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Good day, and welcome to the DHI Group, Inc. Fourth Quarter and Full Year 2025 Financial Results Conference Call. All participants will be in listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Todd Kehrli, Ponder Wilkinson, Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, and welcome to DHI Group's Fourth Quarter and Year-End Earnings Conference Call for 2025. Joining me today are DHI's CEO, Art

Thank you, Todd. Good afternoon, everyone, and thank you for joining us today. I'm Art

Thank you, Art. And good afternoon, everyone. Jumping right in, we reported total revenue of $32.4 million for the fourth quarter, which was down 10% on a year-over-year basis and roughly flat compared to the third quarter. Total bookings for the quarter were $31.2 million, down 5% year-over-year. Our total recurring revenue was down 12% compared to the prior year, and the bookings that drive our recurring revenue were down 6% for the quarter. ClearanceJobs revenue was $13.9 million, up 1% year-over-year and flat sequentially. Bookings for CJ were $14.6 million, up 3% year-over-year. We ended the fourth quarter with 1,775 CJ recruitment package customers, which was down 9% on a year-over-year basis and down 3% on a sequential basis. This reduction continues to be attributable to churn with customers spending less than $15,000 in annual recurring revenue. CJ accounts spending greater than $15,000 annual recurring revenue increased by approximately 60 accounts versus the prior year and includes approximately 25 accounts that upgraded from a lower tier. Our average annual revenue per CJ recruitment package customer was up 8% year-over-year and up 2% sequentially to $27,246. Approximately 90% of CJ revenue is recurring and comes from annual or multiyear contracts. For the quarter, CJ's revenue renewal rate was 90% and CJ's retention rate was 109%. These solid rates demonstrate the continued value CJ delivers in recruitment of cleared professionals. Dice revenue was $17.4 million, which was down 17% year-over-year and down 4% sequentially. Dice bookings were $16.6 million, down 11% year-over-year. We ended the fourth quarter with 4,132 Dice recruitment customers, which is down 3% from last quarter and down 12% year-over-year. Dice revenue renewal rate was 78% for the quarter and its retention rate was 94%. The reduction in customer count from the prior year quarter continues to be attributable to churn with smaller customers spending less than $15,000 per year, which represent approximately 75% of the total churn on count and who are more likely to be impacted by the difficult macro environment and uncertainty. We believe the introduction of our new Dice platform, which offers customers the flexibility of monthly subscriptions, will help reduce future churn among smaller accounts by lowering upfront commitment and improving affordability. Our average annual revenue per Dice recruitment package customer was $15,635, down 5% year-over-year and down 1% sequentially. Approximately 90% of Dice revenue is recurring and comes from annual or multiyear contracts. Both brands continue to onboard notable new clients. In the fourth quarter, ClearanceJobs secured annual contracts with ServiceNow, ForwardEdge AI, and Pennsylvania State University, while Dice landed Ameriprise Financial, Atlas Copco Group, and the Metropolitan Water District of Southern California, demonstrating that employers outside the traditional industry are using our platforms to hire talent to fulfill their tech development needs. Now let's move to operating expenses. For the fourth quarter, our operating expenses decreased $5.3 million to $27.7 million when compared to $33.1 million in the year-ago quarter and includes a $1.4 million impairment of a right-of-use asset as we intend to sublease our New York City office space. Excluding the impairment, our fourth quarter operating expenses declined $6.7 million or 20%. Improvements to our operating efficiency, including the Dice employer experience platform, along with adjusting the business for the difficult market environment over the past few years, we've reduced our annual operating expenses and capitalized development cost by approximately $35 million. For the quarter, we had income tax expense of $800,000 on income before taxes of $2.2 million. Our tax rate for the quarter differed from our approximate statutory rate of 25% due to a nondeductible impairment. Tax law changes allowed for the immediate deduction of R&D costs, helped reduce our 2025 income tax payments by $3.1 million as compared to 2024, and will favorably affect our 2026 cash outlay for income taxes. Moving on to the bottom line, we recorded net income of $1.3 million or 3¢ per diluted share in the fourth quarter. For the prior year quarter, we reported net income of $1 million or 2¢ per diluted share. Net income for the quarter was impacted by the previously mentioned $1.4 million impairment and a $900,000 impairment of an investment. Non-GAAP earnings per share for the quarter was 9¢ per share compared