What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-02 compared with 2023-05-10 · 217 added, 98 removed, 233 unchanged (57% of the section changed)

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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, 2022.

Information contained herein contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

1934, as amended.

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.

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These measures are not in accordance with, or an alternative for, measures in accordance with generally accepted accounting principles in the United States ("U.S.

Such measures presented herein include adjusted earnings before interest, taxes, depreciation and amortization, and

items such as non-cash stock-based compensation, gain or loss on investments, 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.

Such measures presented herein include adjusted earnings before interest, taxes, depreciation and amortization, and items such as non-cash stock-based compensation, gain or loss on investments, and certain other income or expense items, as defined.

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.

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Recent Developments

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.

Our Revenue and Expenses

We derive the majority of our revenue 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, which are predominately annual agreements.

Our Company sells recruitment packages, which comprise approximately 90% or our total revenue, 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 Company's management uses these metrics to monitor the current and future activity of the businesses.

The tables below detail this customer data.

As of March 31, Increase Percent

As of June 30, Increase (Decrease) Percent

Recruitment Package Customers:

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Average Annual Revenue per Recruitment Package Customer (1)

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2023 2022 Increase Percent

Change 2023 2022 Increase Percent

Dice $ 15,534 $ 14,304 $ 1,230 9 % $ 15,602 $ 14,208 $ 1,394 10 %

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The simple average of each month is used to derive the amount for each period and then annualized to reflect 12 months.

Dice had 6,171 recruitment package customers as of March 31, 2023, which was a decrease of 78, or 1%, and average annual revenue per recruitment package customer for Dice increased $1,560, or 11%, from the prior year quarter.

The decrease in

recruitment package customers was due to macroeconomic conditions causing customer counts to decline while the average annual revenue per recruitment package customer increased driven by strong renewal and retention rates as our larger recurring customers continue to renew with Dice.

ClearanceJobs had 2,078 recruitment package customers as of March 31, 2023 compared to 1,928 as of March 31, 2022, an increase of 8%, and average annual revenue per recruitment package customer increased $2,112, or 11%, from the prior year quarter.

Dice had 6,007 recruitment package customers as of June 30, 2023, which was a decrease of 379, or 6%, and average annual revenue per recruitment package customer for Dice increased $1,230, or 9%, from the prior year quarter.

The decrease in recruitment package customers was due to macroeconomic conditions causing customer counts to decline while the average annual revenue per recruitment package customer increased driven by strong renewal and retention rates as our larger recurring customers continue to renew with Dice.

ClearanceJobs had 2,069 recruitment package customers as of June 30, 2023 compared to 1,976 as of June 30, 2022, an increase of 5%, and average annual revenue per recruitment package customer increased $2,134, or 11%, from the prior year quarter.

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.

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.

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

Backlog at March 31, 2023 increased $7.0 million and $18.2 million from December 31, 2022 and March 31, 2022, respectively.

The increase in backlog compared to December 31, 2022 and March 31, 2022 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.

Backlog at June 30, 2023 increased $0.5 million and $13.6 million from December 31, 2022 and June 30, 2022, respectively.

The increase in backlog compared to December 31, 2022 and June 30, 2022 is due to the Company's focus on signing multi-year contracts.

The first quarter of each year is generally the largest bookings quarter of the year, also contributing to the growth from December 31, 2022.

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

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.

Our ability to grow our revenue 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.

Product Releases

Dice Invite To Apply, Dice Matchscore on Jobs Dice New Job Apply Flow, Dice TalentSearch Time Zone Search, Dice TalentSearch Auto Talent Alerts, Dice iOS App Messaging

ClearanceJobs Expressed Interest, ClearanceJobs Enhanced Employer Profile ClearanceJobs Multi-Factor Authentication, ClearanceJobs Live Video, ClearanceJobs Scheduled Broadcast Messages

Dice Premium Enhanced Company Profile, Dice Remote and Company Preferences, Dice Invite To Apply, Dice Matchscore on Jobs New Job Apply Flow, Dice TalentSearch Time Zone Search

ClearanceJobs Comments, ClearanceJobs Expressed Interest, ClearanceJobs Enhanced Employer Profile Multi-Factor Authentication, ClearanceJobs Live Video

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.

