DHI GROUP, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this report. See also our consolidated financial statements and the notes thereto and the section entitled “Note Concerning Forward-Looking Statements” in our Annual Report on Form 10-K for the year ended December 31, 2021. Information contained herein contains forward-looking statements. You should not place undue reliance on those statements because they are subject to numerous uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Forward-looking statements include, without limitation, information concerning our possible or assumed future results of operations. These statements often include words such as “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or similar expressions. These statements are based on assumptions that we have made in light of our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to execute our tech-focused strategy, competition from existing and future competitors in the highly competitive markets in which we operate, failure to adapt our business model to keep pace with rapid changes in the recruiting and career services business, failure to maintain and develop our reputation and brand recognition, failure to increase or maintain the number of customers who purchase recruitment packages, cyclicality or downturns in the economy or industries we serve, the potential impact of COVID-19 on our operations and financial results, uncertainty in respect to the regulation of data protection and data privacy, failure to attract qualified professionals to our websites or grow the number of qualified professionals who use our websites, failure to successfully identify or integrate acquisitions, U.S. and foreign government regulation of the Internet and taxation, our ability to borrow funds under our revolving credit facility or refinance our indebtedness and restrictions on our current and future operations under such indebtedness. These factors and others are discussed in more detail below and in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, under the headings “Risk Factors,” “Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Information contained herein contains certain non-GAAP financial measures. These measures are not in accordance with, or an alternative for, measures in accordance with U.S. GAAP. Such measures presented herein include adjusted earnings before interest, taxes, depreciation, amortization, non-cash stock-based compensation expense, impairment, gain or loss on sale of businesses, and certain other income or expense items, as defined, (“Adjusted EBITDA") and Adjusted EBITDA Margin. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" for definitions of these measures as well as reconciliations to the comparable GAAP measure. You should keep in mind that any forward-looking statement made by us herein, or elsewhere, speaks only as of the date on which it is made. New risks and uncertainties come up from time to time, and it is impossible to predict these events or how they may affect us. We have no obligation to update any forward-looking statements after the date hereof, except as required by federal securities laws. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy and information statements and other material information concerning us are available free of charge on the Investors page of our website at www.dhigroupinc.com . Our reports filed with the SEC are also available by visiting http://www.sec.gov . 21 Table of Contents Overview We are a provider of software products, online tools and services that deliver career marketplaces to candidates and employers in the United States. DHI’s brands, Dice and ClearanceJobs, enable recruiters and hiring managers to efficiently search, match and connect with highly skilled technologists in specialized fields, particularly technology and active government security clearance. Professionals find ideal employment opportunities, relevant job advice and personalized data that help manage their technologist lives. In online recruitment, we specialize in employment categories in which there has been a long-term scarcity of highly skilled, highly qualified professionals relative to market demand, specifically technologists who work in a variety of industries or have active government security clearances. Our websites serve as online two-sided marketplaces where employers and recruiters source and connect with prospective employees, and where technologists find relevant job opportunities, data and information to further their careers. Our websites offer job postings, news and content, career development and recruiting services tailored to the specific needs of the professional community that each website serves. Majority ownership and control of DHI's eFinancialCareers ("eFC") business, which provides career websites to the financial services industry and has operations in the United Kingdom, Continental Europe, Asia, the Middle East and North America, was transferred to eFC management on June 30, 2021. The Company retained a 40% common share interest. As a result, all ongoing DHI operations, which include the Dice and ClearanceJobs brands, are in the United States subsequent to June 30, 2021. We have been in the recruiting and career development business for over 30 years. Based on our operating structure, we have identified one reportable segment, Tech-focused, which includes the Dice and ClearanceJobs businesses and corporate related costs. The Dice and ClearanceJobs businesses and corporate related costs are aggregated into the Tech-focused reportable segment primarily because the Company does not have discrete financial information for those brands or costs. As a result of the eFC separation, the eFC business was deconsolidated from the Company's condensed consolidated balance sheets and statements of operations as of June 30, 2021 and is reflected as a discontinued operation for all periods presented on or before June 30, 2021. Recent Developments None. Our Revenues