Good morning. My name is Lisa and I will be your conference operator today. At this time I would like to welcome everyone to the Fourth Quarter and Full Year 2018 DHI Group Inc Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session.

[Operator Instructions] Thank you. Rachel Ceccarelli, you may begin your conference..

All right, thank you, Lisa, and good morning, everyone. And welcome to our 2018 fourth quarter earnings conference call. With me today are Art Zeile, President and Chief Executive Officer; and Luc Grégoire, Chief Financial Officer.

Today's call includes certain forward-looking statements, particularly statements regarding future financial and operating results of the company. These are based on management's current expectations or beliefs and are subject to uncertainty and changes in circumstances.

Actual results may differ possibly materially from those expressed or implied in these forward-looking statements due to changes in economics, business, competitive, technological and/or regulatory factors.

For a discussion of these principal risks and factors that could affect the company's future results, please see the description of risk factors in our annual report on Form 10-K for the year ended December, 2018, which will be filed shortly and in sections entitled Risk Factors, Forward-looking Statements and Management's Discussion and Analysis of Financial Conditions and Result of Operations.

The company is under no obligation to update any forward-looking statements, except where required by the federal security laws. During today's call, we will be referring to certain financial measures, including adjusted revenues, adjusted EBITDA and adjusted EBITDA margin that are not prepared in accordance with U.S. GAAP.

Information about and reconciliations of these non-GAAP measures to which most directly comparable GAAP measure are available in our earnings release, which is posted on our website at www.dhigroupinc.com in the Investor Relations section. With that, I will now turn the call over to Art..

product, sales, marketing and financial performance. On the product side, improving user experience is a critical area of focus. Our goal is to bring Dice and eFinancial Careers the parity with ClearanceJobs on user experience by the end of this year. In the first half, we plan to introduce three products upgrades to support this objective.

The first upgrade is the introduction of performance based products, which we will offer alongside our current subscription based offering. This enhancement will enable some clients to pay us using a consumption based model consistent with market best practices.

We believe this will improve our responsiveness to areas of unmet need, create new client relationships and in turn increase revenues. ClearanceJobs has relied on this performance based model very successfully for several years, resulting in nearly 50,000 jobs currently posted, which in turn drives more professionals to the site.

The second upgrade is many Candidate Match, which we'll use our AI based technology skills data model to blade each candidate skills, experience and relevance against the requirements of a job hosting. Applications will be automatically score using these sophisticated algorithms, allowing recruiters to quickly rank order their candidates.

The third upgrade is introducing protected profiles, which will allow candidates to control whom they connect with, which makes our sites more attractive for candidates to access. We have observed that better candidate experiences lead to higher client success rates.

We also find a complete review of Dice’s candidate database this year with particular focus on the quality and relevance of its candidate profiles. Access to high quality actionable candidates is essential to Dice’s value proposition and ensures employers are making efficient use of their time as they evaluate candidates.

ClearanceJobs next generation platform will continue to evolve in 2019 with the addition of a consolidated employer newsfeed for candidates and powerful recruiter work flow automation tools.

ClearanceJobs continue to outperform all of its financial and operational goals as well as hitting a new record for job postings and candidate connections in the fourth quarter.

A key driver of ClearanceJobs success is its unique user experience with high levels of interaction, which doesn't exist anywhere else in the market for connecting specialized hard-to-find talent to employers. These features distinguish ClearanceJobs as a community of engaged professionals, not just another job load.

In sales we launched the Dice commercial accounts team in the fourth quarter further expanding our focus on direct hire employers. As I've mentioned on our previous calls, we believe that this is a significant white space opportunity for us. We've added new quota bearing sales reps and recently hired an experienced leader that head the team.

We are currently ramping up this effort and we expect to see improved results later this year. Across our sales organization, we're also revamping client retention, pricing policies, contract terms, sales incentives and other elements that are essential to improving our sales performance.

In marketing, we are focused on increasing channel efficiency and scale to ensure that we are maximizing candidate acquisition and lead generation. In the fourth quarter, we adopted Google for Jobs API to place job postings directly in the Google search algorithm.

We have already seen increases in candidate registrations and applications coming from these search engine optimization efforts. In terms of fundamentals, Luc will provide more specifics in his remarks, but now that we have reached an inflection point in our revenues, our focus in 2019 will be on pivoting to revenue growth and expanding our margins.

To summarize, we are very pleased with how we ended 2018 and the level of momentum we have caring into 2019. We are excited about the path ahead of us.