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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.

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.

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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, 2022.

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

Three Months Ended March 31, Increase Percent

Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

Three Months Ended June 30, Increase (Decrease) Percent

(in thousands, except percentages)

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ClearanceJobs 12,266 10,234 2,032 20 %

Total revenues $ 38,620 $ 34,334 $ 4,286 12 %

Total revenue $ 38,538 $ 37,057 $ 1,481 4 %

(1) Includes Dice and Career Events

For the three months ended March 31, 2023 we experienced an increase in revenue of $4.3 million, or 12%.

Revenue at Dice increased $2.3 million, or 9%, compared to the same period in 2022 due to strong renewal and retention rates.

For the three months ended June 30, 2023 we experienced an increase in revenue of $1.5 million, or 4%.

Revenue at Dice decreased $0.6 million, or 2%, compared to the same period in 2022 due to macroeconomic conditions driving lower new business activity and lower activity with Dice's non-annual products.

Revenues for ClearanceJobs increased $2.0 million, or 20%, as compared to the same period in 2022, primarily driven by continued high demand for professionals with government clearance and consistent product releases and enhancements driving activity on the site.

Cost of Revenues

Three Months Ended March 31, Increase Percent

Cost of Revenue

Three Months Ended June 30, Increase Percent

(in thousands, except percentages)

Cost of revenues $ 4,912 $ 4,099 $ 813 20 %

Percentage of revenues 12.7 % 11.9 %

Cost of revenues increased $0.8 million, or 20%, driven by an increase of $0.7 million from higher compensation related costs, primarily from higher headcount, partially offset by an increase in capitalized labor of $0.1 million, which decreases operating expenses.

Operational costs, including the amortization of cloud computing costs, increased by $0.2 million.

Cost of revenue $ 4,956 $ 4,181 $ 775 19 %

Percentage of revenue 12.9 % 11.3 %

Cost of revenue increased $0.8 million, or 19%, driven by an increase of $0.4 million from higher compensation related costs.

Operational costs, including the amortization of cloud computing costs and software subscriptions, increased by $0.3 million.

Product Development Expenses

Three Months Ended March 31, Increase Percent

Three Months Ended June 30, Decrease Percent

(in thousands, except percentages)

Product development $ 4,158 $ 4,360 $ (202) (5) %

Percentage of revenues 12.2 % 11.5 %

Product development expenses increased $0.8 million, or 19%, driven by an increase of $1.1 million from higher compensation related costs, primarily from higher headcount, partially offset by an increase in capitalized labor of $0.3 million, which decreases operating expenses.

Operational costs, including consulting, decreased by $0.1 million.

Percentage of revenue 10.8 % 11.8 %

Product development expenses decreased $0.2 million, or 5% from the prior year.

The decrease was driven by a $0.6 million reduction in compensation related costs, primarily related to lower headcount and bonus expenses.

These decreases were partially offset by lower capitalized labor of $0.3 million from the prior year, which increases operating expenses.

Sales and Marketing Expenses

Three Months Ended March 31, Increase Percent

Three Months Ended June 30, Increase Percent

(in thousands, except percentages)

Sales and marketing $ 14,723 $ 14,274 $ 449 3 %

Percentage of revenues 41.6 % 40.6 %

Sales and marketing expenses increased $2.1 million, or 15% from the same period in 2022.

This increase was driven by a $1.9 million increase in compensation related costs from higher headcount and quota attainment versus sales plan and a $0.3 million increase in operational costs, including Company events, consulting and travel and entertainment.

The increase was partially offset by $0.1 million decrease in discretionary marketing expenses.

Percentage of revenue 38.2 % 38.5 %

Sales and marketing expenses increased $0.4 million, or 3% from the prior year.

This increase was driven by a $0.8 million increase in amortization related to capitalized contract costs and a $0.2 million increase in operational costs, including Company events and consulting.