and Expenses We derive the majority of our revenues from customers who pay fees, either annually, quarterly or monthly, to post jobs on our websites and to access our searchable databases of resumes. Our fees vary by customer based on the number of individual users of our databases of resumes, the number and type of job postings and profile views purchased and the terms of the packages purchased. Our Company sells recruitment packages that can include access to our databases of resumes and job posting capabilities. We believe the key metrics that are material to an analysis of our businesses are our total number of Dice and ClearanceJobs recruitment package customers and the revenue, on average, that these customers generate. The tables below detail this customer data. As of June 30, Increase (Decrease) Percent Change Recruitment Package Customers: 2022 2021 Dice 6,386 5,441 945 17% ClearanceJobs 1,976 1,784 192 11% 22 Table of Contents Average Annual Revenue per Recruitment Package Customer (1) Three months ended June 30, Six months ended June 30, 2022 2021 Increase (Decrease) Percent Change 2022 2021 Increase (Decrease) Percent Change Dice $ 14,304 $ 13,488 $ 816 6 % $14,208 $13,512 $696 5% ClearanceJobs $ 18,708 $ 16,728 $ 1,980 12 % $18,564 $16,608 $1,956 12% (1) Calculated by dividing recruitment package customer revenue by the daily average count of recruitment package customers during each month, adjusted to reflect a 30-day month. The simple average of each month is used to derive the amount for each period and then annualized to reflect 12 months. Dice had 6,386 recruitment package customers as of June 30, 2022, which was an increase of 945, or 17%, year over year and average annual revenue per recruitment package customer for Dice increased $816, or 6%, year over year. The increases were driven by strong renewal rates and new business activity. ClearanceJobs had 1,976 recruitment package customers as of June 30, 2022 compared to 1,784 as of June 30, 2021, an increase of 11%, and average annual revenue per recruitment package customer increased $1,980, or 12%, year over year. The increases for ClearanceJobs were due to continued high demand for professionals with government clearance and consistent product releases and enhancements driving activity on the site. Deferred revenue, as shown on the condensed consolidated balance sheets, reflects customer billings made in advance of services being rendered. Backlog consists of deferred revenue plus customer contractual commitments not invoiced representing the value of future services to be rendered under committed contracts. We believe backlog to be an important measure of our business as it represents our ability to generate future revenue. A summary of our deferred revenue and backlog is as follows: Comparison to Prior Year End Comparison Year Over Year 6/30/2022 12/31/2021 Increase (Decrease) Percent Change 6/30/2021 Increase (Decrease) Percent Change Deferred Revenue $ 54,144 $ 46,146 $ 7,998 17 % $ 43,188 $ 10,956 25 % Contractual commitments not invoiced 49,981 46,497 3,484 7 % 31,890 18,091 57 % Backlog (1) $ 104,125 $ 92,643 $ 11,482 12 % $ 75,078 $ 29,047 39 % (1) Backlog consists of deferred revenue plus customer contractual commitments not invoiced representing the value of future services to be rendered under committed contracts. Backlog at June 30, 2022 increased $11.5 million and $29.0 million from December 31, 2021 and June 30, 2021, respectively. The increase in backlog compared to December 31, 2021 and June 30, 2021 is due to the strong technology recruitment market driving bookings growth at both Dice and ClearanceJobs, a focus on signing multi-year contracts, and the Company's ongoing investments in sales and marketing. The first quarter of each year is generally the largest bookings quarter of the year, also contributing to the growth from December 31, 2021. To a lesser extent, we also generate revenue from advertising on our various websites or from lead generation and marketing solutions provided to our customers. Advertisements include various forms of rich media and banner advertising, text links, sponsorships, and custom content marketing solutions. Lead generation information utilizes advertising and other methods to deliver leads to customers. The Company continues to evolve and present new software products and features to attract and engage qualified professionals and match them with employers. Our ability to grow our revenues will largely depend on our ability to grow our customer bases in the markets in which we operate by acquiring new customers while retaining a high proportion of the customers we currently serve, and to expand the breadth of services our customers purchase from us. We continue to make investments in our business and infrastructure to help us achieve our long-term growth objectives, such as the innovative products in the table below. 23 Table of Contents Product Releases 2022 2021 New Job Apply Flow, Dice TalentSearch Time Zone Search Dice Marketplace, Dice TalentSearch Social Data Refresh, Brand.io, TalentSearch Personalization, Unbiased Sourcing Mode Multi-Factor Authentication, ClearanceJobs Live Video ClearanceJobs Meetings, ClearanceJobs Video, Team Recruiting, Shared Talent Pipelines, Quality of Use Improvements Other material factors that may affect our results of operations include our ability to attract qualified professionals that become engaged with our websites and our ability to attract customers with relevant job opportunities. The more qualified professionals that use our websites, the more attractive our websites become to employers and advertisers, which in turn makes them more likely to become our customers, resulting positively on our results of operations. If we are unable to continue to attract qualified professionals to engage with our two-sided marketplaces, our customers may no longer find our services attractive, which could have a negative impact on our results of operations. Additionally, we