to 7¢ per share for the prior year quarter. Diluted shares outstanding for the quarter were 44.6 million shares, down 1.3 million shares or 3% from the prior year quarter. Adjusted EBITDA for the fourth quarter was $9.4 million, a margin of 30% compared to $9.2 million or a margin of 26% in the fourth quarter a year ago. On a segmented basis, CJ adjusted EBITDA remained strong at $6 million in the fourth quarter, representing a 43% adjusted EBITDA margin as compared to adjusted EBITDA of $6.4 million or a margin of 47% in the prior year period. Dice's adjusted EBITDA increased to $5.2 million, representing a 30% adjusted EBITDA margin compared to $4.3 million and a 20% margin last year. Operating cash flow for the fourth quarter was $7.2 million compared to $4.4 million in the prior year period. Free cash flow, which is operating cash flows less capital expenditures, was $5.7 million for the fourth quarter compared to $1.6 million in the fourth quarter of last year. Our capital expenditures, which consist primarily of capitalized development costs, were $1.4 million in the fourth quarter compared to $2.7 million in the fourth quarter last year, savings of $1.3 million or 47%. Capitalized development costs in the 2025 CJ were $454,000 compared to $524,000 in the 2024 period, while capitalized development costs for Dice were $1 million this quarter as compared to $1.6 million in the 2024 period. We are targeting total capital expenditures in 2026 to range between $6 million and $7 million as compared to $7.3 million last year. For the full year, we generated $13.8 million of free cash flow compared to $7.1 million last year. From a liquidity perspective, at the end of the quarter, we had $2.9 million in cash and our total debt was $30 million under our $100 million revolver, resulting in leverage at 0.85 times our adjusted EBITDA. We continue to target one times leverage for the business. Deferred revenue at the end of the quarter was $39.9 million, down 12% from the fourth quarter of last year. Our total committed contract backlog at the end of the quarter was $99.6 million, which was down 5% for the end of the fourth quarter last year. Short-term backlog was $76.1 million at the end of the fourth quarter, a decrease of $2.6 million or 3% year-over-year. Long-term backlog, that is revenue to be recognized in thirteen or more months, was $23.5 million at the end of the quarter, a decrease of $2.6 million or 10% from the prior year quarter. During the quarter, we repurchased 2.9 million shares for $5.2 million under our stock repurchase program. For the year, we've repurchased a total of 5.5 million shares for $11.4 million, and over the past three years, we've repurchased 9.1 million shares for $26.5 million, all under our stock repurchase programs and from the vesting of share-based awards. Following the close of the fourth quarter, we completed the $5 million plan authorized in November 2025, and last week, our board approved a new $10 million stock repurchase program, which will begin this month and will run through February 2027. Moving on to guidance, we expect ClearanceJobs bookings to grow in 2026. However, we do not anticipate Dice bookings growth resuming until tech hiring improves. As a result, we expect DHI revenue of $118 to $122 million for the full year, and for the first quarter, we expect revenue of $28 million to $30 million. For CJ, we expect revenue of $56 to $58 million for the full year, and for the first quarter, we expect revenue of $13 million to $14 million. At Dice, we expect revenue of $62 million to $64 million for the full year, and for the first quarter, we expect revenue of $15 million to $16 million. We expect the CJ bookings miss that occurred in 2025 to cause a small sequential and year-over-year revenue decline for CJ in the first quarter, but returning to growth in 2026. From a profitability standpoint, we are targeting a full-year adjusted EBITDA margin for DHI of 25%, and margins of 40% for CJ and 22% for Dice. The lower year-over-year margins are driven by bookings challenges in 2025 related to the continued soft tech hiring environment and uncertainty surrounding government defense spending. These bookings challenges in 2025 drive the lower revenue in 2026. Our focus remains on delivering long-term sustainable and profitable revenue growth into strong free cash flow generation, averaging at or above 10% of revenues. To wrap up, although the hiring environment over the past two-plus years has impacted our revenue growth, we remain optimistic about the road ahead. We anticipate the record-breaking defense budget will be a growth driver for CJ and that companies across all industries will steadily increase their investments in technology initiatives, creating a strong growth opportunity for both ClearanceJobs and Dice. We remain focused on strengthening our industry-leading solutions, optimizing our go-to-market strategy, and executing with efficiency, ensuring we are well-positioned to capitalize on the opportunities that lie ahead. And with that, let me turn the call back to Art.