The increase was partially offset by $0.3 million decrease in discretionary marketing expenses and $0.2 million decrease in compensation related costs, primarily related to lower headcount and bonus expense.

General and Administrative Expenses

Three Months Ended March 31, Increase Percent

Three Months Ended June 30, Decrease Percent

(in thousands, except percentages)

General and administrative $ 8,453 $ 9,109 $ (656) (7) %

Percentage of revenues 21.3 % 22.6 %

General and administrative expenses increased $0.4 million, or 6% from the prior year.

The increase was driven by a $0.7 million increase in stock-based compensation.

The increase in compensation expense is primarily due to higher achievement against targets related to the Company's PSUs.

See also Note 12 of the notes to condensed consolidated financial statements.

The increase was partially offset by a $0.2 million decrease in compensation related costs from lower headcount.

Three Months Ended March 31, Increase Percent

Percentage of revenue 21.9 % 24.6 %

General and administrative expenses decreased $0.7 million, or 7% from the prior year.

The decrease was driven by a $0.6 million decrease in compensation expense, primarily related to lower headcount and bonus expense.

Three Months Ended June 30, Decrease Percent

(in thousands, except percentages)

Depreciation $ 4,162 $ 4,228 $ (66) (2) %

Percentage of revenues 10.8 % 11.5 %

Depreciation expense increased $0.2 million, or 5%, compared to the same period in 2022.

The increase was driven by higher capitalized internal development costs throughout 2022 and in the first quarter of 2023, which increased depreciation in the first quarter of 2023.

Percentage of revenue 10.8 % 11.4 %

Depreciation expense decreased $0.1 million, or 2%, compared to the same period in 2022.

The decrease was driven by the timing of assets being placed into service.

Restructuring

Three Months Ended June 30, Increase Percent

(in thousands, except percentages)

Restructuring $ 2,115 $ — $ 2,115 n/a

Percentage of revenue 5.5 % — %

During the three months ended June 30, 2023, the Company recorded restructuring charges of $2.1 million as part of an organizational restructuring intended to streamline its operations, drive business objectives, reduce operating expenses and improve operating margins.

The restructuring included a reduction of the Company’s then-current workforce by approximately 10%.

There were no restructuring charges during the three months ended June 30, 2022.

Operating Income

Three Months Ended March 31, Decrease Percent

Three Months Ended June 30, Increase (Decrease) Percent

(in thousands, except percentages)

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Operating margin (0.1) % 2.4 %

Operating income for the three months ended March 31, 2023 was $0.6 million, a positive margin of 1.5%, compared to operating income of $0.6 million, a positive margin of 1.8%, for the same period in 2022, a decrease of $0.1 million.

The decrease in operating income and percentage margin was driven by higher operating costs as the Company invests in its product and sales and marketing, primarily through higher headcount in those areas, for future growth.

The decrease was partially offset by higher revenues.

Operating income (loss) for the three months ended June 30, 2023 was approximately zero compared to operating income of $0.9 million, a positive margin of 2.4%, for the same period in 2022, a decrease of $0.9 million.

The decrease in operating income and percentage margin was primarily driven by the restructuring charges, as discussed above.

Income from Equity Method Investment

Three Months Ended March 31, Increase Percent

Three Months Ended June 30, Decrease Percent

(in thousands, except percentages)

Income from equity method investment $ 104 $ 361 $ (257) (71) %

Percentage of revenues 0.4 % 0.5 %

During the three months ended March 31, 2023 and 2022, the Company recorded $0.2 million of income related to its proportionate share of eFC's net income.

The Company records its proportionate share of eFC's net income three months in arrears.

Percentage of revenue 0.3 % 1.0 %

During the three month periods ended June 30, 2023 and 2022, the Company recorded $0.1 million and $0.4 million, respectively, of income related to its proportionate share of eFinancialCareer's net income.

The Company records its proportionate share of eFinancialCareer's net income three months in arrears.

See note 7 for additional information.

