DHI Group (NYSE:DHX) released first-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.

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Summary

DHI Group reported increased demand for AI-related skills, validating its strategic focus on offering a deep skills-based model for tech hiring.

Financially, the company generated strong free cash flow and adjusted EBITDA growth, despite a year-over-year decline in total revenue and bookings.

DHI Group's board approved a $10 million share repurchase program, reflecting confidence in the company's long-term value.

Clearance Jobs showed 5% revenue growth, while Dice experienced a 17% revenue decline, attributed to churn among smaller clients.

Strategic acquisitions, like Point Solutions Group, are expected to enhance growth, with defense spending seen as a key driver for Clearance Jobs.

The company maintains a cautious approach to increasing sales and marketing investments, awaiting clearer signs of tech hiring recovery.

Full Transcript

OPERATOR

Long term driver as of March 2026, 67% or 2/3 of US tech job postings required AI related skills, more than double the 29% we saw a year ago. Over that same period, job postings requiring machine learning skills have increased 167%. We view this as a powerful validation of our strategy. Rather than reducing the need for talent, AI is increasing demand for highly skilled technical professionals. Dice is well positioned here with a deep skills based model that allows employers to identify candidates based on more than 360 distinct AI related skills. Rather than treating AI as a single generic category, Dice enables employers to identify and match candidates based on specific skill sets, an increasingly critical capability as AI roles become more specialized. We have also made it easier for candidates to access Dice job postings by being the first career platform with a Claude Connector. This is only one of many Dice features that implement an AI model solution. As you recall, we enabled two self service options for Dice like late last year and we are already seeing a steady progression of transactions as we ramp our marketing campaign spend. While near term performance will depend on the pace of recovery in the broader tech hiring market, we believe Dice is strategically well positioned, especially as demand for AI related skills continues to grow. From a financial perspective, DHI Group continues to generate strong free cash flow supported by our subscription model and disciplined cost structure. This allows us to take a balanced approach to capital allocation, investing in growth initiatives, pursuing strategic acquisitions and returning capital to shareholders through an active share repurchase program. As a reminder, our board approved a $10 million share repurchase program in the first quarter, demonstrating our confidence in the company's long term value. In summary, we believe DHI Group is uniquely positioned at the intersection of two powerful and durable trends increasing global defense spending and growing demand for highly specialized technology talent, particularly in AI clearance jobs, continues to demonstrate strong growth and expanding opportunity as government and contractor development demand accelerates, while Dice is well positioned to benefit from an eventual recovery in tech hiring supported by our differentiated skills based approach and continued product innovation. At the same time, we are successfully extending our platforms into adjacent services, creating new monetization opportunities and deepening our relationships with customers. Importantly, our highly recurring revenue model and strong free cash flow give us the flexibility to invest for growth while continuing to return capital to shareholders. Taken together, we believe we are building a more durable high growth business with multiple levers for value creation. With that, I'll turn the call over to Greg to walk you through the financial results in more detail.