need to ensure that our websites remain relevant in order to attract qualified professionals to our websites and to engage them in high-value tasks, such as posting resumes and/or applying for jobs. The largest components of our expenses are personnel costs and marketing and sales expenditures. Personnel costs consist of salaries, benefits, and incentive compensation for our employees, including commissions for salespeople. Personnel costs are categorized in our statement of operations based on each employee’s principal function. Personnel costs incurred during the application development stage of internal use software and website development are recorded as fixed assets and amortized to depreciation expense in the statement of operations over the estimated useful life of the asset. Marketing expenditures primarily consist of online advertising, brand promotion and lead generation to employers and job seekers. Critical Accounting Estimates There have been no material changes to our critical accounting estimates as compared to the critical accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021 Revenues Three Months Ended June 30, Increase (Decrease) Percent Change 2022 2021 (in thousands, except percentages) Dice (1) $ 26,823 $ 20,583 $ 6,240 30 % ClearanceJobs 10,234 8,138 2,096 26 % Total revenues $ 37,057 $ 28,721 $ 8,336 29 % (1) Includes Dice and Career Events For the three months ended June 30, 2022 we experienced an increase in revenue of $8.3 million, or 29%. Revenue at Dice increased $6.2 million, or 30%, compared to the same period in 2021 due to improvements in renewal rates and new business activity along with consistently increasing customer counts, which drives additional revenue in future periods. Revenues for ClearanceJobs increased $2.1 million, or 26%, as compared to the same period in 2021, primarily driven by continued high demand for professionals with government clearance and consistent product releases and enhancements driving activity on the site. 24 Table of Contents Cost of Revenues Three Months Ended June 30, Increase Percent Change 2022 2021 (in thousands, except percentages) Cost of revenues $ 4,181 $ 3,593 $ 588 16 % Percentage of revenues 11.3 % 12.5 % Cost of revenues increased $0.6 million, or 16%, driven by an increase of $0.5 million from higher compensation related costs, primarily from higher headcount. Operational costs, including the amortization of cloud computing costs, increased by $0.1 million. Product Development Expenses Three Months Ended June 30, Increase Percent Change 2022 2021 (in thousands, except percentages) Product development $ 4,360 $ 3,510 $ 850 24 % Percentage of revenues 11.8 % 12.2 % Product development expenses increased $0.9 million, or 24%, driven by an increase of $1.9 million from higher compensation related costs partially offset by an increase in capitalized labor of $1.1 million, which decreases operating expenses. Sales and Marketing Expenses Three Months Ended June 30, Increase Percent Change 2022 2021 (in thousands, except percentages) Sales and marketing $ 14,274 $ 10,151 $ 4,123 41 % Percentage of revenues 38.5 % 35.3 % Sales and marketing expenses increased $4.1 million, or 41% from the same period in 2021. This increase was driven by a $2.5 million increase in compensation related costs from higher headcount and quota attainment versus sales plan, $1.3 million increase in discretionary marketing expenses with strong customer recruitment activity, and a $0.3 million increase in operational costs, including travel and entertainment and company events as COVID-19 restrictions have eased. General and Administrative Expenses Three Months Ended June 30, Increase Percent Change 2022 2021 (in thousands, except percentages) General and administrative $ 9,109 $ 6,939 $ 2,170 31 % Percentage of revenues 24.6 % 24.2 % General and administrative expenses increased $2.2 million, or 31% from the prior year. The increase was driven by a $1.5 million increase in compensation expense, which includes a $0.6 million increase in stock-based compensation. The increase in compensation expense is primarily due to higher achievement against targets for the Company's bonus and PSU plans. Operational costs, including professional fees, bad debt, travel, and training increased $0.7 million. Depreciation Three Months Ended June 30, Increase Percent Change 2022 2021 (in thousands, except percentages) Depreciation $ 4,228 $ 4,040 $ 188 5 % Percentage of revenues 11.4 % 14.1 % 25 Table of Contents Depreciation expense increased $0.2 million or 5% from the same period in 2021 in connection with increasing capitalized development costs throughout 2021 and projects being placed into service driving higher depreciation in 2022. Operating Income Three Months Ended June 30, Increase Percent Change 2022 2021 (in thousands, except percentages) Revenue $ 37,057 $ 28,721 $ 8,336 29 % Operating income 905 488 417 85 % Operating margin 2.4 % 1.7 % Operating income for the three months ended June 30, 2022 was $0.9 million, a margin of 2.4%, compared to operating income of $0.5 million, a margin of 1.7%, for the same period in 2021, an improvement of $0.4 million. The increase in operating income and improved percentage margin was driven by higher revenues, partially offset by higher operating costs as the Company invests in its product and sales and marketing for future growth. Income from Equity Method Investment Three Months Ended June 30, Increase Percent Change 2022 2021 (in thousands, except percentages) Income from equity method investment $ 361 $ — $ 361 n/a Percentage of revenues 1.0 % — % During the three months ended June 30, 2022, the Company recorded $0.4 million of income related to its proportionate share of eFC's net income. Gain (Loss) on Investment Three Months Ended June 30, Increase Percent Change 2022 2021 (in thousands, except percentages) Gain (loss) on investment $ 320 $ (674) $ 994 (147) % Percentage of revenues 0.9 % (2.3) % During the three months ended June 30, 2022, the Company recognized a $0.3 million gain from the sale of its 40% common share interest in Rigzone. During the three months ended June 30, 2021, the Company recognized a $0.7 million loss on related to a minority interest representing less than 1% of the common stock of a technology company that became publicly traded during the first quarter of 2021 after filing for its initial public offering. See also Note 7 of the Notes to the condensed consolidated financial statements. Interest Expense and Other Three Months Ended June 30, Increase Percent Change 2022 2021 (in thousands, except percentages) Interest expense and other $ 298 $ 87 $ 211 243 % Percentage of revenues 0.8 % 0.3 % Interest expense and other increased from the same period in 2021, primarily due to higher debt outstanding on the revolving credit facility during the current period. 