Gain on Investment

Three Months Ended June 30, Decrease Percent

(in thousands, except percentages)

Gain on Investment $ — $ 320 $ (320) (100) %

Percentage of revenue — % 0.9 %

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.

See note 7 for additional information.

Interest Expense and Other

Three Months Ended March 31, Increase Percent

Three Months Ended June 30, Increase Percent

(in thousands, except percentages)

Interest expense and other $ 879 $ 298 $ 581 195 %

Percentage of revenues 2.1 % 0.7 %

Interest expense and other increased from the same period in 2022, primarily due to higher debt outstanding on our revolving credit facility during the current period and higher interest rates.

Three Months Ended March 31,

Percentage of revenue 2.3 % 0.8 %

Interest expense and other increased from the prior year, primarily due to higher debt outstanding on our revolving credit facility during the current period and higher interest rates.

Three Months Ended June 30,

(in thousands, except

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Effective tax rate 84.2 % (12.6) %

Our effective tax rate for the three months ended March 31, 2023 and 2022 differed from the U.S.

statutory rate due to tax benefits of $0.5 million and $0.8 million, respectively, from the vesting of share-based compensation awards.

Our effective tax rate for the three months ended June 30, 2023, differed from the U.S.

statutory rate due to a tax benefit of $0.4 million from research tax credits.

The tax rate for the three months ended June 30, 2022, differed from the 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.

Earnings per Share

Three Months Ended March 31,

Three Months Ended June 30,

(in thousands, except

per share amounts)

Net Income (loss) $ (127) $ 1,450

Weighted-average shares outstanding - basic 43,460 44,682

Weighted-average shares outstanding - diluted 43,460 46,961

Diluted earnings per share $ — $ 0.03

Diluted earnings per share was zero and $0.03 for the three months ended June 30, 2023 and 2022, respectively.

The decrease was primarily driven by the restructuring charges, as discussed above.

Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

Six Months Ended June 30, Increase Percent

(in thousands, except percentages)

$ 53,182 $ 51,457 $ 1,725 3 %

ClearanceJobs 23,976 19,934 4,042 20 %

Total revenue $ 77,158 $ 71,391 $ 5,767 8 %

(1) Includes Dice U.S.

and Career Events

We experienced an increase in revenue of $5.8 million, or 8%.

Revenue at Dice increased by $1.7 million, or 3%, compared to the prior year as bookings performance in 2022 delivered revenue in the first half of 2023 while macroeconomic conditions in the first half of 2023 have driven lower new business activity and lower activity with Dice's non-annual products.

Revenue at ClearanceJobs increased by $4.0 million, or 20%, as compared to the prior year, primarily driven by continued high demand for professionals with government clearance and consistent product releases and enhancements driving activity on the site.

Cost of Revenue

Six Months Ended June 30, Increase Percent

(in thousands, except percentages)

Cost of revenue $ 9,868 $ 8,280 $ 1,589 19 %

Percentage of revenue 12.8 % 11.6 %

Cost of revenue increased $1.6 million, or 19%, driven by an increase of $1.2 million from higher compensation related costs, primarily from higher headcount.

Operational costs, including amortization of cloud computing, increased by $0.3 million.

Product Development Expenses

Six Months Ended June 30, Increase Percent

(in thousands, except percentages)

Product development $ 8,852 $ 8,302 $ 550 7 %

Percentage of revenue 11.5 % 11.6 %

Product development increased $0.6 million, or 7%, driven primarily by an increase of $0.6 million from higher compensation related costs.

Sales and Marketing Expenses

Six Months Ended June 30, Increase Percent

(in thousands, except percentages)

Sales and marketing $ 30,783 $ 28,215 $ 2,568 9 %

Percentage of revenue 39.9 % 39.5 %

Sales and marketing expenses increased $2.6 million, or 9% from the prior year.

The increase was driven by a $2.7 million increase in compensation related costs, including higher headcount during the periods and an increase in the amortization of capitalized contract costs as commissions from the strong bookings performance during 2022 increased the amortization of capitalized contract costs during the current period.

