DHX earnings call transcript, November 4, 2026

Good afternoon, and welcome to DHI Group's third quarter earnings conference call for 2026. Joining me today are DHI CEO, Art Zaley, and CFO, Greg Skipper. Before I hand the call over to Art, I'd like to address this.

in accordance with the U.S. GAAP. Information regarding these non-GAAP measures and reconciliations to most directly comparable to GAAP measures is available in our earnings release, which can be found on our website at dhigroupinc.com in the investor relations sector. I will now turn the conference over to Art Zaley, CEO of DHI Group.

Thank you, Kelsey, and good afternoon, everyone. We appreciate you joining us today. At DHI, our mission remains straightforward. We help employers connect with highly skilled technology professionals through our two... platforms, Claris Jobs and Dice, each of which plays a critical role in the technology hiring ecosystem. Our exclusive focus on technology occupations, combined with product innovation, creates a durable, competitive advantage. Today, approximately 5,000 employers... staffing firms, and recruiting organizations subscribe to our platforms, and roughly 90% of our revenue is recurring. Claris Jobs is the leading marketplace for professionals with active U.S. security clearances, serving approximately 1,800 customers, including Lockheed Martin, Booz... Allen Hamilton, Leidos, Raytheon, and many others. Claris Jobs now has more than 2 million cleared candidate profiles, reinforcing our position as the industry's premier destination for cleared technology talent. DICE is the largest technology-focused talent marketplace. In the United States, built over more than 35 years with over 8 million technology profiles. Unlike generalized professional networking platforms, DICE organizes talent around more than 100,000 distinct technology skills, allowing recruiters to identify candidates based on the precise capabilities they need. Together, these two platforms have become essential tools for employers seeking highly specialized technology professionals. Our third quarter performance reflects growing momentum at clearance jobs, continued progress in narrowing

Dice's bookings decline, and strong cash generation. Although the two businesses are at different points in their growth cycles, we remain focused on serving our customers, managing expenses carefully, and investing in opportunities that create long-term shareholder value. Let me begin with Clearance Jobs, our primary growth engine. Clearance Jobs delivered strong third-quarter results, with bookings increasing 32% year-over-year and revenue growing 18%. Excluding Point Solutions Group, bookings increased 15% while revenue grew 4%. The acceleration in our core bookings is particularly encouraging. Following the softer bookings performance we experienced late last year, we strengthened our sales leadership and execution. We are now seeing those efforts reflected in the business, alongside growing demand for clear talent. As we discussed previously, bookings are a leading indicator of revenue. Revenue is recognized over the service periods of the underlying contracts, so stronger bookings translates into revenue growth over time, with the pace influenced by contract start dates and renewal performance. The return to double-digit core bookings growth is therefore an encouraging step toward the sustained revenue growth we believe Clearance Jobs can deliver. Our new business team had its strongest booking quarter in Clearance Jobs' 24-year history. In addition, our recruiter recruitment package customer count increased sequentially and encouraging development after several quarters of pressure. Together, these results point to stronger demand for the platform and progress in converting that demand into customer relationships. We see several factors supporting this opportunity.

First, we have a new business team. First, our traditional defense contractor customers are responding to increased national security and investment and the need to staff programs that require cleared engineers, cybersecurity specialists, and other highly skilled professionals. Second, a growing number of defense technology companies are entering this market. These include venture-backed firms and commercial technology companies pursuing government work. As they develop new capabilities and compete for contracts, access to cleared talent becomes increasingly important. Third, European and allied defense companies, such as SAP and BAE, are expanding their presence in the United States, creating additional opportunities for clearance jobs. These relationships demonstrate how clearance jobs' reach extends beyond traditional U.S. defense contractors. As established international companies and emerging defense technology firms, pursue U.S. opportunities, they need access to professionals with security clearances and specialized skills their programs require. Our established, cleared community positions us well to serve that expanding customer base. The Defense Spending Outlook offers an additional option. potential growth driver. Proposals under consideration for the next fiscal year would represent another significant increase in spending. Final authorization and appropriations bills remain subject to the legislative process and the timing of funding can affect when customers move forward with hiring. We therefore do not assume