I want to thank all of our employees once again for their outstanding work this quarter. It is a pleasure to be part of such a great team. That said, we are happy to answer your questions. We will now begin the Q&A session.

If at any time your question has been addressed and you would like to withdraw your question, please press star. The first question comes from

Hi. Good afternoon, Art and Greg. Congrats on solid results here in Q4 and nice to see ClearanceJobs moving towards sustained growth here in 2026. Just starting with ClearanceJobs, I'm curious about your assumptions around just the bookings trajectory in business. Obviously, potentially a lot of tailwinds with the strong defense spending environment that we're seeing going into next year. So just curious about your assumptions that you're making on the bookings front with your initial guidance for ClearanceJobs in 2026?

Well, first and foremost,

Understood. And then just shifting over to Dice, obviously, to see some green shoots with the overall staffing side of it potentially returning to growth this year. But as the mix of overall AI-related job postings continues to grow on your platform, how are you thinking about just the overall value for Dice and potentially even kind of outperforming a potential inflection in the broader commercial environment inflection that we're hoping to see there?

That's a great question. The question that is asked by just about everyone, including our Board last week at our quarterly board meeting. I can tell you that there's obviously a mix of opinions, a range of opinions as to how AI affects the coding community, programmers in the United States. I can tell you that we believe that this is the year that that's going to become very visible. We do see signs that there is this one particular philosophy that if you become more efficient in anything that is generated, there's higher demand for it. And we think that that is evidenced by the discussions that are being had by people like Marc Andreessen and Sam Altman saying, no, we think that there's going to be kind of a mini explosion of demand for AI. Now that has played out in terms of the demand for AI professionals on the Dice site. But I think that, you know, commercial activity in general is still subdued, and there's kind of a wait-and-see approach. But I think this is the year that we figure out whether or not AI really is a substitute for development capacity and for the community at large and tech professionals. But we're seeing signs that there is high demand. There's no question about that.

Understood. And then just a final question on the margin front for Dice. Is it really just the factors of kind of a lower revenue base that's causing the margins to compress here? Or are there any incremental investments that you're planning on in 2026 for Dice?

Yes. So

Understood. That's really helpful. Well, thanks again for taking my questions and best of luck with the rest of the quarter.

Thank you so much,

The next question comes from Gary Prestopino with Barrington Research. Please go ahead.

Good morning, good afternoon, everyone. Art, could you just elaborate a little bit on the new premier subscription package that you're putting out for CJ?

Yes. I'm happy to do so. So that has been in the works for quite some time since 2025. In many respects, it has the same kind of attributes, same kind of feature set as LinkedIn's premium subscription. And the LinkedIn price point is pretty substantial. It's about $60 per month. We rolled that out to a small user group at the end of Q4 and expanded to about a thousand total candidates that were given the opportunity to buy this subscription. Subsequently, moving into January, we've been kind of advancing that to about 10,000 total candidates. And it has seen a take rate of about 1.5%, and it's growing. So it feels pretty good. We also, at the same time, essentially, randomized pricing. So we offered some candidates a low pricing at $9.95, another set of candidates $12.99, another set of candidates $14.99, another set of candidates $19.99. And it looks like the most promising price point is $12.99. So we are going to go out to the full set of about 1,900,000 candidates and make this offer to them for a premium candidate experience or subscription by the end of Q1, just kind of literally rolling it out in phases, week by week.

