UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________________
FORM 10-K
(Mark One)
|
| | | | |
R☑
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 20182020
OR
|
| | | | |
£☐
| TRANSITION PERIOD PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
Commission File Number: 001-33584
______________________________________________
DHI Group, Inc.
(Exact name of Registrant as specified in its Charter)
______________________________________________
|
| | | | | | | |
| Delaware | | 20-3179218 |
(State or other jurisdiction of
incorporation or organization)
| | (I.R.S. Employer
Identification No.)
|
| |
1450 Broadway, 29th Floor
6465 South Greenwood Plaza, Suite 400 | | |
New York, New YorkCentennial, Colorado | | 1001880111 |
| (Address of principal executive offices) | | (Zip Code) |
(212) 725-6550448-6605
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
______________________________________________
|
| | | | | | | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock, par value $0.01 per share | DHX | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
______________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes £☐ No R☑
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes £☐ No R☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes R☑ No £☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes R☑ No £☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. £
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer £☐Accelerated filerR☑Non-accelerated filer£ ☐Smaller Reporting CompanyR☑
Emerging Growth Company£☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. £☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 726(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £☐ No R☑
The aggregate market value of common stock held by non-affiliates of the registrant was approximately $124,000,000$101,000,000 as of June 29, 2018,30, 2020, the last business day of the registrant’s second fiscal quarter of 2018.2020.
As of February 1, 2019,January 29, 2021, there were 53,193,27052,240,161 shares of the registrant’s common stock, par value $.01 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information from certain portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the fiscal year end of December 31, 2018.
DHI GROUP, INC.
TABLE OF CONTENTS
| | | | | | | | | | | |
| | | Page |
| PART I. | | | |
| Item 1. | | | |
| Item 1A. | | | |
| Item 1B. | | | |
| Item 2. | | | |
| Item 3. | | | |
| Item 4. | | | |
| | | |
| PART II. | | | Page |
PART I. | | | |
Item 1.5. | | | |
Item 1A. | | | |
Item 1B. | | | |
Item 2. | | | |
Item 3. | | | |
Item 4. | | | |
| | | |
PART II. | | | |
Item 5. | | | |
| Item 6. | | | |
| Item 7. | | | |
| Item 7A. | | | |
| Item 8. | | | |
| Item 9. | | | |
| Item 9A. | | | |
| Item 9B. | | | |
| | | |
| PART III. | | | |
| Item 10. | | | |
| Item 11. | | | |
| Item 12. | | | |
| Item 13. | | | |
| Item 14. | | | |
| | | |
| PART IV. | | | |
| Item 15. | | | |
| Item 16. | | | |
NOTE CONCERNING FORWARD-LOOKING STATEMENTS
Information contained herein contains forward-looking statements. You should not place undue reliance on those statements because they are subject to numerous uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Forward-looking statements include information concerning our possible or assumed future results of operations, and descriptions of our business strategy. These statements often include words such as “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or similar expressions. These statements are based on assumptions that we have made in light of our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to:
a review of strategic alternatives may occur from time to time and the possibility that such review will not result in a transaction;
disruption resulting from unsolicited offers to purchase the company;
•our ability to execute our tech-focused strategy;
loss•write-offs of key executivesgoodwill, tradename and technical personnel and our ability to attract and retain key executives, including our CEO;intangible assets;
increases in the unemployment rate, cyclicality or downturns in the United States or worldwide economy or the industries we serve, labor shortages, or job shortages;
•competition from existing and future competitors;
•changes in the recruiting and career services business and technologies, and the development of new products and services;
decreases or delays in business-to-business technology advertising spending could harm our ability to generate advertising revenue;
•failure to develop and maintain our reputation and brand recognition;
•failure to increase or maintain the number of customers who purchase recruitment packages;
•failure to attract qualified professionals or grow the number of qualified professionals who use our websites;
failure to timely and efficiently scale and adapt our existing technology and network infrastructure;
capacity constraints, systems failures or breaches of network security;
compliance with laws and regulations concerning collection, storage and use of professionals’ professional and personal information;
our indebtedness;
inability to borrow funds under our Credit Agreement (as defined below) or refinance our debt;
•results of operations fluctuate on a quarterly and annual basis;
periods of operating and net losses and history of bankruptcy;
covenants in our Credit Agreement;
•inability to successfully integrate recent and future acquisitions or identify and consummate future acquisitions;
•misappropriation or misuse of our intellectual property, claims against us for intellectual property infringement or the failure to enforce our ownership or use of intellectual property;
compliance with changing corporate governance requirements•disruption resulting from unsolicited offers to purchase the company;
•failure of our businesses to attract, retain and costs incurredengage users;
•our foreign operations;
•inability to expand into international markets;
•unfavorable decisions in connection with being a public company;proceedings related to future tax assessments;
•taxation risks in various jurisdictions for past or future sales;
•significant downturn not immediately reflected in our operating results;
•our indebtedness;
•covenants in our Credit Agreement (as defined below);
•inability to borrow funds under our Credit Agreement or refinance our debt;
•compliance with the continued listing standards of the New York Stock Exchange (the “NYSE”);
•volatility in our stock price;
•failure to maintain internal controls over financial reporting;
U.S.•failure to timely and foreign government regulationefficiently scale and adapt our existing technology and network infrastructure;
•capacity constraints, systems failures or breaches of the internet and taxation;network security;
changes in foreign currency exchange rates;
•failure to realize the full potential of our network;
•decrease in user engagement;
•Internet search engine methodologies and their impact on our search result rankings;
•failure to halt the operations of websites that aggregate our data, as well as data from other companies;
failure•our reliance on third-party data hosting facilities;
•compliance with laws and regulations concerning collection, storage and use of professionals’ professional and personal information;
•U.S. and foreign government regulation of the internet and taxation;
•a review of strategic alternatives may occur from time to time and the possibility that such review will not result in a transaction;
•loss of key executives and technical personnel and our businessesability to attract and retain key executives, including our CEO;
•increases in the unemployment rate, cyclicality or downturns in the United States or worldwide economies or the industries we serve, labor shortages, or job shortages;
•decreases or delays in business-to-business technology advertising spending could harm our ability to generate advertising revenue;
•compliance with changing corporate governance requirements and engage users;costs incurred in connection with being a public company;
our•changes in foreign operations;currency exchange rates;
inability to expand into international markets;
unfavorable decisions in proceedings related to future tax assessments;
taxation risks in various jurisdictions for past or future sales;
write-offs of goodwill, tradename and intangible assets;
significant downturn not immediately reflected in our operating results; and
•the UK’s impending departure from the EU.EU; and
•the impact of the novel coronavirus disease ("COVID-19") or other public health issues could have on our business and financial condition and the economy in general.
NON-GAAP FINANCIAL MEASURES
Information contained herein contains certain non-GAAP financial measures. These measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States (“GAAP”). Such measures presented herein include Adjusted Revenues, adjusted earnings before interest, taxes, depreciation, amortization, non-cash stock based compensation expense, impairment, gain or loss on sale of business including the prior operating results of those businesses, and other income or expense (“Adjusted EBITDA”), and Adjusted EBITDA Margin. See Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for definitions of these measures as well as reconciliations to the comparable GAAP measure.
PART I
Item 1. Business
Information Availability
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy and information statements and other material information concerning us are available free of charge on the Investors page of our website at www.dhigroupinc.com. Our reports filed with the SEC are also available by visiting http://www.sec.gov.
Introduction and Summary
This section provides an overview of DHI Group, Inc. (“Company” or “DHI”). Please see our consolidated financial statements included elsewhere in this report for additional discussion regarding our results of operations for the year ended December 31, 2018.2020.
| | | | | | | | | | | | | | | | | | | | |
| (in thousands) | | FY 2020 | | FY 2019 | | Change |
| Revenues | | $ | 136,878 | | | $ | 149,370 | | | (8) | % |
Operating income (loss) (1) | | $ | (29,605) | | | $ | 17,025 | | | (274) | % |
| | | | | | |
| Income (loss) before income taxes | | $ | (32,434) | | | $ | 16,324 | | | (299) | % |
Net income (loss) (2) | | $ | (30,015) | | | $ | 12,551 | | | (339) | % |
Diluted earnings (loss) per share (2) | | $ | (0.62) | | | $ | 0.24 | | | (358) | % |
| Net cash flows from operating activities | | $ | 18,683 | | | $ | 22,923 | | | (18) | % |
| | | | | | |
| | | | | | |
Adjusted EBITDA (3) | | $ | 29,924 | | | $ | 34,859 | | | (14) | % |
Adjusted EBITDA Margin (3) | | 22 | % | | 23 | % | | n.m. |
| | | | | | |
(1) Operating income for the year ended December 31, 2020 includes impairments of intangible assets and goodwill of $38.8 million. Operating income for the year ended December 31, 2019 includes disposition related and other costs of $1.7 million and a loss of $0.5 million related to the sale of Hcareers.
|
(2) Net loss and diluted loss per share for the year ended December 31, 2020 includes the negative impact of $37.9 million, net of tax, and $0.78 per share related to the items identified in number 1 above as well as the impairment of an equity investment and the impact of discrete tax items. Net income and diluted earnings per share for the year ended December 31, 2019 includes the negative impact of $1.6 million, net of tax, and $0.04 per share related to the items identified in number 1 above as well as the impact of discrete tax items.
|
| (3) For a description of these non-GAAP measures and reasons why management believes they provide useful information to investors, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources, and Non-GAAP Measures” located elsewhere in this report. |
|
| | | | | | | | | | | |
| (in thousands) | | FY 2018 | | FY 2017 | | Change |
| Revenues | | $ | 161,570 |
| | $ | 207,950 |
| | (22 | )% |
Operating income (1) | | $ | 11,692 |
| | $ | 22,865 |
| | (49 | )% |
| Income before income taxes | | $ | 9,602 |
| | $ | 19,397 |
| | (50 | )% |
Net income (2) | | $ | 7,174 |
| | $ | 15,978 |
| | (55 | )% |
Diluted earnings per share (2) | | $ | 0.14 |
| | $ | 0.33 |
| | (58 | )% |
| Net cash provided by operating activities | | $ | 14,918 |
| | $ | 34,409 |
| | (57 | )% |
| | | | | | | |
Adjusted Revenues (3) | | $ | 152,258 |
| | $ | 158,465 |
| | (4 | )% |
Adjusted EBITDA (3) | | $ | 32,032 |
| | $ | 36,973 |
| | (13 | )% |
Adjusted EBITDA Margin (3) | | 21 | % | | 23 | % | | n.m. |
|
| | | | | | | |
(1) Operating income for the year ended December 31, 2018 includes gain of $3.4 million related to the sales of Rigzone and Hcareers and includes disposition related and other costs of $7.6 million. Operating income for the year ended December 31, 2017 includes a gain of $6.7 million related to the sale of the Health eCareers business, proceeds from restitution award of $3.3 million in the OilPro related legal matter, disposition related and other costs of $4.7 million and impairment of fixed assets of $2.2 million.
|
(2) Net income and diluted earnings per share for the year ended December 31, 2018 includes $4.7 million, net of tax, and $0.09 per share related to the items identified in number 1 above as well as the impact of certain discrete tax items. Net income and diluted earnings per share for the year ended December 31, 2017 includes income of $4.5 million, net of tax, and $0.09 per share related to the items identified in number 1 above as well as the impact of certain discrete tax items.
|
| (3) For a description of these non-GAAP measures and reasons why management believes they provide useful information to investors, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources, and Non-GAAP Measures” located elsewhere in this report. |
| | | | | | | | |
2020 Highlights | | DHI's primary goals for 2020 were to invest in and to deliver even greater value to both clients and candidates of its three brands, Dice, ClearanceJobs, and eFinancialCareers, including marketplace capabilities and other innovative services to help employers build their tech workforce and technologists to manage their careers, amidst uncertainty and remote work. The Company also invested significantly in improving its sales and marketing capabilities to drive future growth, while maintaining EBITDA margins. Key results include: |
| | |
Deliver Innovative Career Marketplace Features
| | Dice delivered additional career marketplace capabilities with the launch of Recruiter Profile, allowing clients to enrich profiles with photos, personal information and details, creating greater transparency and personalizing the recruiter behind the role; and Messaging to allow real-time career connection conversations within the platform. Dice Remote Jobs launched in May, enabling employers to tap into pools of remote workers across the U.S. to increase talent pipelines and diversify work forces as part of a nationwide shift toward remote work while allowing easier filtering for technologists to apply for remote-only jobs.
ClearanceJobs further enhanced its dynamic career marketplace launching Favorites, allowing clients to flag top candidate prospects and receive alerts on activity; Automated Recruiter Workflow, allows recruiting teams to automate recruitment processes like connecting with potential candidates, sending introduction messages, or tagging candidates to a specific job opening, eliminating 3.5 hours of administrative task time per recruiter per day; and Client Team Dashboard, enabling clients to see the full view of their recruitment team activity, linking activities to successful hiring patterns.
eFinancialCareers completed the foundation of the marketplace, launching Job Alerts, which help candidates find jobs that fit their skills and interests, Enhanced Candidate Profile, enabling finance professionals to create a richer profile and eFC Follow, Voice, Video, a rich set of communication tools for recruiters and professionals to engage in career discussions virtually. |
| | |
| Strengthen Go-To-Market Capabilities | | DHI transformed its sales function under new leadership with expansions of sales teams, account management (customer success), sales operations, and sales enablement. Specifically, the Company added 20 sales reps focusing on Dice SRC and commercial accounts, and ClearanceJobs.
Dice further cemented its position as a trusted market leader through stronger communication of new products and enhanced digital marketing initiatives. The result was over 10% year-over-year increase in candidate visible profiles, demonstrating greater trust in the platform and more than 45% growth in applications, delivering more relevant candidates for employers to grow their tech workforces.
|
| | |
| Pivot to Growth | | ClearanceJobs began selling directly to the federal government in addition to the government contractors that make up its historical customer base and in the process, added a potentially significant new market and growth vehicle.
Despite overall uncertainty in markets for the majority of 2020, Dice exceeded booking targets in the fourth quarter, indicating a pivot toward growth for 2021.
The Company maintained strong EBITDA margins of 22% while continuing to make strategic investments to maximize growth opportunities. |
Company Profile
DHI was incorporated in Delaware on June 28, 2005 and is a leading provider of data, insightssoftware products, online tools and employment connections throughservices to deliver career marketplaces to candidates and employers globally. DHI's three brands — Dice, ClearanceJobs and eFinancialCareers— enable recruiters and hiring managers to efficiently search, match and connect with highly skilled technologists in specialized services forfields, particularly technology, professionals.those with active government security clearances and in financial services. Our mission is to empower technology professionals and organizations that hire them to compete and win through expert insights and relevant employment connections by delivering three key value propositions:
•Providing the best search and match solution for recruiters and employers;
•Delivering the most relevant and personalized technology career related content; and
•Aggregating and analyzing workforce intelligence data to deliver specialized insights.
The majority of our revenues today are generated through the sale of recruitment packages, which allow customers to post jobs on our websites and source candidates through our resume databases. Recruitment packages are typically provided through contractual arrangements with annual, quarterly or monthly terms.
Our Products and Services
We help organizations find the best talent, and we help technology, financial and security cleared professionals find the best jobs andto advance their careers. We do this through a number of productsOur vision is to create indispensable career marketplaces that match the highest quality candidates with the right career opportunities. Our solutions are available individually or bundled in packages, including:
Resume•Talent databases. Each of our brands provides powerful, detailed searchesprovide candidate databases with search capabilities that return relevant profiles, resumes, and social and web profiles that allow for a broader pool of a large number of candidate resumes, bolsteredtalent. We help clients quickly find and connect with social data at Dice. Showing customers relevanttop talent makesto make their recruiting efforts more efficient.
•Job postings. Our job collectionsplatforms are focused on specific verticals tailored to technology, finance and security-cleared individuals, making it easier for tech professionals to search for relevant jobs. In turn, the applications received by our customersclients are more likely to be relevant and qualified compared to applications received fromon generalist sites. Thus, showingProviding professionals with the rightmost relevant job postings benefits both the talent and the recruiting organization.
Unified Profile Index. The Unified Profile Index is•Employer Branding.Each of our brands has a proprietarysuite of offerings that help clients amplify their brand to reach more professionals. Possible solutions include display advertising, email, enhanced job postings or company profiles, and unique index which gathers information aboutsocial targeting.
•Managed Services. This premium service delivers sourced and screened candidates from a large collection of socialto recruiters and web sources, combining that information with Dice's owned and licensed data. The UPI allows our customers to build broader pools of talent from across the web, giving them deeper career insights into the talent they discover.
employers.•Content and data. Each of our brands provides tailored content to help professionals manage their careers and provide employers insight into recruiting strategies and trends.
Industry and Skill Focused Brands
During 20182020 we offered our talent acquisition and career development products and tools through the following key brands:
| | | | | | | | | | | |
| Service | Yrs. in Operation | Specialized Focus | Primary Source of Revenues |
Dice2 | 30 | Technology and engineering in the U.S. | Recruitment packages¹, career fairs and open houses |
| | | |
| ClearanceJobs | 18 | Security-cleared professionals | Recruitment packages¹ |
| | | |
| eFinancialCareers | 20 | Financial services and technology | Recruitment packages¹ and job postings |
| | | |
| | | |
Service | Yrs. in Operation | Specialized Focus | Primary Source of Revenues |
Dice | 28 | Technology and engineering in the U.S. | Recruitment packages¹ |
Dice Europe2
| 16 | Technology and engineering in the U.K. and Germany | Job postings and advertising |
ClearanceJobs | 16 | Security-cleared professionals | Recruitment packages¹ |
Targeted Job Fairs | 30 | Technology, energy and security-cleared professionals | Career fairs and open houses |
eFinancialCareers | 18 | Financial services | Recruitment packages¹
and job postings
|
Rigzone3
| 20 | Oil and gas | Recruitment packages¹
and advertising
|
BioSpace4
| 33 | Biotechnology | Job postings and advertising |
Hcareers5
| 21 | Hospitality | Job postings |
¹ Recruitment packages are a combination of job postings andand/or access to our searchable database of candidates. |
|
2 Dice Europe ceased operations on August 31, 2018.Includes Career Events |
3 Rigzone sold the RigLogix portion of the Rigzone business on February 20, 2018 and DHI transferred majority ownership of remaining Rigzone business to Rigzone management August 31, 2018.
|
4 Transferred majority ownership of BioSpace on January 31, 2018 to BioSpace management.
|
5 Hcareers was sold May 22, 2018.
|
Dice has been a go-to destination for technology and engineering talent in the United States for the past 2830 years. The job postings available on Dice, from both technology and non-technology companies across many industries, include positions for software engineers, big data professionals, systems administrators, database specialists, project managers, and a variety of other technology and engineering professionals. Dice had approximately 78,00058,000 job postings as of December 31, 2018. During 2018,2020 and during 2020, Dice in North America had, on average, approximately 1.41.5 million monthly users.
Customers can purchase recruitment packages, job postings or advertisements. Approximately 91%94% of Dice revenue was derived from recruitment packages in 2018.2020. Recruitment packages including utilizing Unified Profile Index, offer our customers the ability to access the candidate resume database and post up to a specified number of jobs at a single time.jobs. Customers are incentivizedencouraged to purchase our recruitment packages on
an annual basis. Candidate Match and Search on Dice is powered by IntelliSearch, a proprietary machine-learning technology that is foundational to many Dice products and services.
Professionals can post their resumes, search jobs and access our career-related content, news and tools. Skill Center, a tool implemented by Dice, uses data aggregated from across the web to show skillskills trends, giving professionals insights into potential skills gaps and development areas. Salary Predictor and Salary Calculator offer real-time salary tools leveraging predictive analysis to help tech professionals and employers discover tailored salary estimates based on skills, job titles, years of experience and location. Job Search and Job Alerts deliver tailored and personalized career opportunities to candidates.
Dice entered the European market in 2013 through the acquisition of The IT Job Board, a technology career site for the UK and Continental Europe. In 2015, we rebranded The IT Job Board to Dice Europe, which ceased operations on August 31, 2018.
ClearanceJobs is a leading Internet-based career network dedicated to matching security-cleared professionals with the best hiring companies searching for employees. Authorized U.S. government contractors, federal agencies, national laboratories and universities utilize The Cleared Network to quickly and easily find candidates with specific, active security clearance requirements to fill open jobs in a range of disciplines. ClearanceJobs NextGen platform provides opportunities for employers and candidates to engage in real-time through messaging and employers to promote brand differentiators through BrandAmp and Pulse. The majority of candidates with resumes in our database have high-level security clearance. ClearanceJobs had approximately 48,00053,000 job postings as of December 31, 2018. During 2018,2020 and during 2020, ClearanceJobs had, on average, 556,000 unique621,000 monthly users.
eFinancialCareers is one of the world’s leading financial services careers website,websites, operating websites in multiple markets in four languages mainly across the United Kingdom, Continental Europe, Asia, Australia, the Middle East and North America. Professionals from across many sectors of the financial services industry, including asset management, risk management, investment banking, and information technology, use eFinancialCareers to advance their careers. eFinancialCareers extends its global footprint beyond its own sitesEmployers can engage with financial services professionals through job posting distribution agreements with more than 30 financereal-time messaging and business websites around the world, including well-known publications and organizations.promote their employment brand through Recruiter Profiles. eFinancialCareers had approximately 15,00014,500 job postings as of December 31, 2018. During 2018,2020 and during 2020, eFinancialCareers had, on average, 2.22.0 million monthly users.
Rigzone is a leading website dedicatedDuring 2018, our results also included the activities related to delivering online content, data, and career services in the oil and gas industry in North America, Europe, the Middle East, and Asia Pacific. Oil and gas companies, as well as companies that serve the energy industry, use Rigzone to find talent for roles such as petroleum engineers, sales professionals with energy industry expertise and skilled tradesmen. In addition to recruitment packages and advertising, Rigzone provides a number of data services products including Riglogix, RigEdge and RigOutlook. The RigLogix portion of the Rigzone business was sold on February 20, 2018 and a majority ownership of the remaining Rigzone business was transferred to Rigzone management on August 31, 2018.following brands:
Hcareers is a leading source for hospitality jobs across North America and is one of the largest providers of job postings for the hotel, restaurant, food service, casino and assisted living industries. Hospitality professionals like general managers, sales directors, and executive chefs use Hcareers to advance their careers. The Hcareers business was sold on May 22, 2018.
BioSpace is a leading resource for biotechnology careers, news and resources and has helped recruitment, communication and discovery among business and scientific leaders within the life sciences. In addition to recruitment packages, customers can purchase BioSpace’s HotBeds campaigns, a unique branding and advertising product to assist regional clusters of companies with high demands for biotech talent. A majority ownership of the BioSpace business was transferred to BioSpace management on January 31, 2018. | | | | | | | | | |
| Service | | Specialized Focus | Primary Source of Revenues |
Dice Europe2 | | Technology and engineering in the U.K. and Germany | Job postings and advertising |
Rigzone3 | | Oil and gas | Recruitment packages¹ and advertising |
BioSpace4 | | Biotechnology | Job postings and advertising |
Hcareers5 | | Hospitality | Job postings |
| | | |
| ¹ Recruitment packages are a combination of job postings and/or access to our searchable database of candidates. |
2 Dice Europe ceased operations on August 31, 2018. |
3 Rigzone sold the RigLogix portion of the Rigzone business on February 20, 2018 and DHI transferred majority ownership of remaining Rigzone business to Rigzone management on August 31, 2018. |
4 DHI transferred majority ownership of BioSpace on January 31, 2018 to BioSpace management and sold its remaining minority stake in BioSpace to BioSpace management on April 30, 2020. |
5 Hcareers was sold May 22, 2018. |
Our Industry
We primarily operate in the talent discovery and acquisition segment of the broader market for human capital management services through career sites for technology professionals. There is a shortage of skilled professionals worldwide and we believe that the overall demand for talent acquisition and career development products and services has significant long-term growth potential.
We also believe that certain industries that employ highly-skilled and highly-paid professionals will experience particularly strong demand for effective recruiting solutions due to the scarcity of such professionals. For example, as of December 2018,2020, the
seasonally unadjusted U.S. unemployment rate was 2.1%3.0% for computer-related occupations and 2.4%3.1% in the finance sector, as compared to the overall national average of 3.9%6.7%, seasonally adjusted. Historically, the unemployment rate for college graduates has been lower than the unemployment rate for the U.S. overall. As of December 2018,2020, the seasonally unadjusted unemployment rate for college graduates was 2.0%3.6%.
We believe that there are four major trends that will continue to shape demand for talent acquisition services:
•Greater competition for professional talent. The candidate-employer relationship has changed, with the balance of power shifting towards the candidates. As more companies leverage technology to advance their business, employers will increasingly need to hire tech talent to compete. According to analysis of data from the Bureau of Labor statistics, Information technologyMicrosoft, world-wide digital jobs have grownare expected to an average rate of 2.5% over the past 10 years, comparedgrow from 41 million in 2020 to 0.9% for all industries, primarily driven by the emergence of big data, cloud computing and information security.
190 million in 2025.•Continued professional interest in career brands specific to industry and skills. Our services focus on domains or industries that require specialized skills and knowledge and, thus, customized content, profiles and search parameters. In addition, the technology professionals often share a sense of personal identity and community that goes beyond the confines of their careers. We believe that both specialized skills and the sense of personal identity and community lead professionals in our verticals to prefer specialized career brands over generalist ones.
•Talent attraction and retention becoming more of a strategic priority for companies. The PWC 2018 US23rd Annual Global CEO Survey found that 27%32% of U.S. CEOs in North America are ‘extremely concerned’'extremely concerned' about the availability of key skills as a threat to their organizations’ growth prospects. In this environment where top talent is hard to find, organizations are increasingly prioritizing retention of talent.talent and upskilling. According to Deloitte’s Global Human Capital Trends 2018, 61%the PWC report, only 18% of human resources respondentsCEOs believe their organizations have made progress in establishing upskilling programs to develop employees' capabilities and employability with technical, soft and digital skills. These programs are actively redesigning jobs around artificial intelligence (AI), roboticsan effort by organizations globally to address the aging labor force and new business models, resulting in a disruptive change in workforce needs, including skill development.
short supply of technical, digital and soft skills.•Increaseduse of data and analytics in human capital management and increased need for insights. As many companies prove the power of analytics in marketing and other business domains, organizations are seeking to gain a competitive advantage by applying data-driven insights to improve their hiring, retention and leadership capabilities. According to Deloitte’s Global Human Capital Trends 2018, 84% of surveyed companies believe that using people analytics is ‘very important or important.’
In this environment, we believe there is an opportunity for career management and talent acquisition tools that leverage the common interests, goals and skills of select professional communities. We believe that a focus on professional communities allows organizations to more efficiently identify talent, with more complete data and insights about that talent.
Our Value Proposition
We are a leading provider of data, insights and employment connections through specialized online professional communities organized around common professional interests and skill sets powered by technology. This specialized approach provides technology professionals with more relevant career related information and opportunities, enhancing their ability to maximize their careers. Through engaging with professionals, we are able to build rich and unique data sets around valuable talent pools. The combination of our focused online professional websites and rich data sets allows organizations to find and hire professional talent more efficiently and effectively, and therefore incentivizes them to source talent through our online professional communities. The benefits our services provideprovided to both professionals and recruiting customers create a robust marketplace.
Benefits we provide to Professionals
Relevant employment connections. When professionals post their resumes or apply for jobs on our websites, they can make valuable connections with organizations who prize their skills and expertise. Professionals can avoid having to “sort through the clutter” on generalist career sites and get the most out of their time by using our more focused services.
Skills/industry-specific career management tools, information and insights. We provide professionals with targeted and relevant career development tools, content and news. For example, Dice and ClearanceJobs provide professionals with market and salary information and local market trends. In addition, the Salary Predictor allows professionals to evaluate their market value and map out which skills will increase their value. eFinancialCareers provides industry-specialized online career content, as well as career guides targeted to college and graduate students. We believe our career development services and tools provide professionals with the insights they need to propel their careers forward, and thus increase the engagement of professionals with our sites.
Benefits we provide to our Customers
Large pools of qualified and hard-to-reach professionals. We seek to improve the efficiency of the recruiting process for our customers by providing efficient access to large pools of highly qualified and hard-to-reach professionals. Because the communities of professionals who visit our websites are highly-skilled and specialized within specific industries, we believe our customers who post jobs receive applications from candidates who are better qualified for the positions, and that they receive fewer irrelevant applications than when using generalist sites. In addition, since our resume data and resume search
functions are highly tailored by specialty, we believe that our customers can more efficiently identify talent using our resume databases than by using broader services.
Relevant information on prospective candidates. We believe that the specialized nature of our job posting and resume search products makes them inherently more relevant and efficient for recruiting. In addition, our Unified Profile Index creates an aggregated profile of a professional’s experience, contributions, and capabilities as well as their passions and interests. Using all of these products together gives our customers the most complete view of a prospective candidate, and allows them to not only identify the best talent but also tailor their recruiting approach to each individual.
Hyper-targeted candidate outreach and employer branding. We offer recruiting customers the ability to target hard-to-find professionals with messages in the online forums they frequent. Our Lengosocial targeting service leverages our social aggregation capabilities to assemble candidate target lists based on specific factors like skill sets, work experience, location, or interests; then executes hyper-targeted employer branding or job search campaigns in online forums where specific potential candidates spend time.
Our Strategic Goals
Our company undertook a comprehensive strategic review that began
Since arriving in 2017 and continued intoApril of 2018, that resulted in deeperCEO Art Zeile has led an aggressive effort to focus and executionbuild on our legacy of our tech-focused growth strategy designed to reinvigorate our core business and broaden our market opportunity. Our goal has been to further the mission of being the leadingleadership in technology talent acquisition resource serving and engagingreinvigorate the business in multiple respects, including delivering best-in-class candidate quality and match capabilities; transforming Dice and eFinancialCareers from their job board legacies into indispensable career marketplaces modeled on our market-leading and high growth brand, ClearanceJobs; investing in functional excellence to drive growth and product innovation; and transforming/expanding our sales team to drive renewed growth.
Delivering best-in-class candidate quality and match capabilities for technology roles.We believe candidate quality is the essential foundation of success in our industry and we intend to differentiate our business by leading in this respect. In 2020, we dramatically improved the quality of our Dice candidate database to a level we believe is best-in-class and plan continued vigilance and innovation to drive continued improvements. We are also building on our unique legacy and intellectual property in the technology jobs space to create match capabilities for both candidates and clients that are reducing the time and effort required in job searching and talent acquisition. Our proprietary and patent-pending machine-learning technology, IntelliSearch, powers many Dice and ClearanceJobs products and is foundational to providing relevant job opportunities for candidates and efficient search and match solutions for clients.
Building indispensable tech-focused career marketplaces. ClearanceJobs has established a unique franchise in the market for cleared professionals, many with tech experience. Built on a unique cohort of candidates and specialized employer and recruiter tools together, ClearanceJobs is a highly interactive two-sided marketplace environment. These attributes provide clear and measurable ROI for clients and has contributed to ClearanceJobs more than doubling its revenue over the past five years. With over 18 years in the market, we believe ClearanceJobs is a highly defensible and valuable business. We are in the process of transforming our Dice and eFinancialCareers brands into similar career marketplaces customized for the needs of their unique candidate and client communities. In 2020, we delivered the final components of eFinancialCareers marketplace capabilities focused on driving adoption with clients and candidates. We delivered foundational career marketplace features for Dice in 2020, focusing on landing launches and driving adoption with customers. We expect these changes to transform the way our stakeholders use these solutions and to drive results as adoption increases.
Investing in functional excellence and product innovation. Since joining DHI, CEO Art Zeile has built a leadership team capable of driving growth and supporting a culture of high performance. Over the course of the year, the team reinvigorated their functional areas to drive results in the business, working towards the common goal of launching and landing innovative products in the market. Specifically, in 2020 the Company released a number of products to help employers find tech candidates and technologists further their careers. These include, at Dice: Recruiter Profile and Instant Messaging; at ClearanceJobs: Favorites to flag top candidates; and at eFinancialCareers: Job Alerts and Voice, Video and Follow allowing employers and candidates better opportunities to connect in real-time. As a pandemic forced professionals everywhere to work from home, Dice fast-tracked its Remote Jobs product, enabling employers to tap into pools of remote workers across all industries. In addition, we have executed a planthe U.S. to leverage our techincrease talent acquisition franchisepipelines and diversify work forces and technologists to expand our next-generation talent acquisition solutionscontinue to further their careers through finding remote work opportunities.
We are investing to further increase the broader talent acquisition market, across industries and geographic markets. There are four componentspace of innovation by adding engineers to our tech-focused strategy:
Focus resources behind our core tech talent brands. We believe that focusing on technology talent acquisition provides us with the best opportunity to win in our increasingly competitive industry. Moreover, to capture the technology market opportunity we need to move quickly, so we plan to focus incremental investments behind the businesses that fall within our tech-focused portfolio - Dice, eFinancialCareers, and ClearanceJobs.
Deepen the integration of Unified Profile Index through enhanced data analytic capabilities and new go-to-market strategies;
Improve performance attribution for tech-focused talent acquisition brands by accelerating integration with customers’ applicant tracking systems (ATS);
Launchteam, centered around a suite of new value-add Dice recruitment products, such as matching capabilities and products which build deeper trust with the tech community; and
Leverage eFinancialCareers finance franchise and global footprint to capitalize on the Fintech evolution in financial services.
Increase engagement with professional talent. In today's evolving digital media ecosystem, it is critical for our success to be an indispensable career marketplace for talent to connect with the right opportunities in order to gain insights and information about professionals that are valuable to our recruiting customers.
Offer technology professionals a comprehensive career management platform that provides skill specific insights that help align professionals' goals and careers; and
Increase the adoption and utility of the Dice productsdomain-driven development model to increase engagementthe quality and speed of product delivery. Our marketing team is focused on delivering results at lower cost in terms of driving traffic to Dice and eFC, growing visible profiles and applications with technology professionals.
Develop next-generation talent acquisition solutions. As our industry continuesless spend and with more to evolve, the talent acquisition ecosystem is becoming more complex and recruiters are pursuing more sophisticated search strategies. This environment creates demand for next-generation recruitment solutions, suchcome as social sourcing, targeted employer branding, and candidatewe leverage new capabilities in customer relationship management (CRM), product marketing, and digital analytics, among others, that are likely to gain share within the online and broader talent acquisition market in the coming years. We own a suite of next-generation solutions that are well positioned to benefit from this trend, which we believe will be a key source of growth for our company.others.
Further leverage our data aggregation and analysis capabilities through services like Lengo with our tech-focused talent acquisition brands to offer customers more comprehensive solutions.
Acquire complementary assetsTransforming our sales and customer success efforts to acceleratedrive growth.The ongoing evolutionAs early leaders in online talent acquisition, DHI’s brands have a legacy of strong recurring clients and fragmentationrevenue and, as a result, renewals have historically provided the majority of our market provides us with the Company’s revenues. We believe there is significant opportunity to launchgrow our customer base and expand to new revenue opportunities, particularly with commercial accounts, or acquireclients who recruit for their own needs, with an expanded and better enabled sales force. Our customer success team implemented new servicesstrategies to enhancedrive proactive external engagement and report real-time feedback to better include the customer voice to influence our offeringproduct roadmap. We will continue to professionals and recruiting customers.grow our sales team as opportunities arise.
Marketing and Sales
We focus our long-term consumer marketing efforts on growing the number of professionals who visit and engage with our websites, which we believe increases the attractiveness of our websites to our customers. We use a combination of direct marketing, branding and communications initiatives, including content, to increase our brand awareness, traffic, new resumes postedand updated profiles and applications to job postings. We primarily engage in digital media including search engine marketing, online advertising, and participation in industry events, social media, marketingemail and content marketing. Many of our brands use strategic alliances with relevant publishers, trade associations and industry groups to increase reach and traffic. Some of our brands have also invested in broader awareness campaigns that include outdoor advertising in select cities where competition for their respective specializations is high.through digital media and partnerships.
Our customer marketing efforts are primarily focused on lead generation activities, such as digital media, email campaigns and participation in industry events. We also use marketing communications, such as media relations, social media, and thought leadership content, to enhance brand awareness and client relationships. Many of our ongoing customer marketing efforts focus on driving increased customer understanding of our product innovation and tools to drive increased product usage.
We sell our products primarily through our direct sales force. We have a number of direct sales teams globally organized by brand, market segment, and geography. Our field sales groups target Fortune 1000 companies, large staffing and recruiting firms and other large and mid-size businesses. Our strategy in 2020 focused on implementing new sales processes, methodologies, and forecasting to drive improvements to better address market opportunities and our clients' needs. We increased our focus on customer success to drive renewal rates with existing customers. Our in-house sales teams focus on generating new business from recruiters andas well as small and mid-size companies, renewing customer contracts, increasing the service levels customers’ purchase and servicing the needs of our largest clients. As of December 31, 2018,2020, we employed approximately 88111 sales personnel in the United States and approximately 3929 in the rest of the world. In addition to our internal sales organization, we also use ad networks to help generate ad sales.
We also invest in fraud detection initiatives and maintain teams of account managers and customer support specialists who work to ensure customers get the most from our products and services by providing training and assistance. In addition to technologies we leverage for fraud detection, our customer support departments perform some compliance functions, such as reviewing the websites for false or inaccurate job postings.
Customers
We currently serve a diversified customer base consisting of approximately 12,0009,500 customers in total. No one customer accounted for more than 10% of our revenues in 2018.2020. Our customers include small, mid-sized and large direct employers, staffing companies, recruiting agencies, consulting firms and marketing departments of companies. As of December 31, 2018,2020 notable customers of the Dice and ClearanceJobs businesses included AT&T, Adecco, Amazon, Apple, Cisco, Dell, IBM,GEICO, Kforce, Manpower, Microsoft, NCI, Oracle,Procter & Gamble, Samsung, UnitedHealth and Samsung.Verizon. Notable customers of eFinancialCareers included Barclays,Bank of America, Bank of China, BlackRock, Bloomberg, BNY Mellon, Citibank,BNP Paribas, China Construction Bank Corp, China Credit Suisse, Ernst & Young,CitiBank, Goldman Sachs, HSBC Moody's,Holdings, JPMorgan Chase & Co., Morgan Stanley, Qatar National Bank, Societe Generale, State Street,Mistusbishi UFJ Financial Group and UBS AG.Standard Chartered.
Technology
We use a variety of open source and proprietary technologies to support our website services. Our websites provide a multitenancy technology platform with multiple application services developed to perform at scale. We primarily utilize Amazon Web Services (AWS) as our cloud infrastructure platform, which enables us to scale our compute, network, and storage capacity on an as-needed basis. Our application services and data connections are continually monitored 24/7 for performance and stability. Our application and infrastructure architecture enable us to ensure global reach, as well as advantages in resiliency and cloud delivery. Job seekers and customers can access our websites with any standard web browser, mobile web browsers, and iOS and Android applications. Our websites also utilize AWS disaster recovery, redundancy, and
resiliency services, including multi-availability zone, multi-region, redundant storage and networking solutions, and self-healing capabilities.
Competition
The market for talent acquisition services is highly competitive with multiple online and offline competitors. With the evolution of the online recruiting model, there has been an increasing need to provide ease-of-use and relevance to professionals, as well as an efficient and cost-effective recruitment method for direct employers, recruiters and staffing companies. Additionally, further technological advancements and evolution of social networks increasing the interaction between candidates and potential employers have made it easier for new competitors to emerge, with minimal barriers to entry, and advertisers have many alternatives available to reach their target audiences. Our ability to maintain our existing customer base and generate new customers depends to a significant degree on the quality of our candidate databases and audiences, the quality of our services, our ability to enhance our websites and the underlying technology of our websites to meet the needs of a rapidly-evolving marketplace, our pricing strategy and ability to introduce value-added products and services, contracting alternatives such as
subscription or consumption based models, and our reputation among our candidates and our customers and potential customers, who are increasingly sophisticated and demanding. Our competitors include:
•social and professional networking sites, such as LinkedIn, Facebook, Twitter and Google;
•niche or specialist professional networking sites such as GitHub and Stack Overflow;
•generalist job boards, some of which have substantially greater resources and brand recognition than we do, such as CareerBuilder, Monster, StepStone, and Seek which, unlike specialized job boards, permit customers to enter into a single contract to find professionals across multiple occupational categories and attempt to fill all of their hiring needs through a single website;
•aggregators and distributors of job postings and profiles, including Indeed (owned by Recruit), TalentBin (owned by Monster Worldwide), Entelo, ZipRecruiter, Google and Craigslist;
•career-focused community sites such as Glassdoor;
•newspaper and magazine publishers, national and regional advertising agencies, executive search firms and search and selection firms that carry classified advertising, many of whom have developed, begun developing or acquired new media capabilities, such as recruitment websites, or have partnered with generalist job boards;
•specialized services focused specifically on the industries we service, such as FT.com, Doximity, Upwork and JobServe;
•new and emerging competitors with new business models and products;
•our customers, who seek to recruit candidates directly by using their own resources, including corporate websites; and
•general business sites and print publications, as well as technology news and information community sites, such as Google News, Digg.com and Reddit.com.
Intellectual Property
We seek to protect our intellectual property through a combination of service marks, trademarks, copyrights and other methods of restricting disclosure of our proprietary or confidential information. As we continue to develop and improve our technology, patents may become a more significant part of our intellectual property in the foreseeable future. We generally enter into confidentiality agreements with our employees, consultants and vendors. We also seek to control access to and distribution of our technology, documentation and other proprietary information.
We generally pursue the registration of the material service marks we own in the United States and internationally, as applicable. We own a number of registered, applied for and/or unregistered trademarks and service marks that we use in connection with our businesses. Our trademarks and registered trademarks in the United States and other countries include DICE, CLEARANCEJOBS.COM, and EFINANCIALCAREERS. Registrations for trademarks may be maintained indefinitely, as long as the trademark owner continues to use and police the trademarks and timely renews registrations with the applicable governmental office. Although we generally pursue the registration of our material service marks and other material intellectual property we own, where applicable, we have trademarks and/or service marks that have not been registered in the United States and/or other jurisdictions. We have not registered the copyrights in the content of our websites and do not intend to register such copyrights.
The steps we have taken to protect our copyrights, trademarks, service marks and other intellectual property may not be adequate, and third parties could infringe, misappropriate or misuse our intellectual property. If this were to occur, it could
harm our reputation and affect our competitive position. See Item 1A. “Risk Factors-MisappropriationFactors—Misappropriation or misuse of our intellectual property could harm our reputation, affect our competitive position and cost us money.”
Investments
DHI has made no significant investments through the following acquisitions during the past five years:
|
| |
| Oil Careers Ltd.(1)
|
Date Acquired | March 2014 |
Description | A leading recruitment site for oil and gas professionals in Europe and included in our Rigzone brand |
Brands Included | OilCareers.com; subsequently merged into Rigzone brand |
Strategic Rationale | Expansion of Rigzone’s presence in non-U.S. markets |
Purchase Price | $26.1 mm in cash at closing and $0.3 mm paid for working capital |
(1) DHI transferred majority ownership of the Rigzone business to Rigzone management on August 31, 2018. |
the Notes to Consolidated Financial Statements.
Regulation and Legislation
User Privacy
We collect, store and use a variety of information about both professionals and customers on our website properties. Within the websites, the information that is collected, stored, and used has been provided by the professionals or customers with the intent of making it publicly available. We do not ask professionals or customers to supply social security numbers. Our business data is separated from website operations by a variety of security layers including network segmentation, physical and logical access controls, firewalls, and many industry-accepted, best-practice information security controls.
We post our privacy policies on our websites so that our users can access and understand the terms and conditions applicable to the collection, storage, and use of information collected from users. Our privacy policies also disclose the types of information we gather, how we use it and how a user can correct or change their information. Our privacy policies also explain the circumstances under which we share this information and with whom. Professionals who register for our websites have the option of indicating specific areas of interest in which they are willing to receive offers via email or postal mail. These offers contain content created either by us or our third-party partners.
To protect confidential information and to comply with our obligations to our users, we impose constraints on our customers to whom we provide user data, which are consistent with our commitments to our users. Additionally, when we provide lists to third parties, including to our advertiser customers, it is under contractual terms that are consistent with our obligations to our users and with applicable laws and regulations.
U.S. and Foreign Government Regulation
We are subject to a number of government regulations, both domestic and foreign, that regulate our products and online service offerings, including content, copyright infringement, user privacy, advertising and promotional activities, taxation, access charges, liability for third-party activities, and jurisdiction. In addition, federal, state, local, and foreign governmental organizations have enacted and also are considering, and may consider in the future, other legislative and regulatory proposals that would regulate the Internet. Areas of potential regulation include, but are not limited to, libel, electronic contracting, pricing, quality of products and services, and intellectual property ownership.
There are a number of U.S. and foreign laws and regulations that affect companies conducting business online. Certain laws regulate commercial electronic messages. Such laws frequently provide a right on the part of the recipient to request the sender to stop sending messages, and establish penalties for the sending of email messages that are not compliant with such laws, including messages that are intended to deceive the recipient as to source or content or that do not provide an electronic method of informing the sender of the recipient’s decision not to receive further commercial emails.
We are subject to domestic and foreign laws and regulations regarding privacy and protection of data. Our privacy policies and terms of use agreements describe our practices concerning the use, storage, transmission and disclosure of user data. Any failure by us to comply with our privacy policies or terms of use agreements, or privacy-related laws and regulations, could result in proceedings against us by governmental authorities or others, which could harm our business. The interpretation of these privacy and data protection laws and various regulators’ approach to their enforcement, as well as our products and services, continue to evolve over time. We face the risk that these laws may be interpreted and applied in conflicting ways in different jurisdictions or in a manner that is not consistent with our current data protection practices, or that new and unclear laws will be enacted. There currently are a number of proposals pending before federal, state, and foreign legislative and regulatory bodies. In addition, the European General Data Protection Regulation (“GDPR”) took effect in May 2018 and applies to all of our European operations. The GDPR includes operational requirements for companies that receive or process personal data of residents of the European Union that are different than those previously in place in the European Union, and include significant penalties for non-compliance. Similarly, there are laws as well as a number of legislative proposals in the United States, at both the federal and state level, that could impose new obligations in areas affecting our business. business, or may do so in the future. For example, California adopted the California Consumer Privacy Act of 2018, or CCPA, which became effective on
January 1, 2020. The CCPA has been characterized as the first "GDPR-like" privacy statute to be enacted in the United States because it mirrors a number of the key provisions of the GDPR, and it includes penalties for non-compliance, as well as creating the right for consumers to bring a private action in certain circumstances. More recently, on November 3, 2020, California enacted the California Privacy Rights Act ("CPRA"). The CPRA, which goes into effect on January 1, 2023, expands upon the protections provided by the CCPA, including new limitations on the sale or sharing of consumers’ personal information, and the creation of a new state agency to enforce the CPRA’s protections.
In addition, some countries are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data or similar requirements.
Complying with these varying domestic and foreign requirements could cause us to incur additional costs and change our business practices. Further, any failure by us to adequately protect our users’ privacy and data could result in a loss of confidence in our products and services and, ultimately, in a loss of customers, which could have an adverse effect on our business.business, and could subject the Company to penalties or liability.
Furthermore, favorable laws may change, including, for example, in the United States where the FCC voted to repeal net neutrality regulations. Given uncertainty around these rules, including changing interpretations, amendments or repeal, coupled with potentially significant political and economic power of local network operators, we could experience discriminatory or anti-competitive practices that could impede our growth, cause us to incur additional expense, or otherwise negatively affect our business.
The application of laws and regulations affecting online business to our products and services is often unclear, and these laws and how various jurisdictions interpret these laws continue to evolve. Compliance with these laws may be expensive and could harm our business. Any failure by the Company to comply with these laws and regulations could result in actions against us by governmental authorities or other entities, which could harm our business, including governmental or court orders that we cease certain activities.
See Item 1A. Risk Factors "Our business is subject to U.S. and foreign government regulation of the Internet and taxation, which may have a material adverse effect on our business” and “Capacity constraints, systems failures or breaches of our network security could materially and adversely affect our business. If we fail to manage our technical operations infrastructure, our existing customers may experience services outages, and our new customers may experience delays in the deployment of our solution.”
Employees
As of December 31, 2018,2020, we had 484524 employees. Our employees are not represented by any union and are not the subject of a collective bargaining agreement. We believe that we have a good relationship with our employees. We offer flexible work schedules, abbreviated hours on Fridays and remote working opportunities for all team members to promote work/life balance. Throughout the COVID-19 pandemic, we have made it a priority to support our employees as they work from home, including increased flexibility surrounding personal and family commitments. The Company’s Diversity, Equality and Inclusion program is based on promoting a culture of inclusivity, and includes Allyship training and Unconscious Bias training, which teaches team members how to better support marginalized groups. The internal policies of the Company encourage hiring diverse candidates and ensuring that all team members are treated fairly and equally, amongst other things. We aim to inspire.
| |
Item 1A. | Item 1A. Risk Factors |
We may from time
Summary Risk Factors
Our business is subject to time consider strategic alternativesa number of risks that may enhance stockholder value, whichprevent us from achieving our objectives, or may resultadversely affect our business, financial condition, operations, cash flows, and prospects. These risks are outlined and discussed more fully below and include:
Risks Related to Our Business
•our ability to execute our tech-focused strategy in a competitive business environment that is constantly changing;
•failure to develop and maintain our brand, attract customers and recruit new qualified users;
•misappropriation or misuse of our intellectual property, claims against us for intellectual property infringement or failure to enforce our ownership of our intellectual property;
•acquisitions and our ability to successfully integrate acquisitions;
•the results of our operations fluctuate on a quarterly and annual basis;
•issues with our foreign operations, including foreign currency, local laws and regulations, and political instability;
•disruption resulting from unsolicited offers to purchase the Company;
•taxation risks in various jurisdictions and the potential for unfavorable decisions related to tax assessments;
•a significant downturn in our customers' businesses;
Risks Related to Our Indebtedness
•our indebtedness and our ability to borrow in case of adverse changes within the credit market;
•the covenants set forth in our Credit Agreement;
Risks Related to Ownership of Our Securities
•compliance with the listing standards of the NYSE;
•the volatility of our stock price;
•our ability to maintain internal controls over financial reporting;
Risks Related to Our Technology
•our ability to scale, adapt and maintain our technology and infrastructure;
•capacity constraints, systems failures or breaches of our network security;
•any decrease in our user engagement;
•our ability to halt operations of third-party websites that aggregate our data;
•our reliance on third-party hosting facilities;
Regulatory Risks
•our compliance with laws and regulations concerning the collection, storage and use of a significant amountprofessional and personal information, including the GDPR and the CCPA;
•U.S. and foreign government regulation of our management resources or significant costs,the internet and we may not be able to fully realize the potential benefits of any such transaction.taxation;
We may consider from time to time strategic alternatives to ensure the Company’s ownership structure optimizes the Company’sGeneral Risk Factors
•our ability to achieve growth initiatives through its strategic plannavigate the cyclicality or downturns of the U.S. and to maximize stockholder value. The considerationworldwide economies;
•the U.K.'s departure from the E.U.; and
•the impacts of strategic alternatives could result in, among other things, a sale, merger, consolidation or business combination, asset divestiture, partneringthe COVID-19 pandemic or other collaboration agreements, or potential acquisitions or recapitalizations, in one or more transactions, or continuingpublic health issues that may arise.
Risks Related to operate with our current business plan and strategy. There can be no assurance that any review of strategic alternatives will result in the identification or consummation of any transaction. Although there would be uncertainty that considering any possible transaction would result in definitive agreements or the completion of such transaction, we may devote a significant amount of our management resources to analyzing and pursuing such a transaction, which could negatively impact our operations. In addition, we may incur significant costs in connection with seeking such transactions or other strategic alternatives regardless of whether the transaction is completed. In the event that we consummate a strategic alternative in the future, we cannot be certain that we would fully realize the potential benefit of such a transaction and cannot predict the impact that such strategic transaction might have on our operations or stock price. We do not undertake to provide updates or make further comments regarding the evaluation of strategic alternatives, unless otherwise required by law.Our Business
We may not be successful in executing our tech-focused strategy which could have a material adverse effect on our results of operations.
We may not be successful in pursing our tech-focused strategy, which includes narrowing priorities to initiatives related to connecting technology professionals with employers. There can be no assurance that the allocation of resources behind our Tech-focused
tech-focused business and sales and marketing efforts will result in the strengthening of our competitive position, the failure of which could have a material adverse effect on our financial condition and results of operations. As a result of our strategic focus on the tech sector and divesting our businesses operating in different sectors, we have an increased dependence on the economic health of that sector and may not have the mitigating benefits ofexposure to a portfolio of diverse industries in the event of a tech sector downturn.
If we fail to attract or retain key executives and personnel, there could be a material adverse effect on our business.
Our performance is substantially dependent on the performance of senior management and key technical personnel. We have employment agreements, which include non-compete provisions, with all members of senior management and certain key technical personnel. However, we cannot assure you that any of these senior managers or others will remain with us or that they will not compete with us in the event they cease to be employees, which could have a material adverse effect on our business, results of operations, financial condition and liquidity. In addition, we have not purchased key person life insurance on any members of our senior management. Our future success also depends upon our continuing ability to identify, attract, hire and retain highly qualified personnel, including skilled technical, management, product and technology, and sales and marketing personnel, all of whom are in high demand and are often subject to competing offers. There has in the past been, and there may in the future be, a shortage of qualified personnel in the career services market. We also compete for qualified personnel with other companies. A loss of a substantial number of qualified employees, or an inability to attract, retain and motivate additional highly skilled employees required for expansion of our business, could have a material adverse effect on our business. In addition, the recent significant
decline in our stock price may undermine the use of our equity as a retention tool and may make it more difficult to retain key personnel.
We may be adversely affected by cyclicality, volatility or an extended downturn in the United States or worldwide economy, or in or related to the industries we serve.
Our revenues are generated primarily from servicing customers seeking to hire qualified professionals in the technology and finance sectors. Demand for these professionals tends to be tied to economic and business cycles. Increases in the unemployment rate, specifically in the technology industry, cyclicality or an extended downturn in the economy could cause our revenues to decline. For example, during the recession in 2001, employers reduced or postponed their recruiting efforts, including their recruitment of professionals in the technology industry. The 2001 economic recession, coupled with the substantial indebtedness incurred by our predecessor, Dice Inc., resulted in Dice Inc. filing for Chapter 11 protection in 2003. As of December 2018, the seasonally unadjusted U.S. unemployment rate was 2.1% for computer-related occupations, and 2.4% in the finance sector, as compared to the overall national average of 3.9%, seasonally adjusted. The increase in unemployment and decrease in recruitment activity experienced during 2008 and 2009 resulted in decreased demand for our services. During 2009, we experienced a 29% decline in revenues compared to 2008. If the economic environment experienced during 2008 and 2009 returns, our ability to generate revenue may be adversely affected.
In addition, the general level of economic activity in the regions and industries in which we operate significantly affects demand for our services. When economic activity slows, many companies hire fewer employees. Therefore, our operating results, business and financial condition could be significantly harmed by an extended economic downturn or future downturns, especially in regions or industries where our operations are heavily concentrated. Further, we may face increased pricing pressures during such periods as customers seek to use lower cost or fee services. Additionally, the labor market and certain of the industries we serve have historically experienced short-term cyclicality. It is difficult to estimate the total number of passive or active job seekers or available job openings in the United States or abroad during any given period. If there is a labor shortage, qualified professionals may be less likely to seek our services, which could cause our customers to look elsewhere for attractive employees. Such labor shortages would require us to intensify our marketing efforts toward professionals so that professionals who post their resumes on our websites remain relevant to our customers, which would increase our expenses. Furthermore, if there is a shortage of available job openings in a particular region or sector we serve, the number of job postings on our websites could decrease, causing our business to be adversely affected. For example, the continued depression of oil prices led to decreased demand for energy professionals worldwide. Oil prices reached decade lows in 2016 and remained depressed. This decline in demand significantly decreased the sales of energy industry job postings and the use of related services and adversely impacted the results of Rigzone, a business we disposed of in 2018. As a result, we recorded a $24.6 million impairment of goodwill and intangible assets and $34.8 million impairment of goodwill at our Corporate & Other segment for the fiscal years ended December 31, 2016 and 2015, respectively.