the proposed spending translates immediately into bookings. However, we believe the direction of investment along with the growing number of employers pursuing defense work supports a meaningful long-term growth opportunity for clearance jobs. Turning to DICE, we are making progress. Although the business continues to face renewal pressure, the year-over-year decline in bookings narrowed to 9% in the third quarter, down from 14% in the second quarter, and 20% in the first quarter. Our new business sales organization performed well with year-over-year bookings growth. in the quarter, providing an encouraging indication of current hiring demand. At the same time, certain enterprise customers continue to reduce the size of their contracts as they align profile access and other purchasing commitments with their current recruiting needs. In these relationships, the pressure is So, that's right. You have to TONY, still have to give. It's primarily on spending levels rather than on the loss of the customer relationship. Across DICE, customer attrition remains a factor, although we are seeing less adjustment pressure across our mid-market customer base. Stabilizing customer count and improving renewal performance remain important milestones. The broader technology hiring indicators remain encouraging. The CompTIA and Lightcast data we monitor show technology job postings running about 30% above prior year levels, although these indicators have not yet translated into a return to growth for DICE.

They support our view that demand for specialized technology talent remains substantial. We continue to see AI-related initiatives driving demand for experienced technology professionals. Businesses need engineers who can design, implement, integrate, and maintain AI systems. Growing use of forward-deployed engineers to help companies implement AI projects also underscores the importance of that expertise. We remain measured about the timing of DICE's recovery. Improving market indicators and new business performance are positive, but enterprise renewal adjustments continue. to affect bookings and revenue reflects those changes over time. We are focused on improving execution, stabilizing customer relationships, and preserving healthy profitability while positioning DICE to benefit as customer demand strengthens. Across DHI, cash generation... ...remains an important strength of our business model. We generated strong free cash flow during the quarter, supported by disciplined expense management and solid collections. That cash generation enabled us to reduce debt by $2 million, while at the same time repurchasing approximately 900,000 shares... for $3.8 million in the quarter. As we look ahead, our priorities are clear. At Clearance Jobs, we are building on the momentum in core bookings and capturing demand from an expanding defense customer base, with a focus on translating that progress into sustained double-digit revenue.

At DICE, we are focused on customer retention, renewal spending, and new business execution, while maintaining financial discipline and positioning the business to benefit as demand continues to strengthen. With that, I'll turn the call over to Greg to walk through our financial results in greater detail.

Our average annual revenue per CJ recruitment package customer was up 10% year-over-year and up 3% on a sequential basis to $29,228. For the quarter, CJ's revenue renewal rate was 93%, up from 85% in the third quarter. of last year, and CJ's retention rate was 111%, up from 106% a year ago. The solid renewal and retention rates demonstrates the value CJ delivers in the recruitment of cleared professionals. DICE revenue was $15.7 million, which was down 13%. year-over-year and flat sequentially. DICE bookings were $12.1 million, down 9% year-over-year. We ended the quarter with 3,452 DICE recruitment package customers, which is down 7% from last quarter and down 19% year-over-year. DICE's revenue renewal rate was 67% for the quarter, and its retention rate was 92%. The reduction in DICE's customer count from the prior year quarter continues to be attributable to churn with smaller customers, spending less than $15,000 per year, representing approximately 80% of the total churn-on count. and who were more likely to be impacted by the soft tech hiring environment over the past year. We believe the introduction of our new DICE platform, which offers customers the flexibility of monthly subscriptions, will partially offset the churn among smaller accounts by lowering upfront commitment and improving affordability. Our average annual revenue per DICE recruitment package customer was $16,399, up 4% year-over-year and up 3% sequentially.

Deferred revenue at the end of the quarter was $37.3 million, down 9% from the third quarter of last year. Our total committed contract backlog is at the end of the quarter was $87.5 million, which was down 7% from the end of the third quarter last year. Short-term backlog was $69.4 million at the end of the quarter, and long-term backlog, that is, revenue to be recognized in 13 or more months, was $18.1 million.

Both brands onboarded notable clients in the third quarter. For CJ, this includes CISA, Neural Strategic Solutions, Muon Space, and Moog, while DICE landed CSG U.S. Group, touring Enterprises and Pertagic as customers. Now, let's move to operating expenses. For the quarter, our operating expenses decreased $8.2 million or 22% to $28.4 million when compared to $36.6 million in the year-ago quarter. Excluding the impairment in the 2025 period, operating expenses increased. That's $1.4 million, primarily due to the Point Solutions Group acquisition. For the quarter, we had income tax expense of $900,000 on income before taxes of $3.3 million. Our tax rate for the quarter differed from our statutory rate due to state income tax expense of $100,000. Although our income subject to tax has grown, the tax law change in 2025, which allows for the immediate deduction of R&D costs, has partially offset our 2026 cash outlay for income taxes. Moving on to the bottom line, we recorded net income of $2.4 million, or $6 million. For the prior year quarter, we reported a net loss of $4.3 million, or $0.10 per diluted share, which included the impairment charge of $9.6 million. Non-GAAP earnings per share for the quarter was $0.10 per share, compared to $0.09 per share. for the prior year quarter. Diluted shares outstanding for the quarter were 42.2 million shares, down 2.6 million shares, or 6% from the prior year quarter, as we return cash-view shareholders through our share repurchase program.

Adjusted EBITDA for the quarter was $8.9 million. A margin of 28% compared to $10.3 million, or a margin of 32% a year ago. On a segmented basis, CJ Adjusted EBITDA remains strong. It's $6.7 million in the third quarter representing the 41% Adjusted EBITDA margin as compared to Adjusted EBITDA. $5.9 million, or a margin of 43% in the prior year period. DICE's Adjusted EBITDA remains solid at $4 million, representing a 25% Adjusted EBITDA margin compared to $6.2 million and a 34% margin last year. Operating cash flow for the third quarter was $7.2 million compared to $4.8 million in the prior year period. Free cash flow, which is operating cash flow's less capital expenditures, was $5.3 million for the third quarter compared to $3.2 million in the same quarter last year. Capital expenditures, which consist primarily of capitalized development costs, were $1.9 million in the third quarter compared to $1.6 million in the same quarter last year. Capitalized development costs in the third quarter for CJ were $689,000 compared to $451,000. a year ago. While capitalized development costs for DICE were $887,000 this quarter, it's compared to $1.1 million a year ago. The CJ increase was primarily related to continued improvements to the Agile ATS and Premium Candidate Experience products. For the full year, we continued... ...to expect total capital expenditures of between $6 and $7 million, compared with $7.3 million last year. From a liquidity perspective, at the end of the quarter, we had $3.2 million in cash and our total debt was $30 million, a decrease of $2 million from the last quarter to spike.

cash outlays in the quarter of $3.8 million per share repurchases. Leverage at the end of the quarter was 0.86 times our adjusted EBITDA, and we continued to target one times leverage for the business. At the end of the quarter, we had approximately $800,000 remaining on our $10 million share. Moving on to guidance, we expect clearance jobs bookings growth to continue. For DICE, while we expect bookings to remain under pressure through the remainder of 2026, we believe the actions we're taking to improve customer retention and sales execution will support a gradual recovery. We are narrowing our full-year 2026 revenue guidance range to $124 million to $126 million from $124 million to $128 million. We expect CJ and DICE each to contribute revenue of $62 million. $63 million for the full year. From a profitability standpoint, we are raising our full-year adjusted EBITDA margin guidance for DHI to 26% from 25%. We are maintaining our CJ margin target at 40% and raising our DICE margin target to 25%.

Our focus remains on delivering sustainable, profitable revenue growth over the long term, along with 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 are optimistic about the road ahead. The record breaking defense budget is a growth driver for CJ and for DICE. We are seeing companies across all industries steadily increase their investments in technology initiatives, creating a growth opportunity. 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 our employees once again for their outstanding work this quarter. It is a pleasure to be part of such a great team.

The first question comes from Dawson Frizzinger from Lake Street Capital Markets. Please go ahead.