But could you explain what the premium subscription does? I'm a little bit, I guess, fuzzy on that. What exactly are you offering a candidate?

Absolutely. So as one example, you can see who looked at your profile over the last week, thirty days, sixty days, ninety days. What that is to a candidate is a signal that a recruiter is very interested in your profile. So you can reciprocate by going straight to that recruiter and saying, hey, I know that you looked at my profile. Would you like to engage in a conversation? You also can look at a particular job posting and get a score from zero to 100 as to how close you match the required attributes of that particular job posting. And it will also tell you what the gap is, what you should go out and learn if you really want those kinds of career opportunities in the future. It will also give you a boost towards those jobs that are being searched for. So if a recruiter is searching for a Java developer in Centennial, Colorado, and you have this premium candidate subscription, it will boost your profile a little bit closer to the top so that you're more visible to that recruiter. They take your profile more seriously. Those are just three of the features that are embedded in this. There's probably, like, 10 features, and I could definitely get you a much more comprehensive summary of that, Gary. But it really is promoting a candidate's ability to essentially use the platform with more sophistication and have more engagement with recruiters because it's always about the engagement with recruiters and giving them more signals as to what they need to do with their career.

Okay. And you also mentioned, you know, besides the fact you've cut expenses, you've got new products rolling out, did some personnel changes on the sales side or ahead of sales. Could you just talk a little bit about that?

Yes. I will tell you that at the beginning of last year, January 2025, we essentially separated the brands, and we designated presidents. Alex Schulte is the president of ClearanceJobs, and he used to be the VP of sales of ClearanceJobs. He was promoted from VP of sales to president. And we had to find a replacement for him. Unfortunately, I think that we found a person that didn't really scale to the full size of the CJ sales team, which consists of about 50 people. It's a pretty meaningful-sized team to manage. And we saw bookings decay in Q1, Q2, Q3. We thought that that was part of the macro environment or at least partially due to the macro environment, but then we convinced ourselves that we really needed to find a new leader. At the time that we decided that in October, Alex dropped into his old role. He became the acting VP of sales for CJ at the same time that he was the president. And so, you know, he was doing double duty, but we saw an immediate remarkable improvement in bookings. Like, literally, we went from negative 7% or a decline of 7% in bookings Q3 year-over-year to positive 3% in Q4. And, you know, I think that that trend will continue over the course of 2026. So we think that there is a it does make a difference having the right person in the role. We convinced ourselves of that. We do believe that the macro environment did, to a certain degree, hold us back. But now the macro environment feels a lot different, a lot better, and especially in light of the defense budget that was passed into law yesterday.

Okay. And then this individual, do you think he can continue to have double responsibility as president and then head of sales too?

No. We are actually bringing on board and announcing a new VP of Sales in the next few weeks. And so we've been hard at it through a hydrogen struggles-led search to find the new VP of sales for ClearanceJobs. And I personally think the candidate, the person that is going to become our new VP of sales, is spectacular. So, again, don't want to announce it too early, but it will be announced within a few weeks.

Okay. And then just lastly, I mean, you could cite maybe three or four encouraging signs that you're seeing. I mean, obviously, the ClearanceJobs bookings were up. But what else is happening on a macro environment plane? You know, we know about the fact that you've cut costs, and that's great and all that. But what's giving you some encouragement here?