We have a firm conviction that our strategy of delivering state-of-the-art specialized offerings for technology professionals, employers alike will further differentiate us as we address a substantial unmet need in the market. We are executing well and are fully focused on delivering against our strategic priorities.

We believe that the steps we were taking to build a world class highly differentiated business will translate into sustained revenue and earnings growth and leads a superior shareholder value creation over time. With that let me turn the call over to Luc, who will take you through our quarterly financials and then we'll take any questions you have.

Luc?.

Thanks, Art, and hi everybody. We ended 2018 on a strong note and we're very pleased with the progress we've made in delivering against our financial priorities, particularly the inflection in our revenues. As Art highlighted, we successfully stabilized our revenues and margins last year.

Our ongoing tech-focused revenues reached a milestone in the fourth quarter and we're flat versus the prior year period while our adjusted EBITDA margin improved to 22% from 21% in the third quarter. We believe that this is a turning point.

In 2019, we anticipate that our tech-focused businesses will achieve modest year-over-year growth in revenues beginning in the first half, which should improve as the year progresses and we anticipate that Dice will turn to positive year-over-year revenue growth in the second half.

We'll also make further progress on rationalizing our expenses while at the same time investing prudently for growth, which should enable us to maintain our current level of adjusted EBITDA margin in the first half and gradually begin to increase it in the second half.

Our fourth quarter revenues were in line with our expectations and our margins came in ahead helped by the steps we've taken to reduce cost and improve spending efficiency. Our customer related metrics also continue to improve. These results are further evidence that the actions we're taking are having the right impact.

With the divestitures and Dice Europe closure behind us as of the end of the third quarter, my remarks today will refer to revenues excluding these items for all theories. So for the quarter we reported revenues of $38 million unchanged year-over-year.

The improvement in our revenue trend was driven by further narrowing of the decrease in base revenues another quarter of record revenues in ClearanceJobs and a modest increase excluding the foreign exchange and eFinancial Careers. Now looking at revenues by brand.

Dice revenues were $24 billion in the quarter, 4% lower year-over-year continuing the trend of narrowing the rate of decrease. The trend in Dice recruiting package customers also stabilized following a long period of decline. They again remain unchanged.

They had 6,200 customers as of the end of the fourth quarter, even though we’ve typically seen a seasonal decline for this period than the past. Our Dice customer metrics also improved in the fourth quarter with the renewal rate on customer account at 67%.

Our revenue renewal rate at 78% and average monthly revenue by recruitment package customer has $1,129. We feel these metrics are key as 90% of our revenues come from recruitment package customers with an average contract length of more than 12 months.

ClearanceJobs fourth quarter revenues were $5.7 million, a 22% increase year-over-year and the 12th consecutive quarter with at least 20% growth. This persistent revenue growth is reflective of ClearanceJobs strong competitive differentiation.

eFinancial Careers revenue for the quarter were $8.3 million, up 2% versus the prior year excluding foreign exchange driven by solid revenue growth in the Asia Pacific region. We continue to see strong demand by the Tier 1 banks in that region and growing penetration of the Tier 2 banks, which represent a substantial pool of potential clients for us.

Now turning to expenses, fourth quarter operating expenses were $35.6 million for a 13.3 – or 27% year-over-year reduction of which $10.6 million was attributable to the effect of our divestitures and $1.7 million of the – to the closure of Dice Europe.

The remainder of the decrease was primarily driven by lower marketing expenses and stock-based compensation. Our marketing costs normalized to the first half 2017 levels before we increase spending on general awareness marketing.

We have determined that we can generate better returns on our marketing activities by more directly focusing our resources on candidate acquisition and customer lead generation. Partially offsetting these reductions was an increase in G&A expense due in part to consulting fees incurred – that we incurred related to our expense reduction strategy.

We implemented several initiatives in recent months to identify cost savings at each of our expense levels with particular attention on the efficiency of a marketing, travel and vendor spending. We've identified annual run rate reductions of approximately $7 million with half of that already realized in 2018.

The remainder will be progressively achieved throughout 2019 as we move through the new vendor contracts you put in place and as additional contracts come up for renewal.

These savings together with the wrap up of our consulting projects and wind down of the associated expenses will enable us to maintain our margins of the current level and then gradually expanding in the second half while at the same time investing for revenue growth with product development and engineering in key areas of investment for this year.