Greg

Thank you Art and good afternoon everyone. I'll start with a brief overview of our first quarter results before walking through each of the segments in more detail. While total revenue and bookings declined year over year, our results reflect the continued strength of clearance jobs which delivered both revenue and bookings growth, as well as the benefits of the actions we've taken to improve efficiency across the business. Importantly, we delivered solid adjusted EBITDA growth and margin expansion in the quarter along with strong free cash flow generation. Overall, our performance highlights the durability of our subscription based model, the growth opportunity in clearance jobs and the significantly improved profitability we are seeing in Dice as we position the business for an eventual recovery. With that context, let's turn to our segment performance starting with clearance jobs. Clearance jobs revenue was $14.0 million, up 5% year over year and roughly flat compared to the prior quarter. Bookings for ClearanceJobs were $18.0 million, up 7% year over year. PSG Point Solutions Group, acquired at the end of February, contributed $700,000 of revenue and bookings in the quarter for ClearanceJobs. We ended the first quarter with 1,741 ClearanceJobs recruitment package customers which was down 8% on a year over year basis and down 2% on a sequential basis. ClearanceJobs account spending greater than $15,000 in annual recurring revenue increased versus the prior year. Our average annual revenue per ClearanceJobs recruitment package customer was up 6% year over year and and roughly flat on a sequential basis to $27,286. Approximately 90% of ClearanceJobs revenue is recurring and comes from annual or multi year contracts. For the quarter, ClearanceJobs's revenue renewal rate was 88% and ClearanceJobs's retention rate was 105%. The revenue renewal rate was negatively impacted by a customer with annual spend over $500,000 that did not renew in the quarter but is expected to return later this year. The solid retention rate demonstrates the continued value ClearanceJobs delivers in the recruitment of cleared professionals. Dice revenue was $15.7 million which was down 17% year over year and down 10% sequentially. Dice bookings were $20.2 million, down 20% year over year. We ended the quarter with 3,832 Dice recruitment package customers which is down 7% from the last quarter and down 15% year over year. Dice revenue renewal rate was 71% for the quarter and its retention rate was 100%. The reduction in customer count and Dice's renewal rate from the prior year quarter continues to be attributable to churn with smaller customers spending less than $15,000 per year representing 80% 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 offset the churn among smaller accounts by lowering upfront commitment and improving affordability. Our average annual revenue per Dice recruitment package customer was $15,466, down 6% year over year and and down 1% sequentially. As with ClearanceJobs, approximately 90% of Dice revenue is recurring and comes from annual or multi year contracts. Deferred revenue at the end of the quarter was $44.5 million, down 12% from the first quarter of last year. Our total committed contract backlog at the end of the quarter was $99.0 million, which was down 8% from the end of the first quarter last year. Short term backlog was $77.2 million at the end of the quarter and long term backlog, I.e. revenue to be recognized in 13 or more months was $21.8 million. Both brands onboarded notable clients in the first quarter. For ClearanceJobs, this includes Akamai Intelligence, Synthbee and Michigan Technological University. While Dice landed Avrah Health fourth, you get Tech and Parkland center for Clinical Innovation as customers in Q1. Now let's move to operating expenses. For the quarter, our operating expenses decreased $15.0 million, or 36% to $26.6 million when compared to $41.6 million in the year ago quarter. 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 have significantly reduced our annual operating expenses and capitalized development costs. For the quarter, we had income tax expense of $1.0 million on income before taxes of $2.5 million. Our tax rate for the quarter differed from our approximate statutory rate of 25% due to the tax impacts of stock based compensation. Although our income subject to tax has grown, the tax law change in 2025, which allows for the immediate deduction of R and D costs, will partially offset our 2026 cash outlay for income taxes. Moving on to the bottom line, we recorded net income of $1.5 million or $0.04 per diluted share in the quarter. For the prior year quarter we reported a net loss of $9.8 million or $0.21 per diluted share, which included a $7.8 million dice goodwill impairment charge and a $2.3 million restructuring charge. Non GAAP earnings per share for the quarter was $0.08 per share compared to $0.04 per share for the prior year. Quarter Diluted shares outstanding for the quarter were 42.4 million shares, down 3.1 million shares or 7% from the prior year. Quarter as we continue to return cash to shareholders through our share repurchase program, adjusted EBITDA for the quarter was $8.1 million, a margin of 27% compared to $7.0 million or a margin of 22% a year ago. On a segmented basis, ClearanceJobs adjusted EBITDA remains strong at $5.7 million in the first quarter, representing a 40% adjusted EBITDA margin as compared to adjusted EBITDA of $5.7 million or a margin of 43% in the prior year period. Dice's adjusted EBITDA increased to $4.3 million, representing a 28% adjusted EBITDA margin compared to $3.4 million and an 18% margin last year. Operating cash flow for the first quarter was $8.4 million compared to $2.2 million in the prior year period. Free cash flow, which is operating cash flows less capital expenditures, was $6.8 million for the first quarter compared to $88,000 in the first quarter of last year. Our capital expenditures, which consist primarily of capitalized development costs, were $1.6 million in the first quarter compared to $2.2 million in the first quarter last year, an improvement of 24%. Capitalized development costs in the first quarter for ClearanceJobs were $577,000 compared to $362,000 a year ago, while capitalized development costs for dice were $1 million this quarter as compared to $1.7 million a year ago. We are targeting total capital expenditures in 2026 to range between 7 and $8 million as compared to $7.3 million last year. From a liquidity perspective, at the end of the quarter we had $3.0 million in cash and our total debt was $33 million, an increase of $3 million from the last quarter. Despite cash outlays in the quarter of $5 million for the purchase of PSG Point Solutions Group and $4.7 million for the purchase of 2 million shares under our stock repurchase programs, leverage at the end of the quarter was 0.91 times our adjusted EBITDA and we continue to target 1x leverage for the business. At the end of the quarter, we had $6.4 million remaining on our $10 million share repurchase program. Moving on to guidance, we continue to expect clearancejobs bookings to grow in 2026. However, we do not anticipate Dice Brookings growth resuming until tech hiring improves. As a result, we expect DHI Group revenue of $124 million to $128 million for the full year and for the second quarter we expect revenue of 30 to $32 million. For ClearanceJobs. With the addition of PSG Point Solutions Group, we expect revenue of 62 to $64 million for the full year and for 2nd quarter we expect revenue of 15 to $16 million. At Dice, we expect revenue of 62 to 64 million dollars for the full year and for the 2nd quarter we expect revenue of15 million to $16 million. From a profitability standpoint, we continue to target full year adjusted EBITDA margin for DHI Group of 25% and margins of 40% for ClearanceJobs and 22% for Dice. Our focus remains on delivering long term sustainable and profitable revenue growth along with strong, strong free cash flow generation averaging at or above 10% of revenues to wrap up. Although the hiring environment over the past few 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 ClearanceJobs and that companies across all industries will steadily increase their investments in technology initiatives, creating a strong growth opportunity for both clearance jobs 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.