Also contributing to the increase was a $0.5 million increase in operational costs, including consulting, travel and entertainment, and company events.

These increases were partially offset by a $0.6 million decrease in discretionary marketing expenses.

General and Administrative Expenses

Six Months Ended June 30, Decrease Percent

(in thousands, except percentages)

General and administrative $ 16,661 $ 16,875 $ (214) (1) %

Percentage of revenue 21.6 % 23.6 %

General and administrative costs decreased $0.2 million, or 1%, from the prior year.

The decrease was driven by a $0.7 million decrease in compensation related costs, primarily due to lower bonus expense in the current period.

The decrease was partially offset by an increase in stock-based compensation of $0.5 million, which is driven by strong performance of the 2022 performance-based restricted stock units.

Six Months Ended June 30, Increase Percent

(in thousands, except percentages)

Depreciation $ 8,335 $ 8,186 $ 149 2 %

Percentage of revenue 10.8 % 11.5 %

Depreciation expense increased $0.1 million, or 2%, from the prior year in connection with increasing capitalized development costs throughout 2022 and projects being placed into service driving higher depreciation in 2023.

Restructuring

Six Months Ended June 30, Increase Percent

(in thousands, except percentages)

Restructuring $ 2,115 $ — $ 2,115 n/a

Percentage of revenue 2.7 % — %

During the six months ended June 30, 2023, the Company recorded restructuring charges of $2.1 million as part of an organizational restructuring intended to streamline its operations, drive business objectives, reduce operating expenses and improve operating margins.

The restructuring included a reduction of the Company’s then-current workforce by approximately 10%.

There were no restructuring charges during the six months ended June 30, 2022.

Operating Income

Six Months Ended June 30, Increase (Decrease) Percent

(in thousands, except percentages)

Revenue $ 77,158 $ 71,391 $ 5,767 8 %

Operating income 544 1,533 (989) (65) %

Operating margin 0.7 % 2.1 %

Operating income for the six months ended June 30, 2023 was $0.5 million, a positive margin of 0.7%, compared to operating income of $1.5 million, a positive margin of 2.1%, for the same period in 2022, a decrease of $1.0 million.

The decrease in operating income and lower percentage margin was driven by the restructuring charges, as discussed above.

Income from Equity Method Investment

Six Months Ended June 30, Decrease Percent Change

(in thousands, except percentages)

Income from equity method investment $ 275 $ 516 $ (241) (47) %

Percentage of revenue 0.4 % 0.7 %

During the six month periods ended June 30, 2023 and 2022, the Company recorded $0.3 million and $0.5 million, respectively, of income related to its proportionate share of eFC's net income.

The Company records its proportionate share of eFC's net income three months in arrears.

See note 7 for additional information.

Gain on Investment

Six Months Ended June 30, Decrease Percent

(in thousands, except percentages)

Gain on investment $ — $ 320 $ (320) (100) %

Percentage of revenue — % 0.4 %

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.

See note 7 for additional information.

Interest Expense and Other

Six Months Ended June 30, Increase Percent

(in thousands, except percentages)

Interest expense and other $ 1,677 $ 543 $ 1,134 209 %

Percentage of revenue 2.2 % 0.8 %

Interest expense and other increased $1.1 million, or 209%, compared to the same period in 2022, due to higher debt outstanding on our revolving credit facility during the current period and higher interest rates.

Six Months Ended June 30,

(in thousands, except

Income (loss) before income taxes $ (858) $ 1,826

Income tax benefit (1,191) (925)

Effective tax rate 138.8 % (50.7) %

Our effective tax rate for the six months ended June 30, 2023, differed from the U.S.

statutory rate due to tax benefits of $0.4 million from the vesting of share-based compensation awards and $0.4 million from research tax credits.

The tax rate for the six months ended June 30, 2022, differed from the 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.

Earnings (Loss) per Share

Six Months Ended June 30,

(in thousands, except

per share amounts)

Net income $ 333 $ 2,751

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Diluted earnings per share $ 0.01 $ 0.06

Diluted earnings per share was $0.01 and $0.03 for the three months ended March 31, 2023 and 2022, respectively.