Fourth quarter income tax was actually a net benefit of $1.3 million driven mainly by the reversal of $1.6 million and FIN 48 unrecognized tax benefits upon the conclusion of audits and the exploration of certain statutes of limitation.

In 2019, we expect our effective tax rate to be approximately 25% subject to the effects of discrete items such as vesting of stock based awards. Net income for the quarter was $2.9 million, or $0.06 per diluted share.

This result includes the adverse effect of $2.4 million of disposition related and other costs, which was offset by the beneficial income tax items in the quarter, including the FIN 48 reversal distributed. Adjusted EBITDA for the quarter was $8.3 million for a margin of 22% compared to $7.6 million and 19% respectively for the 2017 fourth quarter.

The 2017 fourth quarter excluded the effect of Dice Europe, which had a negative impact on the margin. We generated operating cash flow of about $6.2 million in the fourth quarter, a decrease of $1 million year-over-year.

This result was driven by a combination of lower income from our tech-focused as well as divested businesses along with changes we make to our billing terms, partially offset by tighter vendor payment management. Now let me briefly address our balance sheet.

In the fourth quarter, we refinanced our revolver for an additional five years and reduced the size from $150 million to $90 million. The pricing and covenant light structure of the new facility are materially the same as the prior one.

As we've transitioned to a more stream on company with improving fundamentals, we believe that a smaller revolver sides complemented by the strong balance sheet will provide ample liquidity for our business needs and reduce our borrowing costs over the next five years.

At the end of the quarter, our net debt was approximately $11 million and our leverage ratio was well below one-times adjusted EBITDA. Our strong liquidity and balance sheet remained essential to supporting the strategy execution.

We've repurchased approximately 684,000 shares during the fourth quarter for cumulative total of about 1.1 million shares since starting our buyback program last May. Going forward, we have about $5 million remaining of our authorization.

We'll continue to opportunistically repurchase shares, but we'll also carefully evaluate our first use of cash with our ongoing priority being invested in our business. In the first quarter of this year, we expect weighted average diluted shares outstanding to be about $50 million.

In closing, I'd like to emphasize that we looked at 2019 to be a year of growth and additional transformation for our company. We remain intensely focused on delivering against our strategic and financial objectives and we have a clear path ahead of us for improving our top and bottom line fundamentals while also investing in our business.

We're very excited by the marketing opportunity in front of us and remain confident in our ability to deliver a differentiated user experience across our brands to employers and candidates alike. We're equally confident in our ability to grow revenues and deliver on the meaningful operating leverage embedded in our business.

As always, I'd like to thank you for your interest today. And with that, let me turn the call back to Art..

Thanks, Luc. I'd like to close by once again thanking all our employees around the globe for their hard work and dedication over the last quarter and throughout 2018. Without your focus and commitment, we would not have been able to accomplish what we did last year and begin 2019 with such incredible momentum.

It is a pleasure to be part of such a great team. With that, we're happy to take your questions..

Thank you. [Operator Instructions] Our first question comes from the line of Kara Anderson from B.Riley FBR. Your line is open..

Hi, good morning guys..

Good morning, Kara..

Hey, Kara..

Hey, so I wanted to ask on the new performance based product offerings that you're going to, I guess, offer alongside subscription for Dice.

I'm just wondering if you see that at all pulling away customers, who currently are on subscription and I guess potentially cannibalizing some of the revenue there?.

Well, that's a great question and one that we have actually been working through for quite some time, a number of different months where we've actually studied our entire customer base and we think that this is a really great solution for a certain sub-segment of customers.

So we're going to be rolling that out for those customers that can benefit from it most. But we have done a lot of studies to just prove that the actual trade of subscription to the pay per view model will actually increase the revenue as we believe it rolls out over the course of time associated with those customers.

And that's because with – in conjunction with Intellisearch, we believe that there is a larger usage pattern of the actual database itself. And that's what we're selling access to. So think of it as the fact that the Intellisearch capability gives our recruiters a more sophisticated tool to get to the right number of candidates that are looking for.

And by studying their usage patterns, we believe that we know how many views they will use for every single search. And we're going to go to those customers that we think are going to benefit from that model, but also have high usage patterns..

Got it.

And just for clarification, so it sounds like this may not be offered to everybody, but you've collected those who makes more sense for? Or am I hearing that incorrectly?.

That's correct. In fact, you are rolling that out on a Beta basis literally this month in February and we're going to go GA with it by the end of the quarter. But we are basically being very targeted about who we are offering this set of consumption based pricing services too. That is correct..