I personally think that the context of the defense budget is going to help us a lot. Most of our roles are very heavily technical and weighted towards software development on the ClearanceJobs platform. And programs like the Golden Dome are all about software. I think that the fact that we are moving to a much more technology-rich defense budget will help us, and we're already seeing that, obviously. The other really big macro effect for us is the Dice dependency on staffing recruiting agencies. So we have been in a tech staffing recession since 2023, and that's clearly evidenced by the staffing industry analyst kind of figures that I pronounced in my side of the script. We're coming out of that. You can go to staffing industry analysts. They have a new tech staffing bullhorn indicator, and it shows the revenue growth in the tech staffing industry month over month previous period. And it shows that we are going towards growth in 2026. The staffing industry analyst pulse report that comes out after every sixty days showed that the median tech staffing firm in December, the median grew 10%. The seventy-fifth percentile tech staffing firm in the United States grew 32%. So we're seeing kind of a surge in tech staffing demand. Now, obviously, I'm not trying to overplay that. It's an uncertain world that we live in today, but you could definitely see the trend lines if you go to staffing industry analysts and look at these indicators. And, again, we've been in a recession, so it's a cyclical business. We're hopefully coming out of the cycle.

Happens to be a Thank you so much. Thank you very much.

Appreciate it, Gary.

The next question comes from Max Michaelis with Lake Street Capital Markets. Please go ahead.

Hey guys, great quarter. Few questions from me. I kind of want to stick with ClearanceJobs here. It's good to see bookings up 3% in Q4 and then your guidance for ClearanceJobs at 4%. Going back to your comments earlier in the call about bookings growth expected to continue in ClearanceJobs, should we expect acceleration from this 3%? I know quarterly volatility is a thing, but should we expect ClearanceJobs bookings growth to kind of creep up into the mid-single-digit range? Anything else, sir?

Yeah. This is Greg. And, Max, yeah, you should expect that to trip up through the year. So we expect it to get a little more legs under it, you know, as this new defense budget kind of gets moving and stuff. There should be a little bit of lag with everyone, you know, getting their contracts in order, but we definitely expect that to happen through the year.

Okay. Thank you. And then for ClearanceJobs margins, I think adjusted EBITDA margin was 43% in 2025, and then your guidance calls for around 40%. Is there any reason for that step down in 2026 investment or help me out with that?

Yeah. No. That's a good question. And it's really it is a result of the rather flat bookings through 2025, and in particular, the decline in the third quarter of 7%. In six months or so, that can move over to revenue. And we have a pretty consistent OpEx base, if not increasing a little bit at CJ, expected through 2026 as we continue to invest, you know, in that business. So that's going to compress that margin a little bit. But, again, you know, we're still in that 40% range with CJ, but the revenues will be just a bit more challenged because of the lag in that bookings mess.

Okay. And then shifting over to Dice, my last question. Going back to an earlier question talking about the green shoots and staffing, can you remind me what the percentage of revenue is between staffing and commercial accounts at Dice?

Approximately 80% is really dependent upon tech staffing firms in the United States. Yep. So we have some of the very largest tech staffing firms in the United States and the world. Adecco is the largest customer for us. Robert Half is number two. We have Randstad, Kforce, Jobbot, and then there is a very, very long tail of tech staffing firms in the United States. There are approximately 18,000 tech staffing firms. So, you know, the bottom line is that we have traditionally been very dependent on them because for them, the Dice platform is the equivalent of salesforce.com to a salesperson. It's up on their laptop or their screen every single day, every hour of the day as they're searching for candidates. They have a lot of urgency in getting people in the seat, so to speak, because they can only bill their customers when they actually do land in the position. So, again, we're kind of a go-to platform for many of the tech staffing firms in the United States.

I knew it was high. Just couldn't remember the exact number. But thanks for taking my questions, guys.

Thank you, Max. Well, thank you. Have a great day.

The next question comes from Kevin Liu with K Liu and Company. Please go ahead.

Congrats on a solid finish to the year. Maybe if I could just continue on that line of questioning, the staffing and recruiting piece of Dice. Can you talk a little bit about the trends you've seen within the business with those companies? And as they start to see their own businesses stabilize, is it possible that you'll see growth there which is just being kind of offset by the commercial side of your business?