Any economic downturn or recession in the United States or abroad for an extended period of time could have a material adverse effect on our business, financial condition, results of operations and liquidity. Based on historical trends, improvements in labor markets and the need for our services generally lag behind overall economic improvements. Additionally, there has historically been a lag from the time customers begin to increase purchases of our services and the impact to our revenues due to the recognition of revenue occurring over the length of the contract, which can be several months to a year.
Volatility in global financial markets may also limit our ability to access the capital markets at a time when we would like, or need, to raise capital, which could have an impact on our ability to react to changing economic and business conditions. Accordingly, if the economy does not fully recover or worsens, our business, results of operations and financial condition could be materially and adversely affected.
A write-off of all or a part of our goodwill and intangible assets would hurt our operating results and reduce our net worth.
We have significant intangible assets and goodwill. Goodwill represents the excess of the total purchase price of our acquisitions over the estimated fair value of the net assets acquired. As of December 31, 2018,2020, we had $154.0$133.4 million and $39.0$23.8 million of goodwill and acquired intangible assets, respectively, on our balance sheet, which represented approximately 60%55% and 15%10%, respectively, of our total assets. We do not amortize goodwill nor our indefinite-lived acquired intangible asset, which is the Dice trademarks and brand name, under U.S. GAAP and instead are required to review goodwillthem at least annually for impairment. The indefinite-lived acquired intangible assetannual impairment test for the Dice trademarks and brand name is performed on October 1 of $39.0 million is not amortizedeach year. During the first and instead is reviewed annually for impairment. The fair valuethird quarters of 2020, because of the Dice tradename asimpacts of the most recent annualCOVID-19 pandemic and its potential impact on future earnings and cash flows for the tech-focused reporting unit and those that are attributable to the Dice trademarks and brand name, the Company recorded impairment testing date of October 1, 2018 resulted in the fair value exceeding the carrying value by 2%.charges totaling $38.8 million. During 2015 and 2016, goodwill and intangible assets of $24.6 million related to Rigzone were fully written off. During 2015, goodwill ofand $34.8 million related to Rigzone waswere written off. During 2013, goodwill and intangible assets of $14.9 million related to Slashdot Media and Health Callings was written off. During 2008, goodwill of $7.2 million related to eFinancialCareers’ North American operations was written off. In the event impairment is identified again in the future for any of our reporting units,unit, a charge to earnings would be recorded. Although it
would not affect our cash flow or financialliquidity position, a write-off in future periods of all or a part of our goodwill or intangible assetsasset would have a material adverse effect on our overall results of operations. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Goodwill.Goodwill and Indefinite-Lived Acquired Intangible Assets.”
Concerns regarding the global economic climate, the lingering effects of the European debt crisis, and market perceptions concerning the instability of the Euro could adversely impact our business.
Concerns persist regarding the global economic climate, the recent debt burden of certain Eurozone countries and their ability to meet future financial obligations, the overall stability of the euro and the suitability of the euro as a single currency given the diverse economic and political circumstances in individual Eurozone countries. These concerns, or market perceptions concerning these and related issues, could adversely affect demand for our services in the European market and our business, results of operations, financial condition and liquidity.
We operate in a highly competitive developing market and we may be unable to compete successfully against existing and future competitors.
The market for career services is highly competitive and barriers to entry in the market are relatively low. For example, thereThere are tens of thousands ofmultiple generalist job boards, currently operating on the Internet,as well as a number of existing and new competitors may emerge.emerging alternative business models seeking to compete in our target markets. We do not own any patented technology that would preclude or inhibit competitors from entering the recruiting and career development services market. We compete with other companies that direct all or portions of their websites toward certain segments or sub- segmentssub-segments of the industries we serve. We compete with generalist job boards, some of which have substantially greater resources and brand recognition than we do, such as CareerBuilder, Monster.com, Stepstone and Seek, which, unlike specialist job boards, permit customers to enter into a single contract to find professionals across multiple occupational categories and attempt to fill all of their hiring needs through a single website, as well as job boards focused specifically on the industries we service, such as FT.com, JobServe, Doximity, and Upwork. We also compete with newspaper and magazine publishers, national and regional advertising agencies, executive search firms and search and selection firms that carry classified advertising, many of whom have developed, begun developing or acquired new media capabilities, such as recruitment websites, or have recently partnered with generalist job boards. We also compete with general business sites and print publications, as well as technology news and information community sites, such as Google News, Digg.com and Reddit.com. In addition, we face competition from aggregators of classified advertising, including Indeed, TalentBin, Entelo, ZipRecruiter, Google, and Craigslist. Social and professional networking sites, such as LinkedIn, Facebook, Twitter and Google compete with us in providing professional services. Our Unified Profile Index service competes with Entelo, Gild and TalentBin. We also compete with new competitors, including career-focused community sites such as Glassdoor and talent relationship management software providers such as Avature and SmashFly, and emerging competitors with new business models and products that customers are more willing to trial during periods when talent is scarce.
We must adapt our business model to keep pace with rapid changes in the recruiting and career services business, including rapidly changing technologies and the development of new products and services.
Providing online recruiting and career development services is a rapidly evolving business, and we will not be successful if our business model does not keep pace with new trends and developments. The adoption of recruiting and job seeking, particularly among those who have historically relied on traditional recruiting methods, requires acceptance of a new way of conducting business, exchanging information and applying for jobs. If we are unable to adapt our business model to keep pace with changes in the recruiting business, or if we are unable to continue to demonstrate the value of our online services to our customers, our business, results of operations, financial condition and liquidity could be materially adversely affected. Our success is also dependent on our ability to adapt to rapidly changing technology and to make investments to develop new
products and services. Accordingly, to maintain our competitive position and our revenue base, we must continually modernize and improve the features, reliability and functionality of our service offerings and related products in response to our competitors. Future technological advances in the career services industry may result in the availability of new recruiting and career development offerings. Some of our competitors have longer operating histories, larger client bases, longer relationships with clients, greater brand or name recognition, or significantly greater financial, technical, marketing and public relations resources than we do. As a result, they may be in a position to respond more quickly to new or emerging technologies and changes in customer requirements, and to develop and promote their products and services more effectively than we can. We may not be able to adapt to such technological changes or offer new products on a timely or cost-effective basis or establish or maintain competitive positions. If we are unable to develop and introduce new products and services, or enhancements to existing products and services, in a timely and successful manner, our business, results of operations, financial condition and liquidity could be materially and adversely affected.
Trends that could have a critical impact on our success include:
rapidly changing technology in online recruiting;
recruiting, evolving industry standards relating to online recruiting;
recruiting, developments and changes relating to the Internet and mobile devices;
devices, evolving government regulations;
regulations, competing products and services that offer increased functionality;
functionality, changes in requirements for customers and professionals;professionals, and
privacy protection concerning data available and transactions conducted over the Internet.
If we fail to develop and maintain our reputation and brand recognition our business could be adversely affected.
We believe that establishing and maintaining the identity of our key brands, such as Dice, eFinancialCareers, and ClearanceJobs, is critical in attracting and maintaining the number of professionals and customers using our services, and that the importance of brand recognition will increase due to the growing number of Internet services similar to ours and relatively low barriers to entry. Promotion and enhancement of our brands will depend largely on our success in continuing to provide high quality recruiting and career development services. If users do not perceive our existing career and recruiting services to be of high quality, or if we introduce new services or enter into new business ventures that are not favorably received by users, the uniqueness of our brands could be diminished and accordingly the attractiveness of our websites to professionals and customers could be reduced. We may also find it necessary to increase substantially our financial commitment to creating and maintaining a distinct brand loyalty among users. If we cannot provide high quality career services, fail to protect, promote and maintain our brands or incur excessive expenses in an attempt to improve our career services or promote or maintain our brands, our business, results of operations, financial condition and liquidity could be materially adversely affected.
Our business is largely based on customers who purchase monthly or annual recruitment packages. Any failure to increase or maintain the number of customers who purchase recruitment packages could adversely impact our revenues.
Our customers typically include recruiters, staffing firms, consulting firms and direct hiring companies. Customers can choose to purchase recruitment packages, classified postings or advertisements. Most of our revenues are generated by the fees we earn from our customers who purchase monthly or long-term recruitment packages. Our growth depends on our ability to retain our existing monthly and annual recruitment package customers and to increase the number of customers who purchase recruitment packages, as well as introduce new pricing options. Any of our customers may decide not to continue to use our services in favor of alternate services, lack of need, or because of budgetary constraints or other reasons. We cannot assure you that we will be successful in continuing to attract new customers or retaining existing customers or that our future sales efforts in general will be effective. If our existing customers choose not to use our services, decrease their use of our services, or change from being recruitment package customers to purchasing individual classified postings, our services, job postings and resumes posted on our websites could be reduced, search activity on our websites could decline, the usefulness of our services to customers could be diminished, and we could experience declining revenues and/or incur significant expenses. Dice U.S. recruitment package customers at December 31, 2020, 2019, and 2018 2017were 5,150, 6,000, and 2016 were 6,200, 6,450, and 7,050, respectively.
If we fail to attract qualified professionals to our websites or grow the number of qualified professionals who use our websites, our revenues could decline.
The value of our websites to our customers is dependent on our ability to continuously attract professionals with the experience, education and skill-setskill-sets our customers seek. For example, the professionals who post their resumes on Dice.com are generally highly educated, with approximately 85% having a bachelor’s degree or higher as of January 2019. Our online surveys indicate that almost 82% of professionals who use Dice.com have more than five years of experience, over half have greater than 10 years ofextensive work experience, and the majority are currently employed. To grow our businesses, we must continue to convince qualified professionals that our services will assist them in finding employment, so that customers will choose to use our services to find employees. We do not know the extent to which we have penetrated the market of qualified professionals in the industries we serve or the extent to which we will be able to grow the number of qualified professionals who use our websites. If we are unable to increase the number of professionals using our websites, or if
the professionals who use our websites are viewed as unattractive by our customers, our customers could seek to list jobs and search for professionals elsewhere, which could cause our revenues to decline.
We may not timely and effectively scale and adapt our existing technology and network infrastructure to ensure that our websites are accessible within an acceptable load time.
A key element to our continued growth is the ability of our users (whom we define as anyone who visits our website, regardless of whether or not they are a customer), enterprises and professional organizations in all geographies to access our website within acceptable load times. We call this “website performance.” We have experienced, and may in the future experience, website disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, capacity constraints due to an overwhelming number of users accessing our website simultaneously, and denial of service or fraud or security attacks. In some instances, we may not be able to identify the cause or causes of these website performance problems within an acceptable period of time. It may become increasingly difficult to maintain and improve the performance of our websites, especially during peak usage times and as our solutions become more complex and our user traffic increases. If our websites are unavailable when users attempt to access them or do not load as quickly as they expect, users may seek other websites to obtain the information for which they are looking, and may not return to our websites as often in the future, or at all. This would negatively impact our ability to attract customers, enterprises and professional organizations and increase engagement on our
websites. We expect to continue to make significant investments to maintain and improve website performance and to enable rapid releases of new features and products. To the extent that we do not effectively address capacity constraints, upgrade our systems as needed and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business and operating results may be harmed.
Capacity constraints, systems failures or breaches of our network security could materially and adversely affect our business. If we fail to manage our technical operations infrastructure, our existing customers may experience services outages, and our new customers may experience delays in the deployment of our solution.
We derive almost all of our revenues from the purchase of recruitment products and services and employment advertising offered on our Dice, eFinancialCareers, and ClearanceJobs websites. As a result, our operations depend on our ability to maintain and protect our website services, most of which are housed within Amazon Web Services. System failures, including network, software or hardware failures, which cause interruption or an increase in response time of our services, could substantially decrease usage of our services and could reduce the attractiveness of our services to both our customers and professionals. An increase in the volume of queries conducted through our services could strain the capacity of the software or hardware we employ. This could lead to slower response times or system failures and prevent users from accessing our websites for extended periods of time, thereby decreasing usage and attractiveness of our services. Our technology operations are dependent in part on our ability to protect our operating systems against:
physical damage from acts of God;
terrorist attacks or other acts of war;
power loss;
telecommunications failures;
network, hardware or software failures;
physical and electronic break-ins;
cyber security attacks;
computer viruses or worms;
identity theft; and
similar events.
Although we maintain insurance against fires, floods and general business interruptions, the amount of coverage may not be adequate in any particular case. Furthermore, the occurrence of any of these events could result in interruptions, delays or cessations in service to users of our services, which could materially impair or prohibit our ability to provide our services and significantly impact our business.
Additionally, overall Internet usage could decline if any well-publicized compromise of security occurs or if there is a perceived lack of security of personal and corporate information stored within our systems to facilitate hiring and recruitment business processes. “Hacking” involves efforts to gain unauthorized access to information or systems or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, and online job boards, in particular, have been targeted by hackers who seek to gain unauthorized access to job seeker and customer data for purposes of implementing “phishing” or other schemes. Despite our implementation of numerous security measures; including access controls, network security, information security risk management processes, software development security, cryptography, operational security, business continuity and disaster recovery, and physical security, our websites, servers, databases and other systems may be vulnerable to computer hackers, physical or electronic break-ins, sabotage, computer viruses, worms and similar disruptions from unauthorized tampering with our computer systems. Our systems, like the systems of many other websites, have been targeted in the past in cyber attacks and hacks and will continue to be subject to such attacks. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, such techniques often are not recognized until launched against a target and may originate from less regulated and remote areas around the world, we may be unable to proactively address these techniques or to implement adequate preventative measures. We will continue to review and enhance our security measures in an attempt to prevent unauthorized and unlawful intrusions, although in the future it is possible we may not be able to prevent all intrusions, and such intrusions could result in our network security or computer systems being compromised and possibly result in the misappropriation or corruption of proprietary or personal information or cause disruptions in our services. We might be required to expend significant capital and resources to protect against, remediate or alleviate problems caused by such intrusions. We may also not have a timely remedy against a hacker who is able to penetrate our network security. Our networks could also be affected by viruses or malware or other similar disruptive problems, and we could inadvertently transmit these viruses or malware to our users or other third parties. Our hardware and back-up systems could fail causing our services to be interrupted. Any of these occurrences, and negative publicity arising from any such occurrences, could harm our business or give rise to a cause of action against us. Our general business interruption insurance policies have limitations with respect to covering interruptions caused by computer viruses or hackers. We have not added specific insurance coverage to protect against these risks. Our activities and the activities of third party contractors involve the storage, use and transmission of proprietary and personal information,
including personal information collected from professionals who use our websites. Accordingly, security breaches could expose us to a risk of loss or litigation and possibly liabilities. We cannot assure that contractual provisions attempting to limit our liability in these areas will be successful or enforceable, or that other parties will accept such contractual provisions as part of our agreements. Any security breaches or our inability to provide users with continuous access to our networks could materially impact our ability to provide our services as well as materially impact the confidence of our customers in our services, either of which could have a material adverse effect on our business.
We may be liable with respect to the collection, storage and use of the personal and professional information of the professionals, who use our websites and our current practices may not be in compliance with proposed new laws and regulations.
Our business depends on our ability to collect, store, use and disclose personal and professional data from the professionals who use our websites. Our policies concerning the collection, use and disclosure of personally identifiable information are described on our websites. In recent years, class action lawsuits have been filed and the Federal Trade Commission and state agencies have commenced investigations with respect to the collection, use, sale and storage by various Internet companies of users’ personal and professional information. While we believe we are in compliance with current law, we cannot ensure that we will not be subject to lawsuits or investigations for violations of law. Moreover, our current practices regarding the collection, storage and use of user information may not be in compliance with currently pending legislative and regulatory proposals by the United States federal government and various state and foreign governments intended to limit the collection and use of user information. While we have implemented and intend to implement additional programs designed to enhance the protection of the privacy of our users, these programs may not conform to all or any of these laws or regulations and we may consequently incur civil or criminal liability for failing to conform. As a result, we may be forced to change our current practices relating to the collection, storage and use of user information. Our failure or our perceived failure to comply with laws and regulations could also lead to adverse publicity and a loss of consumer confidence if it were known that we did not take adequate measures to assure the confidentiality of the personally identifiable information that our users had given to us. This could result in a loss of customers and revenue and materially adversely impact the success of our business. Concern among prospective customers and professionals regarding our use of personal information collected on our websites, such as credit card numbers, email addresses, phone numbers and other personal information, could keep prospective customers from using our career services websites. Internet-wide incidents or incidents with respect to our websites, including misappropriation of our users’ personal information, penetration of our network security, or changes in industry standards, regulations or laws could deter people from using the Internet or our websites to conduct transactions that involve confidential information, which could have a material adverse impact on our business. We generally comply with industry standards and are subject to the terms of our privacy policies and privacy-related obligations to third parties (including voluntary third-party certification bodies such as TRUSTe). We strive to comply with all applicable laws, policies, legal obligations and industry codes of conduct relating to privacy and data protection, to the extent possible. However, it is possible that these obligations may be interpreted and applied in new ways and/or in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices or that new regulations could be enacted.
In the past, we have relied on the U.S.-European Union Frameworks, as agreed to by the U.S. Department of Commerce and the European Union (“EU”), as one of the means to legally transfer European personal information from Europe to the United States. However, on October 6, 2015, the European Court of Justice invalidated the U.S.-EU Safe Harbor framework. On February 2, 2016, the U.S. and E.U. announced agreement on a new framework for transatlantic data flows entitled the EU-US Privacy Shield. However, it is possible that Privacy Shield may be challenged in EU courts and there is some uncertainty regarding its future validity and our ability to rely on it for EU to US data transfers.
Additionally, the EU has enacted the GDPR, which took effect on May 25, 2018. The GDPR implemented more stringent operational requirements for processors and controllers of personal data, including, for example, expanded disclosures about how personal information is to be used, limitations on retention of information, mandatory data breach notification requirements and higher standards for controllers to demonstrate that they have obtained valid consent for certain data processing activities. The GDPR also provides for significant penalties for non-compliance. As a result of the GDPR, we expect regulatory and customer attention surrounding data privacy continue to increase. Furthermore, outside of the EU, we continue to see increased regulation of data privacy and security, including the adoption of more stringent subject matter specific state laws and national laws regulating the collection and use of data, as well as security and data breach obligations. For example, California recently adopted the California Consumer Privacy Act of 2018, or CCPA, which will come into effect beginning in January 2020. The CCPA has been characterized as the first "GDPR-like" privacy statute to be enacted in the United States because it mirrors a number of the key provisions of the GDPR. The CCPA establishes a new privacy framework for covered businesses by, among other things, creating an expanded definition of personal information, establishing new data privacy rights for consumers in the State of California and creating a new and potentially severe statutory damages framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches.
The uncertainty and changes in the requirements of multiple jurisdictions may increase the cost of compliance, reduce demand for our websites, restrict our ability to offer services in certain locations or subject us to sanctions by national data protection regulators, all of which could harm our business, financial condition, and results of operations. Failure to provide adequate privacy protections and maintain compliance with the new data privacy laws, including the EU-U.S. Privacy Shield framework and the GDPR, could have a material adverse effect on our financial condition and results of operations.
We have indebtedness which could affect our financial condition, and, if adverse changes in the credit markets occur, we may not be able to borrow funds under our revolving credit facility or refinance our indebtedness.
As of December 31, 2018, we had $18.0 million of outstanding indebtedness under our credit agreement dated November 14, 2018 (the “Credit Agreement”) and we had the ability to borrow an additional $72.0 million. If we cannot generate sufficient cash flow from operations to service our debt, we may need to further refinance our debt, dispose of assets or issue equity to obtain necessary funds. We do not know whether we will be able to take any of these actions, if necessary, on a timely basis or on terms satisfactory to us or at all.
Our Credit Agreement consists of a revolving facility and matures in November 2023. The funding of the revolving facility is dependent on a number of financial institutions. It is possible that one or more of the lenders will refuse or be unable to satisfy their commitment to lend to us should we need to borrow funds under the revolving credit facility. If borrowings are unavailable to us and we cannot generate sufficient revenues to fund our operations, our business will be adversely affected. In addition, the inability to borrow could hinder growth if we need funds to complete an acquisition.
Our indebtedness could limit our ability to:
obtain necessary additional financing for working capital, capital expenditures or other purposes in the future;
plan for, or react to, changes in our business and the industries in which we operate;
make future acquisitions or pursue other business opportunities; or
react in an extended economic downturn.
The terms of our Credit Agreement may restrict our current and future operations, which would adversely affect our ability to respond to changes in our business and to manage our operations.
Our Credit Agreement contains, and any future indebtedness of ours would likely contain, a number of restrictive covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to, among other things:
incur additional debt;
pay dividends and make other restricted payments;
repurchase our own shares;
create liens;
make investments and acquisitions;
engage in sales of assets and subsidiary stock;
enter into sale-leaseback transactions;
enter into transactions with affiliates;
transfer all or substantially all of our assets or enter into merger or consolidation transactions; and
make capital expenditures.
Our Credit Agreement also requires us to maintain certain financial ratios. A failure by us to comply with the covenants or financial ratios contained in our Credit Agreement could result in an event of default under our Credit Agreement which could adversely affect our ability to respond to changes in our business and manage our operations. In the event of any default under our Credit Agreement, the lenders under our Credit Agreement will not be required to lend any additional amounts to us. Our lenders also could elect to declare all amounts outstanding to be due and payable and require us to apply all of our available cash to repay these amounts. If the indebtedness under our Credit Agreement were to be accelerated, there can be no assurance that our assets would be sufficient to repay this indebtedness in full.
We expect our operating results to fluctuate on a quarterly and annual basis.
Our revenue and operating results could vary significantly from quarter-to-quarter and year-to-year and may fail to match our past performance because of a variety of factors, some of which are outside of our control. Any of these events could cause the market price of our common stock to fluctuate. Factors that may contribute to the variability of our operating results include:
•the size and seasonal variability of our customers’ recruiting and marketing budgets;
•the emergence of new competitors in our market whether by established companies or the entrance of new companies;
•the cost of investing in our technology infrastructure may be greater than we anticipate;
•our ability to increase our customer base and customer and professional engagement;
•disruptions or outages in the availability of our websites, actual or perceived breaches of privacy and compromises of our customers’ or professionals’ data;
•changes in our pricing policies or those of our competitors;
•macroeconomic changes, in particular, deterioration in labor markets, which would adversely impact sales of our hiring solutions, or economic growth that does not lead to job growth, for instance increases in productivity;
•costs associated with data security which is becoming increasingly complex;
•the timing and costs of expanding our organization and delays or inability in achieving expected productivity;
•the timing of certain expenditures, including hiring of employees and capital expenditures;
•our ability to increase sales of our products and solutions to new customers and expand sales of additional products and solutions to our existing customers;
•the extent to which existing customers renew their agreements with us and the timing and terms of those renewals; and
•general industry and macroeconomic conditions.
Our history of operations includes periods of operating and net losses, and we may incur operating and net losses in the future. Our significant net losses in periods prior to 2003 and the significant amount of indebtedness incurred by our predecessor led us to declare bankruptcy in early 2003.
Our history of operations includes periods of operating and net losses. Our significant net losses in periods prior to 2003 and the significant amount of indebtedness incurred by our predecessor led us to declare bankruptcy in early 2003. Although we have managed to achieve an increase in revenues since Dice Inc. emerged from bankruptcy, we have also increased our operating expenses significantly, expanded our net sales and marketing operations, made significant acquisitions and have continued to develop and extend our online career services with the expectation that our revenues will grow in the future. We may not generate sufficient revenues to pay for all of these operating or other expenses, which could have a material adverse effect on our business, results of operations and financial condition.
If we are not able to successfully identify or integrate recent or future acquisitions our management’s attention could be diverted, and our efforts to integrate future acquisitions could consume significant resources.
An important component of our tech-focused strategy is developing new capabilities that strengthen and expand our position in the global technology talent acquisition market and broaden the talent solutions through the acquisition of other complementary businesses and technologies (such as the 2013 acquisition of The IT Job Board, the 2012 WorkDigital acquisition, and the 2006 eFinancialGroup acquisition). Our further growth may depend in part on our ability to identify additional suitable acquisition opportunities or consummate such acquisitions on terms that are beneficial to us. We may not be able to identify suitable acquisition opportunities or consummate such acquisitions on favorable terms or at all. In addition, the anticipated results or operational benefits of any businesses we acquire may not be realized and we may not be successful in integrating other acquired businesses into our operations. Failure to manage and successfully integrate acquired businesses could harm our business. Even if we are successful in making an acquisition, we may encounter numerous risks, including the following:
•expenses, delays and difficulties in integrating the operations, technologies and products of acquired companies;
•potential disruption of our ongoing operations;
•diversion of management’s attention from normal daily operations of our business;
•inability to maintain key business relationships and the reputations of acquired businesses;
•the difficulty of integrating acquired technology and rights into our services and unanticipated expenses related to such integration;
•the impairment of relationships with customers and partners of the acquired companies or our customers and partners as a result of the integration of acquired operations;
•the impairment of relationships with employees of the acquired companies or our employees as a result of integration of new management personnel;
•entry into markets in which we have limited or no prior experience and in which our competitors have stronger market positions;
•dependence on unfamiliar employees, affiliates and partners;
•the amortization of acquired companies’ intangible assets;
•insufficient revenues to offset increased expenses associated with the acquisition;
•inability to maintain our internal standards, controls, procedures and policies;
•reduction or replacement of the sales of existing services by sales of products and services from acquired business lines;
•potential loss of key employees of the acquired companies;
•difficulties integrating the personnel and cultures of the acquired companies into our operations;
•in the case of foreign acquisitions, uncertainty regarding foreign laws and regulations and difficulty integrating operations and systems as a result of cultural, systems and operational differences; and
•the impact of potential liabilities or unknown liabilities of the acquired businesses.
If any of these risks materialize, they could have a material adverse effect on our business, results of operations, financial condition and liquidity.
In addition, any acquisition of other businesses or technologies may require us to seek debt or equity financing. Such financing might not be available to us on acceptable terms or at all. The global financial markets have recently experienced declining equity valuations and disruptions in the credit markets due to liquidity imbalances and repricing of risk, which may impact our ability to obtain additional financing on reasonable terms or at all.
Misappropriation or misuse of our intellectual property could harm our reputation, affect our competitive position and cost us money.
Our success and ability to compete are dependent in part on the strength of our intellectual property rights, the content included on our websites, the goodwill associated with our trademarks, trade names and service marks, and on our ability to use U.S. and foreign laws to protect them. Our intellectual property includes, among other things, the content included on our websites, our logos, brands, domain names, the technology that we use to deliver our products and services, the various databases of information that we maintain and make available and the appearance of our websites. We claim common law protection on certain names and marks that we have used in connection with our business activities and the content included on our websites. We also own a number of registered or applied-for trademarks and service marks that we use in connection with our business, including DICE, CLEARANCEJOBS.COM, and EFINANCIALCAREERS some of which we have acquired through business acquisitions. Although we generally pursue the registration of material service marks and other material intellectual property we own, where applicable, we have copyrights, trademarks and/or service marks that have not been registered in the United States and/or other jurisdictions. We generally enter into confidentiality and work-for-hire agreements with our employees, consultants, and vendors to protect our intellectual property rights. We also seek to control access to and distribution of our technology, documentation and other proprietary information as well as proprietary information licensed from third parties. Policing our intellectual property rights worldwide is a difficult task, and we may not be able to identify infringing users. The steps we have taken to protect our proprietary rights may not be adequate, and third parties could infringe, misappropriate or misuse our intellectual property rights. If this were to occur, it could harm our reputation and affect our competitive position. It could also require us to spend significant time and money in litigation. In addition, the laws of foreign countries do not necessarily protect intellectual property rights to the same extent as the laws of the United States. We have licensed in the past (on a royalty free basis), and expect to license in the future, various elements of our distinctive trademarks, service marks, trade dress, content and similar proprietary rights to third parties. We enter into strategic marketing arrangements with certain third-party web site operators pursuant to which we license our trademarks, service marks and content to such third parties in order to promote our brands and services and to generate leads to our websites. While we attempt to ensure that the quality of our brands is maintained by these licensees, we cannot assure you that third-party licensees of our proprietary rights will always take actions to protect the value of our intellectual property and reputation, and if they fail to do so, such failure could adversely affect our business and reputation.
We could be subject to infringement and other claims relating to our services or the content on our websites that may result in costly litigation, the payment of damages or the need to revise the way we conduct business.
We cannot be certain that our technology, offerings, services or content do not or will not infringe upon the intellectual property or other proprietary rights of third parties, or otherwise violate laws. From time to time we receive notices alleging potential infringement of intellectual property or other proprietary rights of third parties or non-compliance with applicable laws. In seeking to protect our marks, copyrights, domain names and other intellectual property rights, or in defending ourselves against claims of infringement or non-compliance that may or may not be without merit, we could face costly litigation and the diversion of our management’s attention and resources. Claims against us could result in the need to develop alternative trademarks, content, technology or other intellectual property or enter into costly royalty or licensing agreements, or substantially modify or cease to offer one or more of our services, which could have a material adverse effect on our business, results of operations, financial condition and liquidity. If we were found to have infringed on a third party’s intellectual property or other proprietary rights, or failed to comply with applicable laws, among other things, the value of our brands and our business reputation could be impaired, and our business could suffer.
If we are unable to enforce or defend our ownership or use of intellectual property, our business, competitive position and operating results could be harmed.
The success of our business depends in large part on our intellectual property rights, including existing and future trademarks and copyrights, which are and will continue to be valuable and important assets of our business. Our business could be harmed if we are not able to protect the content of our databases and our other intellectual property. We have taken measures to protect our intellectual property, such as requiring our employees and consultants with access to our proprietary information to execute confidentiality agreements. In the future, we may sue competitors or other parties who we believe to be infringing our intellectual property. We may in the future also find it necessary to assert claims regarding our intellectual property. These measures may not be sufficient or effective to protect our intellectual property. We also rely on laws, including those regarding copyrights and
trademarks to protect our intellectual property rights. Current laws, or the enforceability of such laws, specifically in foreign jurisdictions, may not adequately protect our intellectual property or our databases and the data contained in them. In addition, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights in Internet related businesses are uncertain and evolving, and we cannot assure you of the future viability or value of any of our proprietary rights. Others may develop technologies similar or superior to our technology. A significant impairment of our intellectual property rights could require us to develop alternative intellectual property, incur licensing or other expenses or limit our product and service offerings.
We have incurred increased costs and will continue to incur these costs as a result of being a public company.
As a public company, we have incurred and will continue to incur significant levels of legal, accounting and other expenses. In addition, the Sarbanes Oxley Act of 2002 (“Sarbanes Oxley”), the Dodd-Frank Act and related rules of the Securities and Exchange Commission (the “SEC”) and the NYSE regulate corporate governance practices of public companies and impose significant requirements relating to disclosure controls and procedures and internal control over financial reporting. Compliance with these public company requirements has increased our costs, required additional resources and made some activities more time consuming. We are required to expend considerable time and resources complying with public company regulations.
Actions of activist shareholders could cause us to incur substantial costs, divert management's attention and resources, and have an adverse effect on our business.
We have been the subject of activity by activist shareholders in the past and shareholder activism generally is increasing. Responding to shareholder activism can be costly and time-consuming, disrupt our operations, and divert the attention of management and our employees from our strategic initiatives. Activist campaigns can create perceived uncertainties as to our future direction, strategy, or leadership and may result in the loss of potential business opportunities, harm our ability to attract new employees, investors, customers, and other partners, and cause our stock price to experience periods of volatility.
If our business fails to attract and retain users, particularly users who create and post original content on our web properties, our financial results will be adversely affected.
Our reliance upon user-generated content requires that we develop and maintain tools and services designed to facilitate: creation of user-generated content, participation in discussion surrounding such user-generated content, evaluation of user-generated content, and distribution of user-generated content. If our development efforts fail to facilitate such activities on our web properties, the level of user engagement and interaction will not increase and may decline. Even if we succeed in
facilitating such activities on our sites, there can be no assurance that such improvements will be deployed in a timely or cost-effective manner. If we fail to increase user engagement and interaction on our web properties, we will not attract and retain a loyal user base or the advertisers who desire to reach them, which will adversely affect our business and our ability to maintain or grow our revenue.
We face risks relating to our foreign operations.
We operate websites serving numerous markets around the world. For the year ended December 31, 2020, approximately 17% of our total revenues were generated outside of the United States. Certain of these amounts are collected in local currency. As a result of operating outside the United States, we are at risk for exchange rate fluctuations between such local currencies and the United States dollar. To date, we have not engaged in exchange rate hedging activities. Even if we were to implement hedging strategies to mitigate this risk, these strategies might not eliminate our exposure to foreign exchange rate fluctuations and would involve costs and risks of their own, such as ongoing management time and expertise, external costs to implement the strategies and potential accounting implications. We are also subject to taxation in foreign jurisdictions. In addition, transactions between our foreign subsidiaries and us may be subject to United States and foreign withholding taxes. Applicable tax rates in foreign jurisdictions differ from those of the United States, and change periodically. The extent, if any, to which we will receive credit in the United States for taxes we pay in foreign jurisdictions will depend upon the application of limitations set forth in the U.S. Internal Revenue Code, as well as the provisions of any tax treaties that may exist between the United States and such foreign jurisdictions. Our current or future international operations might not succeed for a number of reasons including:
•difficulties in staffing and managing foreign operations;
•competition from local recruiting services or employment advertising agencies;
•operational issues, such as longer customer payment cycles and greater difficulties in collecting accounts receivable;
•seasonal reductions in business activity;
•language and cultural differences;
•taxation issues;
•foreign exchange controls that might prevent us from repatriating income earned in countries outside the United States;
•credit risk;
•higher levels of payment fraud;
•multiple and conflicting laws and regulations, including complications due to unexpected changes in these laws and regulations;
•the burdens of complying with a wide variety of foreign laws and regulations;
•difficulties in enforcing intellectual property rights in countries other than the United States; and
•general political and economic trends.
Our future growth may depend on our ability to expand operations in international markets. We may have limited experience or we may need to rely on business partners in these markets, and our future growth will be materially adversely affected if we are unsuccessful in our international expansion efforts.
We operate local websites in numerous markets around the world. Our future growth will depend significantly on our ability to expand our brands and product offerings in additional international markets. As we expand into new international markets, we may have only limited experience in marketing and operating our products and services in such markets. In other instances, we may have to rely on the efforts and abilities of foreign business partners in such markets. Certain international markets may be slower than domestic markets in adopting the online recruitment and advertising industry medium and, as a result, our operations in international markets may not develop at a rate that supports our level of investment. In addition, business practices in these new international markets may be unlike those in the other markets we serve and we may face increased exposure to fines and penalties under U.S. laws, such as the Foreign Corrupt Practices Act, the U.K. Anti-Bribery Act and local laws prohibiting corrupt payments to governmental officials.Although we have implemented policies and procedures designed to ensure compliance with these laws, we cannot be sure that our employees, contractors or agents will not violate our policies. Any such violations could materially damage our reputation, our brand, our international expansion efforts, our business and our operating results.
We may be impacted by unfavorable decisions in proceedings related to future tax assessments.
We operate in a number of jurisdictions and are from time to time subject to audits and reviews by various taxation authorities with respect to income, payroll, sales and use, and other taxes for current and past periods. We may become subject to future
tax assessments by various authorities. The determination of our worldwide provision for income taxes and current and deferred tax assets and liabilities requires judgment and estimation. There are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our tax estimates are reasonable, the ultimate tax outcome may differ materially from the tax amounts recorded in our consolidated financial statements. Any amount we might be required to pay in connection with an ongoing audit or review or a future tax assessment may have a material adverse effect on our financial position, cash flows or overall results of operations.
Taxation risks could subject us to liability for past sales and cause our future sales to decrease.
We do not collect sales or use tax in certain jurisdictions on all the services we provide in the United States. Our operations, and any future expansion of them, along with other aspects of our evolving business, may result in additional sales or use tax obligations.
Currently, the individual states’ laws and regulations determine which services performed over the Internet are subject to sales tax. A number of states have been considering or have adopted initiatives that could impose sales tax on certain services delivered electronically. Additionally, many states have implemented laws or regulations requiring out-of-state vendors to collect sales tax, which may increase our tax filing obligations. Also, a state may take the position that certain services we provide are subject to sales tax under existing regulations. The imposition by state and local governments of various taxes upon certain services delivered over the Internet could create administrative burdens for us, put us at a competitive disadvantage if they do not impose similar obligations on all of our online competitors and potentially decrease our future sales.
We collect indirect tax (including value added tax and goods and services tax) as applicable on services sold by us on some of our international sites. Additional foreign countries may seek to impose indirect tax collection obligations on us. A successful assertion by one or more jurisdictions that we should collect sales tax or other indirect tax on the sale of services could result in substantial tax liabilities for past sales, decrease our ability to compete, and otherwise harm our business.
Because we recognize most of our revenue from our contracts over the term of the agreement, a significant downturn in these businesses may not be immediately reflected in our operating results.
We recognize revenue from sales of our recruiting contracts over the terms of the agreements, which, on average, is approximately 12 months, meaning a significant portion of the revenue we report in each quarter is generated from agreements entered into during previous quarters. Consequently, a decline in new or renewed agreements in any one quarter may not significantly impact our revenue in that quarter but may, instead, negatively affect our revenue in future quarters. In addition, we may be unable to adjust our fixed costs in response to reduced revenue. Accordingly, the effect of significant declines in the sales of these offerings may not be reflected in our short-term results of operations.
Risks Related to Our Indebtedness
We have indebtedness which could affect our financial condition, and, if adverse changes in the credit markets occur, we may not be able to borrow funds under our revolving credit facility or refinance our indebtedness.
As of December 31, 2020, we had $20.0 million of outstanding indebtedness under our credit agreement dated November 14, 2018 (the “Credit Agreement”) and the facility provides capacity for us to borrow an additional $70.0 million. If we cannot generate sufficient cash flow from operations to service our debt, we may need to further refinance our debt, dispose of assets or issue equity to obtain necessary funds. We do not know whether we will be able to take any of these actions, if necessary, on a timely basis or on terms satisfactory to us or at all.
Our Credit Agreement consists of a revolving facility and matures in November 2023. The funding of the revolving facility is dependent on a number of financial institutions. It is possible that one or more of the lenders will refuse or be unable to satisfy their commitment to lend to us should we need to borrow funds under the revolving credit facility. If borrowings are unavailable to us and we cannot generate sufficient revenues to fund our operations, our business will be adversely affected. In addition, the inability to borrow could hinder growth if we need funds to complete an acquisition. Our indebtedness could limit our ability to: obtain necessary additional financing for working capital, capital expenditures or other purposes in the future; plan for, or react to, changes in our business and the industries in which we operate; make future acquisitions or pursue other business opportunities; or react in an extended economic downturn.
The terms of our Credit Agreement may restrict our current and future operations, which would adversely affect our ability to respond to changes in our business and to manage our operations.
Our Credit Agreement contains, and any future indebtedness of ours would likely contain, a number of restrictive covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to, among other things:
•incur additional debt;
•pay dividends and make other restricted payments;
•repurchase our own shares;
•create liens;
•make investments and acquisitions;
•engage in sales of assets and subsidiary stock;
•enter into sale-leaseback transactions;
•enter into transactions with affiliates;
•transfer all or substantially all of our assets or enter into merger or consolidation transactions; and
•make capital expenditures.
Our Credit Agreement also requires us to maintain certain financial ratios. A failure by us to comply with the covenants or financial ratios contained in our Credit Agreement could result in an event of default under our Credit Agreement which could adversely affect our ability to respond to changes in our business and manage our operations. In the event of any default under our Credit Agreement, the lenders under our Credit Agreement will not be required to lend any additional amounts to us. Our lenders also could elect to declare all amounts outstanding to be due and payable and require us to apply all of our available cash to repay these amounts. If the indebtedness under our Credit Agreement were to be accelerated, there can be no assurance that our assets would be sufficient to repay this indebtedness in full.
Risks Related to Ownership of Our Securities
If we do not meet the continued listing requirements of the NYSE our common stock may be delisted.
Our common stock is listed on the NYSE. The NYSE requires us to continue to meet certain listing standards, including standards related to the trading price of our common stock, as well as our global market capitalization. While we are currently in compliance with the NYSE continued listing requirements, we cannot assure you that we will remain in compliance. If we do not meet the NYSE’s continued listing standards, we will be notified by the NYSE and we will be required to take corrective action to meet the continued listing standards; otherwise our common stock will be delisted from the NYSE. A delisting of our common stock on the NYSE would reduce the liquidity and market price of our common stock and the number of investors willing to hold or acquire our common stock, which could negatively impact our ability to access the public capital markets. A delisting would also reduce the value of our equity compensation plans, which could negatively impact our ability to retain key employees.
Our stock price has been volatile in the past and may be subject to volatility in the future.
The trading price of our common stock has been volatile in the past, including recent significant declines, and could be subject to fluctuations in response to various factors, some of which are beyond our control. Factors such as announcements of variations in our quarterly financial results and fluctuations in revenue could cause the market price of our common stock to fluctuate. Fluctuations in the valuation of companies perceived by investors to be comparable to us or in valuation metrics, such as our price to earnings ratio, could impact our stock price. Additionally, the stock markets have at times experienced price and volume fluctuations that have affected and might in the future affect the market prices of equity securities of many companies. These fluctuations have, in some cases, been unrelated or disproportionate to the operating performance of these companies. Further, the trading prices of publicly traded shares of companies in our industry have been particularly volatile and may be very volatile in the future. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes, international currency fluctuations or political unrest, may negatively impact the market price of our common stock.
Failure to maintain effective internal control over financial reporting could have a material adverse effect on our business, operating results and stock price.
Maintaining effective internal control over financial reporting is necessary for us to produce reliable financial reports and is important in helping to prevent financial fraud. If we are unable to maintain adequate internal controls, our business and operating results could be harmed. We are required to satisfy the requirements of Section 404 of Sarbanes Oxley and the related rules of the SEC, which require, among other things, our management to assess annually the effectiveness of our internal control over financial reporting and our independent registered public accounting firm to issue a report on that assessment. We may be unable to remedy deficiencies before the requisite deadlines for those reports. Any failure to remediate deficiencies noted by our independent registered public accounting firm or to implement required new or improved controls or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements.
If our management or our independent registered public accounting firm were to conclude in their reports that our internal control over financial reporting was not effective, investors could lose confidence in our reported financial information, and the trading price of our stock could drop significantly.
Risks Related to Our Technology
We may not timely and effectively scale and adapt our existing technology and network infrastructure to ensure that our websites are accessible within an acceptable load time.
A key element to our continued growth is the ability of our users (whom we define as anyone who visits our website, regardless of whether or not they are a customer), enterprises and professional organizations in all geographies to access our website within acceptable load times. We call this “website performance.” We have experienced, and may in the future experience, website disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, capacity constraints due to an overwhelming number of users accessing our website simultaneously, and denial of service or fraud or security attacks. In some instances, we may not be able to identify the cause or causes of these website performance problems within an acceptable period of time. It may become increasingly difficult to maintain and improve the performance of our websites, especially during peak usage times and as our solutions become more complex and our user traffic increases. If our websites are unavailable when users attempt to access them or do not load as quickly as they expect, users may seek other websites to obtain the information for which they are looking, and may not return to our websites as often in the future, or at all. This would negatively impact our ability to attract customers, enterprises and professional organizations and increase engagement on our websites. We expect to continue to make significant investments to maintain and improve website performance and to enable rapid releases of new features and products. To the extent that we do not effectively address capacity constraints, upgrade our systems as needed and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business and operating results may be harmed.
Capacity constraints, systems failures or breaches of our network security could materially and adversely affect our business. If we fail to manage our technical operations infrastructure, our existing customers may experience services outages, and our new customers may experience delays in the deployment of our solution.
We derive almost all of our revenues from the purchase of recruitment products and services and employment advertising offered on our Dice, eFinancialCareers, and ClearanceJobs websites. As a result, our operations depend on our ability to maintain and protect our website services, most of which are housed within Amazon Web Services. System failures, including network, software or hardware failures, which cause interruption or an increase in response time of our services, could substantially decrease usage of our services and could reduce the attractiveness of our services to both our customers and professionals. An increase in the volume of queries conducted through our services could strain the capacity of the software or hardware we employ. This could lead to slower response times or system failures and prevent users from accessing our websites for extended periods of time, thereby decreasing usage and attractiveness of our services. Our technology operations are dependent in part on our ability to protect our operating systems against:
•physical damage from acts of God;
•terrorist attacks or other acts of war;
•power loss;
•telecommunications failures;
•network, hardware or software failures;
•physical and electronic break-ins;
•cyber security attacks;
•computer viruses or worms;
•identity theft;
•phishing attempts; and
•similar events.
Although we maintain insurance against fires, floods, and general business interruptions, the amount of coverage may not be adequate in any particular case. Furthermore, the occurrence of any of these events could result in interruptions, delays or cessations in service to users of our services, which could materially impair or prohibit our ability to provide our services and significantly impact our business.
Additionally, overall Internet usage could decline if any well-publicized compromise of security occurs or if there is a perceived lack of security of personal and corporate information stored within our systems to facilitate hiring and recruitment business processes. “Hacking” involves efforts to gain unauthorized access to information or systems or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, and online job boards, in particular, have been targeted by hackers who seek to gain unauthorized access to job seeker and customer data for purposes of implementing “phishing” or other schemes. Despite our implementation of numerous security measures; including access controls, network security, information security risk management processes, software development security, cryptography, operational security, business continuity and disaster recovery, and physical security, our websites, servers, our databases and other systems as well as those of our customers' may be vulnerable to computer hackers, physical or electronic break-ins, sabotage, computer viruses, worms, phishing attacks and similar disruptions from unauthorized tampering with our computer systems. Our systems, like the systems of many other websites, have been targeted in the past in cyber-attacks and hacks and will continue to be subject to such attacks. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, such techniques often are not recognized until launched against a target and may originate from less regulated and remote areas around the world, we may be unable to proactively address these techniques or to implement adequate preventative measures. We will continue to review and enhance our security measures in an attempt to prevent unauthorized and unlawful intrusions, although in the future it is possible we may not be able to prevent all intrusions, and such intrusions could result in our network security or computer systems being compromised and possibly result in the misappropriation or corruption of proprietary or personal information or cause disruptions in our services. We might be required to expend significant capital and resources to protect against, remediate or alleviate problems caused by such intrusions. We may also not have a timely remedy against a hacker who is able to penetrate our network security. Our networks could also be affected by viruses or malware or other similar disruptive problems, and we could inadvertently transmit these viruses or malware to our users or other third parties. Our hardware and back-up systems could fail causing our services to be interrupted. Our customers may fall prey to successful phishing attacks and indavertently give unauthorized access to our candidate database. Any of these occurrences, and negative publicity arising from any such occurrences, could harm our business or give rise to a cause of action against us. Our general business interruption insurance policies have limitations with respect to covering interruptions caused by computer viruses or hackers. We have not added specific insurance coverage to protect against these risks. Our activities and the activities of third party contractors involve the storage, use and transmission of proprietary and personal information, including personal information collected from professionals who use our websites. Accordingly, security breaches could expose us to a risk of loss or litigation and possibly liabilities. We cannot assure that contractual provisions attempting to limit our liability in these areas will be successful or enforceable, or that other parties will accept such contractual provisions as part of our agreements. Any security breaches or our inability to provide users with continuous access to our networks could materially impact our ability to provide our services as well as materially impact the confidence of our customers in our services, either of which could have a material adverse effect on our business.
If our users or customers do not find our candidate profiles useful, it could adversely impact demand for our products and services and the growth of our business.
Our product integrates publicly available data on the internet to create aggregated profiles of prospective candidates’ professional experience and other employment-related data. These profiles are made available to our customers through our TalentSearch product to help them identify prospective technical candidates in a way that reduces their need to search multiple websites, while delivering more relevant candidates and useful employment information to recruiters and employers that use it. Candidates sought out through the socially aggregated profiles may not be interested in the opportunities presented to them by the recruiters and employers who use the product, which could decrease its demand.
If Internet search engines’ methodologies are modified or our search result page rankings decline for other reasons, our user engagement could decline.
We depend in part on various Internet search engines, such as Google, Bing and Yahoo!, to direct a significant amount of traffic to our websites. Our ability to maintain the number of visitors directed to our websites is not entirely within our control. Our competitors’ search engine optimization, or SEO, efforts may result in their websites receiving a higher search result page ranking than ours, or Internet search engines could revise their methodologies in an attempt to improve their search results, which could adversely affect the placement of our search result page ranking. If search engine companies modify their search algorithms in ways that are detrimental to our new user growth or in ways that make it harder for our users to use our websites, or if our competitors’ SEO efforts are more successful than ours, overall growth in our user base could slow, user engagement could decrease, and we could lose existing users. These modifications may be prompted by search engine companies entering the online professional networking market or aligning with competitors. Our websites have experienced fluctuations in search result rankings in the past, and we anticipate similar fluctuations in the future. Any reduction in the number of users directed to our websites would harm our business and operating results.
We may not be able to halt the operations of websites that aggregate our data as well as data from other companies, including social networks, or copycat websites that have misappropriated our data in the past or may misappropriate our data in the future. These activities could harm our brand and our business.
From time to time, third parties have misappropriated our data through website scraping, robots or other means and aggregated this data on their websites with data from other companies. In addition, “copycat” websites have misappropriated data on our network and attempted to imitate our brand or the functionality of our websites. These activities could degrade our brands and harm our business. When we have become aware of such websites, we have employed technological or legal measures in an attempt to halt their operations. However, we may not be able to detect all such websites in a timely manner and, even if we could, technological and legal measures may be insufficient to stop their operations. In some cases, particularly in the case of websites operating outside of the United States, our available remedies may not be adequate to protect us against such websites. Regardless of whether we can successfully enforce our rights against these websites, any measures that we may take could require us to expend significant financial or other resources.
We rely on the services of third-party data center hosting facilities. Interruptions or delays in those services could impair the delivery of our service and harm our business.
Our Dice, eFinancialCareers, and Clearancejobs website applications utilize cloud computing technology. It is hosted pursuant to service agreements on technology platforms by third-party service providers, primarily through Amazon Web Services (AWS). We do not control the operation of these providers or their facilities, and the facilities are vulnerable to damage, interruption or misconduct. Unanticipated problems at these facilities could result in lengthy interruptions in our services. If the services of one or more of these providers are terminated, disrupted, interrupted or suspended for any reason, we could experience disruption in our ability to provide our services, which may harm our business and reputation. Further, any damage to, or failure of, the cloud services we use could result in interruptions in our services. Interruptions in our service may damage our reputation, reduce our revenue, cause us to issue credits or pay penalties, cause customers to terminate their agreements and adversely affect our renewal rates and our ability to attract new customers. While we believe our application and network architecture and use of multiple availability zones and regions within Amazon Web Services Cloud reduce our risk, our business would be harmed if our customers and potential customers believe our services are unreliable.
Regulatory Risks
We may be liable with respect to the collection, storage, and use of the personal and professional information of the professionals, who use our websites and our current practices may not be in compliance with proposed new laws and regulations.
Our business depends on our ability to collect, store, use, and disclose personal and professional data from the professionals who use our websites. Our policies concerning the collection, use and disclosure of personally identifiable information are described on our websites. In recent years, class action lawsuits have been filed and the Federal Trade Commission and state agencies have commenced investigations with respect to the collection, use, sale and storage by various Internet companies of users’ personal and professional information. While we believe we are in compliance with current law, we cannot ensure that we will not be subject to lawsuits or investigations for violations of law. Moreover, our current practices regarding the
collection, storage and use of user information may not be in compliance with currently pending legislative and regulatory proposals by the United States federal government and various state and foreign governments intended to limit the collection and use of user information. While we have implemented and intend to implement additional programs designed to enhance the protection of the privacy of our users, these programs may not conform to all or any of these laws or regulations and we may consequently incur civil or criminal liability for failing to conform. As a result, we may be forced to change our current practices relating to the collection, storage and use of user information. Our failure or our perceived failure to comply with laws and regulations could also lead to adverse publicity and a loss of consumer confidence if it were known that we did not take adequate measures to assure the confidentiality of the personally identifiable information that our users had given to us. This could result in a loss of customers and revenue and materially adversely impact the success of our business. Concern among prospective customers and professionals regarding our use of personal information collected on our websites, such as credit card numbers, email addresses, phone numbers and other personal information, could keep prospective customers from using our career services websites. Internet-wide incidents or incidents with respect to our websites or databases, including misappropriation of our users’ personal information, penetration of our network security, or changes in industry standards, regulations or laws could result in regulatory penalties, liability to the persons whose information was compromised, as well as legal expenses, and could deter people from using the Internet or our websites to conduct transactions that involve confidential information, which could have a material adverse impact on our business. We generally comply with industry standards and are subject to the terms of our privacy policies and privacy-related obligations to third parties (including voluntary third-party certification bodies such as TrustArc). We strive to comply with all applicable laws, policies, legal obligations and industry codes of conduct relating to privacy and data protection, to the extent possible. However, it is possible that these obligations may be interpreted and applied in new ways and/or in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices or that new regulations could be enacted.
In the past, we have relied on the U.S.-European Union Frameworks, as agreed to by the U.S. Department of Commerce and the European Union (“EU”), as one of the means to legally transfer European personal information from Europe to the United States. However, on October 6, 2015, the European Court of Justice invalidated the U.S.-EU Safe Harbor framework. On February 2, 2016, the U.S. and E.U. announced agreement on a new framework for transatlantic data flows entitled the EU-US Privacy Shield. However, on July 16, 2020, the European Court of Justice issued a judgment declaring Privacy Shield as invalid. Accordingly, the Company must rely on other mechanisms permitted by the GDPR and EU regulators for the transfer of such information.
Additionally, the EU has enacted the GDPR, which took effect on May 25, 2018. The GDPR implemented more stringent operational requirements for processors and controllers of personal data, including, for example, expanded disclosures about how personal information is to be used, limitations on retention of information, mandatory data breach notification requirements and higher standards for controllers to demonstrate that they have obtained valid consent for certain data processing activities. The GDPR also provides for significant penalties for non-compliance. As a result of the GDPR, we expect regulatory and customer attention surrounding data privacy continue to increase. Furthermore, outside of the EU, we continue to see increased regulation of data privacy and security, including the adoption of more stringent subject matter specific state laws and national laws regulating the collection and use of data, as well as security and data breach obligations. For example, California adopted the California Consumer Privacy Act of 2018, or CCPA, which became effective on January 1, 2020. The CCPA has been characterized as the first "GDPR-like" privacy statute to be enacted in the United States because it mirrors a number of the key provisions of the GDPR. The CCPA established a new privacy framework for covered businesses by, among other things, creating an expanded definition of personal information, establishing new data privacy rights for consumers in the State of California and creating a new and potentially severe statutory damages framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches. More recently, on November 3, 2020, California enacted the California Privacy Rights Act, or CPRA.The CPRA, which goes into effect on January 1, 2023, expands upon the protections provided by the CCPA, including new limitations on the sale or sharing of consumers’ personal information, and the creation of a new state agency to enforce the CPRA’s protections.
The uncertainty and changes in the requirements of multiple jurisdictions may increase the cost of compliance, reduce demand for our websites, restrict our ability to offer services in certain locations or subject us to sanctions by state or national data protection regulators, all of which could harm our business, financial condition, and results of operations. Failure to provide adequate privacy protections and maintain compliance with the new data privacy laws, including the CCPA and the GDPR, could have a material adverse effect on our financial condition and results of operations.