Got it. Okay. And then, I am just hoping you could expand a little bit on the reception of TalentSearch. I see that you pointed to the double-digit increase in usage.

But are you seeing this as a meaningful driver? Or how do you, I guess, expect that usage to translate into revenue growth? And then also when will the remaining 20% rollout?.

Well, that's a great question. In fact we have had the advantage of seeing usage trends ramp up from August where we had our first migration. And we're right now at the end of migration number four of our customer base. Approximately 79% of our customers have migrated to TalentSearch 4.0.

So we've had the ability to track their usage patterns pre and post [indiscernible] for that period of time. It is double-digit. It's depending upon, which way we’re talking about anywhere between 10% to about 20% in terms of usage patterns.

And we believe that by moving to the pay per view model, we actually benefit the company for those customers that are at high usage levels. In other words, right now on a subscription basis, these customers are paying for an infinite number of views basically.

But once we go for pay per view as a model for the future for those customers that are seeing really strong benefit from IntelliSearch, we believe that that's going to drive revenue.

And we've done a little bit of modeling, but I think it's fair to say that as we rollout, we're going to have a lot more evidence of the actual usage and revenue behavior over the next several quarters..

All right, and then on the restructuring of the sales team, I think if I recall, there were some shifting around in accounts to various sales reps.

Just wondering if you've seen any disruption as a result of that?.

No, actually, we've seen the opposite. We have been able to essentially expand the sales team itself. So think of it as going through a period in the middle of last year where we stood up an enterprise field sales team that essentially covered 15 regions in the United States.

By expanding that team and then creating a commercial accounts team at the end of last year, we actually have taken a certain number of accounts, 6,200 accounts, and spread them over more people. So we believe that those accounts are now able to develop a higher level of interactivity and relationship with the reps that are involved.

So we believe that there's – it's been a net positive because there has been the ability to essentially have a more concentrated focus on a smaller number of accounts per rep..

Got it.

And then just wondering if you can speak on sort of a high level to the overall propensity or I mean maybe apprehensive for – apprehension for people to act or close on leads at this time in a little bit of an uncertain environment, particularly impacts from Brexit that you might be seeing on eFC and then if there's any risk to ClearanceJobs revenue trajectories with the government shutdown..

Both of those are excellent questions. I'll tell you that we have been monitoring the effects of Brexit very closely as you would suspect within the eFC team. And we believe that there has been a modest effect.

What has happened in the past is that when any type of major government regulatory or structural change takes place, a lot of activity slows down, but then it has to speed up once there's clarity. And clearly, I guess nobody really knows if there is going to be any near-term clarity to the Brexit situation.

But the good news is that roughly half of our revenue and a growing amount of that revenue is coming from Asia Pacific and we're seeing double-digit growth in bookings in the same period of time that we're seeing some of the negative effects of Brexit.

So think of our platform as being one that's global in nature, attending to the major financial hubs of the world and there is no issues and in fact a strong growth rate associated with Asia Pacific, Hong Kong, Singapore specifically. We also work through Paris, Frankfurt and London through the European side of the eFC business.

You would say that the London side being one of those just smaller factions of our business is probably slowing or we're not seeing the same amount of growth as the rest of the platform, but it's balanced by higher rates of growth across the rest of eFC. With regard to ClearanceJobs, it's very interesting.

Obviously, there is a concern about the government shutdown. We didn't see any negative effect during the period of time. It was shutdown at the end of December, moving into January. We still had strong bookings across ClearanceJobs.

When you think about what is that stake here and in fact that there may be a change in some of the, I would say, government military accounts to potentially fund a wall that that really is a small effect on the overall military infrastructure.

So there's still going to be a lot of people hiring folks for clearance that – that have clearances across the platform, irrespective of whether or not $5 billion goes to a wall versus the $800 billion military defense budget.

Again, we're monitoring the situation very closely and we don't take anything for – we don't dispute that these are issues that we need to monitor closely, but we have not seen any negative effects across both of those two platforms..

Great, thank you so much..

We have no further questions in queue. I'll turn the call back to Rachel Ceccarelli for closing remarks..

All right, thank you all for joining us today. To schedule and email to management, please e-mail ir@dhigroupinc.com or call 212-448-4181. Thank you and have a good day..

Thank you..

Thank you..

This concludes today’s conference call. You may now disconnect..