26 Table of Contents Income Taxes Three Months Ended June 30, 2022 2021 (in thousands, except percentages) Income (loss) before income taxes $ 1,288 $ (273) Income tax benefit (162) (61) Effective tax rate (12.6) % 22.3 % Our effective tax rate for the three months ended June 30, 2022, differed from the U.S. statutory rate due to tax benefits of $0.2 million from the vesting of share-based compensation awards, $0.1 million from research tax credits, and $0.1 million from the release of a valuation allowance on our capital loss carryforward. The tax rate for the three months ended June 30, 2021, differed from the statutory rate due to state income taxes. Income (loss) from discontinued operations, net of tax Three Months Ended June 30, Increase Percent Change 2022 2021 (in thousands, except percentages) Income (loss) from discontinued operations, net of tax $ — $ (29,999) $ 29,999 (100) % Percentage of revenues — % (104.4) % The Company transferred majority ownership of its eFC business on June 30, 2021 to eFC management and recorded it as a discontinued operation. As a result, the Company recognized a $30.0 million loss during the three months ended June 30, 2021. The loss was comprised of $28.1 million related to the reclassification of currency translation adjustments and $5.2 million from the removal of eFC's net assets. The loss was partially offset by the recording of an equity investment of $3.6 million and eFC's earnings during the three months ended June 30, 2021. Earnings (loss) per Share Three Months Ended June 30, 2022 2021 (in thousands, except per share amounts) Income (loss) from continuing operations $ 1,450 $ (212) Loss from discontinued operations, net of tax — (29,999) Net income (loss) $ 1,450 $ (30,211) Weighted-average shares outstanding - basic 44,682 47,227 Weighted-average shares outstanding - diluted 46,961 47,227 Diluted earnings per share - continuing operations $ 0.03 $ — Diluted earnings (loss) per share - discontinued operations $ — $ (0.64) Diluted earnings (loss) per share $ 0.03 $ (0.64) Diluted earnings per share from continuing operations were $0.03 and $0.00 for the three months ended June 30, 2022 and 2021, respectively. The increase is driven by an increase in operating income and the gain on sale of investment in the current period. Diluted earnings (loss) per share were $0.03 and $(0.64) for the three months ended June 30, 2022 and 2021, respectively. The prior year loss per share was driven by the loss from discontinued operations, which did not occur in the second quarter of 2022. 27 Table of Contents Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021 Revenues Six Months Ended June 30, Increase (Decrease) Percent Change 2022 2021 (in thousands, except percentages) Tech-focused Dice (1) $ 51,457 $ 39,634 $ 11,823 30 % ClearanceJobs 19,934 15,763 4,171 26 % Total revenues $ 71,391 $ 55,397 $ 15,994 29 % (1) Includes Dice U.S. and Career Events We experienced an increase in revenue of $16.0 million, or 29%. Revenue at Dice increased by $11.8 million, or 30%, compared to the same period in 2021 due to improvements in renewal rates and new business activity, and increasing customer counts, which drives additional revenue in future periods. Revenue at ClearanceJobs increased by $4.2 million, or 26%, as compared to the same period in 2021, primarily driven by continued high demand for professionals with government clearance and consistent product releases and enhancements driving activity on the site. Cost of Revenues Six Months Ended June 30, Increase Percent Change 2022 2021 (in thousands, except percentages) Cost of revenues $ 8,280 $ 7,295 $ 984 13 % Percentage of revenues 11.6 % 13.2 % Cost of revenues increased $1.0 million, or 13%, driven by an increase of $0.8 million from higher compensation related costs, primarily from higher headcount. Operational costs, including the amortization of cloud computing costs, increased by $0.2 million. Product Development Expenses Six Months Ended June 30, Increase Percent Change 2022 2021 (in thousands, except percentages) Product development $ 8,302 $ 7,112 $ 1,190 17 % Percentage of revenues 11.6 % 12.8 % Product Development increased $1.2 million, or 17%, driven by an increase of $2.8 million from higher compensation related costs, partially offset by an increase in capitalized labor of $1.7 million, which decreases operating expenses. Sales and Marketing Expenses Six Months Ended June 30, Increase Percent Change 2022 2021 (in thousands, except percentages) Sales and marketing $ 28,215 $ 19,922 $ 8,293 42 % Percentage of revenues 39.5 % 36.0 % Sales and marketing expenses increased $8.3 million, or 42% from the same period in 2021. The increase was driven by a $4.8 million increase in compensation related costs from higher headcount and quota attainment versus sales plan, $2.8 million increase in discretionary marketing expenses with strong customer recruitment activity, and a $0.7 million increase in operational costs, including travel and entertainment and company events as COVID-19 restrictions have eased. 