Our business is subject to U.S. and foreign government regulation of the Internet and taxation, which may have a material adverse effect on our business.
Congress and various state and local governments, as well as the EU, have passed legislation that regulates various aspects of the Internet, including content, copyright infringement, user privacy, taxation, access charges, liability for third-party activities and jurisdiction. In addition, federal, state, local and foreign governmental organizations are also considering legislative and regulatory proposals that would regulate the Internet. Areas of potential regulation include libel, pricing, quality of products and services and intellectual property ownership. A number of proposals have been made at the state and local level that would impose taxes on the sale of goods and services through the Internet. Such proposals, if adopted, could substantially impair the growth of commerce over the Internet and could adversely affect our business, future results of operations, financial condition and liquidity. We may be subject to restrictions on our ability to communicate with our customers through email and phone calls. Several jurisdictions have proposed or adopted privacy related laws that restrict or prohibit unsolicited email or “spam.” These laws may impose significant monetary penalties for violations. For example, the CAN-SPAM Act of 2003, or “CAN-SPAM,” imposes complex and often burdensome requirements in connection with sending commercial email. Key provisions of CAN-SPAM have yet to be interpreted by the courts. Depending on how it is interpreted, CAN-SPAM may impose burdens on our email marketing practices or services we offer or may offer. Although CAN-SPAM is thought to have preempted state laws governing unsolicited email, the effectiveness of that preemption is likely to be tested in court challenges. If any of those challenges are successful, our business may be subject to state laws and regulations that may further restrict our email marketing practices and the services we may offer. The scope of those regulations is unpredictable. Because a number of these laws are relatively new and still in the process of being implemented, we do not know how courts will interpret these laws. Therefore, we are uncertain as to how new laws or the application of existing laws will affect our business.
Changes in laws or regulations that adversely affect the growth, popularity or use of the internet, including laws impacting net neutrality, could decrease the demand for our service and increase our cost of doing business. Certain laws intended to prevent network operators from discriminating against the legal traffic that traverse their networks have been implemented in many countries, including across the E.U. In others, the laws may be nascent or non-existent. Furthermore, favorable laws may change, including for example in the United States where the FCC voted to repeal existing net neutrality regulations. Given uncertainty around these rules, including changing interpretations, amendments or repeal, coupled with potentially significant political and economic power of local network operators, we could experience discriminatory or anti-competitive practices that could impede our growth, cause us to incur additional expense or otherwise negatively affect our business.
Due to the global nature of the Internet, it is possible that the governments of other states and foreign countries might attempt to regulate its transmissions or prosecute us for violations of their laws. We might unintentionally violate such laws or such laws may be modified and new laws may be enacted in the future. Any such developments (or developments stemming from enactment or modification of other laws) may significantly harm our business, operating results and financial condition.
If our users or customers do not find our candidate profiles useful, it could adversely impact demand for our products and services and
General Risk Factors
We may from time to time consider strategic alternatives that may enhance stockholder value, which may result in the growthuse of a significant amount of our business.management resources or significant costs, and we may not be able to fully realize the potential benefits of any such transaction.
Our product integrates publicly available data on
We may consider from time to time strategic alternatives to ensure the internetCompany’s ownership structure optimizes the Company’s ability to create aggregated profilesachieve growth initiatives through its strategic plan and to maximize stockholder value. The consideration of prospective candidates’ professional experiencestrategic alternatives could result in, among other things, a sale, merger, consolidation or business combination, asset divestiture, partnering or other collaboration agreements, or potential acquisitions or recapitalizations, in one or more transactions, or continuing to operate with our current business plan and other employment-related data. These profiles are made available to our customers through our TalentSearch product to help them identify prospective technical candidates in a way that reduces their need to search multiple websites, while delivering more relevant candidates and useful employment information to recruiters and employers that use it. While we have invested substantial resources into the development of our Unified Profile Index product, therestrategy. There can be no assurance that any review of strategic alternatives will result in the identification or consummation of any transaction. Although there would be uncertainty that considering any possible transaction would result in definitive agreements or the completion of such transaction, we may devote a significant amount of our management resources to analyzing and pursuing such a transaction, which could negatively impact our operations. In addition, we may incur significant costs in connection with seeking such transactions or other strategic alternatives regardless of whether the transaction is completed. In the event that we consummate a strategic alternative in the future, we cannot be certain that we would fully realize the potential benefit of such a transaction and cannot predict the impact that such strategic transaction might have on our operations or stock price. We do not undertake to provide updates or make further comments regarding the evaluation of strategic alternatives, unless otherwise required by law.
If we fail to attract or retain key executives and personnel, there could be a material adverse effect on our business.
Our performance is substantially dependent on the performance of senior management and key technical personnel. We have employment agreements, which include non-compete provisions, with all members of senior management and certain key
technical personnel. However, we cannot assure you that any of these senior managers or others will continueremain with us or that they will not compete with us in the event they cease to be able to access the data that is necessary to create the candidate profiles used in this product. Technology companies, social and professional networking websites or other companies may develop technologyemployees, which competes with our Unified Profile Index product or we may be prevented from aggregating the data we need to make this product useful, which could decrease the demand for this product. Moreover, candidates sought out through the socially aggregated profiles may not be interested in the opportunities presented to them by the recruiters and employers who use the product, which could decrease its demand. Any decrease in demand for our Unified Profile Index product may adversely affect our ability to differentiate ourselves from our competitors, which would have a material adverse effect on our business, results of operations, financial condition and liquidity. In addition, we have not purchased key person life insurance on any members of our senior management. Our future success also depends upon our continuing ability to identify, attract, hire and retain highly qualified personnel, including skilled technical, management, product and technology, and sales and marketing personnel, all of whom are in high demand and are often subject to competing offers. There has in the past been, and there may in the future be, a shortage of qualified personnel in the career services market. We also compete for qualified personnel with other companies. A loss of a substantial number of qualified employees, or an inability to attract, retain and motivate additional highly skilled employees required for expansion of our business, could have a material adverse effect on our business. In addition, the recent significant decline in our stock price may undermine the use of our equity as a retention tool and may make it more difficult to retain key personnel.
We may be adversely affected by cyclicality, volatility or an extended downturn in the United States or worldwide economies, or in or related to the industries we serve.
Our revenues are generated primarily from servicing customers seeking to hire qualified professionals in the technology and finance sectors. Demand for these professionals tends to be tied to economic and business cycles. Increases in the unemployment rate, specifically in the technology industry, cyclicality or an extended downturn in the economy could cause our revenues to decline. For example, during the recession in 2001, employers reduced or postponed their recruiting efforts, including their recruitment of professionals in the technology industry. The 2001 economic recession, coupled with the substantial indebtedness incurred by our predecessor, Dice Inc., resulted in Dice Inc. filing for Chapter 11 protection in 2003. As of December 2020, the seasonally unadjusted U.S. unemployment rate was 3.0% for computer-related occupations, and the same 3.1% in the finance sector, as compared to the overall national average of 6.7%, seasonally adjusted. The increase in unemployment and decrease in recruitment activity experienced during 2008 and 2009 resulted in decreased demand for our services. During 2009, we experienced a 29% decline in revenues compared to 2008. If the economic environment experienced during 2008 and 2009 returns, our ability to generate revenue may be adversely affected.
In addition, the general level of economic activity in the regions and industries in which we operate significantly affects demand for our services. When economic activity slows, many companies hire fewer employees. Therefore, our operating results,.
business and financial condition could be significantly harmed by an extended economic downturn or future downturns, especially in regions or industries where our operations are heavily concentrated. Further, we may face increased pricing pressures during such periods as customers seek to use lower cost or fee services. Additionally, the labor market and certain of the industries we serve have historically experienced short-term cyclicality. It is difficult to estimate the total number of passive or active job seekers or available job openings in the United States or abroad during any given period. If Internet search engines’ methodologies are modified orthere is a labor shortage, qualified professionals may be less likely to seek our search result page rankings declineservices, which could cause our customers to look elsewhere for other reasons,attractive employees. Such labor shortages would require us to intensify our user engagement could decline.
We depend in partmarketing efforts toward professionals so that professionals who post their resumes on various Internet search engines, such as Google, Bing and Yahoo!, to direct a significant amount of trafficour websites remain relevant to our websites. Our ability to maintaincustomers, which would increase our expenses. Furthermore, if there is a shortage of available job openings in a particular region or sector we serve, the number of visitors directedjob postings on our websites could decrease, causing our business to be adversely affected. For example, the continued depression of oil prices led to decreased demand for energy professionals worldwide. Oil prices reached decade lows in 2016 and remained depressed. This decline in demand significantly decreased the sales of energy industry job postings and the use of related services and adversely impacted the results of Rigzone, a business we disposed of in 2018. As a result, we recorded a $24.6 million impairment of goodwill and intangible assets and $34.8 million impairment of goodwill at our former Corporate & Other segment for the fiscal years ended December 31, 2016 and 2015, respectively.
Any economic downturn or recession in the United States or abroad for an extended period of time could have a material adverse effect on our business, financial condition, results of operations and liquidity. Based on historical trends, improvements in labor markets and the need for our services generally lag behind overall economic improvements. Additionally, there has historically been a lag from the time customers begin to increase purchases of our services and the impact to our websites is not entirely withinrevenues due to the recognition of revenue occurring over the length of the contract, which can be several months to a year.
Concerns persist regarding the debt burden of certain Eurozone countries and their ability to meet future financial obligations. These concerns, or market perceptions concerning these and related issues, could adversely affect demand for our control.
services in the European market and our business, results of operations, financial condition, and liquidity. In addition, Hong Kong has recently experienced significant political unrest and social strife. Any negative developments to China’s economic condition could have an adverse impact on the global economy, and thus our business. Volatility in global financial markets may limit our ability to access the capital markets at a time when we would like, or need, to raise capital, which could have an impact on our
ability to react to changing economic and business conditions. Accordingly, if the domestic or global economies worsen, our business, results of operations and financial condition could be materially and adversely affected.
Our competitors’ search engine optimization,
We could be subject to infringement and other claims relating to our services or SEO, effortsthe content on our websites that may result in their websites receiving a higher search result page ranking than ours,costly litigation, the payment of damages or Internet search engines couldthe need to revise their methodologies in an attempt to improve their search results, which could adversely affect the placement of our search result page ranking. If search engine companies modify their search algorithms in ways that are detrimental to our new user growth or in ways that make it harder for our users to use our websites, or if our competitors’ SEO efforts are more successful than ours, overall growth in our user base could slow, user engagement could decrease, andway we could lose existing users. These modifications may be prompted by search engine companies entering the online professional networking market or aligning with competitors. Our websites have experienced fluctuations in search result rankings in the past, and we anticipate similar fluctuations in the future. Any reduction in the number of users directed to our websites would harm our business and operating results.conduct business.
We maycannot be certain that our technology, offerings, services or content do not be able to haltor will not infringe upon the operationsintellectual property or other proprietary rights of websites that aggregate our data as well as data from other companies, including social networks,third parties, or copycat websites that have misappropriated our data in the past or may misappropriate our data in the future. These activities could harm our brand and our business.
otherwise violate laws. From time to time we receive notices alleging potential infringement of intellectual property or other proprietary rights of third parties have misappropriatedor non-compliance with applicable laws. In seeking to protect our data through website scraping, robotsmarks, copyrights, domain names and other intellectual property rights, or in defending ourselves against claims of infringement or non-compliance that may or may not be without merit, we could face costly litigation and the diversion of our management’s attention and resources. Claims against us could result in the need to develop alternative trademarks, content, technology or other means and aggregated this data on their websites with data from other companies. In addition, “copycat” websitesintellectual property or enter into costly royalty or licensing agreements, or substantially modify or cease to offer one or more of our services, which could have misappropriated dataa material adverse effect on our networkbusiness, results of operations, financial condition and attemptedliquidity. If we were found to imitate our brandhave infringed on a third party’s intellectual property or other proprietary rights, or failed to comply with applicable laws, among other things, the functionalityvalue of our websites. These activities could degrade our brands and harmour business reputation could be impaired, and our business could suffer.
If we are unable to enforce or defend our ownership or use of intellectual property, our business, competitive position and operating results could be harmed.
The success of our business depends in large part on our intellectual property rights, including existing and future trademarks and copyrights, which are and will continue to be valuable and important assets of our business. WhenOur business could be harmed if we are not able to protect the content of our databases and our other intellectual property. We have become aware oftaken measures to protect our intellectual property, such websites,as requiring our employees and consultants with access to our proprietary information to execute confidentiality agreements. In the future, we have employed technologicalmay sue competitors or legalother parties who we believe to be infringing our intellectual property. We may in the future also find it necessary to assert claims regarding our intellectual property. These measures in an attempt to halt their operations. However, we may not be ablesufficient or effective to detect allprotect our intellectual property. We also rely on laws, including those regarding copyrights and trademarks to protect our intellectual property rights. Current laws, or the enforceability of such websiteslaws, specifically in a timely mannerforeign jurisdictions, may not adequately protect our intellectual property or our databases and even ifthe data contained in them. In addition, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights in Internet related businesses are uncertain and evolving, and we could, technological and legal measures may be insufficient to stop their operations. In some cases, particularly in the case of websites operating outsidecannot assure you of the United States,future viability or value of any of our available remediesproprietary rights. Others may not be adequatedevelop technologies similar or superior to protect us against such websites. Regardlessour technology. A significant impairment of whether we can successfully enforce our intellectual property rights against these websites, any measures that we may take could require us to expend significant financialdevelop alternative intellectual property, incur licensing or other resources.expenses or limit our product and service offerings.
If our business fails to attract and retain users, particularly users who create and post original content on our web properties, our financial results will be adversely affected.
Our reliance upon user-generated content requires that we develop and maintain tools and services designed to facilitate:
creation of user-generated content;
participation in discussion surrounding such user-generated content;
evaluation of user-generated content; and
distribution of user-generated content.
If our development efforts fail to facilitate such activities on our web properties, the level of user engagement and interaction will not increase and may decline. Even if we succeed in facilitating such activities on our sites, there can be no assurance that such improvements will be deployed in a timely or cost-effective manner.
If we fail to increase user engagement and interaction on our web properties, we will not attract and retain a loyal user base or the advertisers who desire to reach them, which will adversely affect our business and our ability to maintain or grow our revenue.
We face risks relatinghave incurred increased costs and will continue to our foreign operations.
We operate websites serving numerous markets around the world. For the year ended December 31, 2018, approximately 25% of our total revenues were generated outside of the United States. Certain ofincur these amounts are collected in local currency. Ascosts as a result of operating outsidebeing a public company.
As a public company, we have incurred and will continue to incur significant levels of legal, accounting and other expenses. In addition, the United States, we are at risk for exchange rate fluctuations between such local currenciesSarbanes Oxley Act of 2002 (“Sarbanes Oxley”), the Dodd-Frank Act and related rules of the Securities and Exchange Commission (the “SEC”) and the United States dollar. To date, we have not engaged in exchange rate hedging activities. Even if we wereNYSE regulate corporate governance practices of public companies and impose significant requirements relating to implement hedging strategiesdisclosure controls and procedures and internal control over financial reporting. Compliance with these public company requirements has increased our costs, required additional resources and made some activities more time consuming. We are required to mitigate this risk, these strategies might not eliminate our exposure to foreign exchange rate fluctuations and would involve costs and risks of their own, such as ongoing managementexpend considerable time and expertise, external costs to implement the strategies and potential accounting implications. We are alsoresources complying with public company regulations.
Our business is subject to taxation in foreign jurisdictions. In addition, transactions between our foreign subsidiaries and us may be subject to United StatesU.S. and foreign withholding taxes. Applicable tax rates in foreign jurisdictions differ from thosegovernment regulation of the United States,Internet and change periodically. The extent, if any, totaxation, which we will receive credit in the United States for taxes we pay in foreign jurisdictions will depend upon the application of limitations set forth in the U.S. Internal Revenue Code, as well as the provisions of any tax treaties that may exist between the United States and such foreign jurisdictions. Our current or future international operations might not succeed for a number of reasons including:
difficulties in staffing and managing foreign operations;
competition from local recruiting services or employment advertising agencies;
operational issues, such as longer customer payment cycles and greater difficulties in collecting accounts receivable;
seasonal reductions in business activity;
language and cultural differences;
taxation issues;
foreign exchange controls that might prevent us from repatriating income earned in countries outside the United States;
credit risk;
higher levels of payment fraud;
multiple and conflicting laws and regulations, including complications due to unexpected changes in these laws and regulations;
the burdens of complying with a wide variety of foreign laws and regulations;
difficulties in enforcing intellectual property rights in countries other than the United States; and
general political and economic trends.
Our future growth depends on our ability to expand operations in international markets. We may have limited experience or we may need to rely on business partners in these markets, and our future growth will be materially adversely affected if we are unsuccessful in our international expansion efforts.
We operate local websites in numerous markets around the world. Our future growth will depend significantly on our ability to expand our brands and product offerings in additional international markets. As we expand into new international markets, we may have only limited experience in marketing and operating our products and services in such markets. In other instances, we may have to rely on the efforts and abilities of foreign business partners in such markets. Certain international markets may be slower than domestic markets in adopting the online recruitment and advertising industry medium and, as a result, our operations in international markets may not develop at a rate that supports our level of investment. In addition, business practices in these new international markets may be unlike those in the other markets we serve and we may face increased exposure to fines and penalties under U.S. laws, such as the Foreign Corrupt Practices Act, the U.K. Anti-Bribery Act and local laws prohibiting corrupt payments to governmental officials. Although we have implemented policies and procedures designed to ensure compliance with these laws, we cannot be sure that our employees, contractors or agents will not violate our policies. Any such violations could materially damage our reputation, our brand, our international expansion efforts, our business and our operating results.
We may be impacted by unfavorable decisions in proceedings related to future tax assessments.
We operate in a number of jurisdictions and are from time to time subject to audits and reviews by various taxation authorities with respect to income, payroll, sales and use, and other taxes for current and past periods. We may become subject to future tax assessments by various authorities. The determination of our worldwide provision for income taxes and current and deferred tax assets and liabilities requires judgment and estimation. There are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our tax estimates are reasonable, the ultimate tax outcome may differ materially from the tax amounts recorded in our consolidated financial statements. Any amount we might be required to pay in connection with an ongoing audit or review or a future tax assessment may have a material adverse effect on our financial position, cash flows or overall results of operations.business.
Taxation risks could subject us to liability for past sales
Congress and cause our future sales to decrease.
We do not collect sales or use tax in certain jurisdictions on the services we provide in the United States. Our operations, and any future expansion of them, along with other aspects of our evolving business, may result in additional sales or use tax obligations.
Currently, the individual states’ laws and regulations determine which services performed over the Internet are subject to sales tax. A number of states have been considering or have adopted initiatives that could impose sales tax on certain services delivered electronically. Additionally, many states have implemented laws or regulations requiring out-of-state vendors to collect sales tax following the U.S. Supreme Court's June 2018 decision in Wayfair v. South Dakota, Inc. regarding the tax filing obligations of remote sellers. If more states implement such laws or regulations, we could be required to collect sales tax in additional states. Also, a state may take the position that certain services we provide are subject to sales tax under existing regulations. The imposition byvarious state and local governments, ofas well as the EU, have passed legislation that regulates various taxes upon certain services delivered overaspects of the Internet, could create administrative burdensincluding content, copyright infringement, user privacy, taxation, access charges, liability for us, put us at a competitive disadvantage if they do not impose similar obligations on allthird-party activities and jurisdiction. In addition, federal, state, local and foreign governmental organizations are also considering legislative and regulatory proposals that would regulate the Internet. Areas of our online competitors and potentially decrease our future sales.
We collect indirect tax (including value added tax and goodspotential regulation include libel, pricing, quality of products and services tax) as applicable on services sold by us on someand intellectual property ownership. A number of our international sites. Additional foreign countries may seek toproposals have been made at the state and local level that would impose indirect tax collection obligations on us.
A successful assertion by one or more jurisdictions that we should collect sales tax or other indirect taxtaxes on the sale of goods and services through the Internet. Such proposals, if adopted, could result in substantial tax liabilities for past sales, decreasesubstantially impair the growth of commerce over the Internet and could adversely affect our business, future results of operations, financial condition and liquidity. We may be subject to restrictions on our ability to compete,communicate with our customers through email and otherwise harm our business.
phone calls. Several jurisdictions have proposed or adopted privacy related laws that restrict or prohibit unsolicited email or “spam.”
These laws may impose significant monetary penalties for violations. For example, the CAN-SPAM Act of 2003, or “CAN-SPAM,” imposes complex and often burdensome requirements in connection with sending commercial email. Key provisions of CAN-SPAM have yet to be interpreted by the courts. Depending on how it is interpreted, CAN-SPAM may impose burdens on our email marketing practices or services we offer or may offer. Although CAN-SPAM is thought to have preempted state laws governing unsolicited email, the effectiveness of that preemption is likely to be tested in court challenges. If any of those challenges are successful, our business may be subject to state laws and regulations that may further restrict our email marketing practices and the services we may offer. The scope of those regulations is unpredictable. Because a number of these laws are relatively new and still in the process of being implemented, we do not know how courts will interpret these laws. Therefore, we are uncertain as to how new laws or the application of existing laws will affect our business.
Because we recognize most of our revenue from our contracts over
Changes in laws or regulations that adversely affect the termgrowth, popularity or use of the agreement, ainternet, including laws impacting net neutrality, could decrease the demand for our service and increase our cost of doing business. Certain laws intended to prevent network operators from discriminating against the legal traffic that traverse their networks have been implemented in many countries, including across the E.U. In others, the laws may be nascent or non-existent. Furthermore, favorable laws may change, including for example in the United States where the FCC voted to repeal existing net neutrality regulations. Given uncertainty around these rules, including changing interpretations, amendments or repeal, coupled with potentially significant downturn in these businesses may not be immediately reflected inpolitical and economic power of local network operators, we could experience discriminatory or anti-competitive practices that could impede our operating results.
We recognize revenue from sales of our recruiting contracts over the terms of the agreements, which, on average, is approximately 12 months. As a result, a significant portion of the revenue we report in each quarter is generated from agreements entered into during previous quarters. Consequently, a decline in newgrowth, cause us to incur additional expense or renewed agreements in any one quarter may not significantly impact our revenue in that quarter but may, instead,otherwise negatively affect our revenue in future quarters. In addition, webusiness.
Due to the global nature of the Internet, it is possible that the governments of other states and foreign countries might attempt to regulate its transmissions or prosecute us for violations of their laws. We might unintentionally violate such laws or such laws may be unable to adjust our fixed costs in response to reduced revenue. Accordingly, the effect of significant declinesmodified and new laws may be enacted in the salesfuture. Any such developments (or developments stemming from enactment or modification of these offeringsother laws) may not be reflected insignificantly harm our short-termbusiness, operating results of operations.and financial condition.
The UK’s impendingU.K.’s departure from the EUE.U. could adversely affect us.
The U.K. held a referendum onin June 23, 2016 on its membership in the E.U., in which a majority of voters in the U.K. voted to exit the E.U. (commonly referred to as “Brexit”). The U.K.’s departure formally departed from the E.U. is currently scheduled to take place on Friday, March 29, 2019.January 31, 2020, subject to a transition period which ended on December 31, 2020 (the "Transition Period"). Various E.U. laws, rules and guidance have been on-shored into domestic U.K. legislation and certain transitional regimes and deficiency-correction powers exist to ease the transition. The U.K. and the E.U. announced, on December 24, 2020, that they have reached agreement on a new Trade and Cooperation Agreement (the “TCA”) which addresses a range of aspects of the future relationship between the parties. The TCA was ratified by the U.K. Parliament on December 31, 2020. The TCA addresses, for example, trade in goods and the ability of U.K. nationals to travel to the E.U. on business but defers other issues.While the TCA includes a commitment by the U.K. and the E.U. to keep their markets open for persons wishing to provide financial services through a permanent establishment, it does not address substantive future cooperation in the sphere of financial services or reciprocal market access into the E.U. by U.K. firms under so-called “equivalence” arrangements.The European Commission has indicated that its assessment of the U.K.’s replies to its equivalence inquiries remain ongoing and, at this stage, there is no certainty as to when such assessments will be concluded or whether the U.K. will be deemed equivalent in some or all of the individual assessments.
While the TCA provides clarity in some areas, elements of the uncertainty that has accompanied much of the Brexit process to date will continue.This is driven by the ongoing uncertainty relating to equivalence and the extent to which the E.U. grants reciprocal access to U.K. firms in the sphere of financial services and that, as a new agreement, the implications and operation of the TCA may evolve during the balance of 2021, and potentially beyond that date.The outcomes following the implementation of the TCA (and any subsequent discussions between the U.K. and E.U. in respect of matters not within its scope) are likely to affect, among others, trade in goods and services (including the availability of equivalence regimes for financial services firms); immigration and business travel rules, the ability to move employees across borders, and recognition of professional qualifications; legal and regulatory regimes; and market access rules.
The impact of this uncertainty as well as that of (a) the TCA (and any subsequent discussions between the U.K. in relation to equivalence assessments for financial services) and (b) the operation of on-shored EU laws, rules and guidance in the U.K. are difficult to predict, and could cause disruptions to and create uncertainty surrounding adversely affectour business, including affecting our relationships with our existing and future customers and employees based in the UKU.K. and Europe. For example, if as a result of Brexit, financial institutions move all or a portion of their operations out of the UK,U.K., it may result in decreased demand for jobs in the financial sector in the UKU.K. and could negatively impact the performance of our eFinancialCareers business. Further, the potential loss of the EUE.U. “passport,” or
any other potential restriction on free travel of UKU.K. citizens to Europe, and vice versa, could adversely impact the jobs market in general and our operations in Europe.
In addition, Brexit has resulted in significant volatility in the value of the British Pound Sterling and Euro currencies. Since our financial statements are denominated in U.S. dollars and we currently do not hedge currency risk, a decline in the value of the Pound or Euro may have an adverse impact on our financial condition and results of operations.
The ultimate effects of Brexit are uncertain and will depend on any agreements the UK makes to retain access to EU markets either during a transitional period or more permanently.
Brexit could adversely affect European and worldwide economic and market conditions and could contribute to instability in global financial and foreign exchange markets. Uncertainty over the termsabout future custom and trade agreements between of the U.K.’s departure from and the E.U. could harm our business and financial results. In addition, other E.U. member countries may consider referendums regarding their E.U. membership. These events, along with any political changes that may occur as a result of Brexit, could cause political and economic uncertainty in Europe. In addition, Brexit is likely to lead to legal uncertainty, including uncertainty regarding data protection, taxation, and potentially divergent national laws and regulations as the UKU.K. determines which EUE.U. laws to replace or replicate, including the GDPR. Any of these effects of Brexit, and others we cannot anticipate, could adversely affect our business, results of operations and financial condition.
We rely
COVID-19 could continue to have an adverse impact on the services of third-party data center hosting facilities. Interruptions or delays in those services could impair the delivery of our service and harm our business.
Our Dice, eFinancialCareers,
The spread of the COVID-19 pandemic throughout 2020 caused an economic downturn on a global scale, as well as significant volatility in the financial markets. In March 2020, the World Health Organization declared the spread of the COVID-19 virus a pandemic. COVID-19 slowed recruitment activity for our businesses in 2020 as employers slowed hiring, which reduced our revenues and Clearancejobs, and Rigzone website applications utilize cloud computing technology. It is hosted pursuantoperating cash flows. We expect the pandemic will continue to service agreementsnegatively impact our financial performance in the coming months, but, based on technology platforms by third-party service providers, primarily through Amazon Web Services (AWS). We doinformation currently available, we are not control the operation of these providers or their facilities, and the facilities are vulnerable to damage, interruption or misconduct. Unanticipated problems at these facilities could result in lengthy interruptions in our services. If the services of one or more of these providers are terminated, disrupted, interrupted or suspended for any reason, we could experience disruption in our ability to provide our services, which may harmanticipating a significant long-term impact on our business and reputation. Further, any damageoperations, results of operations, financial condition, cash flows, liquidity and capital and financial resources. However, the situation is uncertain and rapidly changing. The Company cannot at this time predict the ultimate impact that the COVID-19 pandemic will have on its financial condition and operations. In an effort to protect the health and safety of our employees, we have taken action to adopt social distancing policies at our locations around the world, including working from home, closing of our office locations where necessary, and suspending employee travel. We may have to take further actions that we determine are in the best interests of our employees or failureas required by federal, state, or local authorities.
The impact of the cloud services we use could resultCOVID-19 pandemic continues to unfold. The extent of the pandemic’s effect on our operational and financial performance will depend in interruptions in our services. Interruptions in our service may damage our reputation, reduce our revenue, cause uslarge part on future developments, which cannot be predicted with confidence at this time. Future developments include the duration, scope and severity of the pandemic, the actions taken to issue creditscontain or pay penalties, cause customers to terminate their agreementsmitigate its impact, the impact on governmental programs and adversely affect our renewal ratesbudgets, the development of treatments or vaccines, and our ability to attract new customers.the resumption of widespread economic activity. While we believeexpect the pandemic will continue to negatively impact our applicationfinancial performance in the coming months, due to the inherent uncertainty of the unprecedented and network architecture and userapidly evolving situation, we may not be able to predict the likely impact of multiple availability zones and regions within Amazon Web Services Cloud reducethe COVID-19 pandemic on our risk, our business would be harmed if our customers and potential customers believe our services are unreliable.future operations.
| |
Item 1B. | Unresolved Staff Comments |
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We do not own any properties. Our corporate headquarters areis located at 1450 Broadway, 29th Floor, New York, New York,6465 South Greenwood Plaza, Suite 400, Centennial, Colorado, where we lease approximately 4,00028,000 square feet. We lease approximately 45,000 square feet of office space in Urbandale, Iowa; 15,000 square feet of office space in London, England; and 28,00016,000 square feet of office space in Centennial, Colorado.New York, New York, of which 12,000 square feet is subleased as described below. In addition, we have small offices in Cincinnati, Ohio; Frankfurt, Germany; Dubai, United Arab Emirates; Singapore; and Hong Kong; Beijing, China; and Shanghai, China.Kong.
We are currently in the process of de-registering and liquidating our China locations as we no longer have ongoing trade purpose for them. During 2018, we subleased two of our leased properties. Our prior corporate headquarters, which was located at 1040 Avenue of Americas, New York, New York and included approximately 13,00012,000 square feet, was subleased to a third party during the third quarter of 2018. We closed our San Jose office in the second quarter of 2018 and subleased the property, which included approximately 16,000 square feet, to a third party during the third quarter of 2018. The lease term for the San Jose property expired in the second quarter of 2020.
We believe that our facilities are generally adequate for current and anticipated future use, although we may from time to time lease additional facilities as operations require.
Item 3. Legal Proceedings
From time to time we may be involved in disputes or litigation relating to claims arising out of our operations. We are currently not a party to any material unrecorded pending legal proceedings. See also Note 912 of the Notes to Consolidated Financial Statements.
| |
Item 4. | Mine Safety Disclosures |
Item 4. Mine Safety Disclosures
None.
PART II
| |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is listed on the NYSE under the ticker symbol “DHX”. We have not listed our stock on any other markets or exchanges. Prior to July 18, 2007, there was no public market for our common stock.
Holders
As of December 31, 2018,2020, there were 23 stockholders of record of our common stock. A significant number of the outstanding shares of common stock which are beneficially owned by individuals and entities are registered in the name of Cede & Co. Cede & Co. is a nominee of The Depository Trust Company, a securities depository for banks and brokerage firms.
Dividend Policy
We have not declared or paid any cash dividends on our stock as a public company. We currently anticipate that all future earnings will be retained by the Company to support our long-term growth strategy. Accordingly, we do not anticipate paying periodic cash dividends on our stock for the foreseeable future.
Furthermore, we are restricted by our Credit Agreement in the amount of cash dividends that we can pay.
The payment of any future dividends will be at the discretion of our board of directors and subject to the Credit Agreement and will depend upon, among other things, future earnings, operations, capital requirements, our general financial condition, contractual restrictions and general business conditions.
Repurchases of Equity Securities
Our board of directors approved a stock repurchase program that permitted the Company to repurchase our common stock. The following table summarizes the stock repurchase plans approved by the board of directors:
|
| | | | | | | | | | | | | | | | |
| May 2018 to May 2019 | | May 2019 to May 2020 | | May 2020 to May 2021 |
| Approval Date | VIMay 2018 | VII | April 2019 | | May 2020 |
Approval Date | December 2015 | May 2018 |
| Authorized Repurchase Amount of Common Stock | $50 million | $7 million | | $7 million | | $5 million |
Effective Dates | December 2015 to December 2016 | May 2018 to May 2019 | | | |
The Company is currently under the Stock Repurchase Plan VII, which will be in effect for up to one year. Under each plan, management has discretion in determining the conditions under which shares may be purchased from time to time.
During the three months ended December 31, 2018,2020, purchases of our common stock pursuant to the Stock Repurchase Plans were as follows:
|
| | | | | | | | | | | | | |
| Period | | (a) Total Number of Shares Purchased [1] | | (b) Average Price Paid per Share [2] | | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | (d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs |
| October 1 through October 31, 2018 | | 270,666 |
| | $ | 1.82 |
| | 270,666 |
| | 5,666,227 |
|
| November 1 through November 30, 2018 | | 169,144 |
| | $ | 1.78 |
| | 169,144 |
| | 5,378,290 |
|
| December 1 through December 31, 2018 | | 244,313 |
| | $ | 1.62 |
| | 244,313 |
| | 5,022,517 |
|
| Total | | 684,123 |
| | $ | 1.74 |
| | 684,123 |
| | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Period | | (a) Total Number of Shares Purchased [1] | | (b) Average Price Paid per Share [2] | | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | (d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs |
| October 1 through October 31, 2020 | | 88,214 | | | $ | 2.21 | | | 88,214 | | | $ | 3,418,295 | |
| November 1 through November 30, 2020 | | 234,675 | | | $ | 1.92 | | | 234,675 | | | $ | 2,968,803 | |
| December 1 through December 31, 2020 | | 873,436 | | | $ | 2.13 | | | 873,436 | | | $ | 1,107,534 | |
| Total | | 1,196,325 | | | $ | 2.09 | | | 1,196,325 | | | |
[1] No shares of our common stock were purchased other than through a publicly announced plan or program.
[2] Average price paid per share includes costs associated with the repurchases.
Securities Authorized for Issuance under Equity Compensation Plans
The following table sets forth information required by this item as of December 31, 20182020 regarding compensation plans under which the Company’s equity securities are authorized for issuance:
| | | | (a) | | (b) | | (c) | | (a) | | (b) | | (c) |
Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights | | Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights ($) | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) | Number of
Securities to
be Issued
upon
Exercise of
Outstanding
Options, Warrants and Rights | | Weighted-
Average
Exercise
Price of
Outstanding
Options, Warrants and Rights ($) | | Number of
Securities
Remaining
Available for
Future
Issuance
Under Equity
Compensation
Plans
(Excluding
Securities
Reflected in
Column (a)) |
| Plan Category | | | | | | Plan Category | | | | | |
| Equity compensation plans approved by security holders | 327,000 |
| | $ | 8.35 |
| | 4,471,823 |
| Equity compensation plans approved by security holders | 110,000 | | | $ | 7.40 | | | 5,345,414 | |
| Equity compensation plans not approved by security holders | n/a |
| | n/a |
| | n/a |
| Equity compensation plans not approved by security holders | n/a | | n/a | | n/a |
| Total | 327,000 |
| | $ | 8.35 |
| | 4,471,823 |
| Total | 110,000 | | | $ | 7.40 | | | 5,345,414 | |
For material features of the plans, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Stock and Stock-Based Compensation.”
Performance Graph
The following graph shows the total shareholder return of an investment of $100 in cash on December 31, 20132015 through December 31, 20182020 (the last trading day of our common stock on the NYSE in 2018)2020) for (i) our common stock, (ii) the Russell 2000 and (iii) the Dow Jones Internet Composite Index, at the closing price on December 31, 2018.2020. All values assume reinvestment of the full amount of all dividends, if any.
32
Comparative Returns | | | | | | | | | | | | | | | | | | | | |
| 12/31/2015 | 12/31/2016 | 12/31/2017 | 12/31/2018 | 12/31/2019 | 12/31/2020 |
| DHX | $ | 100.00 | | $ | 68.16 | | $ | 20.72 | | $ | 16.58 | | $ | 32.82 | | $ | 24.21 | |
| Russell 2000 | $ | 100.00 | | $ | 121.31 | | $ | 139.08 | | $ | 123.76 | | $ | 155.35 | | $ | 186.36 | |
| Dow Jones Internet Composite Index | $ | 100.00 | | $ | 107.27 | | $ | 148.12 | | $ | 157.76 | | $ | 188.76 | | $ | 288.80 | |
The returns shown on the graph do not necessarily predict future performance. The performance graph is not deemed “filed” with the SEC.
| |
Item 6. | Selected Financial Data |
Item 6. Selected Financial Data
The information set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K (this “Annual Report”).
The following consolidated statements of operations data for the years ended December 31, 2018, 20172020, 2019 and 20162018 and the consolidated balance sheet data as of December 31, 20182020 and 20172019 have been derived from the audited consolidated financial statements and related notes of DHI Group, Inc. for such years, which are included elsewhere in this Annual Report. The consolidated statements of operations data for the years ended December 31, 20152017 and 20142016 and the consolidated balance sheet data as of December 31, 2016, 20152018, 2017 and 20142016 have been derived from the audited consolidated financial statements and related notes of DHI Group, Inc. for such years, which are not included in this Annual Report.
33
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the year ended December 31, |
| | 2020 (4) | | 2019 | | 2018 (3) | | 2017 (2) | | 2016 (1) |
| | (in thousands, except per share information) |
| Revenues | $ | 136,878 | | | $ | 149,370 | | | $ | 161,570 | | | $ | 207,950 | | | $ | 226,970 | |
| Operating expenses | 166,483 | | | 131,808 | | | 153,247 | | | 195,077 | | | 223,579 | |
| Other operating income (loss) | — | | | (537) | | | 3,369 | | | 9,992 | | | — | |
| Operating income (loss) | (29,605) | | | 17,025 | | | 11,692 | | | 22,865 | | | 3,391 | |
| Income (loss) before income taxes | (32,434) | | | 16,324 | | | 9,602 | | | 19,397 | | | (119) | |
| Net income (loss) | $ | (30,015) | | | $ | 12,551 | | | $ | 7,174 | | | $ | 15,978 | | | $ | (5,398) | |
| | | | | | | | | |
| Basic earnings (loss) per share | $ | (0.62) | | | $ | 0.26 | | | $ | 0.15 | | | $ | 0.33 | | | $ | (0.11) | |
| | | | | | | | | |
| Diluted earnings (loss) per share | $ | (0.62) | | | $ | 0.24 | | | $ | 0.14 | | | $ | 0.33 | | | $ | (0.11) | |
| | | | | | | | | |
| Weighted average shares outstanding: | | | | | | | | | |
| Basic | 48,278 | | | 48,739 | | | 48,520 | | | 47,908 | | | 48,319 | |
| Diluted | 48,278 | | | 51,633 | | | 49,605 | | | 48,230 | | | 48,319 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the year ended December 31, |
| | 2020 (4) | | 2019 | | 2018 (3) | | 2017 (2) | | 2016 (1) |
| Other Financial Data: | (in thousands) |
| Net cash from operating activities | $ | 18,683 | | | $ | 22,923 | | | $ | 14,918 | | | $ | 34,409 | | | $ | 44,997 | |
| Depreciation and amortization | 12,019 | | | 9,743 | | | 9,762 | | | 11,890 | | | 16,636 | |
| Capital expenditures | (16,104) | | | (14,188) | | | (10,053) | | | (13,222) | | | (11,699) | |
| Net cash from (used in) investing activities | (15,904) | | | (11,505) | | | 7,489 | | | (775) | | | (10,770) | |
| Net cash used in financing activities | (542) | | | (12,423) | | | (27,174) | | | (44,781) | | | (44,634) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | At December 31, |
| | 2020 (4) | | 2019 | | 2018 (3) | | 2017 (2) | | 2016 (1) |
| Balance Sheet Data: | (in thousands) |
| Cash and cash equivalents | $ | 7,640 | | | $ | 5,381 | | | $ | 6,472 | | | $ | 12,068 | | | $ | 22,987 | |
| Acquired intangible assets, net | 23,800 | | | 39,000 | | | 39,000 | | | 45,737 | | | 49,120 | |
| Goodwill | 133,353 | | | 156,059 | | | 153,974 | | | 170,791 | | | 171,745 | |
| Total assets | 240,987 | | | 278,321 | | | 258,385 | | | 295,718 | | | 310,095 | |
| Deferred revenue | 43,494 | | | 51,626 | | | 56,086 | | | 83,646 | | | 84,615 | |
| Long-term debt, net | 19,583 | | | 9,435 | | | 17,288 | | | 41,450 | | | 84,760 | |
| Total stockholders’ equity | 127,570 | | | 161,195 | | | 145,355 | | | 132,641 | | | 103,883 | |
(1)Reflects the sale of Slashdot Media in January 2016 and the impairment of goodwill and intangible assets of $24.6 million related to the Energy reporting unit.
(2)Reflects the sale of Health eCareers on December 4, 2017 and the discontinuance of getTalent in the third quarter of 2017.
(3)Reflects the transfer of majority ownership of the BioSpace business to BioSpace management on January 31, 2018, sale of the RigLogix portion of the Rigzone business on February 20, 2018, sale of Hcareers on May 22, 2018, transfer of majority ownership of the remaining Rigzone business to Rigzone management on August 31, 2018, and Dice Europe ceased operations August 31, 2018. On January 1, 2018, the Company adopted Topic 606, Revenue from Contracts with Customers. Refer to Note 3 of the Notes to Consolidated Financial Statements.
(4)Reflects the impairments of intangible assets and goodwill of $38.8 million and an equity investment of $2.0 million.
|
| | | | | | | | | | | | | | | | | | | |
| | For the year ended December 31, |
| | 2018 (5) | | 2017 (4) | | 2016 (3) | | 2015 (2) | | 2014 (1) |
| | (in thousands, except per share information) |
| Revenues | $ | 161,570 |
| | $ | 207,950 |
| | $ | 226,970 |
| | $ | 259,769 |
| | $ | 262,615 |
|
| Operating expenses | 153,247 |
| | 195,077 |
| | 223,579 |
| | 253,414 |
| | 216,011 |
|
| Other operating income | 3,369 |
| | 9,992 |
| | — |
| | — |
| | — |
|
| Operating income | 11,692 |
| | 22,865 |
| | 3,391 |
| | 6,355 |
| | 46,604 |
|
| Income (loss) from operations before income taxes | 9,602 |
| | 19,397 |
| | (119 | ) | | 3,041 |
| | 42,849 |
|
| Net income (loss) | $ | 7,174 |
| | $ | 15,978 |
| | $ | (5,398 | ) | | $ | (10,968 | ) | | $ | 27,612 |
|
| | | | | | | | | | |
| Basic earnings (loss) per share | $ | 0.15 |
| | $ | 0.33 |
| | $ | (0.11 | ) | | $ | (0.21 | ) | | $ | 0.53 |
|
| | | | | | | | | | |
| Diluted earnings (loss) per share | $ | 0.14 |
| | $ | 0.33 |
| | $ | (0.11 | ) | | $ | (0.21 | ) | | $ | 0.51 |
|
| | | | | | | | | | |
| Weighted average shares outstanding: | | | | | | | | | |
| Basic | 48,520 |
| | 47,908 |
| | 48,319 |
| | 51,402 |
| | 52,328 |
|
| Diluted | 49,605 |
| | 48,230 |
| | 48,319 |
| | 51,402 |
| | 54,410 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | For the year ended December 31, |
| | 2018 (5) | | 2017 (4) | | 2016 (3) | | 2015 (2) | | 2014 (1) |
| Other Financial Data: | (in thousands) |
| Net cash from operating activities | $ | 14,918 |
| | $ | 34,409 |
| | $ | 44,997 |
| | $ | 63,159 |
| | $ | 58,668 |
|
| Depreciation and amortization | 9,762 |
| | 11,890 |
| | 16,636 |
| | 23,192 |
| | 27,201 |
|
| Capital expenditures | (10,053 | ) | | (13,222 | ) | | (11,699 | ) | | (9,078 | ) | | (8,710 | ) |
| Net cash from (used in) investing activities | 7,489 |
| | (775 | ) | | (10,770 | ) | | (9,078 | ) | | (35,711 | ) |
| Net cash used in financing activities | (27,174 | ) | | (44,781 | ) | | (44,634 | ) | | (47,012 | ) | | (34,538 | ) |
|
| | | | | | | | | | | | | | | | | | | |
| | At December 31, |
| | 2018 (5) | | 2017 (4) | | 2016 (3) | | 2015 (2) | | 2014 (1) |
| Balance Sheet Data: | (in thousands) |
| Cash and cash equivalents | $ | 6,472 |
| | $ | 12,068 |
| | $ | 22,987 |
| | $ | 34,050 |
| | $ | 26,777 |
|
| Acquired intangible assets, net | 39,000 |
| | 45,737 |
| | 49,120 |
| | 65,292 |
| | 81,345 |
|
| Goodwill | 153,974 |
| | 170,791 |
| | 171,745 |
| | 198,598 |
| | 239,256 |
|
| Total assets | 258,385 |
| | 295,718 |
| | 310,095 |
| | 368,935 |
| | 422,636 |
|
| Deferred revenue | 56,086 |
| | 83,646 |
| | 84,615 |
| | 83,316 |
| | 86,444 |
|
| Long-term debt, including current portion | 17,288 |
| | 41,450 |
| | 84,760 |
| | 99,436 |
| | 109,180 |
|
| Total stockholders’ equity | 145,355 |
| | 132,641 |
| | 103,883 |
| | 138,613 |
| | 177,798 |
|
____________________
| |
(1) | Reflects the OilCareers acquisition in March 2014. |
| |
(2) | Reflects impairment of goodwill of $34.8 million related to the Energy reporting unit. |
| |
(3) | Reflects the sale of Slashdot Media in January 2016 and the impairment of goodwill and intangible assets of $24.6 million related to the Energy reporting unit. |
| |
(4) | Reflects the sale of Health eCareers on December 4, 2017 and the discontinuance of getTalent in the third quarter of 2017. |
| |
(5) | Reflects the transfer of majority ownership of the BioSpace business to BioSpace management on January 31, 2018, sale of the RigLogix portion of the Rigzone business on February 20, 2018, sale of Hcareers on May 22, 2018, transfer of majority ownership of the remaining Rigzone business to Rigzone management on August 31, 2018, and Dice Europe ceased operations August 31, 2018. On January 1, 2018, the Company adopted Topic 606, Revenue from Contracts with Customers. Refer to Note 3 of the Notes to Consolidated Financial Statements. |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with Item 6. “Selected Financial Data,” and our consolidated financial statements and the related notes included elsewhere in this Annual Report. Certain statements we make under this Item 7 constitute “Forward-Looking Statements” under the Private Securities Litigation Reform Act of 1995. See also “Note Concerning Forward-Looking Statements.”
You should keep in mind that any forward-looking statement made by us herein, or elsewhere, speaks only as of the date on which it is made. New risks and uncertainties come up from time to time, and it is impossible to predict these events or how they
they may affect us. We have no obligation to update any forward-looking statements after the date hereof, except as required by applicable law.
Overview
We are a leading provider of data, insights and employment connections through our specialized services for professional communities including technology and security clearance and financial services. The Company exited the energy industry with the sale of the RigLogix portion of the Rigzone business on February 20, 2018 and the transfer of majority ownership of the remaining Rigzone business to Rigzone management on August 31, 2018. The Company exited the hospitality industry with the sale of Hcareers on May 22, 2018.professionals. Our mission is to empower professionals and organizations to compete and win through specialized insights and relevant employment connections. Employers and recruiters use our websites and services to source and hire the most qualified professionals in select and highly-skilled occupations, while professionals use our websites and services to find the best employment opportunities in, and the most timely news and information about, their respective areas of expertise.
In online recruitment, we target employment categories in which there has been a long-term scarcity of highly skilled, highly qualified professionals relative to market demand. Our websites serve as online marketplaces where employers and recruiters find and recruit prospective employees, and where professionals find relevant job opportunities and information to further their careers.
Our websites offer job postings, news and content, career development and recruiting services tailored to the specific needs of the professional community that each website serves.
Through our predecessors, we
The Company modified its Tech-focused reportable segment in the first quarter of 2019 to reflect the current Tech-focused operating structure. The change comes as a result of the non-tech businesses being divested during 2018 and, as a result, corporate related costs are now reflected as part of the Tech-focused segment. Accordingly, all prior periods have been recast to reflect the current segment presentation.
We have been in the recruiting and career development business for more than 2530 years. Based on our operating structure, we have identified one reportable segment under the Segment Reporting topic of the FASB Accounting Standards Codification (ASC) as follows:
Tech-focused—
•Tech-focused — Dice, Dice Europe (ceased operations on August 31, 2018), ClearanceJobs, eFinancialCareers Brightmatter excluding getTalent (absorbed into Tech-focusedservices, and corporate related costs (formerly in the third quarter of 2017 and formerly in Corporate & Other) services..
Dice, Dice Europe (ceased operations on August 31, 2018), ClearanceJobs, eFinancialCareers services, and eFinancialCareerscorporate-related costs (formerly in Other) are aggregated into the Tech-focused reportable segment primarily because the Company does not have discrete financial information for those brands individually.or costs.
We
Prior to 2019, we had other services and activities that individually were not a significant portion of consolidated revenues, operating income or total assets. These includeincluded Hospitality (business sold(sold May 22, 2018), Rigzone (sold the RigLogix portion of the Rigzone business on February 20, 2018 and transferred majority ownership of the remaining Rigzone business to Rigzone management on August 31, 2018), and BioSpace (transferred majority ownership to BioSpace management on January 31, 2018) (each formerly2018 and sold the remaining minority interest to BioSpace management in the Global Industry Group), Slashdot Media (business sold in the first quarter of 2016) and getTalent services (discontinued in the third quarter of 2017)2020), which are reported in the “Corporate & Other”"Other" category, along with corporate-related costs whichand are not considered in a segment.
Our Revenues and Expenses
We derive the majority of our revenues from customers who pay fees, either annually, semiannually, quarterly or monthly, to post jobs on our websites and to access our searchable databases of resumes. Our fees vary by customer based on the number of individual users of our databases of resumes, the number and type of job postings and profile views purchased and the terms of the packagepackages purchased. Our Tech-focused segment sells recruitment packages that can include both access to our databases of resumes and job posting capabilities. Our Corporate & Other services sellsHcareers (sold May 22, 2018 and included in Other) sold job postings and access to our resume databases either as part of a package or individually. We believe the key metrics that are material to an analysis of our businesses are our total number of Dice recruitment package customers and the revenue, on average, that these customers generate. Average monthly revenue per recruitment package customer is calculated by dividing recruitment package customer revenue by the daily average count of recruitment package customers during the month, adjusted to reflect a thirty day month. We use the simple average of each month to derive the quarterly amount. At December 31, 20182020 and 2017,2019, Dice had approximately 6,2005,150 and 6,4506,000 total recruitment package customers in the U.S., respectively, and the average monthly revenue per U.S. recruitment package customer increased from $1,110was $1,132 and $1,135 for the yearyears ended December 31, 2017 to $1,119 for the year ended December 31, 2018.2020 and 2019, respectively. Deferred revenue, is a key metricas shown on the Consolidated Balance sheets, reflects customer billings made in advance of our business as it indicates a levelservices being rendered. Backlog consists of sales alreadydeferred revenue plus customer contractual commitments not invoiced that willrepresenting the value of future services to be recognized as revenue in the future. Deferred revenue reflects the impact of our ability to sign customers to longer termrendered under committed contracts. We recordedbelieve deferred revenue of $56.1 million at December 31, 2018 and $83.6 million at December 31, 2017. The lower deferred revenue is duebacklog to the divested businesses and increased flexibility in the Company's billing terms to customers to bring them in line with market standards.
be important measures of
our business as they represent our ability to generate future revenue. A summary of our deferred revenue and backlog as of December 31, 2020 and 2019 are presented in the table below.
We
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Summary of Deferred Revenue and Backlog: | | December 31, 2020 | | December 31, 2019 | | Decrease | | Percent Change |
| Deferred Revenue | | $ | 43,494 | | | $ | 51,626 | | | $ | (8,132) | | | (16) | % |
| Contractual commitments not invoiced | | 32,830 | | | 37,093 | | | (4,263) | | | (11) | % |
Backlog1 | | $ | 76,324 | | | $ | 88,719 | | | $ | (12,395) | | | (14) | % |
| | | | | | | | |
| (1) Backlog consists of deferred revenue plus customer contractual commitments not invoiced representing the value of future services to be rendered under committed contracts. |
Backlog at December 31, 2020 declined $12.4 million from December 31, 2019 due to the negative impacts of COVID-19, lower renewal rates in the Dice brand, and uncertainty around Brexit and political unrest in Hong Kong negatively impacting eFinancialCareers. This decrease was partially offset by a backlog increase at ClearanceJobs.
To a lesser extent, we also generate revenue from advertising on our various websites or from lead generation and marketing solutions provided to our customers. Advertisements include various forms of rich media and banner advertising, text links, sponsorships, and custom content marketing solutions. Lead generation information utilizes advertising and other methods to deliver leads to a customer.
The Company’s revenues declined $12.5 million, or 8.4%, for the year ended December 31, 2018 declined year-over-year in each2020 compared to the same period of our brands exceptthe prior year. This decrease was led by eFinancialCareers decline of 19.9% and an 11.2% decline at Dice and was partially offset by ClearanceJobs and eFinancialCareers.growth of 17.1%. The declines areat Dice and eFinancialCareers were due to many factors including macroeconomicthe negative impacts and evolutions in the digital recruitment market. Foreign currency, primarily changes in the USD:GBP exchange rates, contributed $0.9 million of the year-over-year revenue increase in eFinancialCareers. The digital recruitment market continues to be impacted by attribution, which reflects our ability to receive the proper credit for value delivered to customers based on our customers’ internal tracking systems. Demonstrating attribution for candidates provided to each customer is a key initiative for the Company. However, attribution challenges have contributed toCOVID-19, lower renewal rates as demonstrated byin the reductionDice brand, and uncertainty around Brexit and political unrest in recruitment package customer count at Dice. The rateHong Kong negatively impacting eFinancialCareers. See further discussion in the Comparison of revenue decline for Dice was reduced during 2018 with a decline of 4% and 7% for the quarter and year endedYears Ended December 31, 2018, respectively, compared to 10%2020 and 11% for the same periods of 2017.2019.
The Company continues to evolve and presentdevelop new software products and features to attract and engage qualified professionals and match them with employers including the new TalentSearch platform and real-time salary prediction tools.employers. Our ability to grow our revenues will largely depend on our ability to grow our customer bases in the markets in which we operate by acquiring new customers and advertisers while retaining a high proportion of the customers we currently serve, and to expand the breadth of services our customers purchase from us. We continue to make investments in our business and infrastructure to help us achieve our long-term growth objectives. For example, during the years ended December 31, 2020 and 2019, the Company released the innovative products noted in the table below.
| | | | | | | | | | | |
| Product Releases |
| 2020 | | 2019 |
| Dice IntelliSearch-Based Job Alerts, Dice Private Email, Dice Remote Jobs, Dice Recruiter Profile, Dice Instant Messaging | | Dice Candidate MatchTM, Dice Job Search and Job Alerts |
| ClearanceJobs Client Team Dashboard, ClearanceJobs Workflow, ClearanceJobs Favorites, ClearanceJobs Self-Serve BrandAmp, ClearanceJobs Candidate Search and ClearanceJobs Broadcast Message upgrades | | ClearanceJobs NextGen, ClearanceJobs Pulse, ClearanceJobs BrandAmp |
| eFinancialCareers Messaging, Video and Voice Calling, eFinancialCareers Follow and eFinancialCareers Job Alerts | | eFinancialCareers Recruiter Profile, and eFinancialCareers Candidate Profile |
Other material factors that may affect our results of operations include our ability to attract qualified professionals that become engaged with our websites and our ability to attract customers with relevant job opportunities. The greater the number ofmore qualified professionals that use our websites, the more attractive our websites become to employers and advertisers, which in turn makes them more likely to become our customers, resulting positively onimpacting our results of operations. If we are unable to continue to attract qualified professionals to engage with our websites, our customers may no longer find our services attractive, which could have a negative impact on our results of operations. Additionally, we need to ensure that our websites remain relevant in order to attract qualified professionals to our websites and to engage them in high-valuedhigh-value tasks, such as posting resumes and/orand applying to jobs.