Art

I want to thank all of our team members 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.

OPERATOR

Thank you. We will now begin the question and answer session. To ask a question, please press Star then one on your telephone keypad. If your question has already been addressed and you'd like to remove yourself from Q, please press Star then two. We'll pause for just a moment to assemble our roster. And today's first question comes from Gary Prestipino with Barrington Research. Please go ahead.

Gary Prestipino (Equity Analyst)

Hi, good afternoon, Art and Greg. Hey Greg. What was the. I'm sorry, I didn't get a chance to write down the capitalized development cost or what were they in the quarter?

Greg

So in the quarter the capitalized development costs were 1.6 million. Gary..

Gary Prestipino (Equity Analyst)

Okay, 1.6 million. And then with the acquisition of PSG, is that really entirely the reason for the revenue? The increase in the revenue range at cj or are you performing better than you expected from the start of the year?

Greg

Yeah, good question, Gary. And that is purely related to the, the revenue from PSG Point Solutions Group at this stage, when we anticipated some improvement within ClearanceJobs in the, in the budget, but more in the bookings area as opposed to in revenue, which as you may recall, had some revenue or had some bookings challenges in the mid to Latter Part of 2025 for ClearanceJobs and so that, you know, as that converts to revenue, that that is going to challenge revenue in 2026 minus PSG Point Solutions Group.

Gary Prestipino (Equity Analyst)

And then lastly, and I'll jump off and let somebody else go. Dice retention increased to 100% from 92%, which basically means, you know, you're getting good renewals and you're not losing that, that base business. I suppose as I'm reading that right, is that kind of a good leading, somewhat of a leading indicator for dice, or am I just reading that wrong?

Greg

So, Gary., you were reading that absolutely correctly. I think that we're seeing a stabilization in demand in the environment. And it's consistent with the fact that staffing industry analysts as well as a number of different resources have indicated that we've kind of crossed the line for tech staffing and it's going to be growth area for 2026 and we're seeing that sentiment improve across our, our staffing firms.

Gary Prestipino (Equity Analyst)

Okay, thank you.

Greg

Thank you, Gary.

Art

Appreciate it.

OPERATOR

Thank you. And our next question today comes from Max McAllis with Lake Street. Please go ahead.

Max McAllis (Equity Analyst)

Hey guys, thanks for taking that question. First one. Hey, Art. First one for me. We look at the comptia in the job posting. So I think you said 537,000 jobs this month or, or month of March and then 254,000 new jobs. I know a lot of it's related to AI, but you said you haven't really seen an uptick in bookings from that. I figured you would have. Is there a reason why has there always been kind of a laggard effect with comptia and the impact on bookings? And then I guess with that, what are, what are some of the things you're hearing from your customers? Is it going to be more of a late 2026 where they see more there or more business coming onto your platform? I guess, lack of a better word,

Greg

yes, that's a great question, Max. And I have to say that the number of new tech job postings is definitely a leading indicator. But you have to understand that the historical pattern of our customers have been to essentially have their contract start in every month in the year.

Max McAllis (Equity Analyst)

Right. There is kind of a crescendo that takes place in December and January. So they're thinking about how they're going to renew in forward months based on what they're seeing as a leading indicator today in terms of new tech job postings. But it's pretty significant. Like I said, 19% growth of March 2026 over March 2025 is a pretty big signal. As an aside, staffing industry analysts just posted an article yesterday that's entitled it Staffing Turning the Corner. And Bloomberg the same day yesterday posted an article that's entitled companies Increasingly Favor Temps over Permanent Hires. And kind of they're both coupled. We believe that in this kind of environment, it's a less risky move to essentially go to a staffing agency for your tech hiring needs rather than going to permanent hire. So it's all kind of coming together right now. So really, the impacts of this, you really wouldn't see that towards the end. Until the end of 2026, correct? I think it's. That's correct. It's going to be playing out over the course of the year. And again, you know, those folks that are intended to renew in third quarter and fourth quarter are probably now starting to factor this in, seeing that the demand is increasing. And like I said, 254,000 jobs is a significant increase over the roughly 200,000 jobs that we saw most of last year. So it's a pretty good signal. Okay, that makes sense.

Greg

And if we look at some of the acquisitions you've made to Point Solutions atx, you said they were performing better than what you guys had originally expected. I mean, is that with just a revenue standpoint, or can you help me out, or is there anything else you can offer up that can kind of give me a better understanding of how these are actually performing better than what you originally expected? So that comment in the earnings call was really intended to focus on agile ats, and I would say that the bookings and revenue figure are performing better than expected, although it was a pretty small base when we bought the company back in July of last year. For PSG Point Solutions Group, it's a little bit too early to tell. We closed that transaction right at the end of February, and so we're kind of moving into the integration phase. But the good news is we actually have now established two new relationships, two new subcontracts to primes, even within that short period of time. So it feels like we're on our way. All right, last one for Me and then I'll hang up the mic. It seems to be a common theme. You guys are acquiring companies kind of in the defense space. Is there an active pipeline right now where you could see yourself acquiring another one of these companies kind of in that defense adjacent landscape? Yes. I would say that, you know, true to what we described, we view CJ as a platform and that we have these trusted relationships with 1800 very important military contractors. We want to sell them more and especially sell them more in that talent acquisition and management space. So there is a view to additional tuck in acquisitions over the course of time. Thanks, Max.

OPERATOR

Thank you, Max. Appreciate it.

Kevin Liu (Equity Analyst)

And as a reminder, if you'd like to ask a question, Please press star then 1. Our next question comes from Kevin Liu at K. Lou Co. LLC. Please go ahead.

Greg

Hey, good afternoon, guys. I know on CJ a lot of the traction there and momentum is going to be tied to kind of this defense funding, but was curious if you guys had any exposure to DHS and whether you think kind of the recent funding approval there, if that kind of resuscitates any deals you had in the pipeline.

Kevin Liu (Equity Analyst)

That's actually very insightful. I would have to say that one of our larger customers was the Cybersecurity Infrastructure Services Administration, which is a division of dhs and they did not renew last year. I think that's based on two different factors. It was based on the fact that their funding was uncertain at the time, but also the fact that there is a hiring freeze across most government institutions. We believe, based on the fact that there was a leak that took place that indicated that they are down in terms of their staffing by 40%, that they will be allowed to kind of hire again and they're going to need a platform to do so. So there are elements of the government that I think that will be kind of freed by this funding of DHS and then the need to essentially plug holes in really critical areas in the government. Got it. And just related to that, you guys did reference kind of a large contract that hadn't renewed early in the year but should come back later in the year. Was that related to this at all or is that kind of a separate deal?

Greg

It was unrelated. In this particular case, the customer, in a cost saving move, believed that they could move to a competitor of ours called Clearedjobs.net, this is a platform that is roughly about 1 20th our size. And they've already admitted that this was probably not in their best interests. So we're still in discussions with them. And we hope that they will essentially renew a subscription at their next budget cycle, which is in third quarter.

Kevin Liu (Equity Analyst)

All right, sounds good. And then I'm hoping you could put a finer point just on the contribution from Point Solutions Group. What's kind of the expected contribution to the revenue line both in Q2 and the full year?

Greg

Yeah, this is Greg. Hey, Calvin. So we, and you can really kind of see this in the, in the guidance. We uplifted our guidance by approximately $6 million, you know, for the full year. And so that's roughly where we're anticipating for this 10 month period to land with PSG.

Kevin Liu (Equity Analyst)

All right, that's helpful. And then just lastly for me, as it seems like the environment starts to turn here, just wondering how you're thinking about kind of the timing of maybe investing a bit more on either the sales or marketing side.

Greg

That's a great question. I can tell you that we've always been pretty conservative, especially over the last three years as we're kind of waiting for this tech hiring recession to resolve itself. I would say that for clearance jobs because we see a clear signal associated with the defense budget being put into law this past January and kind of a robust amount of interest. That's where we would essentially hire more people into sales and have more marketing spend at this point in time. But it's early days. I would say that we want to see that play out and we want to see the firming up and stabilization and increasing of demand before we do. So I would not assume that we're going to change our sales and marketing pattern for either brands for now, but we're assessing it real time for the remainder of the year. The one other thing I might just add to that is we do have some additional investment in marketing for dice, specifically related to the self service platform, the digital experience platform in the remainder of the year to drive some revenue from that platform.

Kevin Liu (Equity Analyst)

Understood. Appreciate the extra color there and congrats on a solid start to the year.

OPERATOR

Thank you. Really appreciate that, Kevin. Thank you. Thank you. And that does conclude our question and answer session. I'd like to turn the conference back over to Art Zaihle for any closing remarks.

Art Zaihle (CEO)

Well, thank you, Rocco, and thank you all for joining us today. As always, if you have any questions about our company or would like to speak with management, please reach out to Todd Curley and he will assist you in arranging a meeting. Thank you everyone for your interest in DHI Group and have a great Cinco de Mayo.

OPERATOR

Thank you, sir. And everyone that does conclude our conference for today. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful evening.

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