28 Table of Contents General and Administrative Expenses Six Months Ended June 30, Increase Percent Change 2022 2021 (in thousands, except percentages) General and administrative $ 16,875 $ 13,093 $ 3,782 29 % Percentage of revenues 23.6 % 23.6 % General and administrative costs increased $3.8 million, or 29%, from the same period in 2021. The increase was driven by a $2.6 million increase in compensation expense, which includes a $1.3 million increase in stock-based compensation. The increase in compensation expense is primarily due to higher achievement against targets for the Company's bonus and PSU plans. Operational costs, including legal, collection expenses, travel, and training increased $1.2 million. Depreciation Six Months Ended June 30, Increase Percent Change 2022 2021 (in thousands, except percentages) Depreciation $ 8,186 $ 7,671 $ 515 7 % Percentage of revenues 11.5 % 13.8 % Depreciation expense increased $0.5 million, or 7%, from the same period in 2021 in connection with increasing capitalized development costs throughout 2021 and projects being placed into service driving higher depreciation in 2022. Operating Income Six Months Ended June 30, Increase Percent Change 2022 2021 (in thousands, except percentages) Revenue $ 71,391 $ 55,397 $ 15,994 29 % Operating income 1,533 304 1,229 404 % Operating margin 2.1 % 0.5 % Operating income for the six months ended June 30, 2022 was $1.5 million, a margin of 2.1%, compared to operating income of $0.3 million, a margin of 0.5%, for the same period in 2021, an improvement of $1.2 million. The increase in operating income and improved percentage margin was driven by higher revenues, partially offset by higher operating costs as the Company invests in its product and sales and marketing for future growth. Income from equity method investment Six Months Ended June 30, Increase Percent Change 2022 2021 (in thousands, except percentages) Income from equity method investment $ 516 $ — $ 516 — % Percentage of revenues 0.7 % 0.0 % During the six months ended June 30, 2022, the Company recorded $0.5 million of income related to its proportionate share of eFC's net income. Interest Expense and Other Six Months Ended June 30, Increase Percent Change 2022 2021 (in thousands, except percentages) Interest expense and other $ 543 $ 282 $ 261 93 % Percentage of revenues 0.8 % 0.5 % 29 Table of Contents Interest expense and other increased $0.3 million, or 93%, compared to the same period in 2021, primarily due to higher debt outstanding on the revolving credit facility during the current period. Gain (loss) on investment Six Months Ended June 30, Decrease Percent Change 2022 2021 (in thousands, except percentages) Gain on investments $ 320 $ 1,839 $ (1,519) (83) % Percentage of revenues 0.4 % 3.3 % During the six months ended June 30, 2022, the Company recognized a $0.3 million gain from the sale of its 40% common share interest in Rigzone. During the six months ended June 30, 2021, the Company recognized a $1.8 million gain related to a minority interest representing less than 1% of the common stock of a technology company that became publicly traded during the first quarter of 2021 after filing an initial public offering. See also Note 7 of the Notes to the condensed consolidated financial statements. Income Taxes Six Months Ended June 30, 2022 2021 (in thousands, except percentages) Income before income taxes $ 1,826 $ 1,861 Income tax expense (benefit) (925) 61 Effective tax rate (50.7) % 3.3 % Our effective tax rate for the six months ended June 30, 2022, differed from the U.S. statutory rate due to tax benefits of $1.0 million from the vesting of share-based compensation awards, $0.1 million from research tax credits, and $0.1 million from the release of a valuation allowance on our capital loss carryforward. The tax rate for the six months ended June 30, 2021, differed from the statutory rate due to a $0.4 million tax benefit from the release of a valuation allowance on our capital loss carryforward. Income (loss) from discontinued operations, net of tax Six Months Ended June 30, Increase Percent Change 2022 2021 (in thousands, except percentages) Income (loss) from discontinued operations, net of tax $ — $ (29,340) $ 29,340 (100) % Percentage of revenues — % (53.0) % The Company transferred majority ownership of its eFC business on June 30, 2021 to eFC management and recorded it as a discontinued operation. As a result, the Company experienced a loss from discontinued operations, net of tax, of $29.3 million during the six months ended June 30, 2021. The loss was comprised of $28.1 million related to the reclassification of currency translation adjustments and $5.2 million from the removal of eFC's net assets. The loss was partially offset by the recording of an equity investment of $3.6 million and eFC's earnings during the six months ended June 30, 2021. 30 Table of Contents Earnings (loss) per Share Six Months Ended June 30, 2022 2021 (in thousands, except per share amounts) Income from continuing operations $ 2,751 $ 1,800 Income (loss) from discontinued operations, net of tax $ — $ (29,340) Net income (loss) $ 2,751 $ (27,540) Weighted-average shares outstanding - basic 44,692 47,111 Weighted-average shares outstanding - diluted 46,977 48,854 Diluted earnings per share - continuing operations $ 0.06 $ 0.04 Diluted earnings (loss) per share - discontinued operations $ — $ (0.60) Diluted earnings (loss) per share $ 0.06 $ (0.56) Diluted earnings per share from continuing operations were $0.06 and $0.04 for the six months ended June 30, 2022 and 2021, respectively. The increase is driven by an increase in operating income and an income tax benefit in the current period. Diluted earnings (loss) per share were $0.06 and $(0.56) for the six months ended June 30, 2022 and 2021, respectively. The prior year loss per share was driven by the loss from discontinued operations. Liquidity and Capital Resources Non-GAAP Financial Measures We have provided certain non-GAAP financial measures as additional information for our operating results. These measures are not in accordance with, or an alternative for, measures in accordance with U.S. GAAP and may be different from similarly titled non-GAAP measures reported by other companies. We believe the presentation of non-GAAP measures, such as Adjusted EBITDA and Adjusted EBITDA Margin, provides useful information to management and investors regarding certain financial and business trends relating to our financial condition and results of operations. Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures used by management to measure operating performance. Management uses Adjusted EBITDA and Adjusted EBITDA Margin as performance measures for internal monitoring and planning, including preparation of annual budgets, analyzing investment decisions and evaluating profitability and performance comparisons between us and our competitors. The Company also uses these measures to calculate amounts of performance based compensation under the senior management incentive bonus program. Adjusted EBITDA represents net income plus (to the extent deducted in calculating such net income) interest expense, income tax expense, depreciation and amortization, non-cash stock-based compensation, losses resulting from certain dispositions outside the ordinary course of business including prior negative operating results of those divested businesses, certain write-offs in connection with indebtedness, impairment charges with respect to long-lived assets, expenses incurred in connection with an equity offering or any other offering of securities by the Company, extraordinary or non-recurring non-cash expenses or losses, losses from equity method investments, transaction costs in connection with the credit agreement, deferred revenues written off in connection with acquisition purchase accounting adjustments, write-off of non-cash stock-based compensation expense, severance and retention costs related to dispositions and reorganizations of the Company, and losses related to legal claims and fees that are unusual in nature or infrequent, minus (to the extent included in calculating such net income) non-cash income or gains, including income from equity method investments, interest income, business interruption insurance proceeds, and any income or gain resulting from certain dispositions outside the ordinary course of business, including prior positive operating results of those divested businesses, and gains related to legal claims that are unusual in nature or infrequent. Adjusted EBITDA Margin is computed as Adjusted EBITDA divided by Revenues. We also consider Adjusted EBITDA and Adjusted EBITDA Margin, as defined, to be important indicators to investors because they provide information related to our ability to provide cash flows to meet future debt service, capital expenditures, working 31 Table of Contents capital requirements, and to fund future growth. We present Adjusted EBITDA and Adjusted EBITDA Margin as supplemental performance measures because we believe that these measures provide our Board, management and investors with additional information to measure our performance, provide comparisons from period to period by excluding potential differences caused by variations in capital structures (affecting interest expense) and tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses), and to estimate our value. We understand that although Adjusted EBITDA and Adjusted EBITDA Margin are frequently used by securities analysts, lenders and others in their evaluation of companies, Adjusted EBITDA and Adjusted EBITDA Margin have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our liquidity or results as reported under GAAP. Some limitations are: • Adjusted EBITDA and Adjusted EBITDA Margin do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; • Adjusted EBITDA and Adjusted EBITDA Margin do not reflect changes in, or cash requirements for, our working capital needs; • Adjusted EBITDA and Adjusted EBITDA Margin do not reflect interest expense, or the cash requirements necessary to service interest or principal payments on our debt; • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and Adjusted EBITDA and Adjusted EBITDA Margin do not reflect any cash requirements for such replacements; and • Other companies in our industry may calculate Adjusted EBITDA and Adjusted EBITDA Margin differently than we do, limiting their usefulness as comparative measures. To compensate for these limitations, management evaluates our liquidity by considering the economic effect of excluded expense items independently, as well as in connection with its analysis of cash flows from operations and through the use of other financial measures, such as capital expenditure budget variances, investment spending levels and return on capital analysis. Adjusted EBITDA and Adjusted EBITDA Margin are not measurements of our financial performance under GAAP and should not be considered as an alternative to revenue, net income, net income margin, operating income, cash provided by operating activities, or any other performance measures derived in accordance with GAAP as a measure of our profitability or liquidity. 32 Table of Contents A reconciliation of Adjusted EBITDA for the six months ended June 30, 2022 and 2021 follows (in thousands): Six Months Ended June 30, Dollars 2022 2021 Reconciliation of Net Income (loss) to Adjusted EBITDA: Net income (loss) $ 2,751 $ (27,540) Interest expense 543 373 Income tax expense (benefit) (925) 61 Depreciation 8,186 7,671 Non-cash stock-based compensation 4,691 3,438 Income from equity method investment (516) — Gain on investment (320) (1,839) Severance and related costs 323 1,311 Loss from discontinued operations, net of tax — 29,340 Other — (90) Adjusted EBITDA $ 14,733 $ 12,725 Reconciliation of cash provided by operating activities to Adjusted EBITDA Net cash provided by operating activities $ 19,448 $ 19,298 Interest expense 543 373 Amortization of deferred financing costs (73) (74) Income tax expense (benefit) (925) 61 Deferred income taxes 3,092 951 Change in accrual for unrecognized tax benefits (194) (82) Change in accounts receivable (43) (3,556) Change in deferred revenue (7,998) (7,118) Discontinued operations results — (3,593) Severance and related costs 323 1,311 Changes in working capital and other 560 5,154 Adjusted EBITDA $ 14,733 $ 12,725 Net Income (Loss) Margin and Adjusted EBITDA Margin for the six months ended June 30, 2022 and 2021 follows (in thousands): Six Months Ended June 30, 2022 2021 Revenues $ 71,391 $ 55,397 Net income (loss) $ 2,751 $ (27,540) Net income (loss) margin (1) 4 % (50) % Adjusted EBITDA $ 14,733 $ 12,725 Adjusted EBITDA Margin (1) 21 % 23 % (1) Net income (loss) margin and Adjusted EBITDA Margin are calculated by dividing the respective measure by that period's revenues. 