That's a great question, Kevin, as always. I would have to say that as we looked at, you know, this SIA pulse report over the course of the year, it bumped along, you know, not really meaningfully changing as an indicator the first half of the year. I personally think that that's because of the macro environment, tariffs, announcements, and just uncertainty in general. Coming into a new administration. Then in the second half of the year, you can see a distinct trend. The seventy-fifth percentile was always doing extremely well. The twenty-fifth percentile was still, you know, in tough shape where there were revenue declines. So I used to tell the sales team, it feels like it's a tale of two cities, and we have to go after those staffing firms that have requisitions that are doing extremely well. So when you ask, you know, will we see increases? We are already seeing it with certain companies that are doing well, kind of exiting 2025. We always look at the median as an illustration of, you know, the average firm is doing or what their performance looks like. And the average firm up until this last Pulse report was, you know, like, zero to one to 2%. It looks pretty good moving into 2026 based on how we exited the year. And I'd also say the interesting thing about it is that December is a tough month. Generally speaking, our industry in general, whether it's staffing or it's hiring people commercially, is always down in the month of December. Generally just because, I mean, it's the holiday season, so people aren't hiring that with velocity. Now I could also tell you that our book of business in terms of renewals has a peak around December and January just because people have liked to line up their contracts with their calendar year or fiscal year.

Yep. And just on that note, I wanted to ask a little bit about kind of the renewal trends you've been seeing of late. Obviously, Q4 looked like a nice bounce back from Q3 levels. Can you talk about just kind of how easy or difficult it was to kind of get your larger customers, especially to renew during that period and what you've seen kind of into the new year? And then as we look out for '26, just wondering if you would expect to see continued improvement in overall renewal rates.

Yeah, I would say, well, speaking to each brand individually, ClearanceJobs actually had a very nice bounce back, as we've been talking about. Great revenue renewal rate for Q4. The larger customers felt very bullish about their prospects moving into 2026 because they knew that they were going to see a larger defense budget. As you probably heard, President Trump has even promoted the idea of a $1.5 trillion defense budget for fiscal year 2027, which starts obviously, October of this year. So it feels like we've turned the corner with CJ. And this is, again, in the kind of overshadowing event of the government shutdown, you know, lasted longer than any other shutdown in history. That mostly kind of affected the confidence of the small and medium firms because they obviously have a different balance sheet profile than the large ones. Turning over to Dice, I would say, again, we had a bounce back in terms of revenue renewal rate. Our bigger customers felt better, kind of in line with that idea that there are certain tech staffing firms that are doing a lot better than they did at the beginning of 2025. And we were the beneficiaries of that during the renewal season. So that's just generally how I'd describe it.

Alright. Great. And then just on CJ as well, it was kind of interesting to hear that, you know, the Agile ATS revenue base has kind of doubled already. I know it's off a small base, but how do you think about how Agile can contribute to growth on the CJ side this year?

Well, I think it's going to be still growing steadily. I think that it really does fit a great market need. It's generally for smaller and midsized companies, so that's what we're, you know, doing is we're pitching for those types of customers. I would say that because of the early success that we saw with Agile ATS bookings and revenue, we're actually adding to the sales team specifically to essentially promote Agile ATS moving into 2026. We felt enough confidence in what we had seen that we wanted to expand on that success. And so we're adding resources, and we think that it is going to be a bigger growth driver for us in the year ahead.

Sounds great. Thanks for taking the questions and good luck here.

Thank you. We appreciate it, Kevin.

This concludes our question and answer session. I would like to turn the conference back over to Art

Thank you, operator, and thank you all for joining us today. As always, if you have any questions about our company or would like to speak with the management team, please reach out to Todd Kehrli, and he will assist in arranging a meeting. Thank you for your interest in DHI Group, and have a wonderful day.