The decrease was driven by lower operating income and an increase in interest expense in the current year.

Diluted earnings per share were $0.01 and $0.06 for the six months ended June 30, 2023 and 2022, respectively.

The current year earnings per share was driven by lower operating income, primarily driven by the restructuring charges, as discussed above and an increase in interest expense in the current period.

Non-GAAP Financial Measures

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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, and items such as non-cash stock-based compensation expense, 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.

Adjusted EBITDA represents net income plus (to the extent deducted in calculating such net income) interest expense, income tax expense, depreciation and amortization, and items such as non-cash stock-based compensation expense, 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 revenue 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, restructuring charges 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 revenue.

We also consider Adjusted EBITDA and Adjusted EBITDA Margin, as defined above, 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 capital requirements, and to fund future growth.

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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, operating income, net income, net income margin, cash provided by operating activities, or any other performance measures derived in accordance with GAAP as a measure of our profitability or liquidity.

A reconciliation of Adjusted EBITDA for the three months ended March 31, 2023 and 2022 follows (in thousands):

Three Months Ended March 31,

A reconciliation of Adjusted EBITDA for the six months ended June 30, 2023 and 2022 follows (in thousands):

Six Months Ended June 30,

Reconciliation of Net Income to Adjusted EBITDA:

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Income from equity method investment (275) (516)

Gain on investment — (320)

Severance and related costs 521 323

Restructuring 2,115 —

Adjusted EBITDA $ 16,799 $ 14,733

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Severance and related costs 521 323

Restructuring 2,115 —

Changes in working capital and other 8,307 560

Adjusted EBITDA $ 16,799 $ 14,733

A reconciliation of Adjusted EBITDA Margin for the three months ended March 31, 2023 and 2022 follows (in thousands):

Three Months Ended March 31,

Revenues $ 38,620 $ 34,334

A reconciliation of Adjusted EBITDA Margin for the six months ended June 30, 2023 and 2022 follows (in thousands):

Six Months Ended June 30,

Revenue $ 77,158 $ 71,391

Net income $ 333 $ 2,751

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Adjusted EBITDA Margin (1)

(1) Net income margin and Adjusted EBITDA Margin are calculated by dividing the respective measure by that period's revenues.

(1) Net income margin and Adjusted EBITDA Margin are calculated by dividing the respective measure by that period's revenue.

Liquidity and Capital Resources

A summary of our cash flows for the three months ended March 31, 2023 and 2022 follows (in thousands):

Three Months Ended March 31,

A summary of our cash flows for the six months ended June 30, 2023 and 2022 follows (in thousands):

Six Months Ended June 30,

Cash from operating activities $ 8,077 $ 19,448

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

At March 31, 2023, we had cash of $5.4 million compared to $3.0 million at December 31, 2022.

At June 30, 2023, we had cash of $2.7 million compared to $3.0 million at December 31, 2022.

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

In addition, we had $54.0 million in borrowing capacity under our $100.0 million Credit Agreement, as defined below, at March 31, 2023, subject to certain availability limits including our consolidated leverage ratio, which generally limits borrowings to 2.5 times annual Adjusted EBITDA levels, as defined in the Credit Agreement.

In addition, we had $57.0 million in borrowing capacity under our $100.0 million Credit Agreement, as defined below, at June 30, 2023, 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, 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.

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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 or impairments on investments, and the effect of changes in working capital.

Net cash flows from operating activities were $0.0 million and $9.2 million for the three-month periods ended March 31, 2023 and 2022, respectively.

Net cash flows from operating activities were $8.1 million and $19.4 million for the six-month periods ended June 30, 2023 and 2022, 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.

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Investing Activities

Cash used in investing activities during the three-month period ended March 31, 2023 was $4.8 million compared to $4.1 million used in the same period of 2022.

Cash used in investing activities in the three-month period ended March 31, 2023 increased from comparable 2022 period due to higher purchases of fixed assets, which is primarily comprised of capitalized development costs, as the Company continues to invest in its products.