33 Table of Contents Cash Flows We have summarized our cash flows for the six months ended June 30, 2022 and 2021 (in thousands). Six Months Ended June 30, 2022 2021 Cash from operating activities $ 19,448 $ 19,298 Cash used in investing activities $ (8,210) $ (9,773) Cash used in financing activities $ (9,163) $ (9,270) We have financed our operations primarily through cash provided by operating activities and borrowings under our revolving credit facility. At June 30, 2022, we had cash of $3.6 million compared to $1.5 million at December 31, 2021. Liquidity Our principal internal sources of liquidity are cash and cash equivalents, as well as the cash flow that we generate from our operations. In addition, we had $70.0 million in borrowing capacity under our $100.0 million Credit Agreement at June 30, 2022, subject to certain availability limits including our consolidated leverage ratio, which generally limits borrowings to 2.5 times annual Adjusted EBITDA levels, as defined in the Credit Agreement. We believe that our existing cash and cash equivalents, cash generated from our continuing operations and available borrowings under our Credit Agreement will be sufficient to satisfy our currently anticipated cash requirements through at least the next 12 months and the foreseeable future thereafter. However, it is possible that one or more lenders under the Credit Agreement may refuse or be unable to satisfy their commitment to lend to us, we may violate one or more of our covenants or financial ratios contained in our Credit Agreement or we may need to refinance our debt and be unable to do so. In addition, our liquidity could be negatively affected by a decrease in demand for our products and services and the ability of our customers to pay for current or future services. We may also make acquisitions and may need to raise additional capital through future debt financings or equity offerings to the extent necessary to fund such acquisitions, which we may not be able to do on a timely basis or on terms satisfactory to us or at all. Operating Activities Net cash flows from operating activities primarily consist of net income adjusted for certain non-cash items, including depreciation, amortization, changes in deferred tax assets and liabilities, stock-based compensation, income from equity method investments, gain on investments, loss on disposition of discontinued operations, and the effect of changes in working capital. Net cash flows from operating activities were $19.4 million and $19.3 million for the six-month periods ended June 30, 2022 and 2021, respectively. Cash inflow from operations is driven by earnings and is dependent on the amount and timing of payments to vendors and employees and billings to and cash collections from our customers. Cash provided by operating activities during the 2022 period increased $0.1 million compared to the same period of 2021. Investing Activities Cash used in investing activities during the six-month period ended June 30, 2022 was $8.2 million compared to $9.8 million used in the same period of 2021. Cash used in investing activities in the six-month period ended June 30, 2022 decreased from the comparable 2021 period due to $3.0 million of cash transferred to eFC related to the transfer of ownership in the prior year period. This decrease was partially offset by higher internal development costs in the current period, primarily driven by higher product development headcount. Financing Activities Cash used in financing activities during the six-month period ended June 30, 2022 was $9.2 million and was driven by $7.0 million of net proceeds on long-term debt, and offset by $15.8 million related to share repurchases. Cash used in financing activities during the six-month period ended June 30, 2021 was $9.3 million and was driven by $5.3 million of share repurchases and $4.0 million of net payments on long-term debt. 34 Table of Contents Financing and Capital Requirements Credit Agreement We have a $100 million revolving credit facility, which matures June 2027, with $ 30.0 million of borrowings on the facility at June 30, 2022, leaving $ 70.0 million available for future borrowings, subject to the terms of the Credit Agreement. Borrowings under the Credit Agreement denominated in U.S. dollars bear interest, payable at least quarterly, at the Company’s option, at a Secured Overnight Financing Rate ("SOFR") rate or a base rate, plus a margin. Borrowings under the credit agreement denominated in pounds sterling, if any, bear interest at the Sterling Overnight Index Average ("SONIA") rate plus a margin. Assuming an int eres t rate of 3.30 % (the rate in effect on June 30, 2022) on our current borrowings, interest payments are expected to be $0.5 million from July 1, 2022 to December 31, 2022, $1.0 million in each of 2023, 2024, 2025, and 2026 and $0.5 million in 2027. 