,994,787 $ 2.46 PSUs— PSUs are granted to employees of the Company and its subsidiaries. These shares are granted under two compensation agreements that are for services provided by the employees. The first agreement expired and was terminated during the first quarter of 2020 and there were no unvested shares as of March 31, 2020. Under the second agreement, the fair value of the PSUs are measured at the grant date fair value of the award, which was determined based on an analysis of the probable performance outcomes. The performance period is over one year and is based on the achievement of bookings targets during the year of grant, as defined in the agreement. The earned shares will then vest over a three year period, one-third on each of the first, second, and third anniversaries of the grant date, or if later, the date the Compensation Committee certifies the performance results with respect to the performance period. For the performance period ending December 31, 2020, as a result of the COVID-19 pandemic and its impact on the overall economy, the bookings targets were modified during the third quarter of 2020. Accordingly, the Company remeasured the awards. There were no cash flow impact resulting from the grants. A summary of the status of PSUs as of December 31, 2021, 2020, and 2019 and the changes during the periods then ended, is presented below: Year Ended December 31, 2021 2020 2019 Shares Weighted- Average Fair Value at Grant Date Shares Weighted- Average Fair Value at Grant Date Shares Weighted- Average Fair Value at Grant Date Non-vested at beginning of the period 1,352,438 $ 2.50 1,664,650 $ 2.53 1,255,000 $ 3.45 Granted 990,000 $ 2.62 911,460 $ 2.65 837,150 $ 2.54 Forfeited ( 161,946 ) $ 2.63 ( 695,628 ) $ 3.26 ( 427,500 ) $ 5.26 Vested ( 586,717 ) $ 2.32 ( 528,044 ) $ 1.88 — $ — Non-vested at end of period 1,593,775 $ 2.62 1,352,438 $ 2.50 1,664,650 $ 2.53 Stock Options— The fair value of each option grant is estimated using the Black-Scholes option-pricing model using the weighted-average assumptions in the table below. This valuation model requires the Company to make assumptions and judgments about the variables used in the calculation, including the fair value of the Company’s common stock, the expected life (the period of time that the options granted are expected to be outstanding), the volatility of the Company’s common stock, 77 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS a risk-free interest rate and expected dividends. The expected life of options granted is derived from historical exercise behavior. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury rates in effect at the time of grant. The stock options vest 25% after one year, beginning on the first anniversary date of the grant, and 6.25% each quarter following the first anniversary. There was no cash flow impact resulting from the grants. No stock options were granted during the years ended December 31, 2021, 2020, and 2019. A summary of the status of options previously granted as of December 31, 2021, 2020, and 2019, and the changes during the periods then ended is presented below: Year Ended December 31, 2021 Options Weighted-Average Exercise Price Aggregate Intrinsic Value Options outstanding at January 1 110,000 $ 7.40 $ — Forfeited ( 110,000 ) $ 7.40 — Options outstanding at December 31 — $ — $ — Exercisable at December 31 — $ — $ — Year Ended December 31, 2020 Options Weighted-Average Exercise Price Aggregate Intrinsic Value Options outstanding at January 1 190,000 $ 8.28 $ — Forfeited ( 80,000 ) $ 9.48 — Options outstanding at December 31 110,000 $ 7.40 $ — Exercisable at December 31 110,000 $ 7.40 $ — Year Ended December 31, 2019 Options Weighted-Average Exercise Price Aggregate Intrinsic Value Options outstanding at January 1 327,000 $ 8.35 $ — Forfeited ( 137,000 ) $ 8.46 — Options outstanding at December 31 190,000 $ 8.28 $ — Exercisable at December 31 190,000 $ 8.28 $ — 78 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 18. INCOME TAXES Deferred tax assets (liabilities) included in the balance sheet as of December 31, 2021 and 2020 are as follows (in thousands): 2021 2020 Deferred tax assets: Capital loss carryforward $ 4,971 $ 5,225 Allowance for doubtful accounts 221 252 Provision for accrued expenses and other, net 1,726 1,462 Stock-based compensation 2,245 1,761 Deferred revenue 142 127 Tax credit carryforward 306 258 9,611 9,085 Less valuation allowance 5,139 5,306 Deferred tax asset, net of valuation allowance 4,472 3,779 Deferred tax liabilities: Acquired intangibles ( 6,303 ) ( 6,187 ) Depreciation of fixed assets ( 5,238 ) ( 5,808 ) Capitalized contract costs ( 2,246 ) ( 1,549 ) Deferred tax liability ( 13,787 ) ( 13,544 ) Net deferred tax liability $ ( 9,315 ) $ ( 9,765 ) Recognized in consolidated balance sheets: Deferred tax liability ( 9,315 ) ( 9,765 ) Net deferred tax liability $ ( 9,315 ) $ ( 9,765 ) The Company had deferred tax assets of $ 5.0 million and $ 5.2 million, respectively, at December 31, 2021 and 2020 related to capital loss carryforwards and $ 0.3 million at December 31, 2021 and 2020 related to tax credit carryforwards. The capital losses expire in 2023 through 2025, and the tax credits expire in 2025 through 2030. The Company has recorded valuation allowances of $ 5.1 million and $ 5.3 million, respectively, at December 31, 2021 and 2020 in order to measure only the portion of the deferred tax assets which are more likely than not to be realized. Tax expense (benefit) for the years ended December 31, 2021, 2020 and 2019 is as follows (in thousands): 2021 2020 2019 Current income tax expense (benefit): Federal $ ( 332 ) $ ( 261 ) $ 525 State 154 ( 79 ) 71 Current income tax expense (benefit) ( 178 ) ( 340 ) 596 Deferred income tax expense (benefit): Federal ( 414 ) ( 2,025 ) 1,657 State ( 37 ) ( 461 ) 541 Deferred income tax expense (benefit) ( 451 ) ( 2,486 ) 2,198 Income tax expense (benefit) $ ( 629 ) $ ( 2,826 ) $ 2,794 79 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A reconciliation between tax expense at the federal statutory rate and the reported income tax expense is summarized as follows: Year Ended December 31, 2021 2020 2019 Federal statutory rate $ ( 216 ) $ ( 7,397 ) $ 1,979 Loss (gain) on sale of businesses or investments ( 251 ) ( 42 ) 84 Stock-based compensation ( 84 ) 432 281 Nondeductible impairment — 5,029 — State tax expense (benefit), net of federal effect 110 ( 514 ) 405 Change in accrual for unrecognized tax benefits ( 155 ) ( 216 ) 209 Executive compensation 541 323 147 Research and development tax credits ( 478 ) ( 530 ) ( 558 ) Other ( 96 ) 89 247 Income tax expense (benefit) $ ( 629 ) $ ( 2,826 ) $ 2,794 Effective tax rate 61.0 % 8.0 % 29.6 % An uncertain tax position represents the Company’s expected treatment of a tax position taken in a filed tax return, or planned to be taken in a tax return not yet filed, that has not been reflected in measuring income tax expense for financial reporting purposes. At December 31, 2021 and 2020, the Company has recorded a liability of $ 0.8 million and $ 0.9 million, respectively, which consists of unrecognized tax benefits of $ 0.7 million and $ 0.9 million, respectively, and estimated accrued interest and penalties of $ 0.1 million and $ 0.0 million , respectively. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. During the years ended December 31, 2021, 2020 and 2019, interest expense (income) and penalties recorded in the consolidated statements of operations were $( 27,000 ), $( 195,000 ), and $ 91,000 , respectively. Following is a reconciliation of the amounts of unrecognized tax benefits, net of tax and excluding interest and penalties, for the years ended December 31, 2021, 2020 and 2019 (in thousands): 2021 2020 2019 Unrecognized tax benefits—beginning of period $ 858 $ 903 $ 784 Increases in tax positions related to current year 165 134 154 Increases in tax positions related to prior year — — 41 Decreases in tax positions related to prior year ( 42 ) — — Lapse of statute of limitations ( 251 ) ( 179 ) ( 76 ) Unrecognized tax benefits—end of period $ 730 $ 858 $ 903 The foregoing table indicates unrecognized tax benefits, net of tax and excluding interest and penalties. The balance of gross unrecognized benefits was $ 0.8 million, $ 0.9 million, and $ 1.0 million at December 31, 2021, 2020, and 2019, respectively. If the unrecognized tax benefits at December 31, 2021, 2020, and 2019 were recognized in full, tax benefits of $ 0.8 million, $ 0.9 million, and $ 1.2 million, respectively, would affect the effective tax rate. The Company has filed income tax returns in the U.S. and various foreign jurisdictions. The foreign returns relate to the eFC business, of which the Company transferred a majority interest and control to eFC's management on June 30, 2021. See Notes 1 and 4 for additional disclosures. The Company is generally no longer subject to examinations by U.S. federal tax authorities for tax years prior to 2018, or by U.S. state and foreign authorities for tax years prior to 2017. The Company believes it is reasonably possible that as much as $ 0.2 million of its unrecognized tax benefits may be recognized by the end of 2022 as a result of a lapse of the statute of limitations. 