The largest components of our expenses are personnel related costs and marketing and sales expenditures. Personnel costs consist of salaries, benefits, and incentive compensation for our employees, including commissions for salespeople. Personnel costs are categorized in our statement of operations based on each employee’s principal function. Marketing expenditures primarily consist of online advertising, brand promotion and lead generation to employers and job seekers.
Critical Accounting Policies
This discussion of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue, goodwill and intangible assets, stock-based compensation and income taxes. We based our estimates of the carrying value of certain assets and liabilities on historical experience and on various other assumptions that we believe are reasonable. In many cases, we could reasonably have used different accounting policies and estimates. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. Our actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments used in the preparation of our consolidated financial statements.
Revenue Recognition
On January 1, 2018, we adopted Topic 606 applying the modified retrospective method to all contracts that were not completed as of January 1, 2018. Results for periods beginning after January 1, 2018 are presented under Topic 606, while prior periods are reported under the accounting standards in effect for the period presented.
Under Topic 606, we recognize revenue when control of the promised goods or services is transferred to our customers at an amount that reflects the consideration to which we expect to receive in exchange for those goods or services. Revenue is recognized net of customer discounts ratably over the service period. Customer billings delivered in advance of services being rendered are recorded as deferred revenue and recognized over the service period. We generate revenues from the following sources:
Recruitment packages. Recruitment package revenues are derived from the sale to recruiters and employers of a combination of job postings andand/or access to a searchable database of candidates on the Dice, ClearanceJobs, eFinancialCareers, and Rigzone (sold the RigLogix portion of the Rigzone business on February 20, 2018 and transferred majority ownership of the remaining Rigzone business to Rigzone management on August 31, 2018)eFinancialCareers websites. Certain of the Company’s arrangements include multiple performance obligations, which primarily consists of the ability to post jobs and access to a searchable database of candidates. The Company determines the units of accounting for multiple performance obligations in accordance with Topic 606. Specifically, the Company considers a performance obligation as a separate unit of accounting if it has value to the customer on a standalone basis. The Company’s arrangements do not include a general right of return. Services to customers buying a package of available job postings and access to the database are delivered over the same period and revenue is recognized ratably over the length of the underlying contract, typically from one to twelve months. The separation of the package into two deliverables results in no change in revenue recognition since delivery of the two services occurs over the same time period.
Advertising revenue. Advertising revenue is recognized over the period in which the advertisements are displayed on the websites or at the time a promotional e-mail is sent out to the audience.
Classified revenue. Classified job posting revenues are derived from the sale of job postings to recruiters and employers. A job posting is the ability to list a job on the website for a specified time period. Revenue from the sale of classified job postings is recognized ratably over the length of the contract or the period of actual usage.
Data services revenue. Access to the Company’s database of energy industry data is provided to customers for a fee. Data services revenue is recognized ratably over the length of the underlying contract, typically from one to twelve months. The data services business, called RigLogix, was sold on February 20, 2018.
Career fair and recruitment event booth rentals. Career fair and recruitment event revenues are derived from renting booth space to recruiters and employers. Revenue from these sales are recognized when the career fair or recruitment event is held.
Goodwill
We record goodwill when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired.
We determine whether the carrying value of recorded goodwill is impaired on an annual basis or more frequently if indicators of potential impairment exist. In testing goodwill for impairment, a qualitative assessment can be performed and if it is determined that the fair value of the reporting unit is more likely than not less than the carrying amount, the impairment review process compares the fair value of the reporting unit in which the goodwill resides to the carrying value of that reporting unit. If the fair value of the reporting unit is less than its carrying amount, an impairment charge is recorded for the amount the carrying
value exceeds the fair value. Our annual impairment test for goodwill is performed on October 1 on the Tech-focused reporting unit.
The annual impairment teststest for the Tech-focused reporting unit which were performed as of October 1, 2018 and 2017,2019 resulted in the fair value of the reporting unit exceeding the carrying value by 40%37%. During the first quarter of 2020, because of the initial impacts of the COVID-19 pandemic and 1%, respectively.its potential impact on future earnings and cash flows for the reporting unit, the Company performed an interim impairment analysis of goodwill. The improvedresults of the analysis indicated that the fair value as compared toof the Tech-focused reporting unit was not substantially in excess of the carrying value as of October 1, 2018 is primarily drivenMarch 31, 2020. The percentage by improved operating resultswhich the estimated fair value exceeded carrying value for the Tech-focused reporting unit at March 31, 2020 was less than 1%. During the third quarter of 2020, the impacts of the COVID-19 pandemic continued and the Company's projected earnings and cash flows for the Tech-focused reporting unit declined as compared to the projections and a reductionused in the estimated tax rate from 36% at October 1, 2017 to 26% at October 1, 2018. March 31, 2020 analysis. As a result, the Company performed an interim impairment analysis as of September 30, 2020, which resulted in the Company recording an impairment charge of $23.6 million during the three month period ended September 30, 2020.
Results for the Tech-focused reporting unit for the fourth quarter of 20182020 and estimated future results as of December 31, 2018 are consistent with2020 have exceeded the October 1, 2018projections used in the September 30, 2020 analysis. As a result, the Company believes it is not more likely than not that the fair value of the reporting unitsunit is less than the carrying value as of December 31, 2018.2020. Therefore, no interimquantitative impairment testingtest was performed as of December 31, 2020. No impairment was recorded during the years ended December 31, 2019 and 2018.
The amount of goodwill as of December 31, 20182020 allocated to the Tech-focused reporting unit was $154.0$133.4 million. Determining the fair value of a reporting unit is judgmental in nature and requires the use of estimates and key assumptions, particularly assumed discount rates and projections of future operating results. The discount rate applied for the Tech-focused reporting unit in the September 30, 2020 analysis was 14.3%14.5%, compared to 16.5% at March 31, 2020. The decline in the discount rate is primarily due to the lower projections, as compared to the March 31, 2020 analysis. An increase to the discount rate applied or reductions to future projected operating results could result in future impairment of the Tech-focused reporting unit’s goodwill. It is reasonably possible that changes in judgments, assumptions and estimates the Company made in assessing the fair value of goodwill could cause the Company to consider some portion or all of the goodwill of the Tech-focused reporting unit to become impaired. In addition, a future decline in the overall market conditions, uncertainty related to COVID-19, political instability, and/or changes in the Company’s market share could negatively impact the estimated future cash flows and discount rates used to determine the fair value of the reporting unit and could result in an impairment charge in the foreseeable future.
During the year ended December 31, 2016, an impairment of $15.4 million was recorded at the Energy reporting unit. The fair value of this reporting unit was determined by a combination of a discounted cash flow methodology and market comparable method. Cash flow projections for this reporting unit decreased during 2016 due to a decline in financial performance resulting from declining oil prices. The charge is reflected as Impairment of Goodwill on the Consolidated Statements of Operations.
The determination of whether or not goodwill has become impaired involves a significant levelis judgmental in nature and requires the use of judgment in theestimates and key assumptions, underlying the approach used to determine the valueparticularly assumed discount rates and projections of our reporting unit.future operating results, such as forecasted revenues and earnings before interest, taxes, depreciation and amortization margins and capital expenditure requirements. Fair values are determined either by using a discounted cash flow methodology or by using a combination of a discounted cash flow methodology and a market comparable method. The discounted cash flow methodology is based on projections of the amounts and timing of future revenues and cash flows, assumed discount rates and other assumptions as deemed appropriate. We consider factors such as historical performance, anticipated market conditions, operating expense trends and capital expenditure requirements. Additionally, the discounted cash flows analysis takes into consideration cash expenditures for product development, other technological updates and advancements to our websites and investments to improve our candidate databases. The market comparable method indicates the fair value of a business by comparing it to publicly traded companies in similar lines of business or to comparable transactions or assets. Considerations for factors such as size, growth, profitability, risk and return on investment are analyzed and compared to the comparable businesses and adjustments are made. A market value of invested capital of the publicly traded companies is calculated and then applied to the entity’s operating results to arrive at an estimate of value. Changes in our strategy and/or market conditions could significantly impact these judgments and require adjustments to recorded amounts of goodwill.
Indefinite-Lived Acquired Intangible Assets
The indefinite-lived acquired intangible assets include the Dice trademarks and brand name. The Dice trademark, trade name and domain name is one of the most recognized names of online technology recruiting and career development. Since Dice’s inception in 1991, the brand has been recognized as a leader in recruiting and career development services for technology and engineering professionals. Currently, the brand is synonymous with the most specialized online marketplace for industry-specific talent.technologists. The brand has a significant online and offline presence in online recruiting and career development services. Considering the recognition and the awareness of the Dice brand in the talent acquisition and staffing services market, Dice’s long operating history and the intended use of the Dice brand, the remaining useful life of the Dice trademark, trade name and domain name was determined to be indefinite.
We determine whether the carrying value of recorded indefinite-lived acquired intangible assetsasset is impaired on an annual basis or more frequently if indicators of potential impairment exist. The impairment review process compares the fair value of the indefinite-lived acquired intangible assetsasset to its carrying value. If the carrying value exceeds the fair value, an impairment loss is recorded. The impairment test performed as of October 1, 2018 and 20172019 resulted in the fair value of the Dice trademarks and brand exceeding the carrying value by 2%26%. During the first quarter of 2020, because of the initial impacts of the COVID-19 pandemic and 4%, respectively.
Revenueits potential impact on future earnings and cash flows that are attributable to the Dice trademarks and brand name, the Company performed an interim impairment analysis. As a result of the analysis, the Company recorded an impairment charge of $7.2 million during the first quarter of 2020. During the third quarter of 2020, the impacts of the COVID-19 pandemic continued and the Company's projected earnings and cash flows that are attributable to the Dice trademarks and brand name declined as compared to the projections used in the March 31, 2020 analysis. As a result, the Company performed an interim impairment analysis as of September 30, 2020, which resulted in the Company recording an additional impairment charge of $8.0 million during the three month period ended September 30, 2020.
Revenues attributable to the Dice trademarks and brand name for the fourth quarter of 2020 and estimated future results as of December 31, 2020 have declinedexceeded the projections used in the September 30, 2020 analysis. As a result, the Company believes it is not more likely than not that the fair value of the Dice trademarks and brand name is less than the carrying value as of December 31, 2020. Therefore, no quantitative impairment test was performed as of December 31, 2020. No impairment was recorded during the years ended December 31, 2019 and 2018.
The projections utilized in the March 31 and September 30, 2020 analyses included a decline in revenues caused by the COVID-19 pandemic that are attributable to the Dice trademarks and brand name for the year ended December 31, 2018 due2020 compared to the year ended December 31, 2019. The September 30, 2020 analysis included a further decline in revenues caused by the COVID-19 pandemic that are attributable to the Dice trademarks and brand name for the year ending December 31, 2021 compared to the year ended December 31, 2020 and then increasing to rates approximating industry growth projections, although peaking at rates slightly lower than in the March 31, 2020 analysis. The Company’s ability to achieve these revenue projections may be impacted by, among other things, uncertainty related to COVID-19, competition in the technology recruiting market, challenges in developing and introducing new products and product enhancements to the market and the Company’s ability to attribute value delivered to customers. Revenues related to the Dice trademarks and brand name declined 7% and 10% for the years ended December 31, 2018 and 2017, respectively, and declined 4% and 10% for the three months ended December 31, 2018 and 2017, respectively. The rate of revenue decline narrowed throughout 2018. Revenue projections for the year ended December 31, 2019 and beyond include a modest increase compared to the year ended December 31, 2018. The Company’s ability to achieve these revenue projections may be impacted by, among other things, the factors noted aboveCash flows that have contributed to the decline in recent periods. Cash flowsare attributable to the Dice trademarks and brand name declined during 2018were projected to decline for the year ended December 31, 2020 compared to the year ended December 31, 2019 as a result of the lower revenue, as well as increased spending focused on new and enhanced products and consulting fees relatedbut partially offset by reductions to expense reduction strategies.operating expenses. Operating expenses, excluding amortization expense, impairment chargesimpairments, utilized in the March 31 and disposition related and other costs, areSeptember 30, 2020 analyses were projected to slightly decline for the year ended December 31, 20192020 as compared to the year ended December 31, 2018 and then increase at levels that allow for2019, including a reduction in operating margin. The March 31, 2020 analysis included modest operating margin improvements.improvements during the year ending December 31, 2021 and beyond while the September 30, 2020 analysis included a small reduction in operating margin during the year ending December 31, 2021 and then increasing modestly. If future cash flows that are attributable to the Dice trademarktrademarks and brand name are not achieved, the Company could realize an impairment in a future period. TheIn the March 31, 2020 and September 30, 2020 analyses, the Company utilized a relief from royalty rate method to value the Dice trademarks and brand name using a royalty rate of 6.0%5.0% and 4.0%, respectively, based on comparable industry studies and improving operating margins and a discount rate of 15.3%.17.5% and 15.5%, respectively. The decline in the royalty rate is due to revenue declines and impacts of the COVID-19 pandemic and the decline in the discount rate is primarily due to the lower projections, as compared to the March 31, 2020 analysis.
The determination of whether or not indefinite-lived acquired intangible assets have become impaired involves a significant level of judgment in the assumptions underlying the approach used to determine the value of the indefinite-lived acquired intangible assets. We consider factors such as historical performance, anticipated market conditions, operating expense trends and capital expenditure requirements. Changes in our strategy and/or market conditions could significantly impact these judgments and require adjustments to recorded amounts of intangible assets.
Income Taxes
We utilize the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recognized for differences between the financial statement and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.
The calculation of our tax liabilities involves dealing with uncertainties in applying tax laws and regulations in numerous jurisdictions. Tax benefits from uncertain tax positions are recognized when it is more likely than not that the positions will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits.
Because of the complexity of some of these uncertainties, the ultimate resolution could result in a payment that is materially different from our current estimate of the accrual for unrecognized tax benefits.
Stock and Stock Based Compensation
Under our 2012 Omnibus Equity Award Plan, we have granted stock options, restricted stock and Performance-Based Restricted Stock Units (“PSUs”) to certain of our employees and directors. Compensation expense is recorded for stock awards made to employees and directors in return for service to the Company. The expense is measured at the fair value of the award on the date of grant and recognized as compensation expense on a straight-line basis over the service period, which is the vesting period. The fair value of PSUs granted during 2016 and 2017, which included market based performance measures, are measured using the Monte Carlo pricing model. The fair value of the PSUs granted in 2018, which include internal performance measures, is determined based on the most probable performance outcome. The expense related to the PSUs is recorded over the vesting period.
Recent Developments
None.
Cyclicality
The labor market and certain of the industries that we serve have historically experienced short-term cyclicality. However, we believe that online career websites continue to provide economic and strategic value to the labor market and industries that we serve.
Any slowdown in recruitment activity that occurs willcould negatively impact our revenues and results of operations. Alternatively, a decrease in the unemployment rate or a labor shortage, including as a result of an increase in job turnover, generally means that employers (including our customers) are seeking to hire more individuals, which would generally lead to more job postings and database licenses and have a positive impact on our revenues and results of operations. Based on historical trends, improvements in labor markets and the need for our services generally lag behind overall economic improvements. Additionally, there has historically been a lag from the time customers begin to increase purchases of our recruitment services and the impact to our revenues due to the recognition of revenue occurring over the length of the contract, which can be several months to over a year.
From the second half of 2011 into 2014,time to time, we saw toughersee market conditions in our finance segmentslowdowns, which can lead to lower demand for recruiting technology, financial and a less urgent recruiting environment for technologysecurity cleared professionals. If recruitment is slowactivity slows in the industries in which we operate during 20192021 and beyond, our revenues and results of operations willcould be negatively impacted.
Results of Operations
Our historical financial information discussed in this Annual Report has been derived from the Company’s financial statements and accounting records for the years ended December 31, 2018, 20172020, 2019 and 2016.2018. Consolidated operating results and consolidated operating results as a percent of revenue follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the year ended December 31, |
| (in thousands) | 2020 | | 2019 | | 2018 | | 2020 vs 2019 | | 2019 vs 2018 |
| Revenues | $ | 136,878 | | $ | 149,370 | | $ | 161,570 | | $ | (12,492) | | $ | (12,200) |
| Operating expenses: | | | | | | | | | |
| Cost of revenues | 17,047 | | | 16,237 | | | 18,344 | | | 810 | | | (2,107) | |
| Product development | 16,470 | | | 17,216 | | | 20,212 | | | (746) | | | (2,996) | |
| Sales and marketing | 50,856 | | | 55,909 | | | 59,721 | | | (5,053) | | | (3,812) | |
| General and administrative | 31,265 | | | 31,003 | | | 37,589 | | | 262 | | | (6,586) | |
| Depreciation | 12,019 | | | 9,743 | | | 9,280 | | | 2,276 | | | 463 | |
| Amortization of intangible assets | — | | | — | | | 482 | | | — | | | (482) | |
| Impairment of intangible assets | 15,200 | | | — | | | — | | | 15,200 | | | — | |
| Impairment of goodwill | 23,626 | | | — | | | — | | | 23,626 | | | — | |
| Disposition related and other costs | — | | | 1,700 | | | 7,619 | | | (1,700) | | | (5,919) | |
| Total operating expenses | 166,483 | | | 131,808 | | | 153,247 | | | 34,675 | | | (21,439) | |
| Other operating income (loss): | | | | | | | | | |
| Gain (loss) on sale of businesses | — | | | (537) | | | 3,369 | | | 537 | | | (3,906) | |
| Operating income (loss) | $ | (29,605) | | | $ | 17,025 | | | $ | 11,692 | | | $ | (46,630) | | | $ | 5,333 | |
| | | | | | | | | | | | | | | | | |
| | For the year ended December 31, |
| 2020 | | 2019 | | 2018 |
| Revenues | 100.0% | | 100.0% | | 100.0% |
| Operating expenses: | | | | | |
| Cost of revenues | 12.5 | % | | 10.9 | % | | 11.4 | % |
| Product development | 12.0 | % | | 11.5 | % | | 12.5 | % |
| Sales and marketing | 37.2 | % | | 37.4 | % | | 37.0 | % |
| General and administrative | 22.8 | % | | 20.8 | % | | 23.3 | % |
| Depreciation | 8.8 | % | | 6.5 | % | | 5.7 | % |
| Amortization of intangible assets | — | % | | — | % | | 0.3 | % |
| Impairment of goodwill | 17.3 | % | | — | % | | — | % |
| Impairment of intangible assets | 11.1 | % | | — | % | | — | % |
| Disposition related and other costs | — | % | | 1.1 | % | | 4.7 | % |
| Total operating expenses | 121.6 | % | | 88.2 | % | | 94.8 | % |
| Other operating income (loss): | | | | | |
| Gain (loss) on sale of businesses | — | % | | (4.0) | % | | 2.1 | % |
| Operating income (loss) | (21.6) | % | | 11.4 | % | | 7.2 | % |
|
| | | | | | | | | | | | | | | | | | | |
| | For the year ended December 31, |
| (in thousands) | 2018 | | 2017 | | 2016 | | 2018 vs 2017 | | 2017 vs 2016 |
| Revenues | $ | 161,570 |
| | $ | 207,950 |
| | $ | 226,970 |
| | $ | (46,380 | ) | | $ | (19,020 | ) |
| Operating expenses: | | | | | | | | | |
| Cost of revenues | 18,344 |
| | 29,974 |
| | 32,126 |
| | (11,630 | ) | | (2,152 | ) |
| Product development | 20,212 |
| | 24,984 |
| | 25,714 |
| | (4,772 | ) | | (730 | ) |
| Sales and marketing | 59,721 |
| | 80,508 |
| | 77,451 |
| | (20,787 | ) | | 3,057 |
|
| General and administrative | 37,589 |
| | 40,749 |
| | 43,684 |
| | (3,160 | ) | | (2,935 | ) |
| Depreciation | 9,280 |
| | 9,752 |
| | 9,849 |
| | (472 | ) | | (97 | ) |
| Amortization of intangible assets | 482 |
| | 2,138 |
| | 6,787 |
| | (1,656 | ) | | (4,649 | ) |
| Impairment of goodwill | — |
| | — |
| | 15,369 |
| | — |
| | (15,369 | ) |
| Impairment of fixed and intangible assets | — |
| | 2,226 |
| | 9,252 |
| | (2,226 | ) | | (7,026 | ) |
| Disposition related and other costs | 7,619 |
| | 4,746 |
| | 3,347 |
| | 2,873 |
| | 1,399 |
|
| Total operating expenses | 153,247 |
| | 195,077 |
| | 223,579 |
| | (41,830 | ) | | (28,502 | ) |
| Other operating income: | | | | | | | | | |
| Gain on sale of businesses | 3,369 |
| | 6,699 |
| | — |
| | (3,330 | ) | | 6,699 |
|
| Proceeds from restitution award | — |
| | 3,293 |
| | — |
| | (3,293 | ) | | 3,293 |
|
| Total other operating income | 3,369 |
| | 9,992 |
| | — |
| | (6,623 | ) | | 9,992 |
|
| Operating income | $ | 11,692 |
| | $ | 22,865 |
| | 3,391 |
| | $ | (11,173 | ) | | $ | 19,474 |
|
|
| | | | | | | | |
| | For the year ended December 31, |
| 2018 | | 2017 | | 2016 |
| Revenues | 100.0 | % | | 100.0 | % | | 100.0 | % |
| Operating expenses: | | | | | |
| Cost of revenues | 11.4 | % | | 14.4 | % | | 14.2 | % |
| Product development | 12.5 | % | | 12.0 | % | | 11.3 | % |
| Sales and marketing | 37.0 | % | | 38.7 | % | | 34.1 | % |
| General and administrative | 23.3 | % | | 19.6 | % | | 19.2 | % |
| Depreciation | 5.7 | % | | 4.7 | % | | 4.3 | % |
| Amortization of intangible assets | 0.3 | % | | 1.0 | % | | 3.0 | % |
| Impairment of goodwill | — | % | | — | % | | 6.8 | % |
| Impairment of intangible assets | — | % | | 1.1 | % | | 4.1 | % |
| Disposition related and other costs | 4.7 | % | | 2.3 | % | | 1.5 | % |
| Total operating expenses | 94.8 | % | | 93.8 | % | | 98.5 | % |
| Other operating income: | | | | | |
| Gain on sale of businesses | 2.1 | % | | 3.2 | % | | — | % |
| Proceeds from restitution award | — | % | | 1.6 | % | | — | % |
| Total other operating income | 2.1 | % | | 4.8 | % | | — | % |
| Operating income | 7.2 | % | | 11.0 | % | | 1.5 | % |
Comparison of Years Ended December 31, 20182020 and 20172019
Revenues
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Increase (Decrease) | | Percent
Change | | Foreign Exchange Impact(2) |
| 2020 | | 2019 | | |
| | (in thousands, except percentages) | | |
| Tech-focused | | | | | | | | | |
Dice(1) | $ | 82,190 | | | $ | 92,527 | | | $ | (10,337) | | | (11.2) | % | | $ | — | |
| ClearanceJobs | 28,977 | | | 24,745 | | | 4,232 | | | 17.1 | % | | — | |
| eFinancialCareers | 25,711 | | | 32,098 | | | (6,387) | | | (19.9) | % | | (55) | |
| Total revenues | $ | 136,878 | | | $ | 149,370 | | | $ | (12,492) | | | (8.4) | % | | $ | (55) | |
| | | | | | | | | |
| (1) Includes Dice and Career Events. |
| (2) Foreign exchange impact is calculated by determining the increase (decrease) in current period revenues where current period revenues are translated using prior period exchange rates. |
We experienced a decrease in revenue of $12.5 million, or 8.4%. Revenue at Dice decreased by $10.3 million, or 11.2%, compared to the same period of 2019 due to the impact of the COVID-19 pandemic driving lower renewal rates year over year. Revenues for ClearanceJobs increased by $4.2 million, or 17.1%, as compared to the same period of 2019, driven by continued high demand for professionals with government clearance and consistent product releases and enhancements driving activity on the site. eFinancialCareers revenue decreased $6.4 million, or 19.9%, compared to 2019, due to the COVID-19 pandemic, uncertainty around Brexit, and political unrest in Hong Kong due to the imposition of its new security law.
Cost of Revenues
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Increase | | Percent
Change |
| 2020 | | 2019 | |
| | (in thousands, except percentages) |
| Cost of revenues | $ | 17,047 | | | $ | 16,237 | | | $ | 810 | | | 5.0 | % |
| Percentage of revenues | 12.5 | % | | 10.9 | % | | | | |
Cost of revenues increased by $0.8 million, or 5.0%, primarily driven by an increase in compensation related costs, partially offset by higher capitalization of internal development costs, which decrease operating expenses. Together, this increased expense $0.8 million.
Product Development Expenses
| | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, | | Decrease | | Percent
Change |
| 2020 | | 2019 | |
| | (in thousands, except percentages) |
| Product development | $ | 16,470 | | | $ | 17,216 | | | $ | (746) | | | (4.3) | % |
| Percentage of revenues | 12.0 | % | | 11.5 | % | | | | |
Product development expenses decreased $0.7 million or 4.3%, driven by higher capitalization of internal development costs, which decreases operating expenses. This was partially offset by an increase in compensation related costs due to higher headcount. Together, this decreased expense $0.1 million. The higher capitalization of internal development costs resulted from the Company's continued focus on the design and development of product enhancements and features for the Company's sites. The Company also noted a decrease in travel and other costs due to COVID-19 of $0.6 million.
|
| | | | | | | | | | | | | | |
| | Year Ended December 31, | | Increase (Decrease) | | Percent Change |
| 2018 | | 2017 | |
| | (in thousands, except percentages) |
| Tech-focused | | | | | | | |
Dice (1) | $ | 94,438 |
| | $ | 101,471 |
| | $ | (7,033 | ) | | (6.9 | )% |
| eFinancialCareers | 33,758 |
| | 32,480 |
| | 1,278 |
| | 3.9 | % |
| ClearanceJobs | 21,086 |
| | 17,342 |
| | 3,744 |
| | 21.6 | % |
| Dice Europe | 2,976 |
| | 7,105 |
| | (4,129 | ) | | (58.1 | )% |
| Tech-focused | 152,258 |
| | 158,398 |
| | (6,140 | ) | | (3.9 | )% |
| | | | | | | | |
| Healthcare | — |
| | 24,354 |
| | (24,354 | ) | | n.m. |
|
| Corporate & Other | | | | | | | |
| Hcareers | 5,329 |
| | 14,368 |
| | (9,039 | ) | | (62.9 | )% |
| Rigzone | 3,771 |
| | 7,171 |
| | (3,400 | ) | | (47.4 | )% |
| BioSpace | 212 |
| | 3,592 |
| | (3,380 | ) | | (94.1 | )% |
| Slashdot Media and getTalent | — |
| | 67 |
| | (67 | ) | | (100.0 | )% |
| Corporate & Other | 9,312 |
| | 25,198 |
| | (15,886 | ) | | (63.0 | )% |
| Total revenues | $ | 161,570 |
| | $ | 207,950 |
| | $ | (46,380 | ) | | (22.3 | )% |
| | | | | | | | |
| (1) Includes Dice US, and Targeted Job Fairs | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent
Change |
| 2020 | | 2019 | |
| | (in thousands, except percentages) |
| Sales and marketing | $ | 50,856 | | | $ | 55,909 | | | $ | (5,053) | | | (9.0) | % |
| Percentage of revenues | 37.2 | % | | 37.4 | % | | | | |
Sales and marketing expenses decreased $5.1 million, or 9.0% from the same period in 2019. Sales and marketing had an increase in compensation related costs of $4.9 million. This increase was offset by $6.9 million in reduced discretionary marketing expenses realized from efficiencies in vendor selection and volumes and $3.1 million reduction in other operational costs due to the COVID-19 pandemic, including consulting and travel costs.
General and Administrative Expenses
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Increase | | Percent
Change |
| 2020 | | 2019 | |
| | (in thousands, except percentages) |
| General and administrative | $ | 31,265 | | | $ | 31,003 | | | $ | 262 | | | 0.8 | % |
| Percentage of revenues | 22.8 | % | | 20.8 | % | | | | |
General and administrative costs increased $0.3 million or 0.8%, primarily due to an increase in compensation costs of $0.8 million and non-cash stock based compensation costs of $0.6 million, partially offset by a decrease in other operational costs of $1.4 million, including recruiting, consulting, and travel costs.
Depreciation
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Increase | | Percent
Change |
| 2020 | | 2019 | |
| (in thousands, except percentages) |
| Depreciation | $ | 12,019 | | | $ | 9,743 | | | $ | 2,276 | | | 23.4 | % |
| Percentage of revenues | 8.8 | % | | 6.5 | % | | | | |
Depreciation expense increased $2.3 million or 23.4% from the same period in 2019, in connection with higher headcount driving higher capitalization of internal development costs, which are reflected as purchases of fixed assets in the Consolidated Statements of Cash Flows.
Impairment of Intangible Assets
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Increase | | Percent
Change |
| 2020 | | 2019 | |
| | (in thousands, except percentages) |
| Impairment of intangible assets | $ | 15,200 | | | $ | — | | | $ | 15,200 | | | — | % |
| Percentage of revenues | 11.1 | % | | — | % | | | | |
The Company has an indefinite-lived acquired intangible asset related to the Dice trademarks and brand name. During the first and third quarters of 2020, due to the impacts of the COVID-19 pandemic, the Company performed interim impairment analyses of the Dice trademarks and brand name. As a result of the analyses, the Company recorded impairment charges totaling $15.2 million during the three month periods ended March 31, 2020 and September 30, 2020. See also Note 9 of the Notes to the Consolidated Financial Statements.
Impairment of Goodwill
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Increase | | Percent
Change |
| 2020 | | 2019 | |
| | (in thousands, except percentages) |
| Impairment of goodwill | $ | 23,626 | | | $ | — | | | $ | 23,626 | | | — | % |
| Percentage of revenues | 17.3 | % | | — | % | | | | |
During the first and third quarters of 2020, due to the impacts of the COVID-19 pandemic, the Company performed interim impairment analyses of goodwill. As a result of the analyses, the Company recorded an impairment charge of $23.6 million during the three months ended September 30, 2020. See also Note 10 of the Notes to the Consolidated Financial Statements.
Disposition Related and Other Costs
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent
Change |
| 2020 | | 2019 | |
| (in thousands, except percentages) |
| Disposition related and other costs | $ | — | | | $ | 1,700 | | | $ | (1,700) | | | (100.0) | % |
| Percentage of revenues | — | % | | 1.1 | % | | | | |
Disposition related and other costs of $1.7 million for the year ended December 31, 2019, as described in Note 15 to the Consolidated Financial Statements, are primarily due to severance and related costs incurred in reorganizing the Tech-focused business.
Other Operating Income (Loss)
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Increase | | Percent
Change |
| 2020 | | 2019 | |
| | (in thousands, except percentages) |
| Other operating income (loss) | $ | — | | | $ | (537) | | | $ | 537 | | | (100.0) | % |
| Percentage of revenues | — | % | | (0.4) | % | | | | |
Other operating income (loss) for the year ended December 31, 2019 included a loss of $0.5 million on the 2018 sale of Hcareers due to the finalization of the working capital terms and related contingencies. See also Note 4 to the Consolidated Financial Statements.
Operating Income (Loss)
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent
Change |
| 2020 | | 2019 | |
| (in thousands, except percentages) |
| Revenue | $ | 136,878 | | | $ | 149,370 | | | $ | (12,492) | | | (8.4) | % |
| Operating income (loss) | (29,605) | | | 17,025 | | | $ | (46,630) | | | (273.9) | % |
| Percentages of revenues | (21.6) | % | | 11.4 | % | | | | |
Operating loss for the year ended December 31, 2020 was $29.6 million, a negative margin of 21.6%, compared to operating income of $17.0 million, a positive margin of 11.4%, for the same period in 2019. The decrease in operating income and percentage margin was primarily driven by the non-cash impairments of goodwill and intangible assets of $38.8 million in the 2020 period, partially offset by the disposition and related costs of $1.7 million in the 2019 period.
Interest Expense and Other
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Increase | | Percent
Change |
| 2020 | | 2019 | |
| | (in thousands, except percentages) |
| Interest expense and other | $ | 827 | | | $ | 701 | | | $ | 126 | | | 18.0 | % |
| Percentage of revenues | 2.1 | % | | 0.5 | % | | | | |
Interest expense and other increased by $0.1 million, or 18.0%, from the same period in 2019. Interest expense increased $0.3 million, primarily due to the higher weighted-average debt outstanding during the year ended December 31, 2020 as the Company borrowed on its revolving credit facility in the first quarter of 2020 for liquidity protection during the COVID-19 pandemic. The increase in interest expense was offset by a $0.2 million gain recognized in the second quarter of 2020 on the sale of the Company's 20% interest in BioSpace.
Impairment of Equity Investment
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent
Change |
| 2020 | | 2019 | |
| | (in thousands, except percentages) |
| Impairment of equity investment | $ | (2,002) | | | $ | — | | | $ | (2,002) | | | — | % |
| Percentage of revenues | (1.5) | % | | — | % | | | | |
During the first quarter of 2020, due to the impacts from the COVID-19 pandemic, the Company determined the value of its 7.6% interest in a leading tech skills assessment company to be zero. Accordingly, the Company recorded an impairment charge of $2.0 million during the first quarter of 2020.
Income Taxes
| | | | | | | | | | | |
| | Year Ended December 31, |
| 2020 | | 2019 |
(in thousands, except
percentages) |
| Income (loss) before income taxes | $ | (32,434) | | | $ | 16,324 | |
| Income tax expense (benefit) | (2,419) | | | 3,773 | |
| Effective tax rate | 7.5 | % | | 23.1 | % |
A reconciliation between tax expense at the federal statutory rate and the reported income tax expense is summarized as follows:
| | | | | | | | | | | | | | |
| Year Ended December 31, | | |
| 2020 | | | 2019 | | |
| Federal statutory rate | $ | (6,811) | | | | $ | 3,428 | | | |
| Gain (loss) on sale of businesses | (42) | | | | 84 | | | |
| Stock-based compensation | 482 | | | | 380 | | | |
| Nondeductible impairment | 5,274 | | | | — | | | |
| State taxes, net of federal effect | (315) | | | | 467 | | | |
| Difference between foreign and U.S. rates | 32 | | | | (192) | | | |
| Change in accrual for unrecognized tax benefits | (437) | | | | 107 | | | |
| U.S. tax on global intangible low-taxed income, net of credits | — | | | | 84 | | | |
| Executive compensation | 323 | | | | 147 | | | |
| Currency translation losses | (278) | | | | (67) | | | |
| U.S. transition tax on foreign earnings | — | | | | 140 | | | |
| Research and development tax credits | (530) | | | | (557) | | | |
| Change in valuation allowances | (30) | | | | 12 | | | |
| Other | (87) | | | | (260) | | | |
| Income tax expense (benefit) | $ | (2,419) | | | | $ | 3,773 | | | |
Our effective income tax rate was 7.5% and 23.1% for the years ended December 31, 2020 and 2019, respectively. The 2020 tax rate differed from the federal statutory rate primarily because of tax deficiencies in stock-based compensation; nondeductible impairment charges; a decreased accrual for unrecognized tax benefits; and tax credits for research and development. The 2019 tax rate differed from the federal statutory rate primarily because of tax deficiencies in stock-based compensation; state tax expense; and tax credits for research and development.
Earnings per Share
| | | | | | | | | | | |
| | Year Ended December 31, |
| 2020 | | 2019 |
(in thousands, except
per share amounts) |
| Net income (loss) | $ | (30,015) | | | $ | 12,551 | |
| Weighted-average shares outstanding-diluted | 48,278 | | | 51,633 | |
| Diluted earnings (loss) per share | (0.62) | | | 0.24 | |
Diluted earnings (loss) per share was $(0.62) and $0.24 for the years ended December 31, 2020 and 2019, respectively. The decrease in diluted earnings (loss) per share was primarily driven by the non-cash impairment charges during 2020.
Comparison of Years Ended December 31, 2019 and 2018
Revenues
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Increase (Decrease) | | Percent
Change | | Foreign Exchange Impact (6) |
| 2019 | | 2018 | | |
| | (in thousands, except percentages) | | |
| Tech-focused: | | | | | | | | | |
Dice(1) | $ | 92,527 | | | $ | 94,438 | | | $ | (1,911) | | | (2.0) | % | | $ | — | |
| eFinancialCareers | 32,098 | | | 33,758 | | | (1,660) | | | (4.9) | % | | (1,002) | |
| ClearanceJobs | 24,745 | | | 21,086 | | | 3,659 | | | 17.4 | % | | — | |
| Tech-focused, excluding Dice Europe | 149,370 | | | 149,282 | | | 88 | | | 0.1 | % | | (1,002) | |
Dice Europe(2) | — | | | 2,976 | | | (2,976) | | | n.m. | | — | |
| Tech-focused | 149,370 | | | 152,258 | | | (2,888) | | | (1.9) | % | | (1,002) | |
| | | | | | | | | |
| Other | | | | | | | | | |
Hcareers(3) | — | | | 5,329 | | | (5,329) | | | n.m. | | — | |
Rigzone(4) | — | | | 3,771 | | | (3,771) | | | n.m. | | — | |
BioSpace(5) | — | | | 212 | | | (212) | | | n.m. | | — | |
| Other | — | | | 9,312 | | | (9,312) | | | n.m. | | — | |
| Total revenues | $ | 149,370 | | | $ | 161,570 | | | $ | (12,200) | | | (7.6) | % | | $ | (1,002) | |
| | | | | | | | | |
| (1) Includes Dice and Career Events |
| (2) Dice Europe ceased operations on August 31, 2018. |
| (3) The Company sold Hcareers on May 22, 2018. |
| (4) The Company sold the RigLogix portion of the Rigzone business on February 20, 2018 and majority ownership of the remaining Rigzone business was transferred to Rigzone management on August 31, 2018. |
| (5) The Company transferred majority ownership of the BioSpace business to BioSpace management on January 31, 2018. |
| (6) Foreign exchange impact is calculated by determining the increase (decrease) in current period revenues where current period revenues are translated using prior period exchange rates. |
We experienced a decrease in the Tech-focused segment revenue of $6.1$2.9 million, or 3.9%.1.9%, which was driven by Dice Europe's decline of $3.0 million due to its ceasing operations on August 31, 2018. Excluding Dice Europe and the impacts of foreign exchange, revenue for the Tech-focused segment increased 1% year over year. Revenue at Dice U.S. decreased by $7.0$1.9 million, or 6.9%2.0%, for the year ended December 31, 20182019 compared to the same period of 2017. The rate of Dice U.S. revenue2018, an improvement from the 6.9% decline narrowed throughoutexperienced during the 2018year ended December 31, 2018. Renewal rates have improved over the prior year period as compared to the 2017 period. The lower Dice U.S. revenues were a result of competition in the technology recruiting market, challenges in developing and introducing new products and product enhancements to the market, and the Company's ability to attribute value delivered to customers. Recruitmentwhile recruitment package customer count in the U.S. decreased from 6,450 at December 31, 2017 to 6,200 at December 31, 2018 while average monthly revenue per U.S. recruitment package customerwas down slightly year over year. Revenues for ClearanceJobs increased from $1,110 to $1,119by $3.7 million, or 17.4%, for the yearsyear ended December 31, 2017 and 2018, respectively. Dice Europe revenue decreased by $4.1 million2019 as compared to the same period in 2017 primarily2018, driven by continued high demand for professionals with government clearance and consistent product releases and enhancements driving activity on the site. eFinancialCareers revenue decreased $1.7 million, or 4.9%, compared to 2018, mainly due to the impact on U.K. revenue from the uncertainty around Brexit and the impacts of foreign exchange.
Revenues for Other decreased $9.3 million, which was due to the non-tech businesses which were divested during 2018.
Cost of Revenues
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent
Change |
| 2019 | | 2018 | |
| | (in thousands, except percentages) |
| Cost of revenues | $ | 16,237 | | | $ | 18,344 | | | $ | (2,107) | | | (11.5) | % |
| Percentage of revenues | 10.9 | % | | 11.4 | % | | | | |
Cost of revenues decreased by $2.1 million, or 11.5%, as the Tech-focused segment decreased $0.7 million and Other decreased $1.4 million. In the Tech-focused segment, $0.5 million reduction was due to Dice Europe ceasing operations on August 31, 2018 and $0.9 million reduction was due to a decrease in technology infrastructure costs, partially offset by an increase in compensation related costs of $0.7 million. Other decreased $1.4 million due to the non-tech businesses being divested during 2018.
Product Development Expenses
| | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, | | Decrease | | Percent
Change |
| 2019 | | 2018 | |
| | (in thousands, except percentages) |
| Product development | $ | 17,216 | | | $ | 20,212 | | | $ | (2,996) | | | (14.8) | % |
| Percentage of revenues | 11.5 | % | | 12.5 | % | | | | |
Product development expenses decreased $3.0 million or 14.8%, as the Tech-focused segment decreased $1.7 million and Other decreased $1.3 million. The decrease in Tech-focused was mainly due to higher utilization of the Company's employees in the design and development of product enhancements and features for the Company's sites. This resulted in a higher capitalization rate of internal development costs, which decreased operating expenses in the current period, and are reflected as purchases of fixed assets in the Consolidated Statements of Cash Flows. Other decreased $1.3 million due to the non-tech businesses being divested during 2018.
Sales and Marketing Expenses
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent
Change |
| 2019 | | 2018 | |
| | (in thousands, except percentages) |
| Sales and marketing | $ | 55,909 | | | $ | 59,721 | | | $ | (3,812) | | | (6.4) | % |
| Percentage of revenues | 37.4 | % | | 37.0 | % | | | | |
Sales and marketing expenses decreased $3.8 million, or 6.4%, as the Tech-focused segment decreased $0.6 million and Other decreased $3.2 million. In the Tech-focused segment, compensation related costs increased $3.9 million, of which $2.5 million related to higher sales commissions, including a transitional impact of adopting ASC Topic 606, while consulting costs, professional fees and events, together increased $1.6 million. These increases were offset by a $4.0 million reduction in discretionary marketing expenses realized from efficiencies in vendor selection and a $2.3 million decrease due to Dice Europe ceasing operations on August 31, 2018. Revenues for ClearanceJobsOther decreased $3.2 million due to the non-tech businesses being divested during 2018.
General and Administrative Expenses
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent
Change |
| 2019 | | 2018 | |
| | (in thousands, except percentages) |
| General and administrative | $ | 31,003 | | | $ | 37,589 | | | $ | (6,586) | | | (17.5) | % |
| Percentage of revenues | 20.8 | % | | 23.3 | % | | | | |
General and administrative costs decreased $6.6 million or 17.5% as the Tech-focused segment decreased $5.3 million and Other decreased $1.3 million. In the Tech-focused segment, $2.1 million was due to a decrease in consulting costs, $1.3 million due to a decrease in legal fees and contingencies, which was primarily related to the applicability of provisions of the FCRA to one of our products, as described in Note 12 to the Consolidated Financial Statements, and a $1.8 million decrease mainly due to the resolution of a sales tax contingency and a decrease from lower stock based compensation, which was primarily due to the acceleration and vesting related to the Company's former Chief Executive Officer in 2018. Other decreased $1.3 million due to the non-tech businesses being divested during 2018.
Depreciation
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Increase | | Percent
Change |
| 2019 | | 2018 | |
| (in thousands, except percentages) |
| Depreciation | $ | 9,743 | | | $ | 9,280 | | | $ | 463 | | | 5.0 | % |
| Percentage of revenues | 6.5 | % | | 5.7 | % | | | | |
Depreciation expense increased $0.5 million or 5.0%, as the Tech-focused segment increased $0.8 million and Other decreased $0.3 million. In the Tech-focused segment, depreciation increased primarily in connection with the higher headcount and capitalization rate of internal development costs, which are reflected as purchases of fixed assets in the Consolidated Statements of Cash Flows. Other decreased due to the non-tech businesses being divested during 2018.
Amortization of Intangible Assets
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent
Change |
| 2019 | | 2018 | |
| | (in thousands, except percentages) |
| Amortization | $ | — | | | $ | 482 | | | $ | (482) | | | (100.0) | % |
| Percentage of revenues | — | % | | 0.3 | % | | | | |
Amortization expense decreased by $3.7$0.5 million to zero due to the removal of amortizable intangible assets related to the non-tech businesses divested during the year ended December 31, 2018.
Disposition Related and Other Costs
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent
Change |
| 2019 | | 2018 | |
| (in thousands, except percentages) |
| Disposition related and other costs | $ | 1,700 | | | $ | 7,619 | | | $ | (5,919) | | | (77.7) | % |
| Percentage of revenues | 1.1 | % | | 4.7 | % | | | | |
The disposition related and other costs of $1.7 million for the year ended December 31, 2018 as compared to the same period in 2017, primarily due to continuing strong market conditions and enhanced product offerings. eFinancialCareers revenue increased $1.3 million compared to 2017 primarily due to a positive impact of foreign exchange of $0.9 million, coupled with strong renewals and new business activity in its Asia market.
Healthcare segment revenue, consisting of Health eCareers, decreased as a result of Health eCareers being sold on December 4, 2017.
Revenues from the Corporate & Other segment decreased by $15.9 million, or 63.0%, primarily due to the transfer of the majority ownership of BioSpace to BioSpace management on January 31, 2018, the sale of the RigLogix portion of the Rigzone business on February 20, 2018, sale of Hcareers on May 22, 2018, and transfer of the majority ownership of the remaining Rigzone business to Rigzone management on August 31, 2018. Subsequent to the divestiture dates, BioSpace and Rigzone are no longer included in the Company's consolidated financial results.
|
| | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent Change |
| 2018 | | 2017 | |
| | (in thousands, except percentages) |
| Cost of revenues | $ | 18,344 |
| | $ | 29,974 |
| | $ | (11,630 | ) | | (38.8 | )% |
| Percentage of revenues | 11.4 | % | | 14.4 | % | | | | |
Cost of revenues decreased by $11.6 million, or 38.8%, as the Healthcare segment decreased by $8.6 million as a result of the sale of Heath eCareers on December 4, 2017. Corporate & Other cost of revenues decreased $2.2 million primarily due to the divested businesses. The Tech-focused segment decreased $0.8 million, which was primarily due to Dice Europe ceasing operations on August 31, 2018.
Product Development Expenses
|
| | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent Change |
| 2018 | | 2017 | |
| | (in thousands, except percentages) |
| Product development | $ | 20,212 |
| | $ | 24,984 |
| | $ | (4,772 | ) | | (19.1 | )% |
| Percentage of revenues | 12.5 | % | | 12.0 | % | | | | |
Product development expenses decreased $4.8 million or 19.1%, as the Healthcare segment decreased $2.3 million due to the sale of Health eCareers on December 4, 2017. Corporate & Other decreased $3.8 million, of which $2.7 million related to divested businesses and $1.1 million was due to the discontinuance of getTalent in the third quarter of 2017. These decreases were partially offset by an increase in the Tech-focused segment of $1.3 million primarily due to compensation related costs as the segment develops new products and features.
Sales and Marketing Expenses |
| | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent Change |
| 2018 | | 2017 | |
| | (in thousands, except percentages) |
| Sales and marketing | $ | 59,721 |
| | $ | 80,508 |
| | $ | (20,787 | ) | | (25.8 | )% |
| Percentage of revenues | 37.0 | % | | 38.7 | % | | | | |
Sales and marketing expenses decreased $20.8 million, or 25.8%, as costs decreased $9.2 million in the Healthcare segment as a result of the Health eCareers sale on December 4, 2017. Corporate & Other decreased $8.8 million, of which $7.5 million was related to the divested businesses in 2018, and $1.2 million due to the discontinuance of getTalent in the third quarter of 2017. The Tech-focused segment decreased $2.8 million, of which $2.9 million decrease was due to Dice Europe ceasing operations on August 31, 2018. In the ongoing Tech-focused business, compensation related costs increased approximately $1.0 million, offset by a decrease in discretionary marketing spend of approximately $0.7 million, primarily related to advertising and promotional events, and a decrease in commission expense of $0.6 million, which was driven by the capitalization and amortization of commission expense over the service period as a result of adopting ASC Topic 606 on January 1, 2018.
General and Administrative Expenses
|
| | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent Change |
| 2018 | | 2017 | |
| | (in thousands, except percentages) |
| General and administrative | $ | 37,589 |
| | $ | 40,749 |
| | $ | (3,160 | ) | | (7.8 | )% |
| Percentage of revenues | 23.3 | % | | 19.6 | % | | | | |
General and administrative costs decreased $3.2 million or 7.8%. The Healthcare segment decreased $2.8 million due to the sale of Health eCareers on December 4, 2017. Corporate & Other decreased $4.5 million, of which $2.0 million was related to the divested businesses in 2018, $1.1 million was due to lower stock based compensation costs, and $1.3 million was due to lower legal and other professional fees. The Tech-focused segment increased $4.1 million, primarily due to a $2.1 million increase in consulting costs and $1.0 million for the Fair Credit Reporting Act lawsuit and $0.6 million related to recruiting and employee training.
Disposition Related and Other Costs |
| | | | | | | | | | | | | | |
| | Year Ended December 31, | | Increase | | Percent Change |
| 2018 | | 2017 | |
| (in thousands, except percentages) |
| Disposition related and other costs | $ | 7,619 |
| | $ | 4,746 |
| | $ | 2,873 |
| | 60.5 | % |
| Percentage of revenues | 4.7 | % | | 2.3 | % | | | | |
Disposition related and other costs,2019, as described in Note 12 of15 to the Notes to Consolidated Financial Statements, increased $2.9 million or 60.5%. The $7.6 million of expenses in 2018 was primarily due to the divestitures of the non-tech businesses and the reorganization to the tech-focused strategy, which primarily consisted of severance and retention, lease exit, business closure, professional fees related to activist shareholders, search, financial advisory, and legal services, and other costs to further these strategic objectives.
Disposition related and other costs of $4.7 million in 2017 are primarily due to severance and related costs incurred in reorganizing the Tech-focused business.
The disposition related and other costs of $7.6 million in 2018 are primarily due to severance, lease exit, and other related costs
in connection with the non tech businesses divestiture process and the reorganization to the tech-focused strategy.
DepreciationOther Operating Income (Loss)
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent
Change |
| 2019 | | 2018 | |
| | (in thousands, except percentages) |
| Other operating income (loss) | $ | (537) | | | $ | 3,369 | | | $ | (3,906) | | | (115.9) | % |
| Percentage of revenues | (0.4) | % | | 2.1 | % | | | | |
|
| | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent Change |
| 2018 | | 2017 | |
| (in thousands, except percentages) |
| Depreciation | $ | 9,280 |
| | $ | 9,752 |
| | $ | (472 | ) | | (4.8 | )% |
| Percentage of revenues | 5.7 | % | | 4.7 | % | | | | |
Depreciation expenseOther operating income (loss) for the year ended December 31, 2018 decreased2019, included a loss of $0.5 million or 4.8%. Depreciation inon the Healthcare segment decreased $1.6 million due2018 sale of Hcareers, which was related to a post-closing adjustment upon the finalization of the working capital terms and related contingencies. See also Note 4 to the sale of Health eCareers on December 4, 2017. Depreciation in Corporate & Other decreased $0.9 million due to the divested businesses in 2018. Depreciation in the Tech-focused segment increased $1.4 million, which was driven by the development and release of new products and features in 2018 and the latter part of 2017.Consolidated Financial Statements.
Amortization of Intangible Assets
|
| | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent Change |
| 2018 | | 2017 | |
| | (in thousands, except percentages) |
| Amortization | $ | 482 |
| | $ | 2,138 |
| | $ | (1,656 | ) | | (77.5 | )% |
| Percentage of revenues | 0.3 | % | | 1.0 | % | | | | |
Amortization expense for the year ended December 31, 2018 decreased $1.7 million, or 77.5%. The decrease is primarily due to the divestiture of businesses in the Healthcare segment and Corporate & Other.
Impairment of Fixed and Intangible Assets
During 2017, $2.2 million of capitalized development costs related to getTalent were written off as the getTalent services (included in Corporate & Other) were discontinued during the third quarter of 2017. No such costs were written off during the year ended December 31, 2018.
Other Operating Income
Other operating income for the year ended December 31, 2018 included a gain of $4.6 million related to the sale of the RigLogix portion of the Rigzone business on February 20, 2018 and a $0.8 million gain related to post closing price adjustment to the sale of the Health eCareers business. These gains were partially offset by losses recognized on the sale of the Hcareers business on May 22, 2018 of $0.8 million, the transfer of majority ownership of the remaining Rigzone business to Rigzone management on August 31, 2018 of $0.7 million and the transfer of majority ownership of the BioSpace business to BioSpace management on January 31, 2018 of $0.5 million. See also Note 4 of the Notes to Consolidated Financial Statements.
Other operating income for the year ended December 31, 2017 included $6.7 million of gain on sale from the sale of the Health eCareers business (see Note 4) and proceeds from restitution award of $3.3 million in the OilPro related legal matter.
Operating Income
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Increase (Decrease) | | Percent
Change |
| 2019 | | 2018 | |
| | (in thousands, except percentages) |
| Revenue | $ | 149,370 | | | $ | 161,570 | | | $ | (12,200) | | | (7.6) | % |
| Operating income | $ | 17,025 | | | $ | 11,692 | | | $ | 5,333 | | | 45.6 | % |
| Percentage of revenues | 11.4 | % | | 7.2 | % | | | | |
Operating income for the year ended December 31, 20182019 was $11.7$17.0 million, a margin of 7.2%11.4%, as compared to $22.9$11.7 million, a
margin of 7.2%, for the same period in 2017,2018. The increased operating income and percentage margin were driven by cost savings initiatives, a margin of 11.0%, and a year over year decrease of $11.2 million, or 48.9%. Contributing to the higher margin in 2017 was the $6.7 million gain on the sale of Health eCareers and the $3.3 million restitution award related to an OilPro legal matter. These increases were partially offset by a $2.2 million asset impairment in 2017 and on the increasereduction in disposition related and other costs in 2019, higher utilization of $2.9 million.the Company's employees in the design and development of product enhancements and features for the Company's sites, and the closure of Dice Europe in 2018, which had a lower operating margin.
Interest Expense and Other
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent
Change |
| 2019 | | 2018 | |
| | (in thousands, except percentages) |
| Interest expense | $ | 701 | | | $ | 2,054 | | | $ | (1,353) | | | (65.9) | % |
| Percentage of revenues | 0.5 | % | | 1.3 | % | | | | |
|
| | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent Change |
| 2018 | | 2017 | |
| | (in thousands, except percentages) |
| Interest expense | $ | 2,054 |
| | $ | 3,445 |
| | $ | (1,391 | ) | | (40.4 | )% |
| Percentage of revenues | (1.3 | )% | | (1.7 | )% | | | | |
Interest expense for the year ended December 31, 2018 decreased by $1.4 million, or 65.9%, from the same period in 2017 primarily2018 due to lower weighted-average debt outstanding during the year ended December 31, 2018.2019.
Income Taxes
| | | | | | | | | | | |
| | Year Ended December 31, |
| 2019 | | 2018 |
(in thousands, except
percentages) |
| Income before income taxes | $ | 16,324 | | | $ | 9,602 | |
| Income tax expense | 3,773 | | | 2,428 | |
| Effective tax rate | 23.1 | % | | 25.3 | % |
|
| | | | | | | |
| | Year Ended December 31, |
| 2018 | | 2017 |
(in thousands, except percentages) |
| Income (loss) before income taxes | $ | 9,602 |
| | $ | 19,397 |
|
| Income tax expense | 2,428 |
| | 3,419 |
|
| Effective tax rate | 25.3 | % | | 17.6 | % |
A reconciliation between tax expense at the federal statutory rate and the reported income tax expense is summarized as follows: | | | | Year Ended December 31, | | Year Ended December 31, |
| 2018 | | 2017 | 2019 | 2018 |
| Federal statutory rate | $ | 2,016 |
| | $ | 6,789 |
| Federal statutory rate | $ | 3,428 | | | $ | 2,016 | |
| Gain (loss) on sale of businesses | (6,111 | ) | | (1,571 | ) | Gain (loss) on sale of businesses | 84 | | | (6,111) | |
| Stock-based compensation | 2,112 |
| | 1,414 |
| Stock-based compensation | 380 | | | 2,112 | |
| State taxes, net of federal effect | (38 | ) | | 35 |
| State taxes, net of federal effect | 467 | | | (38) | |
| Difference between foreign and U.S. rates | (102 | ) | | (1,054 | ) | Difference between foreign and U.S. rates | (192) | | | (102) | |
| Change in accrual for unrecognized tax benefits | (1,179 | ) | | 1,003 |
| Change in accrual for unrecognized tax benefits | 107 | | | (1,179) | |
| U.S. tax on global intangible low-taxed income, net of credits | 229 |
| | — |
| U.S. tax on global intangible low-taxed income, net of credits | 84 | | | 229 | |
| Executive compensation | 126 |
| | — |
| Executive compensation | 147 | | | 126 | |
| Currency translation gains | 219 |
| | — |
| |
| Gross tax on foreign dividend | — |
| | 275 |
| |
| Foreign tax credits | — |
| | (275 | ) | |
| Currency translation gains (losses) | | Currency translation gains (losses) | (67) | | | 219 | |
| U.S. transition tax on foreign earnings | 368 |
| | 2,962 |
| U.S. transition tax on foreign earnings | 140 | | | 368 | |
| Federal rate change impact on deferred tax liabilities | — |
| | (3,281 | ) | |
| Research and development tax credits | (481 | ) | | (1,764 | ) | Research and development tax credits | (557) | | | (481) | |
| Change in valuation allowances | 5,117 |
| | (780 | ) | Change in valuation allowances | 12 | | | 5,117 | |
| Other | 152 |
| | (334 | ) | Other | (260) | | | 152 | |
| Income tax expense | $ | 2,428 |
| | $ | 3,419 |
| Income tax expense | $ | 3,773 | | | $ | 2,428 | |
Our effective income tax rate was 25.3%23.1% and 17.6%25.3% for the years ended December 31, 2019 and 2018, respectively. The 2019 tax rate differed from the federal statutory rate primarily because of tax deficiencies in stock-based compensation; state tax expense; and 2017, respectively.tax credits for research and development. The 2018 tax rate differed from the federal statutory rate primarily because of permanent book/tax differences in basis related to the gain or loss on sale of businesses; tax deficiencies in stock-based compensation; a decreased accrual for unrecognized tax benefits; and an increase in the valuation allowance for capital loss carryforwards. The 2017 tax rate differed from the federal statutory rate for a number of reasons, including the allocation of income between the U.S. and foreign jurisdictions; permanent book/tax differences in basis related to the gain or loss on sale of businesses; tax deficiencies in stock-based compensation; an increased accrual for unrecognized tax benefits; the transition tax on foreign earnings; a decrease in deferred tax liabilities because of a change in the federal statutory rate; credits for research and development; and a reduction in the valuation allowance for foreign tax credits.
Earnings per Share
Earnings | | | | | | | | | | | |
| | Year Ended December 31, |
| 2019 | | 2018 |
(in thousands, except
per share amounts) |
| Net income | $ | 12,551 | | | $ | 7,174 | |
| Weighted-average shares outstanding-diluted | 51,633 | | | 49,605 | |
| Diluted earnings per share | 0.24 | | | 0.14 | |
Diluted earnings per share was $0.15$0.24 and $0.33$0.14 for the years ended December 31, 2019 and 2018, and December 31, 2017, respectively, a decreasean increase of $0.18.$0.10. The decreaseimprovement in earnings per share was primarily due to 2017 including a $6.6 million gain on the sale of Health eCareers and $3.3 million in restitution awards, partially offset by a $2.9 million increase in disposition related and other costs in 2018.
Comparison of Years Ended December 31, 2017 and 2016
Revenues
|
| | | | | | | | | | | | | | |
| | Year Ended December 31, | | Increase (Decrease) | | Percent Change |
| 2017 | | 2016 | |
| | (in thousands, except percentages) |
| Tech-focused: | | | | | | | |
Dice (1) | $ | 101,471 |
| | $ | 113,231 |
| | $ | (11,760 | ) | | (10.4 | )% |
| eFinancialCareers | 32,480 |
| | 35,103 |
| | (2,623 | ) | | (7.5 | )% |
| ClearanceJobs | 17,342 |
| | 14,086 |
| | 3,256 |
| | 23.1 | % |
| Dice Europe | 7,105 |
| | 8,179 |
| | (1,074 | ) | | (13.1 | )% |
| Tech-focused | 158,398 |
| | 170,599 |
| | (12,201 | ) | | (7.2 | )% |
| | | | | | | | |
| Healthcare | 24,354 |
| | 27,066 |
| | (2,712 | ) | | (10.0 | )% |
| Corporate & Other | | | | | | | |
| Hcareers | 14,368 |
| | 14,908 |
| | (540 | ) | | (3.6 | )% |
| Rigzone | 7,171 |
| | 9,485 |
| | (2,314 | ) | | (24.4 | )% |
| BioSpace | 3,592 |
| | 4,110 |
| | (518 | ) | | (12.6 | )% |
| Slashdot Media and getTalent | 67 |
| | 802 |
| | (735 | ) | | (91.6 | )% |
| Corporate & Other | 25,198 |
| | 29,305 |
| | (4,107 | ) | | (14.0 | )% |
| Total revenues | $ | 207,950 |
| | $ | 226,970 |
| | $ | (19,020 | ) | | (8.4 | )% |
| | | | | | | | |
| (1) Includes Dice and Targeted Job Fairs | | | | | | | |
We experienced a decrease in the Tech-focused segment revenue of $12.2 million, or 7.2%. Revenue at Dice U.S. decreased by $11.8 million compared to the same period in 2016 due to competition in the technology recruiting market, challenges in developing and introducing new products and product enhancements to the market, and the Company's ability to attribute value delivered to customers. Recruitment package customer count in the U.S. decreased from 7,050 at December 31, 2016 to 6,450 at December 31, 2017 while average monthly revenue per U.S. recruitment package customer decreased 1% to $1,110. Dice Europe revenue decreased by $1.1 million as compared to the same period in 2016 primarily due to lower renewals as well as a negative impact of foreign exchange in 2017 of approximately $0.2 million. eFinancialCareers revenue decreased $2.6 million compared to 2016 due to lower renewals with Brexit contributing to the decline and the negative impact of foreign exchange of $1.0 million. Revenues for ClearanceJobs increased by $3.3 million for the year ended December 31, 2017 as compared to the same period in 2016, primarily due to improved market conditions and enhanced product offerings.
The Healthcare segment, consisting of Health eCareers, revenue decreased by $2.7 million, or 10.0% from the comparable 2016 period primarily due to generating one less month of revenue as a result of being sold December 4, 2017.
Revenues from the Corporate & Other segment decreased by $4.1 million or 14.0% primarily driven by a decrease in Energy of $2.3 million due to the deteriorating energy market and due to the sale of the Slashdot Media business in January 2016 which generated $0.7 million in revenue in that period.
|
| | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent Change |
| 2017 | | 2016 | |
| | (in thousands, except percentages) |
| Cost of revenues | $ | 29,974 |
| | $ | 32,126 |
| | $ | (2,152 | ) | | (6.7 | )% |
| Percentage of revenues | 14.4 | % | | 14.2 | % | | | | |
Cost of revenues decreased by $2.2 million, or 6.7%, primarily due to decreased headcount in both the Tech-focused segment of $0.9 million and Corporate & Other of $0.6 million. A decrease in the Healthcare segment of $0.7 million was due to the sale of Health eCareers on December 4, 2017.
Product Development Expenses
|
| | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent Change |
| 2017 | | 2016 | |
| | (in thousands, except percentages) |
| Product development | $ | 24,984 |
| | $ | 25,714 |
| | $ | (730 | ) | | (2.8 | )% |
| Percentage of revenues | 12.0 | % | | 11.3 | % | | | | |
Product development costs decreased $0.7 million or 2.8%. During the year ended December 31, 2017, the Company reallocated its resources towards the Tech-focused segment to align with the Tech-focused strategy. The primary changes related to headcount costs, in which the Tech-focused segment experienced a $1.4 million increase and the Corporate & Other segment experienced a $1.3 million decrease. Other product development changes included a decrease in Slashdot Media costs of $0.4 million due to the sale of the business in January 2016, and a decrease of consulting and headcount costs of $0.3 million in the Healthcare segment.
Sales and Marketing Expenses |
| | | | | | | | | | | | | | |
| | Year Ended December 31, | | Increase | | Percent Change |
| 2017 | | 2016 | |
| | (in thousands, except percentages) |
| Sales and marketing | $ | 80,508 |
| | $ | 77,451 |
| | $ | 3,057 |
| | 3.9 | % |
| Percentage of revenues | 38.7 | % | | 34.1 | % | | | | |
Sales and marketing costs increased $3.1 million, or 3.9%. The Tech-focused segment increased by $3.8 million, primarily due to increased discretionary marketing spend of $3.7 million to increase brand awareness and drive traffic to our sites. Corporate & Other discretionary marketing spend increased $0.5 million due to higher costs at BioSpace (transferred majority ownership to BioSpace management on January 31, 2018) and getTalent (discontinued in the third quarter of 2017), while these increases were offset by reduced headcount costs of $0.9 million in Corporate & Other.
General and Administrative Expenses
|
| | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent Change |
| 2017 | | 2016 | |
| | (in thousands, except percentages) |
| General and administrative | $ | 40,749 |
| | $ | 43,684 |
| | $ | (2,935 | ) | | (6.7 | )% |
| Percentage of revenues | 19.6 | % | | 19.2 | % | | | | |
General & Administrative expenses decreased $2.9 million or 6.7%. Expenses for the Tech-focused segment decreased $1.9 million primarily due to decreased stock compensation costs of $1.7 million and a decrease in headcount costs of approximately $0.4 million, slightly offset by increased professional fees of $0.2 million. Corporate & Other experienced a $0.7 million decrease in General & Administrative expenses, primarily due to lower headcount and a decrease in legal and professional fees associated with the Oil Pro litigation, director search fees and the strategic alternatives process. The Healthcare segment decreased approximately $0.3 million, which was primarily due to lower stock compensation expense of $0.2 million from forfeitures due to the sale of Health eCareers on December 4, 2017. Overall, lower stock compensation costs were driven primarily by a decrease in the fair value of new grants awarded.
Disposition Related and Other Costs |
| | | | | | | | | | | | | |
| | Year Ended December 31, | | Increase | | Percent Change |
| 2017 | | 2016 | |
| (in thousands, except percentages) |
| Disposition related and other costs | $ | 4,746 |
| | $ | 3,347 |
| | $ | 1,399 |
| | n.m. |
| Percentage of revenues | 2.3 | % | | 1.5 | % | | | | |
Disposition related and other costs are primarily related to the strategic alternatives process and divestiture costs, including the sale of Health eCareers. Costs for the year ended December 31, 2017 consist of severance and retention of $3.1 million, professional fees of $1.1 million, and China exit costs of $0.5 million. Prior year costs were primarily due to the sale of Slashdot Media, including severance of $1.0 million, stock based compensation acceleration of $0.9 million, and a loss on sale of $0.6 million. Also included in disposition related and other costs in 2016 is other severance primarily related to the formation of the Global Industry Group of $0.8 million.
|
| | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent Change |
| 2017 | | 2016 | |
| (in thousands, except percentages) |
| Depreciation | $ | 9,752 |
| | $ | 9,849 |
| | $ | (97 | ) | | (1.0 | )% |
| Percentage of revenues | 4.7 | % | | 4.3 | % | | | | |
Depreciation expense for the year ended December 31, 2017 approximated the same period of the prior year. During 2017, depreciation expense related to getTalent (discontinued in the third quarter of 2017) increased $0.5 million while the Healthcare segment decreased approximately $0.5 million.
Amortization of Intangible Assets
|
| | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent Change |
| 2017 | | 2016 | |
| | (in thousands, except percentages) |
| Amortization | $ | 2,138 |
| | $ | 6,787 |
| | $ | (4,649 | ) | | (68.5 | )% |
| Percentage of revenues | 1.0 | % | | 3.0 | % | | | | |
Amortization expense for the year ended December 31, 2017 decreased $4.6 million, or 68.5%. The reduction was due to certain intangible assets in Health eCareers, Hospitality, and Dice Europe becoming fully amortized during 2016. Additionally, Rigzone decreased $2.1 million due to intangible assets being written off in the third quarter of 2016.
Impairment of goodwill
Goodwill of $15.4 million related to Rigzone, the Energy reporting unit, was fully written off in the third quarter of 2016 due to the decline in demand for energy professionals, stemming from persistently depressed oil prices, which has significantly decreased the use of our energy industry job posting websites and related services. No such impairment was reported during 2017.
Impairment of Fixed and Intangible Assets
During 2017, $2.2 million of capitalized development costs related to getTalent were written off as the getTalent services (included in Corporate & Other) were discontinued during the third quarter of 2017. During 2016, unamortized intangible assets of $9.3 million related to Rigzone, the Energy reporting unit, formerly within the Global Industry Group segment and currently included in Corporate & Other, were written off as a result of the decline in demand for energy professionals, stemming from depressed oil prices, which significantly decreased the use of our energy industry job posting websites and related services.
Other Operating Income
Other operating income for the year ended December 31, 2017 included $6.7 million of gain on sale from the sale of the Health eCareers business (see Note 4) and proceeds from restitution award of $3.3 million in the OilPro related legal matter.
Operating Income
Operating income for the year ended December 31, 2017 was $22.9 million compared to $3.4 million for the same period in 2016, an increase of $19.5 million or 580%. Included in operating income for 2017 was other operating income of $10.0 million related to the sale of Health eCareers and proceeds from restitution award in the OilPro related legal matter that did not occur in 2016, and lower impairment costs of $22.4 million. The operating income improvements in the current period were partially offset by lower revenues of $19.0 million primarily due to lower customer activity across all brands except for ClearanceJobs.
Interest Expense
|
| | | | | | | | | | | | | | |
| | Year Ended December 31, | | Decrease | | Percent Change |
| 2017 | | 2016 | |
| | (in thousands, except percentages) |
| Interest expense | $ | 3,445 |
| | $ | 3,481 |
| | $ | (36 | ) | | (1.0 | )% |
| Percentage of revenues | (1.7 | )% | | (1.5 | )% | | | | |
Interest expense for the year ended December 31, 2017 includes $410,000 of deferred financing costs charged to interest expense following the borrowing capacity reduction of the Credit Agreement from $250 million to $150 million. Excluding this charge, interest expense decreased $346,000 due to lower average borrowings during the period, partially offset by higher interest rates.
Income Taxes
|
| | | | | | | |
| | Year Ended December 31, |
| 2017 | | 2016 |
(in thousands, except percentages) |
| Income before income taxes | $ | 19,397 |
| | $ | (119 | ) |
| Income tax expense | 3,419 |
| | 5,279 |
|
| Effective tax rate | 17.6 | % | | (4,436.1 | )% |
A reconciliation between tax expense at the federal statutory rate and the reported income tax expense is summarized as follows: |
| | | | | | | |
| | Year Ended December 31, |
| 2017 | 2016 |
| Federal statutory rate | $ | 6,789 |
| | $ | (42 | ) |
| Gain (loss) on sale of businesses | (1,571 | ) | | — |
|
| Stock-based compensation | 1,414 |
| | — |
|
| Nondeductible impairment | — |
| | 5,287 |
|
| State taxes, net of federal effect | 35 |
| | 756 |
|
| Difference between foreign and U.S. rates | (1,054 | ) | | 297 |
|
| Change in accrual for unrecognized tax benefits | 1,003 |
| | (923 | ) |
| Gross tax on foreign dividend | 275 |
| | 5,084 |
|
| Tax credits related to foreign dividend | (275 | ) | | (4,244 | ) |
| US transition tax on foreign earnings | 2,962 |
| | — |
|
| Federal rate change impact on deferred tax liabilities | (3,281 | ) | | — |
|
| Research and development tax credits | (1,764 | ) | | (173 | ) |
| Change in valuation allowances | (780 | ) | | (713 | ) |
| Other | (334 | ) | | (50 | ) |
| Income tax expense | $ | 3,419 |
| | $ | 5,279 |
|
Our effective income tax rate was 17.6% and (4,436.1)% for the years ended December 31, 2017 and 2016, respectively. The 2017 tax rate differed from the federal statutory rate for a number of reasons, including the allocation of income between the US and foreign jurisdictions; permanent book/tax differences in basis related to the gain or loss on sale of businesses; tax deficiencies in stock-based compensation; an increased accrual for unrecognized tax benefits; the transition tax on foreign earnings; a decrease in deferred tax liabilities because of a change in the federal statutory rate; credits for research and development; and a reduction in the valuation allowance for foreign tax credits.
Enactment of US tax reform legislation in December 2017 resulted in a $0.3 million reduction in tax expense. We recorded tax expense of $3.0 million for the one-time transition tax on the deemed repatriation of undistributed foreign earnings and recorded a tax benefit of $3.3 million for the reduction in our deferred tax liabilities because of the change in the US federal tax rate from 35% to 21%.
The 2016 tax rate differed significantly from the federal statutory rate because of impairment charges of $24.6 million, of which $15.4 million related to non-deductible goodwill. Based on the jurisdictions where the impairment charges were recorded, the non-deductible amounts caused 2016 tax expense to exceed the expected expense at statutory tax rates by $5.3 million.
The 2016 tax rate was also impacted by the modification of our indefinite reinvestment assertion resulting in the repatriation of cash from our Canada subsidiary to the United States, which caused tax expense of $0.8 million. Additionally, the implementation of a tax planning strategy to utilize foreign tax credits resulted in a $0.7 million decrease in the valuation allowance related to such credits. Also, we had a $0.9 million tax benefit in 2016 from a reduction in the accrual for unrecognized tax benefits, primarily due to the expiration of the statute of limitations in various tax jurisdictions.
Earnings (Loss) per Share
Earnings (loss) per share was $0.33 and ($0.11) for the years ended December 31, 2017 and December 31, 2016, respectively, an improvement of $0.44. The improvement was primarily due to improved net income (loss) in 2017, which was driven by a gain on the sale of Health eCareers of $6.7 million, proceeds from restitution award in the OilPro related legal matter of $3.3 million as compared to an impairment of goodwill and intangibles of $24.6 million that was recorded for the Energy reporting unit during 2016.year over year.
Liquidity and Capital Resources
Non-GAAP Financial Measures
We have provided certain non-GAAP financial information as additional informationmeasures for our operating results. These measures are not in accordance with, or an alternative for, measures in accordance with U.S. GAAP and may be different from similarly titled non-GAAP measures reported by other companies. We believe the presentation of non-GAAP measures, such as Adjusted Revenues, Adjusted EBITDA and Adjusted EBITDA margin, provides useful information to management and investors regarding certain financial and business trends relating to our financial condition and results of operations.
Adjusted Revenues
Adjusted Revenues is a non-GAAP metric used by management to measure operating performance. Adjusted Revenues represents Revenues less the revenues of divested businesses. We consider Adjusted Revenues to be an important measure to evaluate the performance of our ongoing businesses and provide comparable results excluding our divestitures.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP metrics used by management to measure operating performance. Management uses Adjusted EBITDA as a performance measure for internal monitoring and planning, including preparation of annual budgets, analyzing investment decisions and evaluating profitability and performance comparisons between us and our competitors. The Company also uses this measure to calculate amounts of performance based compensation under the senior management incentive bonus program. Adjusted EBITDA represents net income plus (to the extent deducted in calculating such net income) interest expense, income tax expense, depreciation and amortization, non-cash stock based compensation, losses resulting from certain dispositions outside the ordinary course of business including prior negative operating results of those divested businesses, certain writeoffs in connection with indebtedness, impairment charges with respect to long-lived assets, expenses incurred in connection with an equity offering or any other offering of securities by the Company, extraordinary or non-recurring non-cash expenses or losses, transaction costs in connection with the credit agreement, deferred revenues written off in connection with acquisition purchase accounting adjustments, writeoff of non-cash stock based compensation expense, severance and retention costs related to dispositions orand reorganizations of the Company, and losses related to legal claims and fees that are unusual in nature or infrequent, and business interruption insurance proceeds, minus (to the extent included in calculating such net income) non-cash income or gains, and interest income, business interruption insurance proceeds, and any income or gain resulting from certain dispositions outside the ordinary course of business, including prior positive operating results of those divested businesses, and gains related to legal claims that are unusual in nature or infrequent.
The Company changed its definition of Adjusted EBITDA during the first quarter of 2018 to exclude severance and retention costs related to dispositions or reorganizations of the Company, the prior operating results of divested businesses, and losses related to legal claims and fees that are unusual in nature or infrequent. The Company changed its definition of Adjusted EBITDA to provide a more transparent and comparable view of its financial performance. Accordingly, all prior periods have been recast to reflect the current definition.
We also consider Adjusted EBITDA, as defined above, to be an important indicator to investors because it provides information related to our ability to provide cash flows to meet future debt service, capital expenditures and working capital requirements and to fund future growth. We present Adjusted EBITDA as a supplemental performance measure because we believe that this measure provides our board of directors,Board, management and investors with additional information to measure our performance, provide comparisons from period to period and company to company by excluding potential differences caused by variations in capital structures (affecting interest expense) and tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses), and to estimate our value.
We understand that although Adjusted EBITDA is frequently used by securities analysts, lenders and others in their evaluation of companies, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our liquidity or results as reported under GAAP. Some limitations are:
•Adjusted EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
•Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
•Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments on our debt;
•Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and
•Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
To compensate for these limitations, management evaluates our liquidity by considering the economic effect of excluded expense items independently, as well as in connection with its analysis of cash flows from operations and through the use of other financial measures, such as capital expenditure budget variances, investment spending levels and return on capital analysis.
Adjusted EBITDA Margin is computed as Adjusted EBITDA divided by Adjusted Revenues. Adjusted Revenues, Adjusted EBITDA and Adjusted EBITDA Margin are not measurements of our financial performance under GAAP and should not be considered as an alternative to revenue, net income, operating income, revenuecash provided by operating activities, or any other performance measures derived in accordance with GAAP as a measure of our profitability or liquidity.
A reconciliation of Adjusted Revenues for the years ended December 31, 2018, 20172020, 2019 and 20162018 follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2020 | | 2019 | | 2018 |
| Revenues | $ | 136,878 | | | $ | 149,370 | | | $ | 161,570 | |
Hcareers(1) | — | | | — | | | (5,329) | |
Rigzone(2) | — | | | — | | | (3,771) | |
BioSpace(3) | — | | | — | | | (212) | |
| Adjusted Revenues | $ | 136,878 | | | $ | 149,370 | | | $ | 152,258 | |
| | | | | |
| (1) The Company sold Hcareers on May 22, 2018. |
| (2) The Company sold the Riglogix portion of the Rigzone business on February 20, 2018 and transferred majority ownership of remaining Rigzone business to Rigzone management on August 31, 2018. |
| (3) The Company transferred majority ownership of BioSpace to BioSpace management on January 31, 2018 and sold its remaining minority stake in BioSpace to BioSpace management on April 30, 2020. |
|
| | | | | | | | | | | |
| | Year Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Revenues | $ | 161,570 |
| | $ | 207,950 |
| | $ | 226,970 |
|
| Health eCareers | — |
| | (24,354 | ) | | (27,066 | ) |
| Hcareers | (5,329 | ) | | (14,368 | ) | | (14,908 | ) |
| Rigzone | (3,771 | ) | | (7,171 | ) | | (9,484 | ) |
| BioSpace | (212 | ) | | (3,592 | ) | | (4,110 | ) |
| Adjusted Revenues | $ | 152,258 |
| | $ | 158,465 |
| | $ | 171,402 |
|
| | | | | | |
A reconciliation of Adjusted EBITDA for the years ended December 31, 2018, 20172020, 2019 and 20162018 follows (in thousands): | | | | | | | | | | Year Ended December 31, |
| | Year Ended December 31, | 2020 | | 2019 | | 2018 |
| 2018 | | 2017 | | 2016 | |
| Reconciliation of Net Income (Loss) to Adjusted EBITDA: | | | | | | |
| Reconciliation of Net Income (loss) to Adjusted EBITDA: | | Reconciliation of Net Income (loss) to Adjusted EBITDA: | | | | | |
| Net income (loss) | $ | 7,174 |
| | $ | 15,978 |
| | $ | (5,398 | ) | Net income (loss) | $ | (30,015) | | | $ | 12,551 | | | $ | 7,174 | |
| Interest expense | 2,054 |
| | 3,445 |
| | 3,481 |
| Interest expense | 1,073 | | | 703 | | | 2,054 | |
| Income tax expense | 2,428 |
| | 3,419 |
| | 5,279 |
| |
| Income tax expense (benefit) | | Income tax expense (benefit) | (2,419) | | | 3,773 | | | 2,428 | |
| Depreciation | 9,280 |
| | 9,752 |
| | 9,849 |
| Depreciation | 12,019 | | | 9,743 | | | 9,280 | |
| Amortization of intangible assets | 482 |
| | 2,138 |
| | 6,787 |
| Amortization of intangible assets | — | | | — | | | 482 | |
| Non-cash stock based compensation | | Non-cash stock based compensation | 6,327 | | | 5,704 | | | 6,606 | |
| (Gain) loss on sale of businesses, net | | (Gain) loss on sale of businesses, net | — | | | 537 | | | (3,369) | |
| Disposition related and other costs | | Disposition related and other costs | — | | | 1,700 | | | 7,619 | |
| Legal contingencies and related fees | | Legal contingencies and related fees | — | | | 149 | | | 1,965 | |
| Impairment of intangible assets | | Impairment of intangible assets | 15,200 | | | — | | | — | |
| Impairment of goodwill | — |
| | — |
| | 15,369 |
| Impairment of goodwill | 23,626 | | | — | | | — | |
Non-cash stock based compensation1 | 6,606 |
| | 8,608 |
| | 10,245 |
| |
| Impairment of fixed and intangible assets | — |
| | 2,226 |
| | 9,252 |
| |
| (Gain) loss on sale of businesses, net | (3,369 | ) | | (6,699 | ) | | — |
| |
| Costs related to strategic alternatives process | — |
| | 807 |
| | 250 |
| |
| Disposition related and other costs | 7,619 |
| | 4,746 |
| | 3,347 |
| |
| Proceeds from restitution award | — |
| | (3,293 | ) | | — |
| |
| Legal contingencies and related fees | 1,965 |
| | 739 |
| | — |
| |
| Impairment of equity investment | | Impairment of equity investment | 2,002 | | | — | | | — | |
| Gain on sale of equity investment | | Gain on sale of equity investment | (200) | | | — | | | — | |
| Divested businesses | (2,243 | ) | | (4,916 | ) | | (6,261 | ) | Divested businesses | — | | | — | | | (2,243) | |
| Severance and related costs | | Severance and related costs | 2,285 | | | — | | | — | |
| Other | 36 |
| | 23 |
| | 29 |
| Other | 26 | | | (1) | | | 36 | |
| Adjusted EBITDA | $ | 32,032 |
| | $ | 36,973 |
| | $ | 52,229 |
| Adjusted EBITDA | $ | 29,924 | | | $ | 34,859 | | | $ | 32,032 | |
| | | | | | | | | | | | |
| Reconciliation of Operating Cash Flows to Adjusted EBITDA: | | | | | | Reconciliation of Operating Cash Flows to Adjusted EBITDA: | |
| Net cash provided by operating activities | $ | 14,918 |
| | $ | 34,409 |
| | $ | 44,997 |
| Net cash provided by operating activities | $ | 18,683 | | | $ | 22,923 | | | $ | 14,918 | |
| Interest expense | 2,054 |
| | 3,445 |
| | 3,481 |
| Interest expense | 1,073 | | | 703 | | | 2,054 | |
| Amortization of deferred financing costs | (342 | ) | | (690 | ) | | (324 | ) | Amortization of deferred financing costs | (147) | | | (147) | | | (342) | |
| Income tax expense | 2,428 |
| | 3,419 |
| | 5,279 |
| |
| Income tax expense (benefit) | | Income tax expense (benefit) | (2,419) | | | 3,773 | | | 2,428 | |
| Deferred income taxes | (2,699 | ) | | (212 | ) | | 3,268 |
| Deferred income taxes | 2,918 | | | (2,493) | | | (2,699) | |
| Change in accrual for unrecognized tax benefits | 1,179 |
| | (346 | ) | | 923 |
| Change in accrual for unrecognized tax benefits | 446 | | | (107) | | | 1,179 | |
| Change in accounts receivable | (11,947 | ) | | (1,976 | ) | | (2,281 | ) | Change in accounts receivable | (859) | | | (1,694) | | | (11,947) | |
| Change in deferred revenue | 18,866 |
| | (712 | ) | | (2,370 | ) | Change in deferred revenue | 8,193 | | | 4,583 | | | 18,866 | |
| Costs related to strategic alternatives process | — |
| | 807 |
| | 250 |
| |
Disposition related and other costs2 | 7,619 |
| | 4,746 |
| | 1,808 |
| |
| Proceeds from restitution award | — |
| | (3,293 | ) | | — |
| |
| Disposition related and other costs | | Disposition related and other costs | — | | | 1,700 | | | 7,619 | |
| Legal contingencies and related fees | 1,965 |
| | 739 |
| | — |
| Legal contingencies and related fees | — | | | 149 | | | 1,965 | |
| Divested businesses | (2,243 | ) | | (4,916 | ) | | (6,261 | ) | Divested businesses | — | | | — | | | (2,243) | |
| Severance and related costs | | Severance and related costs | 2,285 | | | — | | | — | |
| Changes in working capital and other | 234 |
| | 1,553 |
| | 3,459 |
| Changes in working capital and other | (249) | | | 5,469 | | | 234 | |
| Adjusted EBITDA | $ | 32,032 |
| | $ | 36,973 |
| | $ | 52,229 |
| Adjusted EBITDA | $ | 29,924 | | | $ | 34,859 | | | $ | 32,032 | |
1. Non-cash stock based compensation for 2016 excludes accelerated stock compensation of $0.9 million which is included in disposition related and other costs. | |
2. Disposition related and other costs for 2016 excludes accelerated stock compensation of $0.9 million and the loss on sale of the Slashdot business of $0.6 million, which were already added back to net cash provided by operating activities. | |
A reconciliation of Adjusted EBITDA Margin for the years ended December 31, 2018, 20172020, 2019 and 20162018 follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2020 | | 2019 | | 2018 |
| Adjusted Revenues | $ | 136,878 | | | $ | 149,370 | | | $ | 152,258 | |
| Adjusted EBITDA | $ | 29,924 | | | $ | 34,859 | | | $ | 32,032 | |
| Adjusted EBITDA Margin | 22 | % | | 23 | % | | 21 | % |
|
| | | | | | | | | | | |
| | Year Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Adjusted Revenues | $ | 152,258 |
| | $ | 158,465 |
| | $ | 171,402 |
|
| Adjusted EBITDA | $ | 32,032 |
| | $ | 36,973 |
| | $ | 52,229 |
|
| Adjusted EBITDA Margin | 21 | % | | 23 | % | | 30 | % |
Cash Flows
We have summarized our cash flows for the years ended December 31, 2020, 2019 and 2018 2017 and 2016as follows (in thousands).:
| | | | Year Ended December 31, | | Year Ended December 31, |
| 2018 | | 2017 | | 2016 | 2020 | | 2019 | | 2018 |
| Cash from operating activities | $ | 14,918 |
| | $ | 34,409 |
| | $ | 44,997 |
| Cash from operating activities | $ | 18,683 | | | $ | 22,923 | | | $ | 14,918 | |
| Cash from (used in) investing activities | 7,489 |
| | (775 | ) | | (10,770 | ) | Cash from (used in) investing activities | (15,904) | | | (11,505) | | | 7,489 | |
| Cash used in financing activities | (27,174 | ) | | (44,781 | ) | | (44,634 | ) | Cash used in financing activities | (542) | | | (12,423) | | | (27,174) | |
We have financed our operations primarily through cash provided by operating activities and borrowings under our revolving credit facility. In the fourth quarter of 2016, the Company implemented a tax planning strategy which enhanced our ability to utilize foreign tax credits in the U.S. As a result, we changed our assertion regarding the indefinite reinvestment of our Canada subsidiary’s foreign earnings, and repatriated accumulated earnings of $5.5 million in 2017 and $16.4 million in 2016 from Canada to the United States. In the fourth quarter of 2017, the Company also repatriated earnings of $7.3 million from its U.K. subsidiary since such earnings were subject to tax in the U.S. because of the deemed repatriation provisions in U.S. tax reform legislation enacted in December 2017. Cash from Canada and the U.K. was used by the Company to pay down debt resulting in lower cash at December 31, 2018 and 2017.
At December 31, 2018,2020, we had cash of $6.5$7.6 million compared to $12.1$5.4 million at December 31, 2017.2019. Cash held by foreign subsidiaries totaled approximately $2.2$3.1 million and $9.6$1.9 million at December 31, 20182020 and 2017,2019, respectively. Cash and cash equivalent balances and cash generation in the United States, along with the unused portion of our revolving credit facility, are sufficient to maintain liquidity and meet our obligations without being dependent on cash and earnings from our foreign subsidiaries.
Liquidity
Our principal internal sources of liquidity are cash on hand, as well as the cash flow that we generate from our operations. In addition, externally, we had $72.0$70.0 million in borrowing capacity under our $90.0 million Credit Agreement (reduced from $150.0 million in the fourth quarter of 2018) at December 31, 2018.2020, subject to certain availability limits including our consolidated leverage ratio, which generally limits borrowings to 2.5 times annual adjusted EBITDA levels, as defined in the Credit Agreement. We believe that our existing U.S. cash and cash equivalents, cash generated from operations and available borrowings under our Credit Agreement will be sufficient to satisfy our currently anticipated cash requirements through at least the next 12 months and the foreseeable future thereafter. However, it is possible that one or more lenders under the revolving credit facility may refuse or be unable to satisfy their commitment to lend to us or we may need to refinance our debt and be unable to do so. In addition, our liquidity could be negatively affected by a decrease in demand for our products and services. We may also make acquisitions and may need to raise additional capital through future debt financings or equity offerings to the extent necessary to fund such acquisitions, which we may not be able to do on a timely basis or on terms satisfactory to us or at all.
Comparison of Years Ended December 31, 20182020 and 20172019
Operating Activities
Net cash flows from operating activities primarily consist of net income adjusted for certain non-cash items, including depreciation, amortization, changes in deferred tax assets and liabilities, stock based compensation impairment of intangible goodwill and fixed and intangible assets, gain or loss on the sale of businesses, and the effect of changes in working capital. Net cash flows from operating activities were $14.9$18.7 million and $34.4$22.9 million for the years ended December 31, 20182020 and 2017,2019, respectively, a decrease of $19.5$4.2 million. Cash inflow from operations is driven by earnings and is dependent on the amount and timing of billings and cash collection from our customers. Cash provided by operating activities during the year ended December 31, 20182020 decreased due to $11.0 million lower earnings, which includes cash flows from operating activities, excluding changes in working capital, and $8.5 million from changes in working capital. The lower earnings are primarily due to lower adjusted revenues of $6.1 million and the increase in disposition related and other costs of $2.9 million during the year ended December 31, 2018. In addition, the proceeds from restitution award of $3.3 million in the year ended December 31, 2017 did not recur in the same period of 2018. The changes in working capital are primarily due to increased flexibility in the Company's billing termsbillings to customers resulting from the COVID-19 pandemic, partially offset by cost savings implemented by the Company in response to bring them in line with market standards.the COVID-19 pandemic.
Investing Activities
During the year ended December 31, 2018,2020, cash providedused in investing activities was $15.9 million compared to $11.5 million of cash used in investing activities during the year ended December 31, 2019. Cash used by investing activities during the year ended December 31, 2020 increased from the comparable 2019 period due to higher capitalization of internally developed software of $1.9 million and $2.5 million lower receipts from the sale of businesses and equity investments.
Financing Activities
Cash used in financing activities during the year ended December 31, 2020 was $7.5$0.5 million comparedprimarily due to $0.8$10.0 million of cashnet borrowings on long-term debt and $10.5 million of repurchases of common stock. Cash used during the year ended December 31, 2017,2019 was $12.4 million primarily due to $8.0 million of net repayments on long-term debt and $4.4 million of repurchases of common stock.
Comparison of Years Ended December 31, 2019 and 2018
Operating Activities
Net cash flows from operating activities primarily consist of net income adjusted for certain non-cash items, including depreciation, amortization, changes in deferred tax assets and liabilities, stock based compensation and the effect of changes in working capital. Net cash flows from operating activities were $22.9 million and $14.9 million for the years ended December 31, 2019 and 2018, respectively, an increase of $8.3$8.0 million. Cash inflow from operations is driven by earnings and is dependent on the amount and timing of billings and cash collection from our customers. Cash provided by operating activities during the year ended December 31, 2019 increased due to increased income before changes in working capital and a change in billing terms implemented in the first half of 2018 to bring them in line with market standards, which reduced operating cash flows during the 2018 period. The impact of this change was most significant in the first half of 2018 and then diminished throughout the remainder of the year and has substantially stabilized in 2019.
Investing Activities
During the year ended December 31, 2019, cash used in investing activities was $11.5 million compared to $7.5 million of cash
provided by investing activities during the year ended December 31, 2018. Cash used by investing activities during the year ended December 31, 2019 was attributable to the acquisition of fixed assets, including costs of internally developed software, of $14.2 million, partially offset by escrow cash received from the sale of the non-tech businesses of $2.7 million. Cash provided by investing activities during the year ended December 31, 2018 was attributable to net cash received from the sale of businesses of $17.5 million, partially offset by the acquisition of fixed assets, including costs of internally developed software, of $10.1 million.
Financing Activities
Cash used in investingfinancing activities
during the year ended December 31, 20172019 was attributable$12.4 million primarily due to $13.2 million used to acquire fixed assets, including costs of internally developed software, partially offset by $12.9$8.0 million of net cash proceeds from the salerepayments on long-term debt and $2.5 million of the Health eCareers.
Financing Activities
repurchases of common stock. Cash used in financing activities during the year ended December 31, 2018 was $27.2 million primarily due to $24.0 million of net repayments on long-term debt and $2.0 million of repurchasesrepurchase of common stock. Cash used during the year ended December 31, 2017 was $44.8 million primarily due to $44.0 million of payments on long-term debt.
Comparison of Years Ended December 31, 2017 and 2016
Operating Activities
Net cash flows from operating activities primarily consist of net income adjusted for certain non-cash items, including depreciation, amortization, changes in deferred tax assets and liabilities, stock based compensation, impairment of goodwill and fixed and intangible assets, gain or loss on sale of business, and the effect of changes in working capital. Net cash flows from operating activities were $34.4 million and $45.0 million for the years ended December 31, 2017 and 2016, respectively. Cash inflow from operations for the year ended December 31, 2017, which included $3.3 million of proceeds from a restitution award in the OilPro related legal matter, is driven by earnings and is dependent on the amount and timing of billings and cash collections from our customers. The decline in revenue, partially offset by cost reductions, are the primary drivers for the decrease in cash flows from operations in the year ended December 31, 2017 compared to 2016.
Investing Activities
During the year ended December 31, 2017, cash used by investing activities was $0.8 million compared to $10.8 million in the year ended December 31, 2016. Cash used by investing activities in the year ended December 31, 2017 was attributable to the $13.2 million used to acquire fixed assets, partially offset by proceeds received from sale of the Health eCareers business of $12.9 million. Cash used by investing activities in the year ended December 31, 2016 was primarily attributable to the $11.7 million used to acquire fixed assets and $1.5 million used to purchase preferred stock in a leading tech skills assessment company, partially offset by proceeds from the sale of the Slashdot Media business of $2.4 million.
Financing Activities
Cash used for financing activities during the year ended December 31, 2017 was $44.8 million compared to cash used of $44.6 million in the year ended December 31, 2016. During the current year, the cash used was primarily due to $44.0 million of payments on long-term debt. During the year ended December 31, 2016, the cash used was primarily due to $29.6 million of payments to repurchase the Company’s common stock and $15.0 million used in net repayments on long-term debt, partially offset by $2.8 million in proceeds from stock option exercises.
Financings and Capital Requirements
Credit Agreement
In November 2018, the Company, together with Dice Inc. (a wholly-owned subsidiary of the Company) and its wholly-owned subsidiary, Dice Career Solutions, Inc. (collectively, the “Borrowers”) entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”), which matures in November 2023, and replacesreplaced the previously existing credit agreement dated November 2015. The Credit Agreement provides for a revolving loan facility of $90 million, (previously $150 million), with an Expansion Option up to $140 million, as permitted under the terms of the Credit Agreement. The Company borrowed $18 million to repay, in full, all outstanding indebtedness, including accrued interest, under the previous credit agreement and to pay certain costs associated with the Credit Agreement. Unamortized debt issuance costs of $0.2 million were recorded to interest expense at the time of reduction.
Borrowings under the Credit Agreement bear interest, at the Company’s option, at a LIBORLondon Interbank Offered Rate ("LIBOR") rate or a base rate plus a margin. The margin ranges from 1.75% to 2.50% on LIBOR loans and 0.75% to 1.50% on base rate loans, determined by the Company’s most recent consolidated leverage ratio. The facility may be prepaid at any time without penalty.
The Credit Agreement contains various customary affirmative and negative covenants and also contains certain financial covenants, including a consolidated leverage ratio and a consolidated interest coverage ratio. Borrowings are allowed under the Credit Agreement to the extent the consolidated leverage ratio, calculated on a pro forma basis, is equal to or less than 2.50 to 1.00. Negative covenants include restrictions on incurring certain liens; making certain payments, such as stock repurchases and dividend payments; making certain investments; making certain acquisitions; making certain dispositions; and incurring additional indebtedness. Restricted payments are allowed under the Credit Agreement to the extent the consolidated leverage ratio, calculated
on a pro forma basis, is equal to or less than 2.00 to 1.00, plus an additional $5.0 million of restricted payments. The Credit Agreement also provides that the payment of obligations may be accelerated upon the occurrence of customary events of default, including, but not limited to, non-payment, change of control, or insolvency. As of December 31, 2018,2020, the Company was in compliance with all of the financial covenants under the Credit Agreement. Refer to Note 11 in the Notes to the Condensed Consolidated Financial Statements.
The obligations under the Credit Agreement are guaranteed by two of the Company’sCompany's U.S. based wholly-owned subsidiaries eFinancialCareers, Inc and Targeted Job Fairs, Inc., and secured by substantially all of the assets of the Borrowers and the guarantors and stock pledges from certain of the Company’sCompany's foreign subsidiaries.
Other Capital Requirements
We anticipate capital expenditures in 20192021 to be approximately $8$16 million to $10$18 million. The increase over prior periods is due to the additional investments in the development of new products and features. We intend to use operating cash flows to fund capital expenditures.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Commitments and Contingencies
The following table presents certain minimum payments due and the estimated timing under contractual obligations with minimum firm commitments as of December 31, 2018:2020:
| | | | Payments due by period | | Payments due by period |
| Total | | Less Than 1 Year | | 1-3 Years | | 3-5 Years | | More Than 5 Years | Total | | Less Than 1 Year | | 1-3 Years | | 3-5 Years | | More Than 5 Years |
| | (in thousands) | | (in thousands) |
| Credit Agreement | $ | 18,000 |
| | $ | — |
| | $ | — |
| | $ | 18,000 |
| | $ | — |
| Credit Agreement | $ | 20,000 | | | $ | — | | | $ | 20,000 | | | $ | — | | | $ | — | |
| Operating lease obligations | 20,415 |
| | 4,244 |
| | 6,807 |
| | 4,840 |
| | 4,524 |
| Operating lease obligations | 18,984 | | | 4,040 | | | 7,334 | | | 6,089 | | | 1,521 | |
| Total contractual obligations | $ | 38,415 |
| | $ | 4,244 |
| | $ | 6,807 |
| | $ | 22,840 |
| | $ | 4,524 |
| Total contractual obligations | $ | 38,984 | | | $ | 4,040 | | | $ | 27,334 | | | $ | 6,089 | | | $ | 1,521 | |
We make commitments to purchase advertising from online vendors, which we pay for on a monthly basis. We have no significant long-term obligations to purchase a fixed or minimum amount with these vendors.
Our principal commitments consist of obligations under operating leases for office space and equipment and long-term debt. As of December 31, 2018,2020, we had $18.0$20.0 million outstanding under our Credit Agreement. Interest payments are due quarterly or at varying, specified periods (to a maximum of three months) based on the type of loan (LIBOR or base rate loan) we choose. See Note 811 “Indebtedness” in our consolidated financial statements for additional information related to our Credit Agreement.
Future interest payments on our Credit Agreement are variable due to our interest rate being based on a LIBOR rate or a base rate. Assuming an interest rate of 4.25%2.19% (the rate in effect on December 31, 2018)2020) on our current borrowings, interest payments are expected to be $1.0$0.4 million per year in 2019-2022 and $0.9 million in 2023.2020-2023.
As of December 31, 2018,2020, we recorded approximately $1.7$1.3 million of unrecognized tax benefits as liabilities, and we are uncertain if or when such amounts may be settled. Related to the unrecognized tax benefits considered permanent differences, we have also recorded a liability for potential penalties and interest. Included in the balance of unrecognized tax benefits at December 31, 20182020 are $1.7$1.3 million of tax benefits that if recognized, would affect the effective tax rate. The Company believes it is reasonably possible that as much as $0.2$0.4 million of its unrecognized tax benefits may be recognized in the next twelve months.
Recent Accounting Pronouncements
For a discussion of new accounting pronouncements affecting the Company, refer to Note 2 of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report.
| |
Item 7A. | Quantitative and Qualitative Disclosures about Market Risk |
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We have exposure to financial market risks, including changes in foreign currency exchange rates, interest rates, and other relevant market prices.
Foreign Exchange Risk
We conduct business serving multiple markets, in four languages, mainly across Europe, Asia, Australia, and North America using the eFinancialCareers name. Rigzone (sold RigLogix portion of the Rigzone business on February 20, 2018 and DHI transferred majority ownership of the remaining Rigzone business to Rigzone management on August 31, 2018), Dice Europe (ceased operations on August 31, 2018) and Hcareers (sold May 22, 2018) also conductconducted business outside the United States. For the years ended December 31, 20182020 and 2017,2019, approximately 25%17% and 20%, respectively, of our revenues were earned outside the United States and certain of these amounts are collected in local currency. We are subject to risk for exchange rate fluctuations between such local currencies and the British Pound Sterling and between local currencies and the United States dollar and the subsequent translation of the British Pound Sterling to United States dollars. We currently do not hedge currency risk. A decrease in foreign exchange rates during a period would result in decreased amounts reported in our Consolidated Balance Sheets, Consolidated Statements of Operations, Comprehensive Income (Loss), and of Cash Flows. For example, if foreign exchange rates between the British Pound Sterling and United States dollar decreased by 1.0%, the impact on our revenues and expenses during 20182020 would have been a decrease of approximately $0.2 million.$0.1 million each.
In connection with Brexit, the global markets and currencies have been adversely impacted, including a decline in the value of the British Pound Sterling as compared to the United States dollar. Volatility in exchange rates could continue as the UKU.K. negotiates its exit from the EU.E.U. We currently do not hedge our British Pound Sterling exposure and therefore are susceptible to currency risk. In the longer term, any impact from Brexit on us will depend, in part, on the outcome of tariff, trade, regulatory and other negotiations. Although it is unknown what the result of those negotiations will be, it is possible that new terms may adversely affect our operations and financial results. In addition, trade talks or pacts between the United States and other nations could adversely affect our operations and financial results.
The financial statements of our non-United States subsidiaries are translated into United States dollars using current exchange rates, with gains or losses included in the cumulative translation adjustment account, which is a component of stockholders’ equity. As of December 31, 20182020 and 2017,2019, our translation adjustment decreased stockholders’ equity by $31.2$28.5 million and $27.3$29.2 million, respectively. The change from December 31, 20172019 to December 31, 20182020 is primarily attributable to the position of the United States dollar against the British Pound Sterling.
Interest Rate Risk
We have interest rate risk primarily related to borrowings under our Credit Agreement. Borrowings under our Credit Agreement bear interest, at our option, at a LIBOR rate or base rate plus a margin. The margin ranges from 1.75% to 2.50% on the LIBOR loans and 0.75% to 1.50% on the base rate, as determined by our most recent consolidated leverage ratio. As of December 31, 2018,2020, we had outstanding borrowings of $18.0$20.0 million under our Credit Agreement. If interest rates were to rise by 1.0%, annual interest expense on our current borrowings would increase by approximately $0.2 million. LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform. These reforms and other pressure may cause LIBOR to disappear entirely or to perform differently than in the past. It is expected that certain banks will stop reporting information used to set LIBOR at the end of 2021 when their reporting obligations cease. This would effectively end the usefulness of LIBOR and may end its publication. It is unclear whether or not, at that time, a satisfactory replacement rate will be developed or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of, among other entities, large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new index that measures the cost of borrowing cash overnight, backed by U.S. Treasury securities (“SOFR”). SOFR is observed and backward-looking, which stands in contrast with LIBOR under the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members. Whether or not SOFR or any other potential alternative reference rate attains market traction as a LIBOR replacement rate remains in question. The consequences of these developments with respect to LIBOR cannot be entirely predicted but may result in the level of interest payments on the portion of our indebtedness that bears interest at variable rates to be affected, which may adversely impact the amount of our interest payments under such debt. If LIBOR is no longer widely available, the Company will pursue alternative interest rate calculations under the Credit Agreement. The Company is evaluating the expected impact of this change on its consolidated financial statements.
Item 8. Financial Statements and Supplementary Data
| |
Item 8. | Financial Statements and Supplementary Data |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of DHI Group, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of DHI Group, Inc. and subsidiaries (the "Company") as of December 31, 20182020 and 2017,2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2018,2020, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20182020 and 2017,2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018,2020, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2018,2020, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 7, 2019,10, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 37 to the financial statements, the Company has changed its method of accounting for contract acquisition costsleases in 20182019 due to the adoption of ASU No. 2014-09, Revenue from Contracts with Customers.2016-02, Leases, under the modified retrospective method.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Goodwill andAcquired Intangible Assets, Net– Impairment of Goodwill and Dice Trademarks and Brand Name - Refer to Notes 2, 9, and 10 to the financial statements
Critical Audit Matter Description
The Company determines whether the carrying value of recorded goodwill is impaired on an annual basis or more frequently if indicators of potential impairment exist. If the fair value of the reporting unit is less than its carrying amount, an impairment charge is recorded for the amount the carrying value exceeds the fair value. Fair values are determined by using a combination of a discounted cash flow methodology and a market comparable method. Determining the fair value of a reporting unit is judgmental in nature and requires the use of estimates and key assumptions, particularly assumed discount rates and projections of future operating results, such as forecasted revenues and earnings before interest, taxes, depreciation and amortization (EBITDA) margins. Changes in these assumptions could have a significant impact on either the fair value, the amount of the
goodwill impairment charge, or both. The amount of goodwill as of December 31, 2020 was $133.4 million. During 2020, the Company recognized a $23.6 million goodwill impairment charge as the fair value of the reporting unit was lower than its carrying value.
The Company determines whether the carrying value of recorded indefinite-lived acquired intangible assets, which consists entirely of the Dice trademarks and brand name, is impaired on an annual basis or more frequently if indicators of potential impairment exist. The impairment review process compares the fair value of the Dice trademarks and brand name to their carrying value. If the carrying value exceeds the fair value, an impairment loss is recorded. The Company utilizes a relief from royalty rate method to value the Dice trademarks and brand name, which involves a significant level of judgment in the assumptions underlying the approach used to determine the fair value, including the revenue growth rate, royalty rate, and discount rate. Changes in these assumptions could have a significant impact on either the fair value, the amount of the trademarks and brand name impairment charge, or both. The amount of acquired intangible assets as of December 31, 2020 was $23.8 million. During 2020, the Company recognized a $15.2 million trademarks and brand name impairment charge as the fair value of the trademarks and brand name was lower than their carrying value.
Given the significant judgments made by management to estimate the fair value of the reporting unit and the goodwill impairment charge recorded during the year, performing auditing procedures to evaluate the reasonableness of management’s judgments regarding the business and valuation assumptions utilized in the valuation models, particularly the forecasts of future revenue and EBITDA margins and the selection of the discount rate, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists. In addition, given the determination of the fair values of the Dice trademarks and brand name and the impairment charges recorded during the year required management to make significant estimates and assumptions relating to the forecasts of future revenue and the selection of the royalty and discount rates, performing audit procedures to evaluate the reasonableness of such estimates and assumptions, particularly the forecasts of future revenue and the selection of the discount rate and royalty rate, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the forecasts of future revenues and EBITDA margins and selection of the royalty rate and discount rates used by management to estimate the fair value of the reporting unit and the Dice trademarks and brand name included the following, among others:
•We tested the effectiveness of controls over management’s impairment evaluation of the reporting unit and acquired intangible assets, including those controls related to management’s forecasts of future revenues and expenses and selection of the royalty rate and discount rates.
•We evaluated management’s ability to accurately forecast future revenues and expenses by comparing actual revenues and expenses to management’s historical forecasts.
•We evaluated the reasonableness of management’s revenues and expenses forecast by comparing the forecasts with:
◦Historical revenues and expenses and forecasted information in industry reports.
◦Internal communications to management and the Board of Directors.
•With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) valuation assumptions (discount rates and royalty rate) by:
◦Testing the source information underlying the determination of the assumption and testing the mathematical accuracy of the calculation.
◦Developing a range of independent estimates and comparing those to the assumptions selected by management.
/s/ Deloitte & Touche LLP
Des Moines, Iowa
February 7, 201910, 2021
We have served as the Company's auditor since 2005.
DHI GROUP, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31, 20182020 and 20172019
(in thousands, except per share data)
| | | | December 31,
2018 | | December 31, 2017 | | December 31,
2020 | | December 31, 2019 |
| ASSETS | | | | ASSETS | | | |
| Current assets | | | | Current assets | |
| Cash | $ | 6,472 |
| | $ | 12,068 |
| |
| Accounts receivable, net of allowance for doubtful accounts of $647 and $1,688 | 22,850 |
| | 38,769 |
| |
| Cash and cash equivalents | | Cash and cash equivalents | $ | 7,640 | | | $ | 5,381 | |
| Accounts receivable, net of allowance for doubtful accounts of $1,182 and $708 | | Accounts receivable, net of allowance for doubtful accounts of $1,182 and $708 | 20,298 | | | 21,158 | |
| Income taxes receivable | 2,203 |
| | 2,617 |
| Income taxes receivable | 1,044 | | | 2,353 | |
| Prepaid and other current assets | 7,330 |
| | 5,086 |
| Prepaid and other current assets | 4,503 | | | 4,180 | |
| Total current assets | 38,855 |
| | 58,540 |
| Total current assets | 33,485 | | | 33,072 | |
| Fixed assets, net | 15,890 |
| | 16,147 |
| Fixed assets, net | 24,544 | | | 20,352 | |
| Acquired intangible assets, net | 39,000 |
| | 45,737 |
| |
| Acquired intangible assets | | Acquired intangible assets | 23,800 | | | 39,000 | |
| Capitalized contract costs | 7,939 |
| | — |
| Capitalized contract costs | 7,734 | | | 7,515 | |
| Goodwill | 153,974 |
| | 170,791 |
| Goodwill | 133,353 | | | 156,059 | |
| Deferred income taxes | 136 |
| | 469 |
| Deferred income taxes | 19 | | | 7 | |
| Operating lease right-of-use assets | | Operating lease right-of-use assets | 16,405 | | | 19,712 | |
| Other assets | 2,591 |
| | 4,034 |
| Other assets | 1,647 | | | 2,604 | |
| Total assets | $ | 258,385 |
| | $ | 295,718 |
| Total assets | $ | 240,987 | | | $ | 278,321 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| Current liabilities | | | | Current liabilities | |
| Accounts payable and accrued expenses | $ | 25,030 |
| | $ | 22,196 |
| Accounts payable and accrued expenses | $ | 19,426 | | | $ | 18,908 | |
| Operating lease liabilities | | Operating lease liabilities | 3,410 | | | 3,643 | |
| Deferred revenue | 54,723 |
| | 83,646 |
| Deferred revenue | 42,426 | | | 50,568 | |
| Income taxes payable | 1,168 |
| | 1,129 |
| Income taxes payable | 123 | | | 984 | |
| Total current liabilities | 80,921 |
| | 106,971 |
| Total current liabilities | 65,385 | | | 74,103 | |
| Long-term debt, net | 17,288 |
| | 41,450 |
| Long-term debt, net | 19,583 | | | 9,435 | |
| Deferred income taxes | 10,444 |
| | 8,245 |
| Deferred income taxes | 9,936 | | | 12,823 | |
| Deferred revenue | 1,363 |
| | — |
| Deferred revenue | 1,068 | | | 1,058 | |
| Income taxes payable | — |
| | 1,489 |
| |
| Accrual for unrecognized tax benefits | 1,680 |
| | 2,859 |
| Accrual for unrecognized tax benefits | 1,347 | | | 1,787 | |
| Operating lease liabilities | | Operating lease liabilities | 13,704 | | | 16,664 | |
| Other long-term liabilities | 1,334 |
| | 2,063 |
| Other long-term liabilities | 2,394 | | | 1,256 | |
| Total liabilities | 113,030 |
| | 163,077 |
| Total liabilities | 113,417 | | | 117,126 | |
| Commitments and contingencies (Note 9) |
| |
| |
| Commitments and contingencies (Note 12) | | Commitments and contingencies (Note 12) | | | |
| Stockholders’ equity | | | | Stockholders’ equity | |
| Convertible preferred stock, $.01 par value, authorized 20,000 shares; no shares issued and outstanding | — |
| | — |
| Convertible preferred stock, $.01 par value, authorized 20,000 shares; no shares issued and outstanding | 0 | | | 0 | |
Common stock, $.01 par value, authorized 240,000; issued 87,522 and 83,125 shares, respectively; outstanding: 53,396 and 50,480 shares, respectively | 876 |
| | 831 |
| |
| Common stock, $.01 par value, authorized 240,000; issued 71,233 and 69,509 shares, respectively; outstanding: 51,220 and 53,918 shares, respectively | | Common stock, $.01 par value, authorized 240,000; issued 71,233 and 69,509 shares, respectively; outstanding: 51,220 and 53,918 shares, respectively | 714 | | | 696 | |
| Additional paid-in capital | 383,123 |
| | 375,537 |
| Additional paid-in capital | 233,554 | | | 227,227 | |
| Accumulated other comprehensive loss | (31,236 | ) | | (27,330 | ) | Accumulated other comprehensive loss | (28,519) | | | (29,248) | |
| Accumulated earnings | 71,435 |
| | 59,776 |
| Accumulated earnings | 53,971 | | | 83,986 | |
| Treasury stock, 34,126 and 32,645 shares, respectively | (278,843 | ) | | (276,173 | ) | |
| Treasury stock, 20,013 and 15,591 shares, respectively | | Treasury stock, 20,013 and 15,591 shares, respectively | (132,150) | | | (121,466) | |
| Total stockholders’ equity | 145,355 |
| | 132,641 |
| Total stockholders’ equity | 127,570 | | | 161,195 | |
| Total liabilities and stockholders’ equity | $ | 258,385 |
| | $ | 295,718 |
| Total liabilities and stockholders’ equity | $ | 240,987 | | | $ | 278,321 | |
See accompanying notes to the consolidated financial statements.
DHI GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2018, 20172020, 2019 and 20162018
(in thousands, except per share amounts)
| | | | For the year ended December 31, | | For the year ended December 31, |
| | 2018 | | 2017 | | 2016 | | 2020 | | 2019 | | 2018 |
| Revenues | $ | 161,570 |
| | $ | 207,950 |
| | $ | 226,970 |
| Revenues | $ | 136,878 | | | $ | 149,370 | | | $ | 161,570 | |
| Operating expenses: | | | | | | Operating expenses: | | | | | |
| Cost of revenues | 18,344 |
| | 29,974 |
| | 32,126 |
| Cost of revenues | 17,047 | | | 16,237 | | | 18,344 | |
| Product development | 20,212 |
| | 24,984 |
| | 25,714 |
| Product development | 16,470 | | | 17,216 | | | 20,212 | |
| Sales and marketing | 59,721 |
| | 80,508 |
| | 77,451 |
| Sales and marketing | 50,856 | | | 55,909 | | | 59,721 | |
| General and administrative | 37,589 |
| | 40,749 |
| | 43,684 |
| General and administrative | 31,265 | | | 31,003 | | | 37,589 | |
| Depreciation | 9,280 |
| | 9,752 |
| | 9,849 |
| Depreciation | 12,019 | | | 9,743 | | | 9,280 | |
| Amortization of intangible assets | 482 |
| | 2,138 |
| | 6,787 |
| Amortization of intangible assets | 0 | | | 0 | | | 482 | |
| Impairment of intangible assets | | Impairment of intangible assets | 15,200 | | | 0 | | | 0 | |
| Impairment of goodwill | — |
| | — |
| | 15,369 |
| Impairment of goodwill | 23,626 | | | 0 | | | 0 | |
| Impairment of fixed and intangible assets | — |
| | 2,226 |
| | 9,252 |
| |
| Disposition related and other costs (Note 12) | 7,619 |
| | 4,746 |
| | 3,347 |
| |
| Disposition related and other costs (Note 15) | | Disposition related and other costs (Note 15) | 0 | | | 1,700 | | | 7,619 | |
| Total operating expenses | 153,247 |
| | 195,077 |
| | 223,579 |
| Total operating expenses | 166,483 | | | 131,808 | | | 153,247 | |
| Other operating income: | | | | | | |
| Gain on sale of businesses (Note 4) | 3,369 |
| | 6,699 |
| | — |
| |
| Proceeds from restitution award | — |
| | 3,293 |
| | — |
| |
| Total other operating income | 3,369 |
| | 9,992 |
| | — |
| |
| Operating income | 11,692 |
| | 22,865 |
| | 3,391 |
| |
| Interest expense | (2,054 | ) | | (3,445 | ) | | (3,481 | ) | |
| Other operating income (loss): | | Other operating income (loss): | | | | | |
| Gain (loss) on sale of businesses (Note 4) | | Gain (loss) on sale of businesses (Note 4) | 0 | | | (537) | | | 3,369 | |
| Total other operating income (loss) | | Total other operating income (loss) | 0 | | | (537) | | | 3,369 | |
| Operating income (loss) | | Operating income (loss) | (29,605) | | | 17,025 | | | 11,692 | |
| Interest expense and other | | Interest expense and other | (827) | | | (701) | | | (2,054) | |
| Impairment of equity investment | | Impairment of equity investment | (2,002) | | | 0 | | | 0 | |
| Other expense | (36 | ) | | (23 | ) | | (29 | ) | Other expense | 0 | | | 0 | | | (36) | |
| Income (loss) before income taxes | 9,602 |
| | 19,397 |
| | (119 | ) | Income (loss) before income taxes | (32,434) | | | 16,324 | | | 9,602 | |
| Income tax expense | 2,428 |
| | 3,419 |
| | 5,279 |
| |
| Income tax expense (benefit) | | Income tax expense (benefit) | (2,419) | | | 3,773 | | | 2,428 | |
| Net income (loss) | $ | 7,174 |
| | $ | 15,978 |
| | $ | (5,398 | ) | Net income (loss) | $ | (30,015) | | | $ | 12,551 | | | $ | 7,174 | |
| | | | | | | | | | | | |
| Basic earnings (loss) per share | $ | 0.15 |
| | $ | 0.33 |
| | $ | (0.11 | ) | Basic earnings (loss) per share | $ | (0.62) | | | $ | 0.26 | | | $ | 0.15 | |
| Diluted earnings (loss) per share | $ | 0.14 |
| | $ | 0.33 |
| | $ | (0.11 | ) | Diluted earnings (loss) per share | $ | (0.62) | | | $ | 0.24 | | | $ | 0.14 | |
| | | | | | | |
| Weighted-average basic shares outstanding | 48,520 |
| | 47,908 |
| | 48,319 |
| Weighted-average basic shares outstanding | 48,278 | | | 48,739 | | | 48,520 | |
| Weighted-average diluted shares outstanding | 49,605 |
| | 48,230 |
| | 48,319 |
| Weighted-average diluted shares outstanding | 48,278 | | | 51,633 | | | 49,605 | |
See accompanying notes to the consolidated financial statements.
DHI GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the years ended December 31, 2018, 2017,2020, 2019, and 20162018
(in thousands)
| | | | For the year ended December 31, | | For the year ended December 31, |
| | 2018 | | 2017 | | 2016 | | 2020 | | 2019 | | 2018 |
| Net income (loss) | $ | 7,174 |
| | $ | 15,978 |
| | $ | (5,398 | ) | Net income (loss) | $ | (30,015) | | | $ | 12,551 | | | $ | 7,174 | |
| | | | | | | |
| Foreign currency translation adjustment | (3,906 | ) | | 4,946 |
| | (11,808 | ) | Foreign currency translation adjustment | 729 | | | 1,988 | | | (3,906) | |
| | Total other comprehensive income (loss) | (3,906 | ) | | 4,946 |
| | (11,808 | ) | Total other comprehensive income (loss) | 729 | | | 1,988 | | | (3,906) | |
| Comprehensive income (loss) | $ | 3,268 |
| | $ | 20,924 |
| | $ | (17,206 | ) | Comprehensive income (loss) | $ | (29,286) | | | $ | 14,539 | | | $ | 3,268 | |
See accompanying notes to the consolidated financial statements.
DHI GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the years ended December 31, 2018, 2017,2020, 2019, and 20162018 (in thousands) | | | | | | | | | | | | | | | | | | | | | Convertible
Preferred Stock | | Common Stock | | Additional
Paid-in
Capital | | Treasury Stock | | Accumulated
Earnings | | Accumulated
Other
Comprehensive Loss | | Total |
| | Convertible Preferred Stock | | Common Stock | | Additional Paid-in Capital | | Treasury Stock | | Accumulated Earnings (Loss) | | Accumulated Other Comprehensive Loss | | Total | Shares Issued | | Amount | | Shares Issued | | Amount | |
| Shares Issued | | Amount | | Shares Issued | | Amount | | |
| Balance at January 1, 2016 | — |
| | $ | — |
| | 80,717 |
| | $ | 807 |
| | $ | 352,208 |
| | $ | (243,410 | ) | | $ | 49,476 |
| | $ | (20,468 | ) | | $ | 138,613 |
| |
| Net loss | | | | | | | | | | | | | (5,398 | ) | | | | (5,398 | ) | |
| Other comprehensive income (loss) | | | | | | | | | | | | | | | (11,808 | ) | | (11,808 | ) | |
| Stock based compensation | | | | | | | | | 11,145 |
| | | | | | | | 11,145 |
| |
| Excess tax benefit over book expense from stock options exercised | | | | | | | | | 94 |
| | | | | | | | 94 |
| |
| Restricted stock issued | | | | | 1,302 |
| | 13 |
| | | | | | | | | | 13 |
| |
| Restricted stock forfeited or withheld to satisfy tax obligations | | | | | (328 | ) | | (3 | ) | | | | (2,361 | ) | | | | | | (2,364 | ) | |
| Purchase of treasury stock under stock repurchase plan | | | | | | | | | | | (28,709 | ) | | | | | | (28,709 | ) | |
| Exercise of common stock options | | | | | 642 |
| | 6 |
| | 2,800 |
| | | | | | | | 2,806 |
| |
| Performance-Based Restricted Stock Units forfeited or withheld to satisfy tax obligations | | | | | (98 | ) | | (1 | ) | | | | (506 | ) | | | | | | (507 | ) | |
| Performance-Based Restricted Stock Units eligible to vest | | | | | (246 | ) | | (2 | ) | |
|
| | | | | | | | (2 | ) | |
| Balance at December 31, 2016 | — |
| | — |
| | 81,989 |
| | 820 |
| | 366,247 |
| | (274,986 | ) | | 44,078 |
| | (32,276 | ) | | 103,883 |
| |
| Net loss | | | | | | | | | | | | | 15,978 |
| | | | 15,978 |
| |
| Other comprehensive income (loss) | | | | | | | | | | | | | | | 4,946 |
| | 4,946 |
| |
| Balance at January 1, 2018 | | Balance at January 1, 2018 | — | | | $ | — | | | 83,125 | | | $ | 831 | | | $ | 375,537 | | | $ | (276,173) | | | $ | 59,776 | | | $ | (27,330) | | | $ | 132,641 | |
| Net income | | Net income | | | | | | | | | | | | | 7,174 | | | | | 7,174 | |
| Other comprehensive loss | | Other comprehensive loss | | (3,906) | | | (3,906) | |
| Stock based compensation | | | | | | | | | 8,608 |
| | | | | | | | 8,608 |
| Stock based compensation | | 6,606 | | | 6,606 | |
| Restricted stock issued | | | | | 1,725 |
| | 17 |
| | | | | | | | | | 17 |
| Restricted stock issued | | 4,087 | | | 41 | | | 41 | |
| Restricted stock forfeited or withheld to satisfy tax obligations | | | | | (655 | ) | | (7 | ) | | | | (1,187 | ) | | | | | | (1,194 | ) | Restricted stock forfeited or withheld to satisfy tax obligations | | (440) | | | (4) | | | (693) | | | (697) | |
| Exercise of common stock options | | | | | 66 |
| | 1 |
| | 402 |
| | | | | | | | 403 |
| |
| Performance-based restricted stock units eligible to vest | | Performance-based restricted stock units eligible to vest | | 750 | | | 8 | | | 8 | |
| Cumulative-effect of new accounting principle (see Note 2) | | | | | | | | | 280 |
| | | | (280 | ) | | | | — |
| Cumulative-effect of new accounting principle (see Note 2) | | 4,485 | | | 4,485 | |
| Balance at December 31, 2017 | — |
| | — |
| | 83,125 |
| | 831 |
| | 375,537 |
| | (276,173 | ) | | 59,776 |
| | (27,330 | ) | | 132,641 |
| |
| Unclaimed shareholder liability (Note 13) | | Unclaimed shareholder liability (Note 13) | | 980 | | | 980 | |
| Purchase of treasury stock under stock repurchase plan | | Purchase of treasury stock under stock repurchase plan | | (1,977) | | | (1,977) | |
| Balance at December 31, 2018 | | Balance at December 31, 2018 | — | | | — | | | 87,522 | | | 876 | | | 383,123 | | | (278,843) | | | 71,435 | | | (31,236) | | | 145,355 | |
| Net income | | | | | | | | | | | | | 7,174 |
| | | | 7,174 |
| Net income | | | | | | | | | | | | | 12,551 | | | | | 12,551 | |
| Other comprehensive income (loss) | | | | | | | | | | | | | | | (3,906 | ) | | (3,906 | ) | |
| Other comprehensive income | | Other comprehensive income | | 1,988 | | | 1,988 | |
| Stock based compensation | | | | | | | | | 6,606 |
| | | | | | | | 6,606 |
| Stock based compensation | | 5,704 | | | 5,704 | |
| Restricted stock issued | | | | | 4,087 |
| | 41 |
| | | | | | | | | | 41 |
| Restricted stock issued | | 2,258 | | | 23 | | | 23 | |
| Restricted stock forfeited or withheld to satisfy tax obligations | | | | | (440 | ) | | (4 | ) | | | | (693 | ) | | | | | | (697 | ) | Restricted stock forfeited or withheld to satisfy tax obligations | | (560) | | | (5) | | | (1,904) | | | (1,909) | |
| Performance-Based Restricted Stock Units eligible to vest | | | | | 750 |
| | 8 |
| | | | | | | | | | 8 |
| |
| Cumulative-effect of new accounting principle (see Note 2) | | | | | | | | | | | | | 4,485 |
| | | | 4,485 |
| |
| Unclaimed shareholder liability (see Note 10) | | | | | | | | | 980 |
| | | | | | | | 980 |
| |
| Performance-based restricted stock units eligible to vest | | Performance-based restricted stock units eligible to vest | | 449 | | | 4 | | | 4 | |
| Performance-based restricted stock units forfeited | | Performance-based restricted stock units forfeited | | (160) | | | (2) | | | (2) | |
| Retirement of treasury stock (see Note 13) | | Retirement of treasury stock (see Note 13) | | (20,000) | | | (200) | | | (161,600) | | | 161,800 | | | 0 | |
| Purchase of treasury stock under stock repurchase plan | | | | | | | | |
|
| | (1,977 | ) | |
| | | | (1,977 | ) | Purchase of treasury stock under stock repurchase plan | | (2,519) | | | (2,519) | |
| Balance at December 31, 2018 | — |
| | $ | — |
| | 87,522 |
| | $ | 876 |
| | $ | 383,123 |
| | $ | (278,843 | ) | | $ | 71,435 |
| | $ | (31,236 | ) | | $ | 145,355 |
| |
| Balance at December 31, 2019 | | Balance at December 31, 2019 | — | | | — | | | 69,509 | | | 696 | | | 227,227 | | | (121,466) | | | 83,986 | | | (29,248) | | | 161,195 | |
| Net loss | | Net loss | | | | | | | | | | | | | (30,015) | | | | | (30,015) | |
| Other comprehensive income | | Other comprehensive income | | 729 | | | 729 | |
| Stock based compensation | | Stock based compensation | | 6,327 | | | 6,327 | |
| Restricted stock issued | | Restricted stock issued | | 2,173 | | | 22 | | | 22 | |
| Purchase of treasury stock related to vested restricted and performance stock units | | Purchase of treasury stock related to vested restricted and performance stock units | | (430) | | | (4) | | | (2,248) | | | (2,252) | |
| Performance-based restricted stock units forfeited | | Performance-based restricted stock units forfeited | | (19) | | | 0 | | | 0 | |
| Purchase of treasury stock under stock repurchase plan | | Purchase of treasury stock under stock repurchase plan | | (8,436) | | | (8,436) | |
| Balance at December 31, 2020 | | Balance at December 31, 2020 | — | | | $ | — | | | 71,233 | | | $ | 714 | | | $ | 233,554 | | | $ | (132,150) | | | $ | 53,971 | | | $ | (28,519) | | | $ | 127,570 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See accompanying notes to the consolidated financial statements.
DHI GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2018, 20172020, 2019 and 20162018
(in thousands)
| | | | | | | | | | For the year ended December 31, |
| | For the year ended December 31, | | 2020 | | 2019 | | 2018 |
| | 2018 | | 2017 | | 2016 | |
| Cash flows from operating activities: | | | | | | |
| Cash flows from (used in) operating activities: | | Cash flows from (used in) operating activities: | | | | | |
| Net income (loss) | $ | 7,174 |
| | $ | 15,978 |
| | $ | (5,398 | ) | Net income (loss) | $ | (30,015) | | | $ | 12,551 | | | $ | 7,174 | |
| Adjustments to reconcile net income (loss) to net cash flows from operating activities: | | | | | | |
| Adjustments to reconcile net income to net cash flows from (used in) operating activities: | | Adjustments to reconcile net income to net cash flows from (used in) operating activities: | |
| Depreciation | 9,280 |
| | 9,752 |
| | 9,849 |
| Depreciation | 12,019 | | | 9,743 | | | 9,280 | |
| Amortization of intangible assets | 482 |
| | 2,138 |
| | 6,787 |
| Amortization of intangible assets | 0 | | | 0 | | | 482 | |
| Deferred income taxes | 2,699 |
| | 212 |
| | (3,268 | ) | Deferred income taxes | (2,918) | | | 2,493 | | | 2,699 | |
| Amortization of deferred financing costs | 342 |
| | 690 |
| | 324 |
| Amortization of deferred financing costs | 147 | | | 147 | | | 342 | |
| Stock based compensation | 6,606 |
| | 8,608 |
| | 11,145 |
| Stock based compensation | 6,327 | | | 5,704 | | | 6,606 | |
| Impairment of intangible assets | | Impairment of intangible assets | 15,200 | | | 0 | | | 0 | |
| Impairment of goodwill | — |
| | — |
| | 15,369 |
| Impairment of goodwill | 23,626 | | | 0 | | | 0 | |
| Impairment of fixed and intangible assets | — |
| | 2,226 |
| | 9,252 |
| |
| Impairment of equity investment | | Impairment of equity investment | 2,002 | | | 0 | | | 0 | |
| Change in accrual for unrecognized tax benefits | (1,179 | ) | | 346 |
| | (923 | ) | Change in accrual for unrecognized tax benefits | (446) | | | 107 | | | (1,179) | |
| Gain on sale of equity investment | | Gain on sale of equity investment | (200) | | | 0 | | | 0 | |
| (Gain) loss on sale of businesses | (3,369 | ) | | (6,699 | ) | | 639 |
| (Gain) loss on sale of businesses | 0 | | | 537 | | | (3,369) | |
| Changes in operating assets and liabilities: | | | | | | Changes in operating assets and liabilities: | |
| Accounts receivable | 11,947 |
| | 1,976 |
| | 2,281 |
| Accounts receivable | 859 | | | 1,694 | | | 11,947 | |
| Prepaid expenses and other assets | 1,759 |
| | (1,120 | ) | | (132 | ) | Prepaid expenses and other assets | (1,405) | | | (904) | | | 1,759 | |
| Capitalized contract costs | (3,236 | ) | | — |
| | — |
| Capitalized contract costs | (175) | | | 453 | | | (3,236) | |
| Accounts payable and accrued expenses | 1,743 |
| | 1,659 |
| | (2,954 | ) | Accounts payable and accrued expenses | 139 | | | (5,621) | | | 1,743 | |
| Income taxes receivable/payable | (972 | ) | | (2,111 | ) | | (64 | ) | Income taxes receivable/payable | 480 | | | (338) | | | (972) | |
| Deferred revenue | (18,866 | ) | | 712 |
| | 2,370 |
| Deferred revenue | (8,193) | | | (4,583) | | | (18,866) | |
| Other, net | 508 |
| | 42 |
| | (280 | ) | Other, net | 1,236 | | | 940 | | | 508 | |
| Net cash flows from operating activities | 14,918 |
| | 34,409 |
| | 44,997 |
| Net cash flows from operating activities | 18,683 | | | 22,923 | | | 14,918 | |
| Cash flows from (used in) investing activities: | | | | | | Cash flows from (used in) investing activities: | | | | | |
| Cash received from sale of business, net | 17,542 |
| | 12,947 |
| | 2,429 |
| |
| Cash received from sale of businesses, net | | Cash received from sale of businesses, net | 0 | | | 2,683 | | | 17,542 | |
| Purchases of fixed assets | (10,053 | ) | | (13,222 | ) | | (11,699 | ) | Purchases of fixed assets | (16,104) | | | (14,188) | | | (10,053) | |
| Purchases of cost method investments | — |
| | (500 | ) | | (1,500 | ) | |
| Net cash received from sale of equity investment | | Net cash received from sale of equity investment | 200 | | | 0 | | | 0 | |
| Net cash flows from (used in) investing activities | 7,489 |
| | (775 | ) | | (10,770 | ) | Net cash flows from (used in) investing activities | (15,904) | | | (11,505) | | | 7,489 | |
| Cash flows used in financing activities: | | | | | | |
| Cash flows from (used in) financing activities: | | Cash flows from (used in) financing activities: | | | | | |
| Payments on long-term debt | (31,000 | ) | | (44,000 | ) | | (42,000 | ) | Payments on long-term debt | (26,444) | | | (28,000) | | | (31,000) | |
| Proceeds from long-term debt | 7,000 |
| | — |
| | 27,000 |
| Proceeds from long-term debt | 36,444 | | | 20,000 | | | 7,000 | |
| Payments under stock repurchase plan | (1,977 | ) | | — |
| | (29,572 | ) | Payments under stock repurchase plan | (8,294) | | | (2,519) | | | (1,977) | |
| Proceeds from stock option exercises | — |
| | 403 |
| | 2,806 |
| |
| Purchase of treasury stock related to vested restricted stock and performance stock units | (693 | ) | | (1,184 | ) | | (2,868 | ) | |
| Purchase of treasury stock related to vested restricted and performance stock units | | Purchase of treasury stock related to vested restricted and performance stock units | (2,248) | | | (1,904) | | | (693) | |
| Financing costs paid | (504 | ) | | — |
| | — |
| Financing costs paid | 0 | | | 0 | | | (504) | |
| Net cash flows used in financing activities | (27,174 | ) | | (44,781 | ) | | (44,634 | ) | Net cash flows used in financing activities | (542) | | | (12,423) | | | (27,174) | |
| Effect of exchange rate changes | (829 | ) | | 228 |
| | (656 | ) | Effect of exchange rate changes | 22 | | | (86) | | | (829) | |
| Net change in cash for the period | (5,596 | ) | | (10,919 | ) | | (11,063 | ) | |
| Cash, beginning of period | 12,068 |
| | 22,987 |
| | 34,050 |
| |
| Cash, end of period | $ | 6,472 |
| | $ | 12,068 |
| | $ | 22,987 |
| |
| Net change in cash and cash equivalents for the period | | Net change in cash and cash equivalents for the period | 2,259 | | | (1,091) | | | (5,596) | |
| Cash and cash equivalents, beginning of period | | Cash and cash equivalents, beginning of period | 5,381 | | | 6,472 | | | 12,068 | |
| Cash and cash equivalents, end of period | | Cash and cash equivalents, end of period | $ | 7,640 | | | $ | 5,381 | | | $ | 6,472 | |
See accompanying notes to the consolidated financial statements.
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
DHI Group, Inc. (“DHI” or the “Company”), a Delaware corporation, was incorporated on June 28, 2005. DHI is a leading provider of data, insights and employment connections through its specialized services for technology professionals and other select online communities. Its mission is to empower tech professionals and organizations to compete and win through expert insights and relevant employment connections. Employers and recruiters use its websites and services to source, hire and connect with the most qualified and highly-skilled tech professionals, while professionals use its websites and services to find ideal employment opportunities, relevant job advice and tailored career-related data. For over 2530 years, through its predecessor companies, the Company was built on providing employers and professionals with career connections, news, tools and information. The Company serves multiple markets located throughout North America, Europe, the Middle East and the Asia Pacific region.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation — The consolidated financial statements include the accounts of DHI and its wholly-owned subsidiaries and cost method investment. All intercompany balances and transactions have been eliminated in consolidation.
Revenue Recognition — On January 1, 2018, we adopted Topic 606 applying the modified retrospective method to all contracts that were not completed as of January 1, 2018. Results for periods beginning after January 1, 2018 are presented under Topic 606, while prior periods are reported under the accounting standards in effect for the period presented.
Under Topic 606, weWe recognize revenue when control of the promised goods or services is transferred to our customers at an amount that reflects the consideration to which we expect to receive in exchange for those goods or services. Revenue is recognized net of customer discounts ratably over the service period. Billings with customers are based on contractual schedules. Customer billings delivered in advance and payments received in advance of services being rendered are recorded as deferred revenue and recognized over the service period. We generate revenues from the following sources:
Recruitment packages. Recruitment package revenues are derived from the sale to recruiters and employers of a combination of job postings andand/or access to a searchable database of candidates on the Dice, ClearanceJobs, eFinancialCareers and Rigzone (sold the RigLogix portion of the Rigzone business on February 20, 2018 and DHI transferred majority ownership of the remaining Rigzone business to Rigzone management on August 31, 2018). Certain of the Company’s arrangements include multiple performance obligations, which primarily consists of the ability to post jobs and access to a searchable database of candidates. The Company determines the units of accounting for multiple performance obligations in accordance with Topic 606. Specifically, the Company considers a performance obligation as a separate unit of accounting if it has value to the customer on a standalone basis. The Company’s arrangements do not include a general right of return. Services to customers buying a package of available job postings and access to the database are delivered over the same period and revenue is recognized ratably over the length of the underlying contract, typically from one to twelve months. The separation of the package into two deliverables results in no change in revenue recognition since delivery of the two services occurs over the same time period.
Advertising revenue. Advertising revenue is recognized over the period in which the advertisements are displayed on the websites or at the time a promotional e-mail is sent out to the audience.
Classified revenue. Classified job posting revenues are derived from the sale of job postings to recruiters and employers. A job posting is the ability to list a job on the website for a specified time period. Revenue from the sale of classified job postings is recognized ratably over the length of the contract or the period of actual usage.
Data services revenue. Access to the Company’s database of energy industry data is provided to customers for a fee. Data services revenue is recognized ratably over the length of the underlying contract, typically from one to twelve months. The data services business, called RigLogix, was sold on February 20, 2018.
Career fair and recruitment event booth rentals. Career fair and recruitment event revenues are derived from renting booth space to recruiters and employers. Revenue from these sales are recognized when the career fair or recruitment event is held.
Concentration of Credit Risk—Cash isand cash equivalents are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. These deposits may be redeemed upon demand. The Company believes it is not exposed to any significant credit risk.
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company performs ongoing credit evaluations of its customers’ financial condition and generally does not require collateral on accounts receivable. No single customer represents 10% or more of revenues for the years ended December 31, 2018, 20172020, 2019 and 2016.2018.
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Allowance for Doubtful Accounts—The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of DHI’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.
Statements of Cash Flows—All bank deposits are considered cash.cash and cash equivalents.
The supplemental disclosures to the accompanying consolidated statements of cash flows are as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| | 2020 | | 2019 | | 2018 |
| Supplemental cash flow information: | | | | | |
| Interest paid | $ | 1,100 | | | $ | 639 | | | $ | 1,807 | |
| Taxes paid | 457 | | | 1,506 | | | 2,634 | |
| Non-cash investing and financing activities: | | | | | |
| Capital expenditures on fixed assets included in accounts payable and accrued expenses | 110 | | | 140 | | | 223 | |
| Share repurchases included in accounts payable and accrued expenses | 141 | | | 0 | | | 0 | |
| | | | | |
|
| | | | | | | | | | | |
| | 2018 | | 2017 | | 2016 |
| Supplemental cash flow information: | | | | | |
| Interest paid | $ | 1,807 |
| | $ | 3,254 |
| | $ | 3,256 |
|
| Taxes paid | 2,634 |
| | 4,697 |
| | 9,096 |
|
| Non-cash investing and financing activities: | | | | | |
| Capital expenditures on fixed assets included in accounts payable and accrued expenses | 223 |
| | 63 |
| | 201 |
|
Investments— During 2017, pursuant to the achievement of certain performance milestones, the Company purchased additional preferred stock representing a 2.3% interest in the fully diluted shares of a leading tech skills assessment company for $0.5 million, bringing its total interest to 10.0%. During the year ended December 31, 2018, the skills assessment company completed an additional equity offering, lowering DHI's total interest to 7.6%. As of December 31, 2018, it was not practicable to estimate the fair value of the preferred stock as the shares are not traded. The investment is carried at its original cost of $2.0 million, which is included in the other asset section of the consolidated balance sheets.
On January 31, 2018, the Company transferred a majority ownership of the BioSpace business to BioSpace management with zero proceeds received from the transfer. The Company retained a 20% preferred share interest in the BioSpace business. The fair value of the investment was estimated to be zero at the time of the transfer. As of December 31, 2018, it was not practicable to estimate the fair value of the preferred stock investment as the shares are not traded. The investment is recorded at cost, which is zero. Upon a liquidation, sale or change in control of BioSpace within five years of January 31, 2018, the Company has the right to the first $1.0 million of proceeds or the option to convert its 20% preferred stock interest to a 20% common stock interest. On January 31, 2023, the 20% preferred share interest will convert to a 20% common share interest.
On August 31, 2018, the Company transferred a majority ownership of the Rigzone business to Rigzone management, while retaining a 40% common share interest, with zero proceeds received from the transfer. The Company has agreed to provide $0.4 million of funding to the Rigzone business, which is recorded in accounts payable and accrued expenses on the consolidated balance sheets as of December 31, 2018. The Company has no further funding requirements to the Rigzone business. The Company has evaluated the 40% common share investment in the Rigzone business and has determined the investment meets the definition and criteria of a variable interest entity ("VIE"). The Company evaluated the VIE and determined that the Company does not have a controlling financial interest in the VIE, as the Company does not have the power to direct the activities of the VIE that most significantly impact the VIE's economic performance. The common share interest is being accounted for under the equity method of accounting as the Company has the ability to exercise significant influence over Rigzone. As accumulated earnings of the VIE have been approximately zero since the date of transfer, the investment continues to be recorded at cost, which was zero at December 31, 2018.
Rigzone is a website dedicated to delivering online content, data , and career services in the oil and gas industry in North America, Europe, the Middle East, and Asia Pacific. Oil and gas companies, as well as companies that serve the energy industry, use Rigzone to find talent for roles such as petroleum engineers, sales, professionals with energy industry expertise and skilled tradesmen.
Fixed Assets—Depreciation of equipment, furniture and fixtures, computer software and capitalized website development costs are provided under the straight-line method over estimated useful lives ranging from two to five years. Amortization of leasehold improvements is provided over the shorter of the term of the related lease or the estimated useful life of the improvement. The cost of additions and betterments is capitalized, and repairs and maintenance costs are charged to operations in the periods incurred.
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Capitalized Software Costs—Capitalized software costs consist of costs to purchase and develop software for internal use. The Company capitalizes certain incurred software development costs in accordance with the Internal Use Software subtopic of the FASB ASC. Costs incurred during the application-development stage for software bought and further customized by outside vendors for the Company’s use and software developed by a vendor for the Company’s proprietary use have been capitalized.
Website Development Costs—The Company capitalizes certain costs incurred in designing, developing, testing and implementing enhancements to its websites. These costs are amortized over the enhancement’s estimated useful life, which generally approximates two years. Costs related to the planning and post implementation phases of website development efforts are expensed as incurred.
Goodwill and Indefinite-Lived Acquired Intangible Assets—Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. The indefinite-lived acquired intangible assets include the Dice trademarks and brand name. The Company performs a test for impairment of goodwill and indefinite-lived intangible assets annually on October 1, or more frequently if indicators of potential impairment exist, to determine if the carrying value of the recorded asset is impaired. The impairment review process for goodwill compares the fair value of the reporting unit in which goodwill resides to its carrying value. The impairment review process for indefinite-lived intangible assets compares the fair value of the assets to their carrying value. The determination of whether or not the asset has become impaired involves a significant level of judgment in the assumptions underlying the approach used to determine the value of the Company’s reporting units or the intangible asset. Changes in the Company’s strategy and/or market conditions could significantly impact these judgments and require adjustments to recorded amounts of goodwill or indefinite-lived intangible assets. See Note 5Notes 9 and 10 for discussion of impairment charges.
Capitalized Contract Costs—The Company capitalizes certain contract acquisition costs consisting primarily of commissions paid when contracts are signed. For costs incurred to obtain new business sales contracts, the Company capitalizes and expenses these costs over an average customer life, which was approximately two years as of December 31, 2018.2020. For the remaining sales contracts, the Company capitalizes and expenses these costs over a weighted average contract term, which was approximately one year as of December 31, 2018.2020. See Note 3 for additional contract acquisition cost disclosures.
Foreign Currency Translation—For the Company’s foreign operations whose functional currency is not the U.S. dollar, the assets and liabilities are translated into U.S. dollars at current exchange rates. Resulting translation adjustments are reflected as Other Comprehensive Income (Loss). Revenue and expenses are translated at average exchange rates for the period. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are charged to operations as incurred.
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Advertising Costs—The Company expenses advertising costs as they are incurred. Advertising expense for the years ended December 31, 2020, 2019 and 2018 2017was $12.7 million, $20.1 million and 2016 was $26.7 million, $35.3 million and $30.5 million, respectively.
Income Taxes—The Company recognizes deferred taxes by the asset and liability method. Under this method, deferred income taxes are recognized for differences between the financial statement and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. The primary sources of temporary differences are stock-based compensation, amortization and impairment of intangible assets, and depreciation of fixed assets.
Stock-Based Compensation—The Company has a plan to grant equity awards to certain employees and directors of the Company and its subsidiaries. See Note 13.16.
Fair Value of Financial Instruments—The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximate their fair values. The Company’s long-term debt consists of borrowings under its credit facility. See Note 5 for fair value disclosures.
Risks and Uncertainties—The Company is subject to the risks, expenses and uncertainties frequently encountered by companies in the rapidly evolving markets for online products and services. These risks include the failure to develop and extend the Company’s online service brands, the rejection of the Company’s services by consumers, vendors and/or advertisers, the inability of the Company to maintain and increase the levels of traffic on its online services, as well as other risks and uncertainties. In the event that the Company does not successfully execute its business plan, certain assets may not be recoverable.
Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the financial statements, and reported amounts of
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
revenues and expenses during the reporting period. Actual results could differ from these estimates. DHI’s significant estimates include the useful lives and valuation of fixed assets and intangible assets, goodwill, the income tax valuation allowance, and the assumptions used to value the Performance-Based Restricted Stock Units (“PSUs”) of the Company.
Earnings (Loss) per Share—The Company follows the Earnings Per Share topic of the FASB ASC in computing earnings per share (“EPS”). Basic EPS is calculated by dividing net income (loss) by the weighted average number of shares outstanding. When the effects are dilutive, diluted earnings (loss) per share is calculated using the weighted average number of shares outstanding, and the dilutive effect of stock-based compensation awards as determined under the treasury stock method. Certain stock awards were excluded from the computation of diluted (loss) earnings per share due to their anti-dilutive effect. See Note 17.20.
New Accounting Pronouncements— In May 2014, FASB issued ASU No. 2014-09 ("Topic 606"), Revenue from Contracts with Customers. Topic 606 supersedes the revenue recognition requirements in Accounting Standards Codification Topic 605, Revenue Recognition, and requires entities to measure and recognize revenue and the related cash flows it expects to be entitled for the transfer of promised goods or services to customers and requires an entity to recognize the incremental costs of obtaining a contract with a customer as an asset if the entity expects to recover those costs over time. Topic 606 became effective for reporting periods beginning after December 15, 2017. Topic 606 provides companies with two implementation methods. Companies can choose to apply the standard retrospectively to each prior reporting period presented (full retrospective application) or retrospectively with the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings of the annual reporting period that includes the date of initial application (modified retrospective application). The Company has chosen the modified retrospective application method and has implementimplemented Topic 606 effective January 1, 2018.
The Company has determined that the January 1, 2018 cumulative effect to its revenue streams was an increase of approximately $0.2 million to deferred revenues, and the cumulative effect to its contract acquisition costs was an increase to contract acquisition cost assets of approximately $6.1 million, with a net after tax increase to retained earnings of approximately $4.5 million. The cumulative impact on contract acquisition costs was computed based on contracts in force as of December 31, 2017 using average commission rates on both new business sales to be amortized over approximately two years and the remaining sales contracts to be amortized over approximately one year. See Note 3 to the Notes to the Consolidated Financial Statements.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10):Recognition and Measurement of Financial Assets and Financial Liabilities. The new standard aims to improve existing U.S. GAAP and will change certain aspects of accounting for equity investments, financial instruments, financial liabilities, and presentation and
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
related disclosures. The updated standard became effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company adopted the new standard in the first quarter of 2018, and has determined the adoption did not have a material impact on its consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases. The new standard has requirements on how to account for leases by both the lessee and the lessor and adds clarification for what constitutes a lease, among other items. The updated standard becomes effective for fiscal years beginning after December 15, 2018 and interim periods the following year, with early adoption permitted. The new standard must be applied using a modified retrospective transition. In July 2018, the FASB issued updated guidance which allows an additional transition method to adopt the new standard at the adoption date, as compared to the beginning of the earliest period presented, and recognize a cumulative-effect adjustment to the beginning balance of retained earnings in the period of adoption. DHI has implemented the new standard effective January 1, 2019 and has elected to recognize a cumulative effect adjustment to the beginning balance of retained earnings in the period of adoption. Adoption of this standard has resulted in a right-of-use asset of approximately $16 to $18$17.2 million, net of accrued rent and alease exit costs, and related operating lease liability of approximately $17 to $19$18.0 million being established on the Company's balance sheet on January 1, 2019, with no material cumulative-effect adjustment to retained earnings. Right-of-Use ("ROU") assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the obligation to make payments arising from the lease. The Company has implemented processes and tools to assist in the ongoing lease data collection and analysis, and has updated accounting policies and internal controls as a result of adopting this standard.
In MarchJune 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The Company adopted the standard during the three months ended March 31, 2017. The new standard requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled, rather than in additional paid-in capital. Accordingly, the new standard eliminates the requirement to reclassify excess tax benefits from operating activities to financing activities in the statement of cash flows. Additionally, the Company can now make a policy election toASU 2016-13 changes how entities will account for forfeitures as they occur. Amendments requiring recognition of excess tax benefitscredit losses for most financial assets and tax deficiencies in the income statement were applied prospectively. The tax effect of awards vested resulted in income tax expense of $1.4 million during the twelve months ended December 31, 2017. The Company recast 2016 cash flows to reflect the excess tax benefit as an operating activity, resulting in a reclassification of $0.4 million from “Excess tax benefit over book expense from stock based compensation” to “Income taxes receivable/payable” on the Consolidated Statements of Cash Flows. The Company will record forfeitures as they occur, rather
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
than estimating in advance. On January 1, 2017, under the modified retrospective transition method as required by the standard, the Company recorded a cumulative-effect adjustment of $0.3 million to decrease accumulated earnings and increase additional paid-in capital to remove estimated forfeitures on all outstanding equity awards after December 31, 2016.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other. The new standard eliminates Step 2 from the goodwill impairment test and requires the Company to compare thecertain other instruments that are not measured at fair value through net income. The guidance replaces the current "incurred loss" model with an "expected loss" model that requires consideration of a reporting unit with its carrying amount. The Company should recognize an impairment charge forbroader range of information to estimate expected credit losses over the amount by which the carrying amount exceeds the fair value. The standardlifetime of a financial asset. ASU 2016-13 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2019, with early adoption permitted. Accordingly,2022 for Smaller Reporting Companies. The Company is evaluating the expected impact of this standard on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurements (Topic 820), Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This standard removes, modifies, and adds certain disclosure requirements for fair value measurements. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. The Company has adopted the new standard during the year ended December 31, 2017, whichon January 1, 2020. The adoption of ASU 2018-13 did not have a material impact on theits consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. The new standard requires entities that are customers in cloud computing arrangements to defer implementation costs if they would be capitalized by the entity in software licensing arrangements under the internal-use software guidance. ASU No. 2018-15 is effective for fiscal years beginning after December 15, 2019 and interim periods within those years and early adoption is permitted.years. The amendments allow either a retrospective or prospective approach to all implementation costs incurred after adoption. The Company adopted this standard, effective January 1, 2020, under the prospective approach, and capitalized implementation costs are included in other assets on the Company's balance sheet.
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, which eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating taxes during interim quarters and the recognition of deferred tax liabilities for outside basis differences. This guidance also simplifies aspects of accounting for franchise taxes, specifies the timing for recognizing certain income tax effects of changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is evaluating the expected impact of this standard on its consolidated financial statements.
3. REVENUE RECOGNITION
On January 1, 2018, the Company adopted Topic 606 applying the modified retrospective method to all contracts that were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 will be presented under Topic 606, while prior period amounts will not be adjusted and continue to be reported under the accounting standards in effect prior to January 1, 2018.
We recorded a net increase to opening retained earnings of $4.5 million as of January 1, 2018 due to the cumulative impact of adopting Topic 606.
Changes in accounting policies as a result of adopting Topic 606 and nature of goods.
The Company recognizes revenue when control of the promised goods or services is transferred to our customers at an amount that reflects the consideration to which we expect to receive in exchange for those goods or services. Revenue is recognized net of customer discounts ratably over the service period. Customer billings delivered in advance of services being rendered are recorded as deferred revenue and recognized over the service period. See also Note 2 to the Notes to Consolidated Financial Statements.The Company generates revenue from recruitment packages, advertising, classifieds, data services, and career fair and recruitment event booth rentals.
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Disaggregation of revenue
Our brands serve various economic professions, such as technology, financial, hospitality (the Hcareers business was sold on May 22, 2018), and energy (sold the RigLogix portion of the Rigzone business on February 20, 2018 and transferred majority ownership of the remaining Rigzone business to Rigzone management on August 31, 2018). The following table provides information about disaggregated revenue by brand and includes a reconciliation of the disaggregated revenue with reportable segments (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, |
| 2020 | | 2019 | | 2018 |
| Tech-focused | | Other | | Total | | Tech-focused | | Other | | Total | | Tech-Focused | | Other | | Total |
Dice (1) | $ | 82,190 | | | 0 | | | $ | 82,190 | | | $ | 92,527 | | | $ | 0 | | | $ | 92,527 | | | $ | 94,438 | | | $ | 0 | | | $ | 94,438 | |
| ClearanceJobs | 28,977 | | | 0 | | | 28,977 | | | 24,745 | | | 0 | | | 24,745 | | | 21,086 | | | 0 | | | 21,086 | |
| eFinancial Careers | 25,711 | | | 0 | | | 25,711 | | | 32,098 | | | 0 | | | 32,098 | | | 33,758 | | | 0 | | | 33,758 | |
Dice Europe(2) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 2,976 | | | 0 | | | 2,976 | |
Rigzone(3) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 3,771 | | | 3,771 | |
Hcareers(3) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 5,329 | | | 5,329 | |
BioSpace(3) | 0 | | | 0 | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 212 | | | 212 | |
| Total | $ | 136,878 | | | $ | 0 | | | $ | 136,878 | | | $ | 149,370 | | | $ | 0 | | | $ | 149,370 | | | $ | 152,258 | | | $ | 9,312 | | | $ | 161,570 | |
| | | | | | | | | | | | | | | | | |
| (1) Includes Dice U.S. and Career Events. |
| (2) The Company ceased Dice Europe operations on August 31, 2018. |
| (3) The Company sold the RigLogix portion of the Rigzone business on February 20, 2018 and transferred majority ownership of the remaining Rigzone business to Rigzone management on August 31, 2018. Hcareers was sold on May 22, 2018 and the Company transferred majority ownership of BioSpace to BioSpace management on January 31, 2018. |
|
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
| | | | | | | | | | | | |
| | | For the Year Ended December 31, 2018 |
| | | Tech-focused | | Corporate & Other | | Total |
| Dice (1) | | $ | 94,438 |
| | $ | — |
| | $ | 94,438 |
|
| ClearanceJobs | | 21,086 |
| | — |
| | 21,086 |
|
| Dice Europe (2) | | 2,976 |
| | — |
| | 2,976 |
|
| eFinancial Careers | | 33,758 |
| | — |
| | 33,758 |
|
| Hcareers (3) | | — |
| | 5,329 |
| | 5,329 |
|
| Rigzone (3) | | — |
| | 3,771 |
| | 3,771 |
|
| BioSpace (3) | | — |
| | 212 |
| | 212 |
|
| Total | | $ | 152,258 |
| | $ | 9,312 |
| | $ | 161,570 |
|
| | | | | | | |
| (1) Includes Dice U.S. and Targeted Job Fairs. | | | | | | |
| (2) The Company ceased Dice Europe operations on August 31, 2018. |
| (3) The Company sold the RigLogix portion of the Rigzone business on February 20, 2018 and transferred majority ownership of the remaining Rigzone business to Rigzone management on August 31, 2018. Hcareers was sold on May 22, 2018 and the Company transferred majority ownership of BioSpace to BioSpace management on January 31, 2018. |
Revenue for periods ending prior to January 1, 2018 have not been presented under Topic 606.
Contract Balances
The following table provides information about opening and closing balances of receivables and contract liabilities from contracts with customers as required under Topic 606 (in thousands):
| | | | | | | | | | | | | |
| As of December 31, 2020 | | As of December 31, 2019 | | |
| Receivables | $ | 20,298 | | | $ | 21,158 | | | |
| Short-term contract liabilities (deferred revenue) | 42,426 | | | 50,568 | | | |
| Long-term contract liabilities (deferred revenue) | 1,068 | | | 1,058 | | | |
|
| | | | | | | |
| | As of December 31, 2018 | | As of January 1, 2018 |
| Receivables | $ | 22,850 |
| | $ | 38,769 |
|
| Short-term contract liabilities (deferred revenue) | 54,723 |
| | 83,646 |
|
| Long-term contract liabilities (deferred revenue) | 1,363 |
| | — |
|
We receive payments from customers based upon contractual billing schedules; accounts receivable is recorded when customers are invoiced per the contractual billing schedules. As the Company's standard payment terms are less than one year, the Company elected the expedient, where applicable. As a result, the Company did not consider the effects of a significant financing component. Contract liabilities include customer billings delivered in advance of performance under the contract, and associated revenue is realized when services are rendered under the contract.
Receivables increase due to customer billings and decrease by cash collected from customers along with business divestitures. Included in January 1, 2018 is $4.4 million of receivables related to businesses divested during the year ended December 31, 2018.customers. Contract liabilities increase due to customer billings and are decreased as performance obligations are satisfied under the contracts. Included in January 1, 2018 is $8.4 million of short-term contract liabilities related to the businesses divested during the year ended December 31, 2018.
During the year ended December 31, 2018, theThe Company recognized the following revenues as a result of changes in the contract liability balances in the respective periods (in thousands):
70
|
| | | | |
| | | Year Ended December 31, 2018 |
| Revenue recognized in the period from: | | |
| Amounts included in the contract liability at the beginning of the period | | $ | 75,967 |
|
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2020 | | Year Ended December 31, 2019 | | Year Ended December 31, 2018 |
| Revenue recognized in the period from: | | | | | |
| Amounts included in the contract liability at the beginning of the period | $ | 50,438 | | | $ | 54,825 | | | $ | 75,967 | |
Transaction price allocated to the remaining performance obligations
Under the guidance of Topic 606, the following table includes estimated deferred revenue expected to be recognized in the future periods related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | 2022 | | 2023 | | Total |
| Tech-focused | $ | 42,426 | | | $ | 1,033 | | | $ | 35 | | | $ | 43,494 | |
|
| | | | | | | | | | | | | | | |
| | 2019 | | 2020 | | 2021 | | Total |
| Tech-focused | $ | 54,723 |
| | $ | 1,348 |
| | $ | 15 |
| | $ | 56,086 |
|
Contract acquisition costs
In connection with the adoption of Topic 606, weWe are required to capitalize certain contract acquisition costs consisting primarily of commissions paid when contracts are signed. As allowed for by the practical expedient, the Company is using a portfolio approach for contract acquisition costs, which allows the new revenue guidance to be applied to a portfolio of contracts with similar characteristics. As a result, the Company has applied the portfolio approach to new business contracts and recurring or remaining business contracts. The Company reasonably expects that the effects of applying the portfolio approach would not differ materially from applying Topic 606 at the individual contract level. As of January 1, 2018, the date we adopted Topic 606, we capitalized $6.1 million in contract acquisition costs related to contracts that were not completed. The cumulative effect for contract acquisition costs was computed based on contracts in force as of December 31, 2017 using the average commission rates on both new business sales contracts, to be amortized over approximately two years, and the remaining sales contracts to be amortized over approximately one year. For costs incurred to obtain new business sales contracts, we will record these costs over an average customer life, which was determined using customer renewal rates; for the remaining sales contracts, we will record these costs over the weighted average contract term. For the year ended December 31, 2018, theThe Company recorded $11.5 million, $11.8 million and $10.1 million of expense related to the amortization of contract acquisition costs during the years ended December 31, 2020, 2019 and 2018, respectively, and there was no impairment loss incurred. During the year ended December 31, 2018 $1.2 million of contract acquisition costs were removed due to the sale of BioSpace and the RigLogix portion of the Rigzone business in the first quarter of 2018, the sale of Hcareers in the second quarter of 2018, and the transfer of majority ownership of the remaining Rigzone business to Rigzone management in the third quarter of 2018.
In accordance with Topic 606, the impact of adoption to our consolidated statements of operations was as follows:
|
| | | | | | | | | | | | |
| | | Year Ended December 31, 2018 |
| (in thousand, except per share amounts | As Reported | | Balance Without Adoption of Topic 606 | | Effect of Change-Higher (Lower) |
| | | | | | | |
| Revenues | $ | 161,570 |
| | $ | 161,457 |
| | $ | 113 |
|
| Operating expenses | $ | 153,247 |
| | $ | 156,129 |
| | $ | (2,882 | ) |
| Gain on sale of businesses | $ | 3,369 |
| | $ | 4,568 |
| | $ | (1,199 | ) |
| Operating income | $ | 11,692 |
| | $ | 9,896 |
| | $ | 1,796 |
|
| Net income | $ | 7,174 |
| | $ | 5,827 |
| | $ | 1,347 |
|
| | | | | | | |
| Basic earnings per share | $ | 0.15 |
| | $ | 0.12 |
| | $ | 0.03 |
|
| Diluted earnings per share | $ | 0.14 |
| | $ | 0.12 |
| | $ | 0.02 |
|
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In accordance with Topic 606, the impact of adoption to our consolidated balance sheets was as follows: |
| | | | | | | | | | | | |
| | | As of December 31, 2018 |
| (in thousands) | As reported | | Balance Without Adoption of Topic 606 | | Effect of Change-Higher (Lower) |
| | | | | | | |
| Assets | | | | | |
| Capitalized contract assets | $ | 7,939 |
| | $ | — |
| | $ | 7,939 |
|
| Total Assets | $ | 258,385 |
| | $ | 250,446 |
| | $ | 7,939 |
|
| | | | | | | |
| Liabilities & Stockholders Equity | | | | | |
| Deferred revenue | $ | 54,723 |
| | $ | 54,610 |
| | $ | 113 |
|
| Deferred income taxes | $ | 10,444 |
| | $ | 8,450 |
| | $ | 1,994 |
|
| Total liabilities | $ | 113,030 |
| | $ | 110,923 |
| | $ | 2,107 |
|
| Stockholders equity | | | | | |
| Accumulated earnings | $ | 71,435 |
| | $ | 65,603 |
| | $ | 5,832 |
|
| Total stockholders' equity | $ | 145,355 |
| | $ | 139,523 |
| | $ | 5,832 |
|
| Total liabilities & stockholders' equity | $ | 258,385 |
| | $ | 250,446 |
| | $ | 7,939 |
|
In accordance with Topic 606, the impact of adoption to our consolidated statements of cash flows was as follows:
|
| | | | | | | | | | | | |
| | | Year Ended December 31, 2018 |
| | | As Reported | | Balance Without Adoption of Topic 606 | | Effect of Change-Higher (Lower) |
| Cash flows from operating activities: | | | | | |
| Net Income | $ | 7,174 |
| | $ | 5,827 |
| | $ | 1,347 |
|
| Adjustments to reconcile net income to net cash flows from operating activities: | | | | | |
| Deferred income taxes | $ | 2,699 |
| | $ | 1,896 |
| | $ | 803 |
|
| Gain on sale of businesses, net | $ | (3,369 | ) | | $ | (4,568 | ) | | $ | 1,199 |
|
| Capitalized contract costs | $ | (3,236 | ) | | $ | — |
| | $ | (3,236 | ) |
| Deferred revenue | $ | (18,866 | ) | | $ | (18,753 | ) | | $ | (113 | ) |
| Net cash flows from operating activities | $ | 14,918 |
| | $ | 14,918 |
| | $ | — |
|
4. SALE OF BUSINESSES
The Company transferred a majority ownership of the Rigzone business to Rigzone management on August 31, 2018. The Company retained a 40% common share interest in Rigzone. The Company incurred approximately $0.4 million in selling costs and recognized a $0.7$0.4 million loss on sale duringin the year ended December 31,third quarter of 2018.
The Company sold the Hcareers business on May 22, 2018 for $16.5 million and incurred approximately $1.5 million in selling costs, with $1.7 million of the purchase price placed in escrow, (recorded in prepaid and other current assets), to be released twelve months after the closing date, subject to the terms and conditions of the transaction agreement, including certain contingencies. Additionally, the Company recorded a receivable of $0.2 million (recorded in prepaid and other current assets) related to working capital to be released four months after the closing date, subject to the terms and conditions of the transaction agreement. As of December 31, 2018, working capital had not been finalized. Net cash proceeds of $14.0 million were received on the date of sale of Hcareers. As a result of the sale, a $0.8 million loss was recognized in the second quarter of 2018. During the second quarter of 2019, the escrow of $1.7 million and working capital terms and related contingencies were finalized resulting in the Company recording an additional loss on sale of $0.5 million and receiving cash of $0.7 million from the escrow and $0.2 million from working capital.
The Company sold the RigLogix portion of the Rigzone business on February 20, 2018 for $4.2 million and incurred approximately $0.6 million in selling costs. $0.4 million of the purchase price was placed in escrow, (recorded in prepaid and other current assets) and will bewhich was released twelve months after the closing date, subject to the terms and conditionsCompany in the first quarter of the transaction
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
agreement.2019. As a result of the sale, a $4.6 million gain was recognized in the first quarter of 2018. The gain on sale exceeded net proceeds as liabilities transferred in the transaction exceeded assets, primarily due to deferred revenues of $1.2 million.
The Company transferred a majority ownership of the BioSpace business to BioSpace management on January 31, 2018. The Company retained a preferred share interest in BioSpace, Inc., representing a 20% diluted interest. The Company incurred approximately $0.3 million in selling costs and recognized a $0.5 million loss on sale during the year ended December 31, 2018.
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company sold the Health eCareers business on December 4, 2017 for $15.0 million and incurred approximately $0.6 million of selling costs.million. $1.5 million of the purchase price was placed in escrow, (recorded in other current assets in the consolidated balance sheet) and will be released 18 months after the closing date, subject to the terms and conditions of the transaction agreement. Additionally, the Company recorded a receivable of $0.6 million (recorded in other current assets in the consolidated balance sheet) related to working capital, which was released duringto the firstCompany in the second quarter of 2018. Net cash proceeds on the date of sale were $12.9 million. A $6.7 million gain on the sale of the business during the fourth quarter of 2017.2019.
The Company sold the Slashdot and SourceForge businesses (together referred to as “Slashdot Media”) on January 27, 2016 for $2.8 million cash plus working capital of $0.4 million and incurred approximately $0.8 million of selling costs. A $0.6 million loss on sale of business was recognized in the year ended December 31, 2016.
5. FAIR VALUE MEASUREMENTS
The FASB ASC topic on Fair Value Measurements and Disclosures defines fair value, establishes a framework for measuring fair value and requires certain disclosures for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. As a basis for considering assumptions, a three-tier fair value hierarchy is used, which prioritizes the inputs used in measuring fair value as follows:
•Level 1 – Quoted prices for identical instruments in active markets.
•Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations, in which all significant inputs are observable in active markets.
•Level 3 – Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The carrying amounts reported in the Consolidated Balance Sheets for cash and cash equivalents, accounts receivable, other assets, accounts payable and accrued expenses and long-term debt approximate their fair values. The fair value of the long-term debt was estimated using present value techniques and market based interest rates and credit spreads. The estimated fair value of long-term debt is based on Level 2 inputs.
Certain assets and liabilities are measured at fair value on a non-recurring basis. These assets include investments (included in other assets), goodwill and intangible assets which result as acquisitions occur.resulted from prior acquisitions. Items valued using such internally generated valuation techniques are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be some significant inputs that are readily observable. Such instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances, for example, when there is evidence of impairment.
Impairment—The Company performs annual impairment tests for goodwill and the Dice trademarks and brand name as of October 1 of each year or more frequently if indicators of potential impairment exist. See Notes 9 and 10 of the Notes to Consolidated Financial Statements. The Company evaluates the carrying value of equity investments at each reporting period as described in Note 6 of the Notes to the Consolidated Financial Statements.
6. INVESTMENTS
At January 1, 2018, the Company held preferred stock representing a 10.0% interest in the fully diluted shares of a leading tech skills assessment company. During 2018, the skills assessment company completed an additional equity offering, lowering DHI's total interest to 7.6%. The Company did not adjust the recorded value of the investment because the shares issued under the new share offering were not similar to the Company's share rights. The Company has elected the measurement alternative in accordance with FASB ASC 321, Investments - Equity Securities. As of December 31, 2019, it was not practicable to estimate the fair value of the preferred stock as the shares are not traded. Accordingly, the investment was carried at its original cost of $2.0 million and was included in the other assets section of the Condensed Consolidated Balance Sheets. During the year ended December 31, 2020, based on the investment's historical cash burn rate, uncertainty of its ability to meet revenue and cash flow projections, current liquidity position, lack of access to additional capital, and impacts from the COVID-19 pandemic, the Company determined the value to be zero. Accordingly, the Company recorded an impairment charge of $2.0 million during the first quarter of 2020.
On January 31, 2018, the Company transferred a majority ownership of the BioSpace business to BioSpace management with zero proceeds received from the transfer, while retaining a 20% preferred share interest in the BioSpace business. At the time of sale, the fair value of the investment was estimated to be zero. During the second quarter of 2020, the Company sold its 20% interest in BioSpace to BioSpace management for $0.2 million. Accordingly, the Company recognized a $0.2 million gain on sale, which was included in interest expense and other on the Consolidated Statements of Operations.
Rigzone is a website dedicated to delivering online content, data , and career services in the oil and gas industry in North America, Europe, the Middle East, and Asia Pacific. Oil and gas companies, as well as companies that serve the energy industry, use Rigzone to find talent for roles such as petroleum engineers, sales, professionals with energy industry expertise
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
and skilled tradesmen. On August 31, 2018, the Company transferred a majority ownership of the Rigzone business to Rigzone management, while retaining a 40% common share interest, with zero proceeds received from the transfer. The Company agreed to provide $0.4 million of funding to the Rigzone business, which was recorded in accounts payable and accrued expenses on the consolidated balance sheets as of December 31, 2018. The Company has no further funding requirements to the Rigzone business. The Company has evaluated the 40% common share investment in the Rigzone business and has determined the investment meets the definition and criteria of a variable interest entity ("VIE"). The Company evaluated the VIE and determined that the Company does not have a controlling financial interest in the VIE, as the Company does not have the power to direct the activities of the VIE that most significantly impact the VIE's economic performance. The common share interest is being accounted for under the equity method of accounting as the Company has the ability to exercise significant influence over Rigzone. As accumulated earnings of the VIE have been approximately zero since the date of transfer, the investment continues to be recorded at cost, which was zero at December 31, 2020.
7. LEASES
On January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842), applying the modified retrospective transition. Periods beginning after January 1, 2019 will be presented under Topic 842, while prior period amounts will not be adjusted and continue to be reported under the accounting standards in effect prior to January 1, 2019.
The Company has operating leases for corporate office space and certain equipment. The leases have terms from one year to eight years, some of which include options to renew the lease, and are included in the lease term when it is reasonably certain that the Company will exercise the option. No leases include options to purchase the leased property. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We do not have any lease agreements with related parties.
Operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Based on the present value of the lease payments for the remaining lease term of the Company's existing leases, the Company recorded operating ROU assets of $17.2 million and operating lease liabilities of $18.0 million as of January 1, 2019. Operating lease ROU assets and liabilities commencing after January 1, 2019 are recognized at commencement date based on the present value of lease payments over the lease term. When readily available, the Company uses the implicit rate in determining the present value of the lease payments. When leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on information available at the commencement of the lease, including the lease term. Because the implicit rate in each lease is not available, the Company used its incremental borrowing rate to determine the present value of lease payments. Leases with an initial term of 12 months or less are not recorded on the balance sheet. All operating lease expense is recognized on a straight-line basis over the lease term.
The component of lease cost were as follows (in thousands):
| | | | | | | | | | | |
| Year Ended December 31, 2020 | | Year Ended December 31, 2019 |
| Operating lease cost* | $ | 4,059 | | | $ | 4,265 | |
| Sublease income | (1,018) | | | (1,322) | |
| Total lease cost | $ | 3,041 | | | $ | 2,943 | |
| | | |
| *Includes short-term and variable lease costs, which are immaterial. | | |
Supplemental cash flow information related to leases was as follows (in thousands):
| | | | | | | | | | | |
| Year Ended December 31, 2020 | | Year Ended December 31, 2019 |
| Cash paid for amounts included in measurement of lease liabilities: | | | |
| Operating cash flows from operating leases | $ | 4,315 | | | $ | 4,632 | |
| | | |
| Right-of-use assets obtained in exchange for lease obligations: | | | |
| Operating leases | $ | 292 | | | $ | 7,434 | |
Supplemental balance sheet information related to lease was as follows (in thousands, except lease term and discount):
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | | | | | | | | | | |
| Year Ended December 31, 2020 | | Year Ended December 31, 2019 |
| Operating lease right-of-use assets | $ | 16,405 | | | $ | 19,712 | |
| | | |
| Operating lease liabilities - current | 3,410 | | | 3,643 | |
| Operating lease liabilities - non-current | 13,704 | | | 16,664 | |
| Total operating lease liabilities | $ | 17,114 | | | $ | 20,307 | |
| | | |
| Weighted average remaining lease term | | | |
| Operating leases | 4.9 years | | 5.9 years |
| | | |
| Weighted average discount rate | | | |
| Operating leases | 4.0 | % | | 4.0 | % |
As of December 31, 2020, future operating lease payments were as follows: (in thousands):
| | | | | |
| Operating Leases |
| |
| 2021 | $ | 4,040 | |
| 2022 | 3,780 | |
| 2023 | 3,554 | |
| 2024 | 3,073 | |
| 2025 | 3,016 | |
| 2025 and Thereafter | 1,521 | |
| |
| Total lease payments | 18,984 | |
| Less imputed interest | (1,870) | |
| Total | $ | 17,114 | |
As of December 31, 2020, the Company has no additional operating or finance leases that have not yet commenced.
8. FIXED ASSETS, NET
Fixed assets, net consist of the following as of December 31, 2020 and 2019 (in thousands):
| | | | | | | | | | | |
| | 2020 | | 2019 |
| Computer equipment and software | $ | 5,397 | | | $ | 6,869 | |
| Furniture and fixtures | 2,525 | | | 2,934 | |
| Leasehold improvements | 3,320 | | | 3,593 | |
| Capitalized development costs | 48,515 | | | 35,925 | |
| 59,757 | | | 49,321 | |
| Less: Accumulated depreciation and amortization | (35,213) | | | (28,969) | |
| Fixed assets, net | $ | 24,544 | | | $ | 20,352 | |
9. ACQUIRED INTANGIBLE ASSETS, NET
As a result of the sale of Hcareers (sold May 22, 2018), the Company disposed of all its remaining unamortized acquired intangible assets. Acquired intangible assets disposed of in conjunction with the sale had costs of $12.9 million and accumulated amortization of $6.7 million. Therefore, as of December 31, 2020 and 2019, the net value of all finite-lived acquired intangible assets was zero.
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Considering the recognition of the Dice brand, its long history, awareness in the talent acquisition and staffing services market, and the intended use, the remaining useful life of the Dice.com trademarks and brand name was determined to be indefinite. We determine whether the carrying value of recorded indefinite-lived acquired intangible assets is impaired on an annual basis or more frequently if indicators of potential impairment exist. The impairment review process for goodwill compares the fair value of the reporting unit in which the goodwill residesindefinite-lived acquired intangible assets to its carrying value. If the carrying value exceeds the fair value, an impairment loss is recorded.
As of December 31, 2020 and 2019, the Company had an indefinite-lived acquired intangible asset of $23.8 million and $39.0 million, respectively, related to the Dice trademarks and brand name. The annual impairment test for the Dice trademarks and brand name is performed on October 1 of each year. During the first quarter of 2020, because of the initial impacts of the COVID-19 pandemic and its potential impact on future earnings and cash flows that are attributable to the Dice trademarks and brand name, the Company performed an interim impairment analysis. As a result of the analysis, the Company recorded an impairment charge of $7.2 million during the first quarter of 2020. During the third quarter of 2020, the impacts of the COVID-19 pandemic continued and the Company's projected earnings and cash flows that are attributable to the Dice trademarks and brand name declined as compared to the projections used in the March 31, 2020 analysis. As a result, the Company performed an interim impairment analysis as of September 30, 2020, which resulted in the Company recording an additional impairment charge of $8.0 million during the three month period ended September 30, 2020.
Revenues attributable to the Dice trademarks and brand name for the fourth quarter of 2020 and estimated future results as of December 31, 2020 have exceeded the projections used in the September 30, 2020 analysis. As a result, the Company believes it is not more likely than not that the fair value of the Dice trademarks and brand name is less than the carrying value as of December 31, 2020. Therefore, no quantitative impairment test was performed as of December 31, 2020. No impairment was recorded during the years ended December 31, 2019 and 2018.
The projections utilized in the March 31 and September 30, 2020 analyses included a decline in revenues caused by the COVID-19 pandemic that are attributable to the Dice trademarks and brand name for the year ended December 31, 2020 compared to the year ended December 31, 2019. The September 30, 2020 analysis included a further decline in revenues caused by the COVID-19 pandemic that are attributable to the Dice trademarks and brand name for the year ending December 31, 2021 compared to the year ended December 31, 2020 and then increasing to rates approximating industry growth projections, although peaking at rates slightly lower than in the March 31, 2020 analysis. The Company’s ability to achieve these revenue projections may be impacted by, among other things, uncertainty related to COVID-19, competition in the technology recruiting market, challenges in developing and introducing new products and product enhancements to the market and the Company’s ability to attribute value delivered to customers. Cash flows that are attributable to the Dice trademarks and brand name were projected to decline for the year ended December 31, 2020 compared to the year ended December 31, 2019 as a result of the lower revenue, but partially offset by reductions to operating expenses. Operating expenses, excluding impairments, utilized in the March 31 and September 30, 2020 analyses were projected to decline for the year ended December 31, 2020 as compared to the year ended December 31, 2019, including a reduction in operating margin. The March 31, 2020 analysis included modest operating margin improvements during the year ending December 31, 2021 and beyond while the September 30, 2020 analysis included a small reduction in operating margin during the year ending December 31, 2021 and then increasing modestly. If future cash flows that are attributable to the Dice trademarks and brand name are not achieved, the Company could realize an impairment in a future period. In the March 31, 2020 and September 30, 2020 analyses, the Company utilized a relief from royalty rate method to value the Dice trademarks and brand name using a royalty rate of 5.0% and 4.0%, respectively, based on comparable industry studies and a discount rate of 17.5% and 15.5%, respectively. The decline in the royalty rate is due to revenue declines and impacts of the COVID-19 pandemic and the decline in the discount rate is primarily due to the lower projections, as compared to the March 31, 2020 analysis.
The determination of whether or not indefinite-lived acquired intangible assets have become impaired involves a significant level of judgment in the assumptions underlying the approach used to determine the value of the indefinite-lived acquired intangible assets. Fair values are determined using a profit allocation methodology which estimates the value of the trademark and brand name by capitalizing the profits saved because the company owns the asset. We consider factors such as historical performance, anticipated market conditions, operating expense trends and capital expenditure requirements. Changes in our strategy, uncertainty related to COVID-19, and/or changes in market conditions could significantly impact these judgments and require adjustments to recorded amounts of intangible assets. If projections are not achieved, the Company could realize an impairment in the foreseeable future.
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. GOODWILL
The following table shows the carrying amount of goodwill by segment as of December 31, 2020 and 2019 and the changes in goodwill for the years then ended (in thousands):
| | | | | |
| Goodwill at January 1, 2019 | $ | 153,974 | |
| Foreign currency translation adjustment | 2,085 | |
| Goodwill at December 31, 2019 | $ | 156,059 | |
| Foreign currency translation adjustment | 920 | |
| Impairment | (23,626) | |
| Goodwill at December 31, 2020 | $ | 133,353 | |
The amount of goodwill as of December 31, 2020 allocated to the Tech-focused reporting unit. Ifunit was $133.4 million. The annual impairment test for the Tech-focused reporting unit is performed on October 1 of each year. During the first quarter of 2020, because of the initial impacts of the COVID-19 pandemic and its potential impact on future earnings and cash flows for the reporting unit, the Company performed an interim impairment analysis of goodwill. The results of the analysis indicated that the fair value of the Tech-focused reporting unit was not substantially in excess of the carrying value as of March 31, 2020. The percentage by which the estimated fair value exceeded carrying value for the Tech-focused reporting unit at March 31, 2020 was less than 1%. During the third quarter of 2020, the impacts of the COVID-19 pandemic continued and the Company's projected earnings and cash flows for the Tech-focused reporting unit declined as compared to the projections used in the March 31, 2020 analysis. As a result, the Company performed an interim impairment analysis as of September 30, 2020, which resulted in the Company recording an impairment charge of $23.6 million during the three month period ended September 30, 2020.
Results for the Tech-focused reporting unit for the fourth quarter of 2020 and estimated future results as of December 31, 2020 have exceeded the projections used in the September 30, 2020 analysis. As a result, the Company believes it is not more likely than not that the fair value of the reporting unit is less than the carrying value anas of December 31, 2020. Therefore, no quantitative impairment charge istest was performed as of December 31, 2020. No impairment was recorded during the years ended December 31, 2019 and 2018.
Revenue projections for the excessTech-focused reporting unit declined compared to the projections used in the March 31, 2020 analysis due to the continued impacts of the carryingCOVID-19 pandemic. The September 30, 2020 analysis included a further decline in revenues attributable to the Tech-focused reporting unit for the year ending December 31, 2021 compared to the year ended December 31, 2020 and then increasing to rates approximating industry growth projections, although peaking at rates slightly lower than in the March 31, 2020 analysis. The Company’s ability to achieve these revenue projections may be impacted by, among other things, the length and impacts of the COVID-19 pandemic, competition in the technology recruiting market, challenges in developing and introducing new products and product enhancements to the market and the Company’s ability to attribute value overdelivered to customers. Cash flows attributable to the Tech-focused reporting unit declined for the year ended December 31, 2020 compared to the year ended December 31, 2019 as a result of the lower revenue, but partially offset by reductions to operating expenses. Operating expenses, excluding impairments, utilized in the March 31 and September 30, 2020 analyses have declined for the year ending December 31, 2020 as compared to the year ended December 31, 2019, including a reduction in operating margin. The March 31, 2020 analysis included modest operating margin improvements during the year ending December 31, 2021 and beyond while the September 30, 2020 analysis included a small reduction in operating margin during the year ending December 31, 2021 and then increasing modestly.
The discount rate applied for the Tech-focused reporting unit in the September 30, 2020 analysis was 14.5%, compared to 16.5% at March 31, 2020. The decline in the discount rate is primarily due to the lower projections, as compared to the March 31, 2020 analysis. An increase to the discount rate applied or reductions to future projected operating results could result in future impairment of the Tech-focused reporting unit’s goodwill. It is reasonably possible that changes in judgments, assumptions and estimates the Company made in assessing the fair value of goodwill could cause the Company to consider some portion or all of the goodwill of the Tech-focused reporting unit to become impaired. In addition, a future decline in the overall market conditions, uncertainty related to COVID-19, political instability, and/or changes in the Company’s market share could negatively impact the estimated future cash flows and discount rates used to determine the fair value of the reporting unit.unit and could result in an impairment charge in the foreseeable future.
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The determination of whether or not goodwill has become impaired is judgmental in nature and requires the use of estimates and key assumptions, particularly assumed discount rates and projections of future operating results, such as forecasted revenues and earnings before interest, taxes, depreciation and amortization margins and capital expenditure requirements. Fair values are determined either by using a discounted cash flow methodology or by using a combination of a discounted cash flow methodology and a market comparable method. The discounted cash flow methodology is based on projections of the amounts and timing of future revenues and cash flows, assumed discount rates and other assumptions as deemed appropriate. Factors such as historical performance, anticipated market conditions, operating expense trends and capital expenditure requirements are considered. Additionally, the discounted cash flows analysis takes into consideration cash expenditures for product development, other technological updates and advancements to the websites and investments to improve the candidate databases. The market comparable method indicates the fair value of a business by comparing it to publicly traded companies in similar lines of business or to comparable transactions or assets. Considerations for factors such as size, growth, profitability, risk and return on investment are analyzed and compared to the comparable businesses and adjustments are made. A market value of invested capital of the publicly traded companies is calculated and then applied to the entity’s operating results to arrive at an estimate of value.
During the third quarter of 2016, goodwill at the Energy reporting unit with a carrying value of $15.4 million was tested for impairment due to the decline in demand for energy professionals, stemming from persistently depressed oil prices. The Company recorded an impairment of goodwill of $15.4 million as of September 30, 2016, bringing goodwill at the Energy reporting unit to zero. In order to arrive at the implied fair value of goodwill, the Company calculated the fair value of all the assets and liabilities of the reporting unit as if it had been acquired in a business combination. After assigning fair value to the assets and liabilities of
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the reporting unit, the implied fair value of goodwill resulted in an impairment of $15.4 million in the year ended December 31, 2016. The goodwill balance represented a Level 3 asset measured at fair value on a nonrecurring basis subsequent to its original recognition.
The fair value of the assets and liabilities of the Energy reporting unit was determined by a combination of a discounted cash
flow methodology and market comparable method. Cash flow projections for this reporting unit decreased due to a decline in financial performance resulting from persistently low oil prices. The charge is reflected as Impairment of Goodwill on the Consolidated Statements of Operations.
As required under FASB ASC 360, Impairment or Disposal of Long-Lived Assets, an impairment loss shall be recognized only if the carrying amount of the long-lived asset is not recoverable and exceeds its fair value. During 2017, the Company performed an in-depth review of the getTalent product and the market outlook due to slow sales of the product and the high cost of development. Based on the review, the Company determined the required investments to competitively position the product were too high. As a result, the product offering was canceled. The long-lived assets of getTalent were tested for recoverability. This process resulted in an impairment of capitalized website development costs of $9.3 million, which was recorded in the third quarter of 2017 and reduced the net book value of assets related to getTalent to zero. During 2016, the long-lived assets of the Energy reporting unit were tested for recoverability due to the downturn in the current and expected future financial performance of the reporting unit and an impairment charge of unamortized intangible assets of $2.2 million was recorded, which reduced the unamortized intangible assets at the Energy reporting unit to zero. Both getTalent (discontinued in the third quarter of 2017) and Energy (sold RigLogix portion of the Rigzone business on February 20, 2018 and transferred majority ownership of the remaining business to Rigzone management on August 31, 2018) are included in Corporate & Other.
6. FIXED ASSETS, NET
Fixed assets, net consist of the following as of December 31, 2018 and 2017 (in thousands):
|
| | | | | | | |
| | 2018 | | 2017 |
| Computer equipment and software | $ | 8,954 |
| | $ | 13,588 |
|
| Furniture and fixtures | 2,809 |
| | 3,093 |
|
| Leasehold improvements | 2,890 |
| | 3,199 |
|
| Capitalized development costs | 26,919 |
| | 21,824 |
|
| | 41,572 |
| | 41,704 |
|
| Less: Accumulated depreciation and amortization | (25,682 | ) | | (25,557 | ) |
| Fixed assets, net | $ | 15,890 |
| | $ | 16,147 |
|
7. ACQUIRED INTANGIBLE ASSETS, NET
As a result of the sale of Hcareers (sold May 22, 2018), the Company disposed of all its remaining unamortized acquired intangible assets. Acquired intangible assets disposed of in conjunction with the sale had costs of $12.9 million and accumulated amortization of $6.7 million. Therefore, as of December 31, 2018, the net value of all finite-lived acquired intangible assets was zero.
As of December 31, 2018, the Company had an indefinite-lived acquired intangible asset of $39.0 million related to the Dice trademark and brand name. The Company evaluates the indefinite-lived acquired intangible asset for impairment on an annual basis. No impairment has been recorded during the twelve months ending December 31, 2018.
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Below is a summary of the major acquired intangible assets (in thousands) as of December 31, 2017:
|
| | | | | | | | | | | | | | | |
| | As of and for the year ended December 31, 2017 |
| | Total Cost | | Accumulated Amortization | | Foreign Currency Translation Adjustment | | Acquired Intangible Assets, Net |
| Technology | $ | 4,561 |
| | $ | (3,930 | ) | | $ | (631 | ) | | $ | — |
|
| Trademarks and brand names—Dice | 39,000 |
| | — |
| | — |
| | 39,000 |
|
| Trademarks and brand names—Other | 11,103 |
| | (7,260 | ) | | (2,185 | ) | | 1,658 |
|
| Customer lists | 12,887 |
| | (5,696 | ) | | (2,112 | ) | | 5,079 |
|
| Candidate and content database | 8,857 |
| | (8,354 | ) | | (503 | ) | | — |
|
| Acquired intangible assets, net | $ | 76,408 |
| | $ | (25,240 | ) | | $ | (5,431 | ) | | $ | 45,737 |
|
During the fourth quarter of 2017, the Company disposed of $4.6 million of fully amortized acquired intangible assets from the sale of Health eCareers (sold December 4, 2017).
During the first quarter of 2017 and the second quarter of 2016, the Company retired $26.7 million and $44.1 million, respectively, of fully amortized acquired intangible assets.
During the quarter ended September 30, 2016, the long-lived assets of the Energy reporting unit were tested for recoverability due to the downturn in the current and expected future financial performance of the reporting unit. The Company recorded an impairment of unamortized intangible assets of $9.3 million as of September 30, 2016.
Indefinite Life on Trade Name
Considering the recognition of the Dice brand, its long history, awareness in the talent acquisition and staffing services market, and the intended use, the remaining useful life of the Dice.com trademarks and brand name was determined to be indefinite. We determine whether the carrying value of recorded indefinite-lived acquired intangible assets is impaired on an annual basis or more frequently if indicators of potential impairment exist. The impairment review process compares the fair value of the indefinite-lived acquired intangible assets to its carrying value. If the carrying value exceeds the fair value, an impairment loss is recorded. The impairment test performed as of October 1, 2018 and 2017 resulted in the fair value of the Dice trademarks and brand name exceeding the carrying value by 2% and 4%, respectively.
Revenue attributable to the Dice trademarks and brand name have declined during the year ended December 31, 2018 due to competition in the technology recruiting market, challenges in developing and introducing new products and product enhancements to the market and the Company’s ability to attribute value delivered to customers. Revenues related to the Dice trademarks and brand name declined 7% and 10% for the years ended December 31, 2018 and 2017, respectively, and declined 4% and 10% for the three months ended December 31, 2018 and 2017, respectively. The rate of revenue decline narrowed throughout 2018. Revenue projections for the year ended December 31, 2019 and beyond include a modest increase compared to the year ended December 31, 2018. The Company’s ability to achieve these revenue projections may be impacted by, among other things, the factors noted above that have contributed to the decline in recent periods. Cash flows attributable to the Dice trademarks and brand name declined during 2018 as a result of the lower revenue, as well as increased spending focused on new and enhanced products and consulting fees related to expense reduction strategies. Operating expenses, excluding amortization expense, impairment charges and disposition related and other costs, are projected to slightly decline for the year ended December 31, 2019 as compared to the year ended December 31, 2018 and then increase at levels that allow for modest operating margin improvements. If future cash flows attributable to the Dice trademark are not achieved, the Company could realize an impairment in a future period. The Company utilized a relief from royalty rate method to value the Dice trademarks and brand name using a royalty rate of 6.0% based on comparable industry studies and improving operating margins and a discount rate of 15.3%.
The determination of whether or not indefinite-lived acquired intangible assets have become impaired involves a significant level of judgment in the assumptions underlying the approach used to determine the value of the indefinite-lived acquired intangible assets. Fair values are determined using a profit allocation methodology which estimates the value of the trademark and brand name by capitalizing the profits saved because the company owns the asset. We consider factors such as historical performance, anticipated market conditions, operating expense trends and capital expenditure requirements. Changes in our strategy and/or market conditions could significantly impact these judgments and require adjustments to recorded amounts of intangible assets. If projections are not achieved, the Company could realize an impairment in a future period.
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8.11. INDEBTEDNESS
Credit Agreement—In November 2018, the Company, together with Dice Inc. (a wholly-owned subsidiary of the Company) and its wholly-owned subsidiary, Dice Career Solutions, Inc. (collectively, the “Borrowers”), entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”), which matures in November 2023, and replaces the previously existing credit agreement dated November 2015. The Credit Agreement provides for a revolving loan facility of $90 million, (previously $150 million), with an Expansion Optionexpansion option up to $140 million, as permitted in the Credit Agreement. The Company borrowed $18 million to repay, in full, all outstanding indebtedness, including accrued interest, under the previous credit agreement and to pay certain costs associated with the Credit Agreement. Unamortized debt issuance costs of $0.2 million were recorded to interest expense at the time of reduction.
Borrowings under the Credit Agreement bear interest, at the Company’s option, at a LIBOR rate or a base rate plus a margin. The margin ranges from 1.75% to 2.50% on LIBOR loans and 0.75% to 1.50% on base rate loans, determined by the Company’s most recent consolidated leverage ratio. The Company incurs a commitment fee ranging from 0.30% to 0.45% on any unused capacity under the revolving loan facility, determined by the Company's most recent consolidated leverage ratio. The facility may be prepaid at any time without penalty. Interest expense on long-term debt for the years ended December 31, 2020, 2019, and 2018 was $1.1 million, $0.9 million, and $1.9 million, respectively.
The Credit Agreement contains various customary affirmative and negative covenants and also contains certain financial covenants, including a consolidated leverage ratio and a consolidated interest coverage ratio. Borrowings are allowed under the Credit Agreement to the extent the consolidated leverage ratio, calculated on a pro forma basis, is equal to or less than 2.50 to 1.00. Negative covenants include restrictions on incurring certain liens; making certain payments, such as stock repurchases and dividend payments; making certain investments; making certain acquisitions; making certain dispositions; and incurring additional indebtedness. Restricted payments are allowed under the Credit Agreement to the extent the consolidated leverage ratio, calculated on a pro forma basis, is equal to or less than 2.00 to 1.00, plus an additional $5.0 million of restricted payments. The Credit Agreement also provides that the payment of obligations may be accelerated upon the occurrence of customary events of default, including, but not limited to, non-payment, change of control, or insolvency. As of December 31, 2018,2020, the Company was in compliance with all of the financial covenants under the Credit Agreement.
The obligations under the Credit Agreement are guaranteed by two of the Company’s wholly-owned subsidiaries, eFinancialCareers, Inc and Targeted Job Fairs, Inc. and secured by substantially all of the assets of the Borrowers and the guarantors and stock pledges from certain of the Company’s foreign subsidiaries.
Previous Credit Agreement—The Borrowers previously maintained an Amended and Restated Credit Agreement (the “Old Credit Agreement”), which was scheduled to mature in November 2020. The Old Credit Agreement, when entered into during November 2015, provided for a revolving loan facility of $250.0 million, which was subsequently reduced to $150.0 million, during August 2017, as permitted under the Old Credit Agreement. Unamortized debt issuance costs of $0.4 million were recorded to interest expense at the time of reduction.
Borrowings under the Old Credit Agreement accrued interest, at the Company’s option, at a LIBOR rate or a base rate plus a margin. The margin ranges from 1.75% to 2.50% on LIBOR loans and 0.75% to 1.50% on base rate loans, determined by the Company’s most recent consolidated leverage ratio. There was no penalty for prepayment of this facility.
The amounts borrowed as of December 31, 20182020 and 20172019 are as follows (dollars in thousands):
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | | | December 31,
2018 |
| December 31,
2017 | | December 31,
2020 | | December 31,
2019 |
| Amounts borrowed: | | | | Amounts borrowed: | | | |
| Revolving credit facility | $ | 18,000 |
| | $ | 42,000 |
| Revolving credit facility | $ | 20,000 | | | $ | 10,000 | |
| Less: deferred financing costs, net of accumulated amortization of $25 and $1,529 | (712 | ) | | (550 | ) | |
| Less: deferred financing costs, net of accumulated amortization of $319 and $172 | | Less: deferred financing costs, net of accumulated amortization of $319 and $172 | (417) | | | (565) | |
| Total borrowed | $ | 17,288 |
| | $ | 41,450 |
| Total borrowed | $ | 19,583 | | | $ | 9,435 | |
| | | | | | | | |
| Available to be borrowed under revolving facility | $ | 72,000 |
| | $ | 108,000 |
| Available to be borrowed under revolving facility | $ | 70,000 | | | $ | 80,000 | |
| | | | | |
| Interest rates: | | | | Interest rates: | |
| LIBOR rate loans: | | | | LIBOR rate loans: | |
| Interest margin | 1.75 | % | | 2.25 | % | Interest margin | 2.00 | % | | 1.75 | % |
| Actual interest rates | 4.25 | % | | 3.88 | % | Actual interest rates | 2.19 | % | | 3.56 | % |
| | Commitment Fee | | Commitment Fee | 0.35 | % | | 0.30 | % |
There are no scheduled payments until maturity of the Credit Agreement in November 2023.
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9.12. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases equipment and office space under operating leases expiring at various dates through December 2026. Future minimum lease payments under non-cancellable operating leases as of December 31, 2018 are as follows (in thousands):
|
| | | |
| 2019 | $ | 4,244 |
|
| 2020 | 3,710 |
|
| 2021 | 3,097 |
|
| 2022 | 2,540 |
|
| 2023 | 2,300 |
|
| 2024 and thereafter | 4,524 |
|
| Total minimum payments | $ | 20,415 |
|
Rent expense was $3.7 million, $4.9 million and $4.5 million for the years ended December 31, 2018, 2017, and 2016, respectively, and is included in General and Administrative expense in the Consolidated Statements of Operations.
Litigation
The Company is subject to various claims from taxing authorities, lawsuits and other complaints arising in the ordinary course of business. The Company records provisions for losses when claims become probable and the amounts are reasonably estimable. Although the outcome of these legal matters cannot be determined, it is the opinion of management that the final resolution of these matters will not have a material adverse effect on the Company’s financial condition, operations or liquidity.
During the first quarter of 2018, the Company recorded a $1.0 million liability related to a class action lawsuit regarding the applicability of provisions of the Fair Credit Reporting Act (the "FCRA") to one of our products. The recorded liability reflects a tentative settlement, which upon execution and final approval by the court, will resolve all remaining claims subject to the lawsuit. The lawsuit was brought by Ian Douglas, individually, as a representative of the class and on behalf of the general public, against DHI Group, Inc. and Dice Inc. asserting six claims under the FCRA that the Company'sCompany’s Open Web profiles are "consumer reports"“consumer reports” and Dice is a "consumer“consumer reporting agency"agency” under the FCRA, including claims pursuant to the private right of action in 15 U.S.C. Section 1681n for alleged willful violations of the FCRA. The action was originally filed in a federal district court on July 26, 2017, but as a part of the settlement process, the action has beenwas re-filed and is pending in the Superior Court of Santa Clara County, California (Case No. 18CV331732). The parties have moved for preliminary approvalrecorded liability reflected a settlement, which was subject to a final judgment, and was paid in the third quarter of 2019. The settlement resolved all remaining claims subject to the lawsuit, and final judgment approving the settlement which the court is scheduled to hear in March 2019.was entered on July 24, 2020.
Tax Contingencies
The Company operates in a number of tax jurisdictions and is routinely subject to examinations by various tax authorities with respect to income taxes and indirect taxes. The determination of the Company’s worldwide provision for taxes requires judgment and estimation. The Company has reserved for potential examination adjustments to our provision for income taxes and accrual of indirect taxes in amounts which the Company believes are reasonable.
10.13. EQUITY TRANSACTIONS
Stock Repurchase Plans— In May 2018, theThe Company's Board of Directors authorized("Board") approved a stock repurchase program that permits the purchase of upCompany to $7 million of the Company'srepurchase its common stock through May 2019. Under the plan, managementstock. Management has discretion in determining the conditions under which shares may be purchased from time to time. There were no stock repurchase plan in place during the year ended December 31, 2017. The following table summarizes the Stock Repurchase Plans approved by the Board of Directors:
| | | | | | | | | | | | | | |
| | |
| VIMay 2018 to May 2019 | VIIMay 2019 to May 2020 | May 2020 to May 2021 |
| Approval Date | December 2015 | | | May 2018 | April 2019 | May 2020 |
| Authorized Repurchase Amount of Common Stock | $50 million | | | $7 million |
Effective Dates | December 2015 to December 2016$7 million | May 2018 to May 2019$5 million |
78
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2020, the value of shares available to be purchased under the current plan was $1.1 million.
During the years ended December 31, 2018, 20172020, 2019 and 20162018, purchases of the Company’s common stock pursuant to Stock Repurchase Plans were as follows:
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2020 | | 2019 | | 2018 |
Shares repurchased[1] | | 3,548,265 | | | 848,760 | | | 1,086,420 | |
Average purchase price per share[2] | | $ | 2.38 | | | $ | 2.97 | | | $ | 1.82 | |
| Dollar value of shares repurchased (in thousands) | | $ | 8,436 | | | $ | 2,519 | | | $ | 1,977 | |
Unsettled shares repurchased[3] | | 63,451 | | | 4,310 | | | 26,337 | |
|
| | | | | | | | | | | |
| Period | | Total Number of Shares Purchased | | Average Price Paid per Share | | Approximate Dollar Value of Shares Purchased |
| Year Ended December 31, 2018 | | 1,086,420 |
| | $ | 1.82 |
| | $ | 1,977,483 |
|
| Year Ended December 31, 2017 | | — |
| | $ | — |
| | $ | — |
|
| Year Ended December 31, 2016 | | 3,946,396 |
| | $ | 7.27 |
| | $ | 28,709,000 |
|
There were 26,337 unsettled[2] Average price paid per share repurchases, which are included aboveincludes costs associated with the repurchases.
[3] Included in the number of shares purchasedrepurchased above
The Company's Board approved the retirement of 20 million shares of treasury stock during the first quarter of 2019 and, as a result, the Company reduced additional paid in capital by $161.6 million and Common Stock by $0.2 million during the quarter. The value of treasury stock retired was computed based on the average repurchase price of all treasury shares as of DecemberMarch 31, 2018. There were no unsettled shares repurchases as of December 31, 2017 and 2016.2019, which was $8.09 per share.
Convertible Preferred Stock—The Company has 20 million shares of convertible preferred stock authorized, with a $0.01 par value. No shares have been issued and outstanding since prior to our initial public offering in 2007. The rights, preferences, privileges and restrictions granted to and imposed on the convertible preferred stock are as set forth below. The Company currently has no preferred stock outstanding. The Company’s amended and restated certificate of incorporation permits the terms of any preferred stock to be determined at the time of issuance.
Dividend provisions
The preferred stockholders would be entitled to dividends only when dividends are paid to common shareholders. In the event of a dividend, the holders of the preferred shares would be entitled to share in the dividend on a pro rata basis, as if their shares had been converted into shares of common stock.
Conversion rights
Any holder of preferred stock has the right, at its option, to convert the preferred shares into shares of common stock at a ratio of one preferred stock share for one common stock share. The holders of 66 2/3% of all outstanding preferred stock have the right at any time to require all the outstanding shares of preferred stock to be converted into an equal number of shares of common stock. Voting rights include the right to vote at a special or annual meeting of stockholders on all matters entitled to be voted on by holders of common stock, voting together as a single class with the common stock. There are no redemption rights associated with the preferred stock.
Liquidation rights
Upon the occurrence of liquidation, the holders of the preferred shares shall be paid in cash for each share of preferred stock held, out of, but only to the extent of, the assets of the Company legally available for distribution to its stockholders, before any payment or distribution is made to any shareholders of common stock. The liquidation value is $2.17 per share, subject to adjustments for stock splits, stock dividends, combinations, or other recapitalizations of the preferred stock.
Dividends—No dividends have beenwere declared in 2018, 2017during the years ended December 31 2020, 2019 or 2016.2018. Our Credit Agreement limits our ability to declare and pay dividends. Refer to Note 811 “Indebtedness.”
Unclaimed Shareholder Liability—Prior to the third quarter of 2018, other long-term liabilities included $1.0 million due to former shareholders of the Company under a Joint Plan of Reorganization that was agreed to by the Company and two of its creditors, and confirmed by the U.S. Bankruptcy Court of the Southern District Court of New York on June 24, 2003. During the third quarter of 2018, the Company concluded the unclaimed amounts were no longer due and payable and further, such
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
amounts represent additional equity of the Company. Accordingly, the Company reclassified $1.0 million from other long-term liabilities to additional paid-in capital during the third quarter of 2018.
11.14. ACCUMULATED OTHER COMPREHENSIVE LOSS
FASB ASC topic on Comprehensive Income establishes standards for the reporting and display of comprehensive income (loss) and its components in a full set of general-purpose financial statements. This statement requires that all items that are required to be recognized as components of comprehensive income (loss) be reported in a financial statement with the same prominence as other financial statements. The Company had no amounts reclassified out of accumulated other comprehensive income for the years ended December 31, 2018, 2017,2020, 2019, and 2016.2018. The foreign currency translation adjustments impact comprehensive income (loss).income. Accumulated other comprehensive income (loss), net consists of the following components, net of tax (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Foreign currency translation: | | | | | |
| Balance at beginning of year | $ | (29,248) | | | $ | (31,236) | | | $ | (27,330) | |
| Translation adjustments | 729 | | | 1,988 | | | (3,906) | |
| Balance at end of year | $ | (28,519) | | | $ | (29,248) | | | $ | (31,236) | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
| | | | | | | | | | | |
| | Year Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Foreign currency translation: | | | | | |
| Balance at beginning of year | $ | (27,330 | ) | | $ | (32,276 | ) | | $ | (20,468 | ) |
| Translation adjustments | (3,906 | ) | | 4,946 |
| | (11,808 | ) |
| Balance at end of year | $ | (31,236 | ) | | $ | (27,330 | ) | | $ | (32,276 | ) |
12.15. DISPOSITION RELATED AND OTHER COSTS
In May 2017, the Company announced plans to divest a number of its online professional communities to achieve greater focus and resource allocation toward its core tech-focused business. The planned divestitures included: BioSpace (transferred majority ownership to BioSpace management on January 31, 2018)2018 and sold the remaining interest during the second quarter of 2020), Hcareers (sold May 22, 2018), Health eCareers (sold December 4, 2017), and Rigzone (sold the RigLogix portion of the Rigzone business on February 22, 2018 and transferred majority ownership of the remaining Rigzone business to Rigzone management on August 31, 2018). Additionally, the Company ceased the Dice Europe operations on August 31, 2018 and vacated certain offices during 2018. In connection with the planned divestitures and reorganization to the tech-focused strategy, the Company incurred certain costs, including severance and retention, lease exit, business closure, professional fees related to activist shareholders, search, financial advisory, and legal services, and other costs to further these strategic objectives. The activities associated with disposition related and other costs were substantially completed during the year ended December 31, 2019.
The following table displays a roll forward of the disposition related and other costs and related liability balances (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Accrual at December 31, 2019 | | Expense | | Cash Payments | | | | Accrual at December 31, 2020 |
| Severance and retention | $ | 145 | | | $ | 0 | | | $ | (145) | | | | | $ | 0 | |
| Lease exit and related asset impairment costs | 365 | | | 0 | | | (117) | | | | | 248 | |
| Total disposition related and other costs | $ | 510 | | | $ | 0 | | | $ | (262) | | | | | $ | 248 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Accrual at December 31, 2018 | | Expense | | Cash Payments | | | | Accrual at December 31, 2019 |
| Severance and retention | $ | 1,089 | | | $ | 1,258 | | | $ | (2,202) | | | | | $ | 145 | |
| Professional fees and other costs | 1,271 | | | 442 | | | (1,713) | | | | | 0 | |
| Lease exit and related asset impairment costs | 947 | | | 0 | | | (582) | | | | | 365 | |
| Total disposition related and other costs | $ | 3,307 | | | $ | 1,700 | | | $ | (4,497) | | | | | $ | 510 | |
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | | | Accrual at December 31, 2017 | | Expense | | Cash Payments | | Non-cash Impairment | | Accrual at December 31, 2018 | | Accrual at December 31, 2017 | | Expense | | Cash Payments | | Non-cash Impairment | | | Accrual at December 31, 2018 |
| Severance and retention | $ | 1,237 |
| | $ | 3,191 |
| | $ | (3,339 | ) | | $ | — |
| | $ | 1,089 |
| Severance and retention | $ | 1,237 | | | $ | 3,191 | | | $ | (3,339) | | | $ | 0 | | | | $ | 1,089 | |
| Professional fees and other costs | 825 |
| | 2,914 |
| | (2,468 | ) | | — |
| | 1,271 |
| Professional fees and other costs | 825 | | | 2,914 | | | (2,468) | | | 0 | | | | 1,271 | |
| Lease exit and related asset impairment costs | — |
| | 1,514 |
| | (399 | ) | | (168 | ) | | 947 |
| Lease exit and related asset impairment costs | 0 | | | 1,514 | | | (399) | | | (168) | | | | 947 | |
| Total disposition related and other costs | $ | 2,062 |
| | $ | 7,619 |
| | $ | (6,206 | ) | | $ | (168 | ) | | $ | 3,307 |
| Total disposition related and other costs | $ | 2,062 | | | $ | 7,619 | | | $ | (6,206) | | | $ | (168) | | | | $ | 3,307 | |
|
| | | | | | | | | | | | | | | |
| | Accrual at December 31, 2016 | | Expense | | Cash Payments | | Accrual at December 31, 2017 |
| Severance and retention | $ | — |
| | $ | 3,112 |
| | $ | (1,875 | ) | | $ | 1,237 |
|
| Professional fees | — |
| | 1,634 |
| | (809 | ) | | 825 |
|
| Total disposition related and other costs | $ | — |
| | $ | 4,746 |
| | $ | (2,684 | ) | | $ | 2,062 |
|
In January 2016, the Company completed the sale of Slashdot Media and incurred severance costs and additional stock based compensation expense for the acceleration of stock vesting. The Company recognized a loss on the sale of assets of Slashdot Media.
The following table displays the disposition related and other costs incurred during the year ended December 31, 2016 (in thousands):
|
| | | | | | | | |
Severance—Slashdot Media | | | | | | $ | 981 |
|
Accelerated stock based compensation expense—Slashdot Media | | | | | | 900 |
|
| Loss on sale of Slashdot Media | | | | | | 639 |
|
| Severance related to other brands | | | | | | 827 |
|
| Total | | | | | | $ | 3,347 |
|
13.16. STOCK BASED COMPENSATION
Under the 2012 Omnibus Equity Award Plan, the Company has granted stock options, restricted stock and Performance-Based Restricted Stock Units (“PSUs”) to certain employees and directors. On January 1, 2017, as a result of ASU No. 2016-09 as discussed in Note 2, theThe Company began recordingrecords expense based upon the number of awards outstanding with no estimate for forfeitures.
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
forfeitures. Previously, the Company estimated forfeitures that it expected would occur and recorded expense based upon the number of awards expected to vest.
The Company recorded stock based compensation expense of $6.3 million, $5.7 million, and $6.6 million and $8.6 million induring the years ended December 31, 2020, 2019, and 2018, and 2017, respectively. During the year ended December 31, 2016, the Company recorded $11.1 million, which included $0.9 million of accelerated compensation due to the sale of Slashdot Media as shown in Note 12. At December 31, 2018,2020, there was $8.8$9.0 million of unrecognized compensation expense related to unvested awards, which is expected to be recognized over a weighted-average period of approximately 1.51.3 years.
In connection with the employment agreement for the Company's new Chief Executive Officer, the Company granted, as Inducement Grants Under NYSE Rule 303A.08, 1,750,000 restricted stock units during the second quarter of 2018 and 750,000 performance based restricted stock units during the fourth quarter of 2018 to the Company's new Chief Executive Officer.
Restricted Stock—Restricted stock is granted to employees of the Company and its subsidiaries, and to non-employee members of the Company’s Board. These shares are part of the compensation plan for services provided by the employees or Board members. The closing price of the Company’s stock on the date of grant is used to determine the fair value of the grants. The expense related to the restricted stock grants is recorded over the vesting period as described below. There was no cash flow impact resulting from the grants.
The restricted stock vests in various increments either quarterly or on the anniversaries of each grant, subject to the recipient’s continued employment or service through each applicable vesting date. Vesting occurs over one year for Board members and over two to four years for employees.
A summary of the status of restricted stock awards as of December 31, 2018, 2017,2020, 2019, and 20162018 and the changes during the periods then ended is presented below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2020 | | 2019 | | 2018 |
| Shares | | Weighted- Average Fair Value at Grant Date | | Shares | | Weighted- Average Fair Value at Grant Date | | Shares | | Weighted- Average Fair Value at Grant Date |
| Non-vested at beginning of the period | 3,994,787 | | | $ | 2.46 | | | 4,518,932 | | | $ | 2.32 | | | 2,393,257 | | | $ | 5.48 | |
| Granted | 2,172,550 | | | $ | 2.67 | | | 2,257,940 | | | $ | 2.72 | | | 4,087,342 | | | $ | 1.68 | |
| Forfeited | (430,136) | | | $ | 2.81 | | | (560,375) | | | $ | 2.75 | | | (439,750) | | | $ | 4.20 | |
| Vested | (1,859,348) | | | $ | 2.58 | | | (2,221,710) | | | $ | 2.36 | | | (1,521,917) | | | $ | 5.03 | |
| Non-vested at end of period | 3,877,853 | | | $ | 2.49 | | | 3,994,787 | | | $ | 2.46 | | | 4,518,932 | | | $ | 2.32 | |
|
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| | Shares | | Weighted- Average Fair Value at Grant Date | | Shares | | Weighted- Average Fair Value at Grant Date | | Shares | | Weighted- Average Fair Value at Grant Date |
| Non-vested at beginning of the period | 2,393,257 |
| | $ | 5.48 |
| | 2,226,375 |
| | $ | 7.87 |
| | 2,122,225 |
| | $ | 8.54 |
|
| Granted | 4,087,342 |
| | $ | 1.68 |
| | 1,724,500 |
| | $ | 4.05 |
| | 1,302,375 |
| | $ | 7.33 |
|
| Forfeited | (439,750 | ) | | $ | 4.20 |
| | (655,000 | ) | | $ | 6.54 |
| | (327,750 | ) | | $ | 8.17 |
|
| Vested | (1,521,917 | ) | | $ | 5.03 |
| | (902,618 | ) | | $ | 7.89 |
| | (870,475 | ) | | $ | 8.58 |
|
| Non-vested at end of period | 4,518,932 |
| | $ | 2.32 |
| | 2,393,257 |
| | $ | 5.48 |
| | 2,226,375 |
| | $ | 7.87 |
|
PSUs—PSUs are granted to employees of the Company and its subsidiaries. These shares are granted under two compensation agreements that are for services provided by the employees. UnderThe first agreement expired and was terminated during the first agreement, with grants during the years ended December 31, 2016 and 2017, the fair valuequarter of PSUs are measured using the Monte Carlo pricing model. The expense related to these PSUs are recorded over the vesting period. These shares will vest on the dates the Compensation Committee certifies the Company’s achievement2020.
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Under the second agreement, the fair value of the PSUs are measured at the grant date fair value of the award, which was determined based on an analysis of the probable performance outcomes. The performance period is over one year and is based on the achievement of bookings targets during the yearyears ended December 31, 2020 and 2019, as defined in the agreement. The earned shares will then vest over a three year period, one-third on each of the first, second, and third anniversaries of the grant date, or if later, the date the Compensation Committee certifies the performance results with respect to the performance period. For the performance period ending December 31, 2020, as a result of the COVID-19 pandemic and its impact on the overall economy, the bookings targets were modified during the third quarter of 2020. Accordingly, the Company remeasured the awards. As of December 31, 2020, there were 1,352,438 unvested shares related to the second agreement.
There waswere no cash flow impact resulting from the grants.
The fair value of PSUs measured using the Monte Carlo pricing model utilized the following assumptions:
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
| | | | | | | | |
| | Year Ended December 31, |
| | | 2017 | | 2016 |
| Weighted average fair value of PSUs granted | | $ | 5.38 |
| | $ | 7.24 |
|
| Dividend yield of DHI Group, Inc. stock | | — | % | | — | % |
| Dividend yield of Russell 2000 Index | | 1.4 | % | | 1.7 | % |
| Risk free interest rate | | 1.5 | % | | 0.9 | % |
| Volatility of DHI Group, Inc. stock | | 41.0 | % | | 33.5 | % |
| Volatility of Russell 2000 Index | | 16.7 | % | | 16.7 | % |
A summary of the status of PSUs as of December 31, 2018, 2017,2020, 2019, and 20162018 and the changes during the periods then ended, is presented below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2020 | | 2019 | | 2018 |
| Shares | | Weighted- Average Fair Value at Grant Date | | Shares | | Weighted- Average Fair Value at Grant Date | | Shares | | Weighted- Average Fair Value at Grant Date |
| Non-vested at beginning of the period | 1,664,650 | | | $ | 2.53 | | | 1,255,000 | | | $ | 3.45 | | | 760,003 | | | $ | 6.92 | |
| Granted | 911,460 | | | $ | 2.65 | | | 837,150 | | | $ | 2.54 | | | 750,000 | | | $ | 1.58 | |
| Forfeited | (695,628) | | | $ | 3.26 | | | (427,500) | | | $ | 5.26 | | | (255,003) | | | $ | 8.27 | |
| Vested | (528,044) | | | $ | 1.88 | | | 0 | | | $ | 0 | | | 0 | | | $ | 0 | |
| Non-vested at end of period | 1,352,438 | | | $ | 2.50 | | | 1,664,650 | | | $ | 2.53 | | | 1,255,000 | | | $ | 3.45 | |
|
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| | Shares | | Weighted- Average Fair Value at Grant Date | | Shares | | Weighted- Average Fair Value at Grant Date | | Shares | | Weighted- Average Fair Value at Grant Date |
| Non-vested at beginning of the period | 760,003 |
| | $ | 6.92 |
| | 580,004 |
| | $ | 8.02 |
| | 415,000 |
| | $ | 9.25 |
|
| Granted | 750,000 |
| | $ | 1.58 |
| | 397,500 |
| | $ | 5.38 |
| | 417,500 |
| | $ | 7.24 |
|
| Forfeited | (255,003 | ) | | $ | 8.27 |
| | (217,501 | ) | | $ | 7.04 |
| | (98,751 | ) | | $ | 8.17 |
|
| Vested | — |
| | $ | — |
| | — |
| | $ | — |
| | (153,745 | ) | | $ | 9.13 |
|
| Non-vested at end of period | 1,255,000 |
| | $ | 3.45 |
| | 760,003 |
| | $ | 6.92 |
| | 580,004 |
| | $ | 8.02 |
|
Stock Options—The fair value of each option grant is estimated using the Black-Scholes option-pricing model using the weighted-average assumptions in the table below. This valuation model requires the Company to make assumptions and judgments about the variables used in the calculation, including the fair value of the Company’s common stock, the expected life (the period of time that the options granted are expected to be outstanding), the volatility of the Company’s common stock, a risk-free interest rate and expected dividends. The expected life of options granted is derived from historical exercise behavior. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury rates in effect at the time of grant. The stock options vest 25% after one year, beginning on the first anniversary date of the grant, and 6.25% each quarter following the first anniversary. There was no cash flow impact resulting from the grants. No stock options were granted during the years ended December 31, 2018, 2017,2020, 2019, and 2016.2018.