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. As of June 30, 2022, the Company was in compliance with all of the financial covenants under the Credit Agreement. Refer to Note 10 in the notes to the condensed consolidated financial statements and Item 3. "Quantitative and Qualitative Disclosures about Market Risk - Interest Rate Risk." Contractual Obligations The Company has operating leases for corporate office space and certain equipment. The leases have terms from one year to eight years, some of which include options to renew the lease, and are included in the lease term when it is reasonably certain that the Company will exercise the option. No leases include options to purchase the leased property. As of June 30, 2022, the value of our obligations under operating leases was $6.0 million. See note 6 to the condensed consolidated financial statements for further information. We make commitments to purchase advertising from online vendors, which we pay for on a monthly basis. We have no significant long-term obligations to purchase a fixed or minimum amount with these vendors. Other Capital Requirements As of June 30, 2022, we recorded approximately $1.0 million of unrecognized tax benefits as liabilities, and we are uncertain if or when such amounts may be settled. Related to the unrecognized tax benefits considered permanent differences, we have also recorded a liability for potential penalties and interest. Included in the balance of unrecognized tax benefits at June 30, 2022 are $1.0 million of tax benefits that would affect the effective tax rate if recognized. The Company believes it is reasonably possible that as much as $0.2 million of its unrecognized tax benefits may be recognized in the next 12 months. The Company's Board of Directors previously approved a stock repurchase program that permits the Company to repurchase its common stock. During the six months ended June 30 2022, the Company repurchased $11.2 million of shares of its common stock pursuant to the stock repurchase program. As of June 30, 2022, the value of shares available to be purchased under the current plan was $ 9.4 million. Management has discretion in determining the conditions under which shares may be purchased from time to time. See note 12 of the notes to the condensed consolidated financial statements for further information. We anticipate capital expenditures in 2022 to be approximately $20 million. The increase over prior periods is due to the additional investments in the development of new products and features. We intend to use operating cash flows to fund capital expenditures. Impact of COVID-19 on our Business The spread of the coronavirus disease (“COVID-19”) caused an economic downturn on a global scale, as well as significant volatility in the financial markets. In March 2020, the World Health Organization declared the spread of the COVID-19 virus a pandemic. COVID-19 slowed recruitment activity for our businesses during 2020 as employers slowed hiring, which reduced our revenues and operating cash flows during 2020 and into the beginning of 2021. The pandemic may impact our financial performance in the coming months, but, based on information currently available, we are not anticipating a significant long-term impact on our business and operations, results of operations, financial condition, cash flows, liquidity and capital and financial resources. However, the situation is uncertain and rapidly changing. The Company cannot at this time predict the ultimate impact that the COVID-19 pandemic will have on its financial condition and operations. In an effort to protect the health and safety of our employees, we have taken action to adopt certain policies at our office locations, including working 35 Table of Contents from home and the temporary closure of our locations when necessary. We may have to take further actions that we determine are in the best interests of our employees or as required by health organizations, federal, state, or local authorities. The impact of the COVID-19 pandemic continues to unfold. The extent of the pandemic’s effect on our operational and financial performance will depend in large part on future developments, which cannot be predicted with confidence at this time. Future developments include the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the further development of additional treatments or vaccines, and the resumption of widespread economic activity. While the pandemic may impact our financial performance in the coming months, due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we may not be able to predict the likely impact of the COVID-19 pandemic on our future operations. Cyclicality The labor market and certain of the industries that we serve have historically experienced short-term cyclicality. However, we believe that online career websites continue to provide economic and strategic value to the labor market and industries that we serve. Any slowdown in recruitment activity that occurs could negatively impact our revenues and results of operations. For instance, the COVID-19 pandemic resulted in a slowdown of recruiting activity in 2020, which negatively impacted our business. Alternatively, a decrease in the unemployment rate or a labor shortage, including as a result of an increase in job turnover, generally means that employers (including our customers) are seeking to hire more individuals, which would generally lead to more job postings and database licenses and have a positive impact on our revenues and results of operations. Based on historical trends, improvements in labor markets and the need for our services generally lag behind overall economic improvements. Additionally, there has historically been a lag from the time customers begin to increase purchases of our recruitment services and the impact to our revenues due to the recognition of revenue occurring over the length of the contract, which can be several months to over a year. From time to time, we see market slowdowns, which can lead to lower demand for recruiting technologists and financial and security cleared professionals. In 2020 and early in 2021, the COVID-19 pandemic led to a reduction in recruitment activity. If recruitment activity slows in the industries in which we operate, our revenues and results of operations may be negatively impacted.