Cash used in investing activities during the six-month period ended June 30, 2023 was $9.2 million compared to $8.2 million used in the same period of 2022.

Cash used in investing activities in the six-month period ended June 30, 2023 increased from comparable 2022 period due to higher purchases of fixed assets, which is primarily comprised of capitalized development costs, as the Company continues to invest in its products.

Financing Activities

Cash used in financing activities during the three-month ended March 31, 2023 was $7.2 million and was driven by $16.0 million of net proceeds on long-term debt and offset by $8.8 million, net, related to share repurchases.

Cash used in financing activities during the three-month period ended March 31, 2022 was $1.7 million and was driven by $10.0 million of net proceeds on long-term debt and $11.7 million related to share repurchases.

Cash from financing activities during the six-month ended June 30, 2023 was $0.9 million and was driven by $13.0 million of net proceeds on long-term debt, partially offset by $12.1 million, net, related to share repurchases.

Cash used in financing activities during the six-month period ended June 30, 2022 was $9.2 million and was driven by $15.8 million related to share repurchases and $0.5 million of financing costs paid related to the Company's Credit Agreement, partially offset by $7.0 million of net proceeds on long-term debt.

Financing and Capital Requirements

Credit Agreement

We have a $100 million revolving credit facility, which matures June 2027, with $ 46.0 million of borrowings on the facility at March 31, 2023, leaving $ 54.0 million available for future borrowings, subject to the terms of the Credit Agreement.

We have a $100 million revolving credit facility, which matures June 2027, with $ 43.0 million of borrowings on the facility at June 30, 2023, leaving $ 57.0 million available for future borrowings, subject to the terms of the Credit Agreement.

Borrowings under the Credit Agreement denominated in U.S.

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The Company incurs a commitment fee ranging from 0.35% to 0.50% on any unused capacity under the revolving loan facility, determined by the Company's most recent consolidated leverage ratio.

Assuming an int eres t rate of 6.90 % (the rate in effect on March 31, 2023) on our current borrowings, interest payments are expected to be $2.4 million from April 1, 2023 to December 31, 2023, $3.2 million in each of 2024, 2025 and 2026 and $1.6 million in 2027.

Assuming an int eres t rate of 7.52 % (the rate in effect on June 30, 2023) on our current borrowings, interest payments are expected to be $1.6 million from July 1, 2023 to December 31, 2023, $3.2 million in each of 2024, 2025 and 2026 and $1.6 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 March 31, 2023, the Company was in compliance with all of the financial covenants under the Credit Agreement.

As of June 30, 2023, 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.

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No leases include options to purchase the leased property.

As of March 31, 2023, the value of our lease right-of-use asset was $6.1 million and the value of our lease liability was $8.0 million.

As of June 30, 2023, the value of our lease right-of-use asset was $5.6 million and the value of our lease liability was $7.5 million.

See note 6 to the condensed consolidated financial statements for further information.

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Other Capital Requirements

As of March 31, 2023, we recorded approximately $0.8 million of unrecognized tax benefits as liabilities, and we are uncertain if or when such amounts may be settled.

As of June 30, 2023, we recorded approximately $1.1 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 March 31, 2023 are $0.8 million of tax benefits that would affect the effective tax rate if recognized.

Included in the balance of unrecognized tax benefits at June 30, 2023 are $1.1 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 Board previously approved a stock repurchase program that permits the Company to repurchase its common stock.

As of March 31, 2023, the value of shares available to be purchased under the current plan was $ 8.2 million.

As of June 30, 2023, the value of shares available to be purchased under the current plan was $ 4.8 million.

Management has discretion in determining the conditions under which shares may be purchased from time to time.

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However, we believe that online career websites and marketplaces 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.

Any slowdown in recruitment activity that occurs could negatively impact our revenue 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.

Additionally, there has historically been a lag from the time customers begin to increase purchases of our recruitment services and the impact to our revenue 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 security cleared professionals.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis