Brendan Metrano - VP, IR Mike Durney - President and CEO Luc Gregoire - CFO.

Kara Anderson - B. Riley & Company Kip Paulson - Cantor Fitzgerald.

Hello, and welcome to the DHI Group, Inc. Third Quarter 2017 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I’d now like to turn the conference over to Brendan Metrano, Vice President of Investor Relations. Please go ahead sir..

Good morning, everyone. With me on the call today is Mike Durney, President and Chief Executive Officer of DHI Group Inc.; and Luc Gregoire, Chief Financial Officer. This morning, we issued a press release describing the company's results for the third quarter of 2017. A copy of that release can be reviewed on the company's website at dhigroupinc.com.

Before I turn the call over to Mike, I'd like to note that today's call includes certain forward-looking statements, particularly statements regarding future financial and operating results of the company and its businesses.

These statements are based on management's current expectations or beliefs and are subject to uncertainty and changes in circumstances.

Actual results may vary materially from those expressed or implied in the statements here due to changes in economics, business, competitive, technological and/or regulatory factors, and the planned divestiture of our non-tech businesses, and the possibility that such divestitures does not occur.

The principal risks that could cause our results to differ materially from our current expectations are detailed in the company's SEC filings, including our Annual Report on Form 10-K and quarterly report on Form 10-Q in the sections entitled Risk Factors, Forward-looking Statements, and Management's Discussion, Analysis of Financial Conditions and Results of Operations.

The company is under no obligation to update any forward-looking statements except where it is required by federal securities laws. Today's call also includes certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margin.

For details on these measures, including why we use them and reconciliations to the most comparable GAAP measures, please refer to our earnings release and our Form 8-K that has been furnished to the SEC, both of which are available on our website. With that, I'll turn the call over to Mike..

Great. Thanks Brendan, and hi everyone, and thanks for joining this morning. I’m going to spend some time today recapping the key in initiatives that will commence to move our check-post-focused strategy forward and our progress against them in the third quarter.

I’ll also discuss the market dynamics that are impacting our businesses as well as our view for what will move the dial in 2018. Then I’ll turn it over to Luc, who will provide an update on our financials. And before we open up to questions, I’ll talk briefly about the CEO succession plan that we announced this morning.

During our last update we outlined strategic objectives for the second half of 2017 that we believe are paramount to us being successful. We certainly need progress on many of these and we are transitioning from the implementation state to the execution state now.

We’ve got most of the people and resources in place and now we’re focusing on initiatives, evaluating feedback and making adjustments accordingly. It’s an intuitive process and with our product initiatives and refined value proposition, we expect to take some time before the impact is realized on our financial results.

The first goal we have via the last quarter is returning the Dice business to growth. We’ve done a number of things to organize around this objective and we’re focused on improving our sales execution as well as evaluating our product offerings.

To carry this out, we believe having a fully dedicated and tech-focused sales organization in North America will drive the growth agenda for indirect and direct sales. We hired an EVP of sales late in the quarter and expect to see improved performance from that area in the near term.

In evaluating our services, we must focus our efforts on the core of what we do best, so we’ve refocused resources from products like getTalent to accelerate results in the Dice service.

For example, getTalent is no longer offered as a standalone service, however elements of it, including shifting some of the talent to work on the product of benefiting Dice. We also began serving in the Mainland China market from our Hong Kong office, which created a more efficient cost structure for us going forward.

These are just two examples of how we’re continuing to look at how we serve our markets and best deploy our resources.

Other factors we’re addressing is return to growth is making adjustments in our go-to-market strategy through our bucket view approach, mobilizing our enterprise sales force and offering more flexible payment options like pay for performance and monthly billing to better meet the needs of our customers.

We certainly had success in pay-for-performance at clearing shops and some early wins at Dice with monthly billing yielding incremental sales, but there’s more to be done here. Our second goal is reposition the tech-focused franchise, as the go-to resource to finally connect the best talent.

On Dice we’ve increased investment in to product development around our core offerings. Our solutions approach remains and we see focusing on the branding and product improvement will boost efficiency and deliver highly skilled candidates to our clients.

The number of Dice recruitment package customers with open web access rose 7% in the quarter, and the penetration among Dice recruitment package customers rose to 37%.

These are small signals of the power of the web and validation and its proving valuable to customers who are recruiting for hard-to-find tech professionals in a market where specific skillsets are scarce.

The usage rates among customers are still pretty low as they continue to adapt to access in talent through the traditional Dice database and through Open Web profiles. In the next few months, we’ll release our Talent Search 4.0, which will improve the integrated search process above Dice and Open Web.

Improving the search experience for our clients is the key to saving time, while sourcing. A solution we rolled out at ClearanceJobs will refer the joint in to our integrated search in a month ahead. This product feature which we call a Talent Search customer search time from minutes to seconds.

And Talent Search essentially takes the job description and uses it that as a search mechanism by using skills and job specific words from the full job description, this feature populates best matched candidates. Gone are the days of long and complicated bullying strings to attempt to find the right candidate.

The deep machine learning in this and our contextual search makes a painful and not very efficient process more manageable, especially for journalist recruiters who have trouble with very specific tech or security cleared searches. Developing affective APIs for clients continues to be a strategic priority for us.

We’ve added more partners and in advanced discussion with some key players to move this initiative further ahead. This is an important component of demonstrating our drive for clients and solving the attribution issue, so many of us in the employment industry face today.

We’re seeing several improving and today about half of the customers integrated with our APIs are actively using them. One of the important KPIs related to these tools is the renewal rate of customers with API integrations, which today outpaces our overall renewal rate.

This reinforces that the customer has become more familiar with the various tools and as we continue to make them easier to access they have a better experience recruiting tech professionals.

Improvements to our talent search including better location functionality, enhanced user interface with filters, managed alerts and advanced search has been rolled out to new business customers and certain enterprise customers. A lot of features boost our search tool and ultimately help recruiters be more efficient and effective while sourcing.

Last quarter we mentioned the rollout of ClearanceJobs Voice, a new tool which leverages voice-over-IP technology to offer live on-demand voice chat between employers and professionals. Voice lets employers talk to recruited candidates logged in to ClearanceJobs in real-time so they can connect, talk about job opportunity and gain each other’s trust.

There are no apps to download or plug-ins to install our ClearanceJobs Voice; it works directly through the users web browsers. ClearanceJobs is the first online career site to offer live Voice-over-IP communication between employers and candidates.

The backlog today has reached over $700,000 people waiting for security clearance, and the processing time for a top secret clearance is now over 500 days. The demand for security cleared talent so greatly outstrips supply that defense contractors hiring security cleared talent have reached a roadblock.

ClearanceJobs Voice solves a major pain point of connecting the right talent at the right time and we’ll be releasing a deeper integration of voice in to 2018. The market is sourced and recruit tech talent continues to be a challenge.

The unemployment rate for tech professional remains incredibly low and with employment today considered nearly full, recruiters are tests with offering unique perks and relevant job opportunities. One of the ways we stand apart from competitors is our focus on skills.

Our search of character skills not job titles, our resume database and outlook profiles are centered around skillsets and the combination of those skills, which are a tremendous value to employers.

We began to see progress in our incremental marketing spend and holistic marketing approach aligning professional facing initiatives with customer base and campaigns.

Part of this included partnerships with online news site, Bustle, which culminated with a co-branded study reporting on career and pay gap for women in technology and us sponsoring their annual upstart awards honoring the entrepreneurial millennial women.

If you checkout the Bustle tech channel in the month of November, Dice has exclusive positioning to this incredibly important volumes. We’re also targeting spend on increasing awareness amongst professionals, employers in the secondary tech markets.

Our Dice local campaign which includes various parts, events and advertising today in Atlanta, Salt Lake City and Charlotte is in its early days, but so far has seen an uptick in page visits driven by radio and banner ads in those markets. Our third goal is deepening professional engagement through the products, services and insights we deliver.

Because the market to recruit tech talent is so heated, highly skilled candidates are in the driver seat for choosing ideal job opportunities, yet have a lack of resources to inform their career decisions.

One of the tools we use is Dice Careers mobile app, which delivers tailored salary, job recommendations and career path and data based on tech pros information. The app account for about 20% of our unique visitor traffic today and has had about 500,000 downloads to date. The average number of monthly unique visitors continues to grow from a year ago.

There are a variety of salary calculators like this in the market, but our focus on skills instead of titles sets us apart. We compete on skills and the content career mapping and the search we provide is all based on this (inaudible). The app experience is also available on desktop and data. We’ll have more to say about that in the future.

Dice has unique voice in the tech community, with our combination of skill expertise and employer insights. We launched the first ever Dice Ideal Employer survey, where tech pros choose their top companies based on a series of attributes and strengths.

The study creates a lively discussion and reveals how tech pros feel about places they may be looking to work. The content has been some of the most commented on stories on social to date and also serves as a valuable lead generation tool for clients.

We launched Ideal Employer originally with eFinancialCareers and received positive reaction for the in depth analysis career data that provides Wall Street employers.

Content has been a central part of the eFinancialCareers platform and continues to be an area of focus as we think about how we attract professionals to the product and move them through the funnel to relevant jobs.

In fact, we surpassed 2 million unique content users in the quarter further highlighting the demand among financial services and skilled tech professionals for this specific information. We also launched a new eFinancialCareers homepage to provide a more personalized user experience based on end users behavior and usage of the site.

So far we’ve seen a lift in visits to content and rise in applications to jobs with this approach. The redesign improves relevancy by showing financial professionals the right content at the right time, so that we’re with professionals every step of the way of their careers.

As we position ourselves for future success, creating an efficient organizational structure to serve the changing needs of our customers is important. It is fourth goal and we’ve already laid the ground work here to propel us in the short term and in the long term.

For example, we’ve migrated many of our services to our cloud based platform which reduces downtime and event (inaudible) and also creates a simplified infrastructure for our brands.

While many of these are happening behind the scenes and not necessarily customer facing, we are seeing the benefit in some ways through cost savings and we will discuss cost structure later on.

This is a pivotal find for DHI, the competitive market is as fierce as ever and the broader recruitment environment is a challenge as employers are inundated with tools and solutions from every direction.

When I was at the HR Technology Conference a few weeks ago, I was impressed by the growth and players in our industry including Google, who is pushing forward its job widget and testing along the way. These new large generalist are reinforced that DHI serves a specialized slice of the recruitment industry.

Our value proposition of delivering relevant tech think tank and security cleared talent to companies today through our targeted knowledge of skillsets is really unmatched. The onus is on us to continue to improve the quality of our products, offer talent insights and serve the employer and the professional communities with the best experience.

Our evolution to a functional organization is largely complete and with the addition of our new EVP of sales we’ve got all the players to executing on such strategy and drive our performance. Our people are the most valuable asset and a good team makes all the difference in our success.

The next stage for our company is an exciting one including further investing in the solutions we provide, focusing on resources behind our core brands and discovering new areas we can grow. And with that I’ll turn it over to Luc..

Thank you Mike and good morning everyone. Today I’ll review the key points of our third quarter 2017 financial performance; I’ll address our fourth quarter outlook and discuss the financial aspects of our tech focus strategy. Before I begin, let me explain our new segmentation.

Effective in the third quarter, the company organized its leadership around its tech focus strategy. As a result, the company is now reporting two segments, our tech focus and our healthy eCareer segments. The Tech-focused segment consists of Dice, ClearanceJobs and eFinancialCareers.

Our other business is hospitality; Rigzone and BioSpace have been included in corporate and other. We’ve provided a supplement in the appendix to today’s presentation material that recasts our segmented results in prior periods.

Now on to the review, third quarter results were consistent with our expectations and the rate of decline in revenue would start abating, helped by exchanged cost becoming easier with the British pound fallout in mid-2016 that followed the Brexit.

Revenue for the quarter declined 7% with the Tech-focused segment down 7% and the non-Tech businesses down 5% year-on-year. Exchange was not a factor this quarter. Drilling down on the key components of our Tech-focused business, Dice US revenue declined 10%, with recruitment package customers at 6600, down 9% year-on-year.

Customer renewal rates have stabilized in the mid-60%. Average monthly revenue continues to hold around 1110 per customer and 95% of our contracts are 11 months or longer.

However what we’re not seeing yet is the uplift in net new and win-back customers, which we expect should occur as we gain more traction with our enhanced product features we extend a more flexible term to meet the needs of different types of customers and fully execute on our sales and marketing strategies.

Moving on to eFinancialCareers; revenue declined 6% and was impacted mostly by persistent Brexit related concerns. While sentiment on Brexit seems to be improving, customers remain hesitant regarding long-term hiring plans.

For ClearanceJobs, revenues grew 23%, although billings grew at a lower rate of 10% due to the continued tight line for supply for security cleared professionals.

For our non-tech businesses, which comprised Health eCareers, Hospitality, BioSpace and Rigzone? Total revenue was down 5% for the quarter, compared to declines of 12% in the first half of this year, due mainly to easier comps particularly in energy.

Third party operating expenses before depreciation and amortization of stock based compensation and disposition related and other costs increased 2% year-over-year, with higher Tech-focused marketing and product development expenses partly offset by lower cost of revenue and sales expenses, with general and administrative cost being flat.

We continue to carefully manage expenses, particularly in areas that had a less meaningful contribution to our Tech-focused business.

Our headcount so far this year is 6.5% down and the rationalization of resources such as discontinuing getTalent and servicing China from Hong Kong enable us to achieve savings to help mitigate the impact of lower revenue and redirect resources to product and marketing efforts.

Adjusted EBITDA for the quarter was $10 million including 900,000 for disposition related costs. Our adjusted EBITDA margin excluding this impact was 21%. Depreciation and amortization expense decline 900,000 from last year, mainly due to energy related impairment charges that were taken in 2016.

Stock based compensation was down 28% due to forfeitures and lower grant date values. The interest expense increase was due to a write-down of $410,000 of deferred financing costs related to the reduction of our credit line, which will save us 400,000 in annual commitment fees. Excluding this charge, interest decreased from lower average borrowings.

Our effective tax rate of 22% benefited from a discrete tax credit realized this quarter. Net income for the quarter was $1.1 million or $0.02 a share. This quarter net income was impacted by a number of items, many of which are the results of initiatives we’re pursuing to move the company forward.

These include discontinuing getTalent which caused a $2.2 million fixed asset write-off. However, this enables us to save or redeploy the $3 million in expense and capital incurred on getTalent this year.

Cost related to find divestitures and the realignment of our Tech-focused organization of $1 million mostly for termination and retention cost, and the write-down in deferred financing cost of 410,000 that already described. We also incurred significant cost in this and prior quarters for (inaudible) and legal matters.

However on October 24, we received $3.3 million in restitution which will be accounted for in the fourth quarter. Cumulatively, these unusual expenses impacted earnings per share by $0.05 for the third quarter. We generated $3.5 million of operating cash flow in the third quarter, compared to $12 million last year.

The decrease is mainly due to lower cash earnings and billings, as well as a cash benefit in the prior year period from improved receivables collections. Net outstanding on our revolver was 69 million again in the quarter, down 23 million year-over-year.

Deferred revenue was 81.8 million, slightly below the prior year balance, as lower billings were partly offset by an increase in the average contract [rate].

Looking at the rest of the year, we don’t see a significant change in our Tech-focused business trends as its taking longer to acquire and win back Dice customers in the current competitive environment.

In that context, we would expect a modest improvement in the rates of revenue decline helped by ClearenceJobs continued growth and better exchange cost for our finance business. Typical environmental factors are not expected to change materially. The trends in our non-tech-focused businesses should also continue for the rest of the year.

Fourth quarter spending growth will be slightly higher than the third quarter due to increased marketing efforts with candidates and recruiters.

Our ongoing rationalization efforts should enable us to make that investment and still maintain an adjusted EBITDA margin after disposition and related cost of approximately 20% for the full year continue to invest in key product and marketing initiatives.

As we’ve discussed before, the benefit to our topline from the various initiatives can have a delayed effect. So we expect the current level of margin to persist for some time. But we don’t view this as our normal run rate.

For other items in the fourth quarter, depreciation, amortization, stock compensation, those should be consistent with their quarter run rates in total. The LIBOR spread on our loan will increase 25 basis points, the tax rate should be our normal 38%, and the diluted share count should be approximately 50 million.

Given the inherent uncertainty of such processes, we are now assuming for the fourth quarter any proceeds for the divestiture of our non-tech-focused businesses. We’ve experienced a considerable amount of activity and interest since we began the process, and we continue to be engaged with a number of potential acquirers across all the businesses.

But there can be no assurance that [AMD] will result in a fourth quarter transaction. We believe our non-tech businesses are valuable and support the note that they performed above our expectations during this current process.

Regarding our near-term capital allocation policy, as we’ve indicated before, we remained focused on preserving liquidity to ensure we can adequately fund our growth initiatives, namely investing in our Tech-focused business and making opportunistic bold acquisitions. Therefore, free cash flow generation will be applied against our revolving line.

Once we gain a more definitive view of the divestitures outcome, we can then reevaluate our current capital allocation policy which in the past included returning capital to shareholders.

So to recap, the topline results are taking longer than expected to improve, but we feel we’re making progress on multiple fronts in our tech-focused strategy, while continuing to rationalize our resources carefully.

This should positon us well to leverage our unique skills based capabilities and meet the needs of the growing tech-professional recruitment market. As always, I thank you for your interest and I’ll now turn the call back to Mike. .

Thanks Luc. So before we turn it over to Q&A, I just want to address the announcement we made today that the Board of Directors now have initiated the CEO transition plan. The company continues to make progress on our single-tech-focused organization. And we continue this transition, we now a full management team in place.

The Board and I believe it’s the right time for the company’s evolution to now implement the plan. So that Board has commenced a search and we’ve hired the consultants to lead that search. So I will continue to be the CEO until March 31 or until a successor is found.

If earlier than I’ll help provide transition in that process and if it takes a little while longer then I’ll stay a little longer until we find that person.

I think all of the people who work in the organization are absolutely focused on moving forward with our strategy and executing on our product roadmap and our strategic plan, rolling it together, this great opportunity for this business. We need to execute on that and everybody here is focused on it.

The Board and the management team are all confident that we have the right strategy and we have to execute on it. So that is the focus the company has been and will continue to be for the foreseeable future. And so with I’ll turn it over to questions.

Operator?.

[Operator Instructions] And the first question comes from Kara Anderson with B. Riley & Company. .

Recognizing that you stabilized renewal rates for Dice improvement packaged customer accounts, what kind of feedback are you receiving from those turning out and how has that conversation changed over the past year. .

I think when we look at customers who don’t renew and I know we say all the time, but I’ll just remind everybody, when we talk about renewal rates of mid to higher 60%, that is measured in the month that bear up for renewal.

So we get some number of those back overtime which is roughly a third to a half overtime, whether it’s the following month or two months or three months or six months later. So just by way of background and as a reminder that’s how we measure retention rates. So with that the most popular response we get is no need.

Now no need comes in a variety of forms that could be somebody had a number of positions, they felt done and they don’t have a need and when they come back, they come back as shorter term customers. It may have been somebody building out a tech organization, they finished that and off they go.

Competitive environment, there are generalist who get a bulk of the spend whether its LinkedIn or Indeed where customers allocate a fair amount of their spend to crossbows generalist because I serve the needs in sales and marketing and accounting and admin and operations. Customers will go to them. Those are the two biggest points of feedback we get.

Occasionally we don’t find the person or the [tech crew] that they are looking for, because they are very hard to find in geographic markets that are tough to fill or in specific skillsets are tough and they come to us thinking as a specialist we’ll find them and occasionally we can’t because those people don’t exist. So that’s another reason.

But those reasons generally haven’t really changed materially over the years. That has been the pattern of responses when we talk about why people don’t renew when they are up for renewal. .

And then on Open Web it appears you are gaining some decent traction still, what kind of level of penetration do you think that can go to, or said differently, does Open Web not make (inaudible) and Dice equipment packaged customers. .

I’ll answer the second piece. Yes, there is some component of the Dice recruitment package customer world that Open Web probably wouldn’t be appropriate, we like to think it’s appropriate for everybody.

But there are some customers who like to post jobs and not search a database whether its proprietary Dice database with resumes or profiles or whether it’s the Open Web generated database with publicly available information used to create an aggregated profile.

One of the things we find and I refer to this earlier and talked about usage is, we’re really trying to push Open Web as a way for customers to find both active and passive tech professionals. We generally don’t like to use (inaudible) but the world does and we refer to them as such.

One of the things we find with Open Web is customers that used the Dice, they were used to interacting with tech professionals who has a resume or has a structured profile tend to be more responsive, I think it’s obvious than somebody access to Open Web who doesn’t have their profile or their resume in a place but we’ve gotten information about that person that we are able to provide.

The response rates are lower and similar to what somebody like LinkedIn. So certain customers really want to address the active database much more than (inaudible) passive. So we never had thought that Open Web would have anywhere near full penetration of our customer base.

While we are working on improving research, technology and how the search of the Dice database and the Open Web database interact, which we think will make it more attractive to a greater customer base.

But to answer your little question is that we believe there is a limit on the number of Dice recruitment package customers that would find Open Web useful just by the nature of the way they search. .

And then last one from me, on Dice Careers downloads, is that been driven job seekers and how do you connect that to monetized offerings?.

The primary focus has been on existing Dice users as we’ve rolled out the features and functionality.

Over time we’ll do more of a marketing push and product distribution push so that we’re reaching tech professionals that aren’t current users of Dice, because our strategy is to go find tech professionals wherever they are whenever a customer needs them not purely rely on bringing them to our site or to the mobile app.

The monetization from that will be come from the increased usage in activity levels and engagement from the professionals which were monetized through clients, customers, recruiters, not for the foreseeable future through the app itself.

So it is a way to reach tech professional, it’s a way for tech professionals to engage with us and ultimately see careers opportunities for which we monetize in the way we always hope. .

[Operator Instructions] and then next question comes from Kip Paulson with Cantor Fitzgerald. .

Wondering if you can just flush out your sales and marketing investments a bit more, any changes to your marketing strategy?.

Sure.

If I break that in to sales and marketing, our sales go-to-market strategy is similar to what it’s been, but we’re quite excited now about having organized the North America team around the three brands that we have as part of our Tech-focused strategy, Dice, ClearanceJobs and eFinancialCareers and expanding the opportunity to penetrate the market with each of those three to having a new leader over those three which is a position we’ve never had before in our old structure.

And I think we are quite excited about that person will bring some historical knowledge and experience from the market to us. That will increase our sales performance I believe. But no real great change from sales campaign. From a marketing standpoint, the strategy continues to be to push in to the market with all offering to engage tech professionals.

That will come through a variety of ways, one is, increases in product, one is social distribution and engagement techniques that aren’t what I would call traditional marketing.

But from a more traditional marketing standpoint, it’s going to further distribute our offerings to places where tech professionals are and bring opportunities to those professionals again wherever they are not surely focused on trying to attract people to the site and engage on the site..

As there are no more questions at the present time, we’d like to return the call to Brendan Metrano for any closing comments. .

Thanks Steve. We appreciate your interest in DHI Group. If you have any follow-up questions, you can call Investor Relations at 212-448-4181, or email ir@dhigroupinc.com..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..