19. EMPLOYEE SAVINGS PLAN The Company has a savings plan (the “Savings Plan”) that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under the Savings Plan, participating employees may defer a portion of their pretax earnings, up to the Internal Revenue Service annual contribution limit. The Company contributed $ 1.7 million, $ 1.6 million, and $ 1.4 million for the years ended December 31, 2021, 2020 and 2019, respectively, to match employee contributions to the Savings Plan. 80 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 20. EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share is computed based on the weighted-average number of shares of common stock outstanding. Diluted earnings per share is computed based on the weighted-average number of shares of common stock outstanding plus common stock equivalents, where dilutive. As shown in the table below, certain dilutive shares were excluded from the computation of shares contingently issuable upon exercise as we recognized a loss from continuing operations. The following is a calculation of basic and diluted earnings per share and weighted-average shares outstanding (in thousands, except per share amounts): 2021 2020 2019 Income (loss) from continuing operations $ ( 402 ) $ ( 32,397 ) $ 6,631 Income (loss) from discontinued operations, net of tax $ ( 29,340 ) $ 2,382 $ 5,920 Net Income (loss) $ ( 29,742 ) $ ( 30,015 ) $ 12,551 Weighted-average shares outstanding—basic 46,333 48,278 48,739 Add shares issuable from stock-based awards — — 2,894 Weighted-average shares outstanding—diluted $ 46,333 $ 48,278 $ 51,633 Basic earnings (loss) per share - continuing operations $ ( 0.01 ) $ ( 0.67 ) $ 0.14 Diluted earnings (loss) per share - continuing operations $ ( 0.01 ) $ ( 0.67 ) $ 0.13 Basic earnings (loss) per share - discontinued operations $ ( 0.63 ) $ 0.05 $ 0.12 Diluted earnings (loss) per share - discontinued operations $ ( 0.63 ) $ 0.05 $ 0.11 Basic earnings (loss) per share $ ( 0.64 ) $ ( 0.62 ) $ 0.26 Diluted earnings (loss) per share $ ( 0.64 ) $ ( 0.62 ) $ 0.24 Shares issuable from stock-based awards (1) 2,579 1,293 — Shares excluded from the calculation of diluted earnings per share (2) 487 2,279 506 (1) Represents shares excluded from the computation of shares contingently issuable upon exercise as we recognized a net loss from continuing operations. (2) Represents outstanding stock-based awards that were anti-dilutive and excluded from the calculation of diluted earnings per share. 81 Table of Contents DHI GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 21. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following is a summary of unaudited quarterly results of operations for 2021 and 2020 and has been restated to reflect the transfer of majority ownership and control of the eFC business to eFC's management, which is presented as a discontinued operation, as described in note 4: For the Three Months Ended March 31 June 30 September 30 December 31 (in thousands, except per share amounts) 2021 Revenues $ 26,676 $ 28,721 $ 30,758 $ 33,748 Total operating expenses 26,860 28,233 32,973 33,589 Operating income (loss) $ ( 184 ) $ 488 $ ( 2,215 ) $ 159 Income (loss) from continuing operations 2,012 ( 212 ) ( 2,434 ) 232 Income (loss) from discontinued operations, net of tax 659 ( 29,999 ) — — Net income (loss) $ 2,671 $ ( 30,211 ) $ ( 2,434 ) $ 232 Basic income (loss) per share - continuing operations $ 0.04 $ — $ ( 0.05 ) $ 0.01 (1) Diluted income (loss) per share - continuing operations $ 0.04 $ — $ ( 0.05 ) $ — (1) Basic earnings (loss) per share - discontinued operations $ 0.01 $ ( 0.64 ) $ — $ — (1) Diluted earnings (loss) per share - discontinued operations $ 0.01 $ ( 0.64 ) $ — $ — (1) Basic earnings (loss) per share $ 0.06 $ ( 0.64 ) $ ( 0.05 ) $ 0.01 (1) Diluted earnings (loss) per share $ 0.05 $ ( 0.64 ) $ ( 0.05 ) $ — (1) 2020 Revenues $ 29,385 $ 27,596 $ 27,149 $ 27,037 Total operating expenses 35,955 25,941 55,627 26,034 Operating income (loss) $ ( 6,570 ) $ 1,655 $ ( 28,478 ) $ 1,003 Income (loss) from continuing operations ( 7,535 ) 1,162 ( 26,993 ) $ 969 Income (loss) from discontinued operations, net of tax 985 700 ( 329 ) $ 1,026 Net income (loss) $ ( 6,550 ) $ 1,862 $ ( 27,322 ) $ 1,995 Basic income (loss) per share - continuing operations $ ( 0.15 ) $ 0.02 $ ( 0.56 ) $ 0.02 (1) Diluted income (loss) per share - continuing operations $ ( 0.15 ) $ 0.02 $ ( 0.56 ) $ 0.02 (1) Basic earnings (loss) per share - discontinued operations $ 0.02 $ 0.01 $ ( 0.01 ) $ 0.02 (1) Diluted earnings (loss) per share - discontinued operations $ 0.02 $ 0.01 $ ( 0.01 ) $ 0.02 (1) Basic earnings (loss) per share $ ( 0.13 ) $ 0.04 $ ( 0.57 ) $ 0.04 (1) Diluted earnings (loss) per share $ ( 0.13 ) $ 0.04 $ ( 0.57 ) $ 0.04 (1) (1) The sum of the quarters may not equal the full year amount. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None.