A summary of the status of options previously granted as of December 31,
2018, 2017,2020, 2019, and
2016,2018, and the changes during the periods then ended is presented below:
| | | | Year Ended December 31, 2018 | | Year Ended December 31, 2020 |
| | Options | | Weighted-Average Exercise Price | | Aggregate Intrinsic Value | | Options | | Weighted-Average Exercise Price | | Aggregate Intrinsic Value |
| Options outstanding at January 1 | 1,101,875 |
| | $ | 9.28 |
| | $ | — |
| Options outstanding at January 1 | 190,000 | | | $ | 8.28 | | | $ | 0 | |
| Exercised | — |
| | $ | — |
| | $ | — |
| |
| | Forfeited | (774,875 | ) | | $ | 9.67 |
| | — |
| Forfeited | (80,000) | | | $ | 9.48 | | | — | |
| Options outstanding at December 31 | 327,000 |
| | $ | 8.35 |
| | $ | — |
| Options outstanding at December 31 | 110,000 | | | $ | 7.40 | | | $ | 0 | |
| Exercisable at December 31 | 327,000 |
| | $ | 8.35 |
| | $ | — |
| Exercisable at December 31 | 110,000 | | | $ | 7.40 | | | $ | 0 | |
| | | | | | | |
|
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2019 |
| Options | | Weighted-Average Exercise Price | | Aggregate Intrinsic Value |
| Options outstanding at January 1 | 327,000 | | | $ | 8.35 | | | $ | 0 | |
| | | | | |
| Forfeited | (137,000) | | | $ | 8.46 | | | — | |
| Options outstanding at December 31 | 190,000 | | | $ | 8.28 | | | $ | 0 | |
| Exercisable at December 31 | 190,000 | | | $ | 8.28 | | | $ | 0 | |
| | | | | |
| | | | | |
| | | | Year Ended December 31, 2017 | | Year Ended December 31, 2018 |
| | Options | | Weighted-Average Exercise Price | | Aggregate Intrinsic Value | | Options | | Weighted-Average Exercise Price | | Aggregate Intrinsic Value |
| Options outstanding at January 1 | 1,779,613 |
| | $ | 8.46 |
| | $ | 50,869 |
| Options outstanding at January 1 | 1,101,875 | | | $ | 9.28 | | | $ | 0 | |
| Exercised | (66,188 | ) | | $ | 6.08 |
| | $ | 12,821 |
| |
| | Forfeited | (611,550 | ) | | $ | 7.25 |
| | — |
| Forfeited | (774,875) | | | $ | 9.67 | | | — | |
| Options outstanding at December 31 | 1,101,875 |
| | $ | 9.28 |
| | $ | — |
| Options outstanding at December 31 | 327,000 | | | $ | 8.35 | | | $ | 0 | |
| Exercisable at December 31 | 1,076,155 |
| | $ | 9.32 |
| | $ | — |
| Exercisable at December 31 | 327,000 | | | $ | 8.35 | | | $ | 0 | |
| Options expected to Vest at December 31 | 25,720 |
| | $ | 7.43 |
| | | |
| | | | | | | |
|
| | | | | | | | | | |
| | Year Ended December 31, 2016 |
| | Options | | Weighted-Average Exercise Price | | Aggregate Intrinsic Value |
| Options outstanding at January 1 | 2,673,512 |
| | $ | 7.46 |
| | $ | 5,485,248 |
|
| Exercised | (641,710 | ) | | $ | 4.37 |
| | $ | 2,209,260 |
|
| Forfeited | (252,189 | ) | | $ | 8.20 |
| | — |
|
| Options outstanding at December 31 | 1,779,613 |
| | $ | 8.46 |
| | $ | 50,869 |
|
| Exercisable at December 31 | 1,552,642 |
| | $ | 8.52 |
| | $ | 50,869 |
|
In connection with the Company’s sale of Slashdot Media, the Company accelerated the vesting of 130,375 shares of restricted stock and 24,001 stock options to certain former employees during the year ended December 31, 2016, the expense of which is recorded in Disposition Related and Other Costs in the Consolidated Statements of Operations.
The weighted-average remaining contractual term of options exercisable at December 31, 20182020 is 1.50.2 years. The following table summarizes information about options outstanding as of December 31, 2018:2020:
| | | | | | | | | | | | | | | | | |
| | Options Outstanding | | Options
Exercisable |
| Exercise Price | Number
Outstanding | | Weighted-
Average
Remaining
Contractual
Life | | Number
Exercisable |
| | | | (in years) | | |
| $ 7.00 - $ 7.99 | 100,000 | | | 0.1 | | 100,000 | |
| $ 8.00 - $ 8.99 | 10,000 | | | 0.8 | | 10,000 | |
| | | | | |
| | | | | |
| 110,000 | | | | | 110,000 | |
|
| | | | | | | | |
| | Options Outstanding | | Options Exercisable |
| Exercise Price | Number Outstanding | | Weighted- Average Remaining Contractual Life | | Number Exercisable |
| | | | (in years) | | |
| $ 7.00 - $ 7.99 | 155,000 |
| | 2.1 |
| | 155,000 |
|
| $ 8.00 - $ 8.99 | 92,000 |
| | 0.8 |
| | 92,000 |
|
| $ 9.00 - $ 9.99 | 80,000 |
| | 1.1 |
| | 80,000 |
|
| | 327,000 |
| | | | 327,000 |
|
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14.17. INCOME TAXES
Deferred tax assets (liabilities) included in the balance sheet as of December 31, 20182020 and 20172019 are as follows (in thousands):
| | | | 2018 | | 2017 | | 2020 | | 2019 |
| Deferred tax assets: | | | | Deferred tax assets: | | | |
| Net operating loss carryforward | $ | 71 |
| | $ | 168 |
| Net operating loss carryforward | $ | 389 | | | $ | 0 | |
| Capital loss carryforward | 5,263 |
| | — |
| Capital loss carryforward | 5,225 | | | 5,044 | |
| Allowance for doubtful accounts | 145 |
| | 272 |
| Allowance for doubtful accounts | 255 | | | 150 | |
| Provision for accrued expenses and other, net | 1,621 |
| | 1,300 |
| Provision for accrued expenses and other, net | 1,577 | | | 792 | |
| Stock based compensation | 2,603 |
| | 3,770 |
| |
| Stock-based compensation | | Stock-based compensation | 1,872 | | | 2,162 | |
| Deferred revenue | 537 |
| | 920 |
| Deferred revenue | 127 | | | 211 | |
| Tax credit carryforward | 272 |
| | — |
| Tax credit carryforward | 258 | | | 146 | |
| | 10,512 |
| | 6,430 |
| | 9,703 | | | 8,505 | |
| Less valuation allowance | 5,305 |
| | 224 |
| Less valuation allowance | 5,343 | | | 5,072 | |
| Deferred tax asset, net of valuation allowance | 5,207 |
| | 6,206 |
| Deferred tax asset, net of valuation allowance | 4,360 | | | 3,433 | |
| Deferred tax liabilities: | | | | Deferred tax liabilities: | | | |
| Acquired intangibles | (10,374 | ) | | (10,933 | ) | Acquired intangibles | (6,187) | | | (10,253) | |
| Depreciation of fixed assets | (3,291 | ) | | (3,049 | ) | Depreciation of fixed assets | (6,327) | | | (4,288) | |
| Capitalized contract costs | (1,850 | ) | | — |
| Capitalized contract costs | (1,763) | | | (1,708) | |
| Deferred tax liabilities | (15,515 | ) | | (13,982 | ) | |
| Deferred tax liability | | Deferred tax liability | (14,277) | | | (16,249) | |
| Net deferred tax liability | $ | (10,308 | ) | | $ | (7,776 | ) | Net deferred tax liability | $ | (9,917) | | | $ | (12,816) | |
| Recognized in Consolidated Balance Sheets: | | | | Recognized in Consolidated Balance Sheets: | | | |
| Deferred tax asset | 136 |
| | 469 |
| Deferred tax asset | 19 | | | 7 | |
| Deferred tax liability | (10,444 | ) | | (8,245 | ) | Deferred tax liability | (9,936) | | | (12,823) | |
| Net deferred tax liability | $ | (10,308 | ) | | $ | (7,776 | ) | Net deferred tax liability | $ | (9,917) | | | $ | (12,816) | |
The Company had deferred tax assets of $0.1$0.4 million and $0.2 million, respectively, at December 31, 2018 and 20172020 related to net operating loss carryforwards; $5.3$5.2 million and $5.0 million, respectively, at December 31, 20182020 and 2019 related to capital loss carryforwards; and $0.3 million and $0.1 million, respectively, at December 31, 20182020 and 2019 related to tax credit carryforwards. The Company had no capital loss or tax credit carryforwards at December 31, 2017. The net operating losses expire in various years through 2037 and theloss carryforward period is indefinite. The capital losses expire in 2023.2023 through 2025. The tax credit carryforward period is indefinite.credits expire in 2029. The Company has recorded valuation allowances of $5.3 million and $0.2$5.1 million, respectively, at December 31, 20182020 and 20172019 in order to measure only the portion of the deferred tax assets which are more likely than not to be realized.
Tax expense (benefit) for the years ended December 31, 2018, 2017 and 2016 isIncome (loss) before income taxes are as follows (in thousands):
|
| | | | | | | | | | | |
| | 2018 | | 2017 | | 2016 |
| Current income tax expense (benefit): | | | | | |
| Federal | $ | (1,299 | ) | | $ | 1,984 |
| | $ | 5,048 |
|
| State | (119 | ) | | (285 | ) | | 931 |
|
| Foreign | 1,570 |
| | 1,504 |
| | 2,259 |
|
| Current income tax expense | 152 |
| | 3,203 |
| | 8,238 |
|
| Deferred income tax expense (benefit): | | | | | |
| Federal | 1,387 |
| | (207 | ) | | (891 | ) |
| State | 104 |
| | 329 |
| | 192 |
|
| Foreign | 785 |
| | 94 |
| | (2,260 | ) |
| Deferred income tax expense (benefit) | 2,276 |
| | 216 |
| | (2,959 | ) |
| Income tax expense | $ | 2,428 |
| | $ | 3,419 |
| | $ | 5,279 |
|
| | | | | | | | | | | | | | | | | |
| 2020 | | 2019 | | 2018 |
| United States | $ | (5,628) | | | $ | 10,882 | | | $ | 762 | |
| Foreign | (26,806) | | | 5,442 | | | 8,840 | |
| Income (loss) before income taxes | $ | (32,434) | | | $ | 16,324 | | | $ | 9,602 | |
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tax expense (benefit) for the years ended December 31, 2020, 2019 and 2018 is as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| | 2020 | | 2019 | | 2018 |
| Current income tax expense (benefit): | | | | | |
| Federal | $ | 244 | | | $ | 524 | | | $ | (1,299) | |
| State | 173 | | | 72 | | | (119) | |
| Foreign | 82 | | | 684 | | | 1,570 | |
| Current income tax expense | 499 | | | 1,280 | | | 152 | |
| Deferred income tax expense (benefit): | | | | | |
| Federal | (2,025) | | | 1,660 | | | 1,387 | |
| State | (461) | | | 539 | | | 104 | |
| Foreign | (432) | | | 294 | | | 785 | |
| Deferred income tax expense (benefit) | (2,918) | | | 2,493 | | | 2,276 | |
| Income tax expense (benefit) | $ | (2,419) | | | $ | 3,773 | | | $ | 2,428 | |
A reconciliation between the tax expense at the federal statutory rate and the reported income tax expense is summarized as follows:
| | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| Federal statutory rate | $ | (6,811) | | | $ | 3,428 | | | $ | 2,016 | |
| Gain (loss) on sale of businesses | (42) | | | 84 | | | (6,111) | |
| Stock-based compensation | 482 | | | 380 | | | 2,112 | |
| Nondeductible impairment | 5,274 | | | 0 | | | 0 | |
| State taxes, net of federal effect | (315) | | | 467 | | | (38) | |
| Difference between foreign and U.S. rates | 32 | | | (192) | | | (102) | |
| Change in accrual for unrecognized tax benefits | (437) | | | 107 | | | (1,179) | |
| U.S. tax on global intangible low-taxed income, net of credits | 0 | | | 84 | | | 229 | |
| Executive compensation | 323 | | | 147 | | | 126 | |
| Currency translation gains (losses) | (278) | | | (67) | | | 219 | |
| U.S. transition tax on foreign earnings | 0 | | | 140 | | | 368 | |
| Research and development tax credits | (530) | | | (557) | | | (481) | |
| Change in valuation allowances | (30) | | | 12 | | | 5,117 | |
| Other | (87) | | | (260) | | | 152 | |
| Income tax expense (benefit) | $ | (2,419) | | | $ | 3,773 | | | $ | 2,428 | |
| Effective tax rate | 7.5 | % | | 23.1 | % | | 25.3 | % |
|
| | | | | | | | | | | |
| | Year Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Federal statutory rate | $ | 2,016 |
| | $ | 6,789 |
| | $ | (42 | ) |
| Gain (loss) on sale of businesses | (6,111 | ) | | (1,571 | ) | | — |
|
| Stock-based compensation | 2,112 |
| | 1,414 |
| | — |
|
| Nondeductible impairment | — |
| | — |
| | 5,287 |
|
| State taxes, net of federal effect | (38 | ) | | 35 |
| | 756 |
|
| Difference between foreign and U.S. rates | (102 | ) | | (1,054 | ) | | 297 |
|
| Change in accrual for unrecognized tax benefits | (1,179 | ) | | 1,003 |
| | (923 | ) |
| U.S. tax on global intangible low-taxed income, net of credits | 229 |
| | — |
| | — |
|
| Executive compensation | 126 |
| | — |
| | — |
|
| Currency translation gains | 219 |
| | — |
| | — |
|
| Gross tax on foreign dividend | — |
| | 275 |
| | 5,084 |
|
| Foreign tax credits | — |
| | (275 | ) | | (4,244 | ) |
| U.S. transition tax on foreign earnings | 368 |
| | 2,962 |
| | — |
|
| Federal rate change impact on deferred tax liabilities | — |
| | (3,281 | ) | | — |
|
| Research and development tax credits | (481 | ) | | (1,764 | ) | | (173 | ) |
| Change in valuation allowances | 5,117 |
| | (780 | ) | | (713 | ) |
| Other | 152 |
| | (334 | ) | | (50 | ) |
| Income tax expense | $ | 2,428 |
| | $ | 3,419 |
| | $ | 5,279 |
|
| Effective tax rate | 25.3 | % | | 17.6 | % | | (4,436.1 | )% |
H.R.1, commonly known as the Tax Cuts and Jobs Act (“TCJA”), was signed into law in December 2017 and made significant changes to the Internal Revenue Code. Changes included a reduction in the U.S. statutory federal tax rate from 35% to 21%; the transition of U.S. international taxation from a worldwide tax system to a territorial system; a one-time transition tax on the deemed repatriation of undistributed earnings from foreign subsidiaries; and a tax on global intangible low-taxed income earned by foreign subsidiaries.
Subsequent to enactment of the TCJA in December 2017, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to provide guidance regarding accounting for the TCJA’s impact. SAB 118 required companies to recognize those tax items for which accounting had been completed. For items whose accounting had not been completed, companies were required to recognize provisional amounts to the extent they were reasonably estimable, with subsequent adjustments over a measurement period as more information was available and calculations were finalized. The measurement period provided in SAB 118 concluded as of December 2018.
As of December 31, 2017, the Company applied the guidance of SAB 118 and recorded a provisional decrease of $3.3 million in its deferred tax liabilities to reflect the new U.S. statutory rate of 21%; and recorded a liability of $3.0 million less tax credits of $1.4 million for a $1.6 million provisional estimate of the transition tax on the deemed repatriation of foreign earnings.
2017. In the year ended December 31, 2018, the Company completed its analysis of the impact of the TCJA on its deferred tax liabilities and itsliability for the one-time transition tax liability. No change was made toon the provisional adjustmentdeemed repatriation of the deferred tax liabilities. For the transition tax, theundistributed earnings from foreign subsidiaries. The Company recognized a measurement-periodan adjustment on the basis of revised foreign earnings computations and additional guidance issued by U.S. federal and state tax authorities. The adjustment increased the transition tax liability to $2.0 million,authorities, resulting in tax expense of $0.4 million.
The Company had asserted as of December 31, 2016 that with the exception of its Canada subsidiary, all unremitted earnings of foreign subsidiaries were indefinitely reinvested outside the U.S. As of December 31, 2017, the Company indicated that it was evaluating the impact of the TCJA on the Company's existing accounting position with regard to indefinite reinvestment, including an analysis of the potential U.S. and foreign tax liabilities that could result from future repatriations. The Company completed this
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
evaluation in In the year ended December 31, 2018 and made no change to2019, the Company increased its indefinite reinvestment position. The Company also sold its Canada subsidiary during 2018. As of December 31, 2018, undistributed earnings of all foreign subsidiaries will continue to be indefinitely reinvested outside the U.S., and taxes that would result from distributions have not been provided as determination of the deferredtransition tax liability is not practicable.
The TCJA established new rules designed to reflect further guidance issued by tax U.S. companies on global intangible low-taxed income ("GILTI") earned by foreign subsidiaries. Companies can make an accounting policy election either to recognize deferred taxes for temporary basis differences related to GILTI; or to recognize tax expense as current period cost in the period when the tax related to GILTI is incurred. As of December 31, 2017, the Company indicated that it was evaluating its policy election alternatives and the impact of GILTI on tax expense. The Company completed this evaluation in the year ended December 31, 2018 and elected to treat tax expense related to GILTI as a current period cost. The Company determined its GILTI liability for 2018 to be $0.4 million less tax credits of $0.2 million,authorities, resulting in tax expense of $0.2$0.1 million.
The Company recorded impairment charges of zero, $2.2 million, and $24.6 million for the years ended December 31, 2018, 2017, and 2016, respectively. Of the total impairment, the amount relating to non-deductible goodwill in 2016 was $15.4 million, which caused tax expense to exceed the expected expense at statutory tax rates by $5.3 million. The amount of non-deductible goodwill was zero in 2018 and 2017.
Prior to December 2016, the Company had asserted under ASC 740-30 that all unremitted earnings of its foreign subsidiaries were indefinitely invested. The Company evaluates this assertion based on a number of factors, including the operating plans, budgets, and forecasts for both the Company and its foreign subsidiaries; the long-term and short-term financial requirements in the U.S. and in each foreign jurisdiction; and the tax consequences of any decision to repatriate earnings of foreign subsidiaries to the U.S. In the fourth quarter of 2016, the Company evaluated a tax planning strategy related to the utilization of foreign tax credits on its U.S. federal tax return. Absent the strategy, the Company believed that it would not realize any of the credits during the allowable carryforward period under U.S. law. The Company concluded in December 2016 that it would implement the strategy, thus impacting the tax consequences of repatriation by enabling greater utilization of foreign tax credits. As a result, the Company changed its assertion regarding the indefinite reinvestment of its Canada subsidiary’s foreign earnings, but did not change its assertion with regard to the undistributed earnings of all other foreign subsidiaries. The Company recorded a tax liability of $0.8 million at December 31, 2016 reflecting the repatriation of $16.4 million from Canada to the U.S. All cumulative earnings of the Canada subsidiary through December 31, 2016 were distributed, so no additional accrual for deferred taxes related to earnings of the Canada subsidiary was required. The Company also recorded a tax benefit of $0.7 million in the year ended December 31, 2016 to record the partial release of a valuation allowance related to its foreign tax credit carryforwards.
An uncertain tax position represents the Company’s expected treatment of a tax position taken in a filed tax return, or planned to be taken in a tax return not yet filed, that has not been reflected in measuring income tax expense for financial reporting purposes. At December 31, 20182020 and 2017,2019, the Company has recorded a liability of $1.7$1.3 million and $2.9$1.8 million, respectively, which consists of unrecognized tax benefits of $1.4$1.2 million and $2.5$1.4 million, respectively, and estimated accrued interest and penalties of $0.3$0.1 million and $0.4 million, respectively. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. During the years ended December 31, 2018, 20172020, 2019 and 2016,2018, interest expense (income) and penalties recorded in the Consolidated Statements of Operations were $(214,000), $94,000 and $(61,000), $(41,000) and $(86,000), respectively.
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Following is a reconciliation of the amounts of unrecognized tax benefits, net of tax and excluding interest and penalties, for the years ended December 31, 2018, 20172020, 2019 and 20162018 (in thousands):
| | | | 2018 | | 2017 | | 2016 | | 2020 | | 2019 | | 2018 |
| Unrecognized tax benefits—beginning of period | $ | 2,539 |
| | $ | 2,153 |
| | $ | 2,989 |
| Unrecognized tax benefits—beginning of period | $ | 1,434 | | | $ | 1,422 | | | $ | 2,539 | |
| Increases in tax positions related to current year | 330 |
| | 278 |
| | 117 |
| Increases in tax positions related to current year | 134 | | | 163 | | | 330 | |
| Increases in tax positions related to prior year | — |
| | 646 |
| | — |
| Increases in tax positions related to prior year | 0 | | | 41 | | | 0 | |
| Decreases in tax positions related to prior year | (9 | ) | | — |
| | (43 | ) | Decreases in tax positions related to prior year | 0 | | | 0 | | | (9) | |
| Settlements with taxing authorities | (838 | ) | | — |
| | — |
| Settlements with taxing authorities | 0 | | | 0 | | | (838) | |
| Lapse of statute of limitations | (600 | ) | | (538 | ) | | (910 | ) | Lapse of statute of limitations | (360) | | | (192) | | | (600) | |
| Unrecognized tax benefits—end of period | $ | 1,422 |
| | $ | 2,539 |
| | $ | 2,153 |
| Unrecognized tax benefits—end of period | $ | 1,208 | | | $ | 1,434 | | | $ | 1,422 | |
The foregoing table indicates unrecognized tax benefits, net of tax and excluding interest and penalties. The balance of gross unrecognized benefits was $1.3 million, $1.5 million, $2.7 million, and $2.9$1.5 million at December 31, 2018, 20172020, 2019 and 2016,2018, respectively. If the unrecognized tax benefits at December 31, 2018, 20172020, 2019 and 20162018 were recognized in full, tax benefits of $1.7$1.3 million, $2.9$1.8 million and $2.5$1.7 million, respectively, would affect the effective tax rate.
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company files income tax returns in the U.S. and various foreign jurisdictions. The Company is generally no longer subject to examinations by U.S. federal tax authorities for tax years prior to 2015,2017, or by U.S. state and foreign authorities for tax years prior to 2014.2016. The Company believes it is reasonably possible that as much as $0.2$0.4 million of its unrecognized tax benefits may be recognized by the end of 20192021 as a result of a lapse of the statute of limitations.
15.
18. EMPLOYEE SAVINGS PLAN
The Company has a savings plan (the “Savings Plan”) that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under the Savings Plan, participating employees may defer a portion of their pretax earnings, up to the Internal Revenue Service annual contribution limit. The Company contributed $1.3$1.6 million, $1.7$1.4 million, and $1.7$1.3 million for the years ended December 31, 2018, 20172020, 2019 and 2016,2018, respectively, to match employee contributions to the Savings Plan.
16.19. SEGMENT INFORMATION
The
Beginning in 2019, the Company previouslyhas had two reportable segments which was reduced to onea single reportable segment, when Health eCareers (Healthcare reportable segment) was sold on December 4, 2017. The remaining Tech-focused, reportable segmentwhich includes the Dice, Dice Europe (ceased operations on August 31, 2018), ClearanceJobs, and eFinancialCareers (formerly in the Global Industry Group segment), and Brightmatter (absorbed into Tech-focused in the third quarter of 2017 and formerly in Corporate & Other) services. Management has organized its reportable segment based upon our internal management reporting.
services, as well as corporate related costs. The Company hasallocates resources and assesses financial performance on a consolidated basis, as all services pertain to the Company's Tech-focused strategy.
Prior to 2019, the Company had other services and activities that individually arewere not significant in relation to consolidated revenues, operating income or total assets. These include Slashdot Media (business sold in the first quarter of 2016), Hcareers (sold May 22, 2018), Rigzone (sold(sold the RigLogix portion of the Rigzone business on February 20, 2018 and transferred majority ownership of the remaining Rigzone business to Rigzone management on August 31, 2018), BioSpace (transferred and Biospace (majority ownership transferred to BioSpace management on January 31, 2018) (each formerly in the Global Industry Group segment), and getTalent (discontinued in the third quarter of 2017) services, which are recorded in the "Corporate & Other" category, along with corporate-related costs which are not considered in a segment."Other" category.
The Company’s current foreign operations are comprised of the Dice Europe operation (ceased operations on August 31, 2018) operations and a portion of the eFinancialCareers and Rigzone services (sold the RigLogix portion of the Rigzone business on February 20, 2018 and transferred majority ownership of the remaining Rigzone business to Rigzone management on August 31, 2018), which operate in Europe, the financial centers of the gulf region of the Middle East, and Asia Pacific. The Company’sCompany's foreign operations also includeincluded Hcareers (sold on May 22, 2018), which operated in Canada. Revenue and long-lived assets by geographic region,geography, as shownpresented in the tabletables below, isare based on the location of each of the Company’sCompany's subsidiaries.
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table shows the segment information (in thousands)thousands and recast for the change in reportable segments):
| | | | 2018 | | 2017 | | 2016 | | 2020 | | 2019 | | 2018 |
| By Segment: | | | | | | By Segment: | | | | | |
| Revenues: | | | | | | Revenues: | |
| Tech-focused | $ | 152,258 |
| | $ | 158,398 |
| | $ | 170,599 |
| Tech-focused | $ | 136,878 | | | $ | 149,370 | | | $ | 152,258 | |
| Healthcare | — |
| | 24,354 |
| | 27,066 |
| |
| Corporate & Other | 9,312 |
| | 25,198 |
| | 29,305 |
| |
| Other | | Other | 0 | | | 0 | | | 9,312 | |
| Total revenues | $ | 161,570 |
| | $ | 207,950 |
| | $ | 226,970 |
| Total revenues | $ | 136,878 | | | $ | 149,370 | | | $ | 161,570 | |
| | | | | | | | | | | | |
| Depreciation: | | | | | | Depreciation: | |
| Tech-focused | $ | 8,942 |
| | $ | 6,868 |
| | $ | 7,060 |
| Tech-focused | $ | 12,019 | | | $ | 9,743 | | | $ | 9,001 | |
| Healthcare | — |
| | 1,625 |
| | 2,089 |
| |
| Corporate & Other | 338 |
| | 1,259 |
| | 700 |
| |
| Other | | Other | 0 | | | 0 | | | 279 | |
| Total depreciation | $ | 9,280 |
| | 9,752 |
| | $ | 9,849 |
| Total depreciation | $ | 12,019 | | | 9,743 | | | $ | 9,280 | |
| | | | | | | | | | | | |
| Amortization: | | | | | | Amortization: | |
| Tech-focused | $ | — |
| | $ | 132 |
| | $ | 1,923 |
| Tech-focused | $ | 0 | | | $ | 0 | | | $ | 0 | |
| Healthcare | — |
| | 596 |
| | 835 |
| |
| Corporate & Other | 482 |
| | 1,410 |
| | 4,029 |
| |
| Other | | Other | 0 | | | 0 | | | 482 | |
| Total amortization | $ | 482 |
| | $ | 2,138 |
| | $ | 6,787 |
| Total amortization | $ | 0 | | | $ | 0 | | | $ | 482 | |
| | | | | | | | | | | | |
| Operating income (loss): | | | | | | Operating income (loss): | |
| Tech-focused | $ | 26,851 |
| | $ | 38,462 |
| | $ | 54,066 |
| Tech-focused | $ | (29,605) | | | $ | 17,025 | | | $ | 7,280 | |
| Healthcare | — |
| | (1,507 | ) | | (929 | ) | |
| Corporate & Other | (15,159 | ) | | (14,090 | ) | | (49,746 | ) | |
| Other | | Other | 0 | | | 0 | | | 4,412 | |
| Operating income | 11,692 |
| | 22,865 |
| | 3,391 |
| Operating income | (29,605) | | | 17,025 | | | 11,692 | |
| Interest expense | (2,054 | ) | | (3,445 | ) | | (3,481 | ) | |
| Interest expense and other | | Interest expense and other | (827) | | | (701) | | | (2,054) | |
| Other expense | (36 | ) | | (23 | ) | | (29 | ) | Other expense | (2,002) | | | — | | | (36) | |
| Income (loss) before income taxes | $ | 9,602 |
| | $ | 19,397 |
| | $ | (119 | ) | Income (loss) before income taxes | $ | (32,434) | | | $ | 16,324 | | | $ | 9,602 | |
| | | | | | | | | | | | |
| Capital expenditures: | | | | | | Capital expenditures: | |
| Tech-focused | $ | 10,060 |
| | $ | 10,481 |
| | $ | 7,545 |
| Tech-focused | $ | 16,104 | | | $ | 14,188 | | | $ | 10,060 | |
| Healthcare | — |
| | 1,160 |
| | 1,113 |
| |
| Corporate & Other | 221 |
| | 1,914 |
| | 2,756 |
| |
| Other | | Other | 0 | | | 0 | | | 221 | |
| Total capital expenditures | $ | 10,281 |
| | $ | 13,555 |
| | $ | 11,414 |
| Total capital expenditures | $ | 16,104 | | | $ | 14,188 | | | $ | 10,281 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| |
| 2020 | | 2019 | | 2018 |
| By Geography: | | | | | |
| Revenues: | | | | | |
| United States | $ | 113,202 | | | $ | 119,882 | | | $ | 121,097 | |
| United Kingdom | 12,767 | | | 17,343 | | | 22,356 | |
| EMEA, APAC and Canada (1) | 10,909 | | | 12,145 | | | 18,117 | |
| Non-United States | 23,676 | | | 29,488 | | | 40,473 | |
| Total revenues | $ | 136,878 | | | $ | 149,370 | | | $ | 161,570 | |
| | | | | |
| (1) Europe (excluding United Kingdom), the Middle East and Africa (“EMEA”) and Asia-Pacific (“APAC”). Revenues from Canada ceased May 22, 2018 upon the sale of the Company's Hcareers business. |
87
|
| | | | | | | | | | | |
| | 2018 | | 2017 | | 2016 |
| By Geography: | | | | | |
| Revenues: | | | | | |
| United States | $ | 121,097 |
| | $ | 154,406 |
| | $ | 167,855 |
|
| United Kingdom | 15,665 |
| | 22,247 |
| | 23,969 |
|
| EMEA, APAC and Canada (1) | 24,808 |
| | 31,297 |
| | 35,146 |
|
| Non-United States | 40,473 |
| | 53,544 |
| | 59,115 |
|
| Total revenues | $ | 161,570 |
| | $ | 207,950 |
| | $ | 226,970 |
|
| | | | | | |
| (1) Europe (excluding United Kingdom), the Middle East and Africa (“EMEA”) and Asia-Pacific (“APAC”) |
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | |
| As of | | As of |
| March 31, | | December 31, | | December 31, | | December 31, |
| 2020 | | 2019 | | 2020 | | 2019 |
Long-lived assets2: | | | | | | | |
| United States | | | | | $ | 33,838 | | | $ | 30,260 | |
| United Kingdom | | | | | 6,277 | | | 8,307 | |
EMEA and APAC(1) | | | | | 834 | | | 1,497 | |
| Non-United States | | | | | 7,111 | | | 9,804 | |
| Total long-lived assets | | | | | $ | 40,949 | | | $ | 40,064 | |
| | | | | | | |
| (1) Europe (excluding United Kingdom), the Middle East and Africa (“EMEA”) and Asia-Pacific (“APAC”). |
| (2) Long-lived assets include fixed assets and lease right of use assets. |
|
| | | | | | | | | | | |
| | December 31,
2018 | | December 31,
2017 | | December 31,
2016 |
| Total assets: | | | | | |
| Tech-focused | $ | 251,860 |
| | $ | 266,390 |
| | $ | 263,462 |
|
| Healthcare | — |
| | — |
| | 14,375 |
|
| Corporate & Other | 6,525 |
| | 29,328 |
| | 32,258 |
|
| Total assets | $ | 258,385 |
| | $ | 295,718 |
| | $ | 310,095 |
|
The following table shows the carrying amount of goodwill by segment as of December 31, 2017 and 2018 and the changes in goodwill for the years ended (in thousands):
|
| | | | | | | | | | | | | | | |
| | Tech-focused | | Healthcare | | Corporate & Other | | Total |
| Goodwill at January 1, 2017 | $ | 152,162 |
| | $ | 6,269 |
| | $ | 13,314 |
| | $ | 171,745 |
|
| Foreign currency translation adjustment | 5,315 |
| | — |
| | — |
| | 5,315 |
|
| Sale of business | — |
| | (6,269 | ) | | — |
| | (6,269 | ) |
| Goodwill at December 31, 2017 | $ | 157,477 |
| | $ | — |
| | $ | 13,314 |
| | $ | 170,791 |
|
| Foreign currency translation adjustment | (3,503 | ) | | — |
| | — |
| | (3,503 | ) |
| Sale of business | — |
| | — |
| | (13,314 | ) | | (13,314 | ) |
| Goodwill at December 31, 2018 | $ | 153,974 |
| | $ | — |
| | $ | — |
| | $ | 153,974 |
|
| | | | | | | | |
| Goodwill at December 31, 2018 | | | | | | | |
| Goodwill | $ | 153,974 |
| | $ | — |
| | $ | — |
| | $ | 153,974 |
|
| Accumulated impairment losses | — |
| | — |
| | — |
| | — |
|
| | $ | 153,974 |
| | $ | — |
| | $ | — |
| | $ | 153,974 |
|
The annual impairment tests for the Tech-focused reporting unit, which were performed as of October 1, 2018 and 2017, resulted in the fair value of the reporting unit exceeding the carrying value by 40% and 1%, respectively. The increased fair value as compared to the carrying value is primarily driven by improved operating results and projections and a reduction in the estimated tax rate from 36% at October 1, 2017 to 26% and October 1, 2018. Results for the Tech-focused reporting unit for the fourth quarter of 2018 and estimated future results as of December 31, 2018 are consistent with the October 1, 2018 analysis. As a result, the Company believes it is not more likely than not that the fair value of the reporting units is less than the carrying value as of December 31, 2018. Therefore, no interim impairment testing was performed as of December 31, 2018.
The amount of goodwill as of December 31, 2018 allocated to the Tech-focused reporting unit was $154.0 million. Determining the fair value of a reporting unit is judgmental in nature and requires the use of estimates and key assumptions, particularly assumed discount rates and projections of future operating results. The discount rate applied for the Tech-focused reporting unit was 14.3% An increase to the discount rate applied or reductions to future projected operating results could result in future impairment of the Tech-focused reporting unit’s goodwill. It is reasonably possible that changes in judgments, assumptions and estimates the Company made in assessing the fair value of goodwill could cause the Company to consider some portion or all of the goodwill of the Tech-focused reporting unit to become impaired. In addition, a future decline in the overall market conditions and/or changes in the Company’s market share could negatively impact the estimated future cash flows and discount rates used to determine the fair value of the reporting unit and could result in an impairment charge in the foreseeable future.
The Tech-focused reporting unit has gone through a period of revenue declines, resulting from competition in the U.S. as well as market slowness in the U.K. due to Brexit. These disruptions and uncertainties could decrease demand for finance and technology professionals in the markets we serve. This decline in demand and any future declines in demand could significantly decrease the use of our finance and technology industry job posting websites and related services, which may adversely affect the Tech-focused reporting unit's financial condition and results of operations. If recruitment activity is slow in the industries in which we operate during 2019 and beyond, our revenues and results of operations may be negatively impacted. As a result of these factors, in the fourth quarter, the Company further evaluated the fair value of the Tech-focused reporting unit and believes it is not more likely than not that the fair value is less than the carrying value. If events and circumstances change resulting in significant
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
reductions in actual operating income or projections of future operating income, the Company will test this reporting unit for impairment prior to the annual impairment test.
The decline in oil prices in 2014 and 2015 and the continued volatility in 2016 decreased demand for energy professionals worldwide. This decline in demand for energy professionals significantly decreased the use of the Company’s energy industry products and services, adversely affecting the Energy reporting unit’s financial condition and results of operations. As a result of these factors, the Company evaluated the fair value of this reporting unit and recorded a goodwill impairment of $15.4 million during the quarter ended September 30, 2016 at the Corporate & Other segment, bringing goodwill for the Energy reporting unit to zero. See Note 5 for further discussion.
17.20. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share (“EPS”) is computed based on the weighted-average number of shares of common stock outstanding. Diluted EPS is computed based on the weighted-average number of shares of common stock outstanding plus common stock equivalents assuming exercise of stock options, where dilutive. In 2016 shares issuable from stock-based awards of $0.8 million were excluded from the computation of shares contingently issuable upon exercise as we recognized a net loss. The following is a calculation of basic and diluted earnings per share and weighted-average shares outstanding (in thousands, except per share amounts):
| | | | | | | | | | | | | | | | | |
| | 2020 | | 2019 | | 2018 |
| Income (loss) from continuing operations—basic and diluted | $ | (30,015) | | | $ | 12,551 | | | $ | 7,174 | |
| | | | | |
| Weighted-average shares outstanding—basic | 48,278 | | | 48,739 | | | 48,520 | |
| Add shares issuable from stock-based awards | 0 | | | 2,894 | | | 1,085 | |
| Weighted-average shares outstanding—diluted | $ | 48,278 | | | $ | 51,633 | | | $ | 49,605 | |
| | | | | |
| Basic earnings (loss) per share | $ | (0.62) | | | $ | 0.26 | | | $ | 0.15 | |
| Diluted earnings (loss) per share | $ | (0.62) | | | $ | 0.24 | | | $ | 0.14 | |
|
| | | | | | | | | | | |
| | 2018 | | 2017 | | 2016 |
| Income (loss) from continuing operations—basic and diluted | $ | 7,174 |
| | $ | 15,978 |
| | $ | (5,398 | ) |
| | | | | | |
| Weighted-average shares outstanding—basic | 48,520 |
| | 47,908 |
| | 48,319 |
|
| Add shares issuable from stock-based awards | 1,085 |
| | 322 |
| | — |
|
| Weighted-average shares outstanding—diluted | 49,605 |
| | 48,230 |
| | 48,319 |
|
| | | | | | |
| Basic earnings (loss) per share | $ | 0.15 |
| | $ | 0.33 |
| | $ | (0.11 | ) |
| Diluted earnings (loss) per share | $ | 0.14 |
| | $ | 0.33 |
| | $ | (0.11 | ) |
DHI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18.21. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of unaudited quarterly results of operations for 20182020 and 2017: 2019:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended | |
| | March 31 | | June 30 | | September 30 | | December 31 | |
| | (in thousands, except per share amounts) | |
| 2020 | | | | | | | | |
| Revenues | $ | 36,633 | | | $ | 33,784 | | | $ | 33,250 | | | $ | 33,211 | | |
| Total operating expenses | 41,883 | | | 31,331 | | | 61,828 | | | 31,441 | | |
| | | | | | | | |
| Operating income (loss) | $ | (5,250) | | | $ | 2,453 | | | $ | (28,578) | | | $ | 1,770 | | |
| | | | | | | | |
| Net income (loss) | $ | (6,550) | | | $ | 1,862 | | | $ | (27,322) | | | $ | 1,995 | | |
| Basic earnings (loss) per common share | $ | (0.13) | | | $ | 0.04 | | | $ | (0.57) | | | $ | 0.04 | | [1] |
| Diluted earnings (loss) per common share | $ | (0.13) | | | $ | 0.04 | | | $ | (0.57) | | | $ | 0.04 | | [1] |
| | | | | | | | |
| 2019 | | | | | | | | |
| Revenues | $ | 37,120 | | | $ | 37,359 | | | $ | 37,176 | | | $ | 37,715 | | |
| Total operating expenses | 33,528 | | | 33,057 | | | 31,903 | | | 33,320 | | |
| Other operating income (loss) | $ | 0 | | | $ | (537) | | | $ | 0 | | | $ | 0 | | [2] |
| Operating income | $ | 3,592 | | | $ | 3,765 | | | $ | 5,273 | | | $ | 4,395 | | |
| | | | | | | | |
| Net income | $ | 1,588 | | | $ | 3,061 | | | $ | 4,381 | | | $ | 3,521 | | |
| Basic earnings per common share | $ | 0.03 | | | $ | 0.06 | | | $ | 0.09 | | | $ | 0.07 | | [1] |
| Diluted earnings per common share | $ | 0.03 | | | $ | 0.06 | | | $ | 0.08 | | | $ | 0.07 | | [1] |
| | | | | | | | |
[1]The sum of the quarter may not equal the full year amount.
[2]Escrow and working capital terms and related contingencies were finalized regarding the Hcareers's sale resulting in an additional loss on the sale.
|
| | | | | | | | | | | | | | | | |
| | For the Three Months Ended | |
| | March 31 [1] | | June 30 [2] | | September 30 [3] | | December 31 | |
| | (in thousands, except per share amounts) | |
| 2018 | | | | | | | | |
| Revenues | $ | 43,071 |
| | $ | 41,595 |
| | $ | 38,917 |
| | $ | 37,987 |
| |
| Total operating expenses | 40,861 |
| | 39,686 |
| | 37,085 |
| | 35,615 |
| |
| Other operating income (loss) | 4,639 |
| | (839 | ) | | (365 | ) | | (66 | ) | |
| Operating income | $ | 6,849 |
| | $ | 1,070 |
| | $ | 1,467 |
| | $ | 2,306 |
| |
| | | | | | | | | |
| Net income (loss) | $ | 3,503 |
| | $ | (205 | ) | | $ | 930 |
| | $ | 2,946 |
| |
| Basic earnings per common share | $ | 0.07 |
| | $ | — |
| | $ | 0.02 |
| | $ | 0.06 |
| [4] |
| Diluted earnings per common share | $ | 0.07 |
| | $ | — |
| | $ | 0.02 |
| | $ | 0.06 |
| [4] |
| | | | | | | | | |
| 2017 | | | | | | | | |
| Revenues | $ | 52,190 |
| | $ | 52,400 |
| | $ | 52,424 |
| | $ | 50,936 |
| |
| Total operating expenses | 47,895 |
| | 48,398 |
| | 49,886 |
| | 48,898 |
| |
| Other Operating Income | $ | — |
| | $ | — |
| | $ | — |
| | $ | 9,992 |
| [5] |
| Operating income (loss) | $ | 4,295 |
| | $ | 4,002 |
| | $ | 2,538 |
| | $ | 12,030 |
| |
| | | | | | | | | |
| Net income (loss) | $ | 1,340 |
| | $ | 1,822 |
| | $ | 1,058 |
| | $ | 11,758 |
| |
| Basic earnings (loss) per common share | $ | 0.03 |
| | $ | 0.04 |
| | $ | 0.02 |
| | $ | 0.24 |
| [4] |
| Diluted earnings (loss) per common share | $ | 0.03 |
| | $ | 0.04 |
| | $ | 0.02 |
| | $ | 0.24 |
| [4] |
| | | | | | | | | |
| |
[1] | Majority ownership of the BioSpace business was transferred to BioSpace management on January 31, 2018 and the RigLogix portion of the Rigzone business was sold on February 20, 2018. |
| |
[2] | The Hcareers business was sold on May 22, 2018. |
| |
[3] | Majority ownership of the remaining Rigzone business was transferred to Rigzone management and Dice Europe ceased operations on August 31, 2018. |
| |
[4] | The sum of the quarter may not equal the full year amount. |
| |
[5] | Includes gain on sale of Health eCareers of $6.7 million and proceeds from restitution award of $3.3 million related to the OilPro legal matter. |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
None.
| |
Item 9A. | Controls and Procedures |
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the fiscal period covered by this report.
Based on such evaluations, the CEO and CFO have concluded that the disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the SEC, and that such information is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2018.2020.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Deloitte & Touche LLP has audited the Company’s internal control over financial reporting as of December 31, 20182020 and has issued a report regarding its assessment included herein.
Changes in Internal Controls
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) occurred during the quarter ended December 31, 20182020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of DHI Group, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of DHI Group, Inc. and subsidiaries (the “Company”) as of December 31, 2018,2020, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018,2020, based on criteria established in Internal Control -— Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2018,2020, of the Company and our report dated February 7, 2019,10, 2021, expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s adoption of a new accounting standard.statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Des Moines, Iowa
February 7, 2019
10, 2021
| |
Item 9B. | Other Information |
Item 9B. Other Information
None.
PART III
| |
Item 10. | Directors, Executive Officers and Corporate Governance |
Item 10. Directors, Executive Officers and Corporate Governance
The information called for by Item 10 will be set forth in our definitive proxy statement relating to our 20192021 Annual Meeting of Stockholders (the "Proxy Statement”) to be filed within 120 days of the Company’s fiscal year end of December 31, 20182020 and is incorporated herein by reference.
As previously announced, Art Zeile became the Company's President, Chief Executive Officer in April 2018. Prior to Mr. Zeile's joining the Company, Michael Durney served as the Company's President and Chief Executive Officer until March 31, 2018.
Executive Officers of the Company
Set forth below is information relating to the Company’s executive officers as of February 7, 2019.10, 2021.
|
| | | | | | | | | | |
| Name | Age | | Position |
| Art Zeile | 5556 | | President and Chief Executive Officer |
Luc GrégoireKevin Bostick | 5953 | | Chief Financial Officer |
Klavs MillerPaul Farnsworth | 49 | | Chief Technology Officer |
| Christian Dwyer | 5154 | | Chief Product Officer |
| Michelle Marian | 5355 | | Chief Marketing Officer |
Ian ShepherdArie Kanofsky | 5352 | | Chief Revenue Officer |
Pam BilashChris Henderson | 6053 | | Senior Vice President, Human ResourcesChief Operating Officer |
| Pam Bilash | 62 | | Chief Human Resources Officer |
| Brian P. Campbell | 5456 | | Senior Vice President, Corporate Development and General CounselChief Legal Officer |
Art Zeile has been President and Chief Executive Officer, as well as a director of the Company since April 2018. Prior to joining DHI, Art co-founded HOSTING, a cloud computing services company and served as its Chief Executive Officer from 2008 until 2016. At HOSTING, Art formulated a strategy for a rollup of cloud services companies in the U.S. and focused on managing security and compliance for mission critical web applications. Earlier in his career, Art served as CEO of QTC Management Inc, a healthcare technology company, from 2006 to 2007. Prior to joining QTC Management, Art co-founded Inflow Inc., a public data center company, and Link-VTC, one of the first companies to deliver videoconferencing services. Art earned a bachelor's degree in Astronautical Engineering from the U.S. Air Force Academy and served in the United States Air Force from 1988 until 1993. Art also received a master's degree in public policy from Harvard University.
Luc GrégoireKevin Bostick has been Chief Financial Officer since joining the Company in November 2016.December 2019. He has overall responsibility for the Company’sCompany's financial organization, including financial and strategic planning, corporate development, accounting, financial reporting, investor relations, treasury, internal audit and tax as well as the Company’s legal organization.matters. Prior to joining the Company,DHI, Mr. GrégoireBostick was partner and CFO at Level 5 Capital Partners, a private equity firm, since 2018. From 2013 to 2018, Mr. Bostick served as the Chief Financial Officerpresident and CFO of 365 Data Centers, a data center company. He has also served as CFO at AvePoint, Inc. from 2014 to 2016 which he helped steer to a SaaS business model.Elevation DC, Local Insight Media and New Global Telecom. Earlier in his career he held senior financeleadership roles with Take-Two Interactiveat Level 3 Communications, JP Morgan and KPMG. Mr. Bostick holds an MBA from 2008-2014, McGraw HillThe Wharton School, University of Pennsylvania and a B.S. in accounting from 2007 to 2008, Standard Motor Products from 2005-2007 and Merck from 1992-2005, and had been a partner with Arthur Andersen. He also serves onPenn State University.
Paul Farnsworth is the board of a private New York-based residential real estate company. He graduated from Concordia University with a Bachelor of Commerce degree and holds a Graduate Diploma in Public Accountancy from McGill University. Mr. Grégoire is a licensed Certified Public Accountant in Canada.
Klavs Miller is Chief Technology Officer, and previouslyjoining the Company in February 2019. Prior to joining DHI, Mr. Farnsworth served as Chief Technology Officer at Reed Group, where he was responsible for all aspects of technology delivery and support including: product software delivery, end user environment support, hosting, vendor strategy, client professional services, and enterprise program management. Prior to Reed Group, he was the Senior Vice President Technology since January 2014, after joiningof Information at Level 3 Communications, where he led the Company throughIT Solutions Delivery Group. He served as Programme Director at BT, with responsibility for customer facing portals and websites in Europe and India. Earlier in his career he held technology leadership roles of increasing responsibility at Qwest Corporation prior to its acquisition of onTargetjobs where Mr. Millerby CenturyLink. He has served as the Chief Information Officer since 2011. He oversees the Company’s technology-related functions, including enterprise R&D, operations, supportBoard Technology Advisor at SafeHarbor Technology Corporation and infrastructure. Mr. Miller started his career as a software engineer in the early 1990s, followed byheld board appointments at various technicalstartup and management positions with international ERP company, Baan. Since then, he has held a number of senior management positions with variousgrowth companies, advising on technology best practices and software companies, such as InfoNow, Vericept and Quark. He holds a B.S. in Electrical Engineering from Vestjysk Teknikum, Denmark.future roadmaps.
Christian Dwyer is the Chief Product Officer, joining the Company in September 2018. Mr. Dwyer oversees the product strategy, development and expansion of DHI products including Dice, ClearanceJobs and eFinancialCareers. Prior to joining DHI, Mr. Dwyer served as the Executive Vice President of Product Management at HealthGrades, where he led product strategy, product development and business development across consumer web, mobile and native applications. He previously served as Senior Vice President and General Manager at AOL/MapQuest, where he successfully repositioned the business for growth by establishing partnership alliances and scaling new products across web and mobile applications. Earlier in his career he held leadership positions at Navidec and Carpoint.com. Mr. Dwyer serves as a board member for the Colorado Technology
Association. He earned an M.S.
in Finance from the University of Colorado at Denver and a B.A. in Business Economics from the University of California at Santa Barbara.
Michelle Marian is the Chief Marketing Officer, joining the Company in October 2018. Ms. Marian leads DHI’s global marketing organization with responsibility for its digital marketing strategy, demand generation and branding. Prior to joining DHI, Ms. Marian was the Head of Global Digital Marketing at Crocs, where she was responsible for driving new customer growth and a data-driven customer centric approach to eCommerce. Prior to Crocs, she served as the Vice President of Marketing at Shopathome.com, defining the marketing strategy and execution of customer acquisition and engagement initiatives at the company. Earlier in her career, Ms. Marian held executive marketing positions at Webroot, Safeway, and AOL. Ms. Marian holds a Masters of International Business Studies from the University of South Carolina and a B.S. in International Business & Marketing from the University of Colorado at Boulder.
Ian Shepherd Arie Kanofskyis the Chief Revenue Officer. Mr. Shepherd joined DHIOfficer, joining the Company in September 2017 as Executive Vice President of Sales and became the Chief Revenue Officer in June 2018. Mr. ShepherdOctober 2019. Arie is responsible for driving growth and scaling sales opportunities for DHI's brands globally. Prior to joining DHI, Mr. Kanofsky was the growth agendaVP of Growth and Head of Sales for Smartlinx Solutions. Previously, he was the Chief Sales Officer at Sterling Talent Solutions. Earlier in his career, he was the Director of Sales for JobFox. Mr. Kanofsky was also the co-founder and executive vice president of JobExpo.com (formerly CareerFairsUSA prior to its merger with JobExpo.com). Mr. Kanofsky holds a B.A. in Communication from the University of Tampa.
Chris Henderson is the Chief Operating Officer, joining the Company in April 2019. Mr. Henderson previously served as Chief Strategy Officer. Mr. Henderson is responsible for the Companyoverall strategy and leading directoperations of DHI, particularly as it relates to the development and indirect sales acrossexecution of products and go-to-market solutions for each of the globe.Company’s brands. Prior to joining the Company, Mr. ShepherdHenderson served as the Senior Vice PresidentCEO of North American Enterprise Sales at Monster Worldwide.the Universal Service Administrative Company, which delivers the FCC's $10 billion Universal Service effort to deliver high quality broadband to all Americans. Mr. Shepherd has an extensive history of leading global sales operations atHenderson previously held a number of SaaS-basedsenior roles in the public sector including Senior Advisor to Interior Secretary Ken Salazar and public companies. In 2013,COO of City for the Denver under Mayor John Hickenlooper. He also spent twelve years at Vestar Capital Partners, a private equity firm, where he served as Senior Vice Presidentwas managing director, member of sales at Automic Softwarethe investment committee and prior to that was Group Vice President at Oracle.co-head of the consumer group. Mr. ShepherdHenderson holds an M.B.A. from Columbia University and a B.A. degree in economicsPolitical Science from the University of Manitoba.Colorado at Boulder.
Pam Bilash has been is the Senior Vice President,Chief Human Resources sinceOfficer, joining the Company in January 2014 having joined the Company through its acquisition of onTargetjobs where she led the Human Resources team as Executive Vice President since 2009. Ms. Bilash brings the Company more than 25 years' experience in talent management and in the information industry. Prior to joining onTargetjobs, Ms. Bilash worked for Thomson Reuters in roles of increasing responsibility, culminating as Senior Vice President of Human Resources for the healthcare group.group and serving on their Human Resources leadership team, in addition to her executive duties. Ms. Bilash is a graduate of the University of Hartford.
Brian P. Campbell is the Senior Vice President, Corporate Development, General CounselChief Legal Officer and Corporate Secretary of DHI Group, Inc. He previously served as Senior Vice President, Corporate Development and General Counsel and Corporate Secretary and earlier at DHI as Vice President, Business and Legal Affairs at DHI since June 2003, after joining our predecessor, Dice Inc. in January 2000. Mr. Campbell is responsible for managing our legal affairs, including intellectual property, mergers and acquisitions, strategic alliances, corporate securities, real estate, litigation and employment law, as well as corporate development and supervising outside counsel. Mr. Campbell also oversees our privacy initiatives. Prior to joining the Company, Mr. Campbell served as Vice President, General Counsel and Corporate Secretary at CMP Media, where he worked since 1995. From 1988 to 1995, Mr. Campbell worked as a Corporate Associate at the law firm of Mudge, Rose, Guthrie, Alexander and Ferdon. Mr. Campbell is the Immediate Past PresidentChair of the Small Law Department Network of the Association of Corporate Counsel and is a past president of the New York City Chapter of the Association of Corporate Counsel, where he has served on the Board of Directors for six years and has been a member for over twentytwenty-five years. HeMr. Campbell earned a J.D. from St. John’s University School of Law and a B.A. (English) from the University of Virginia.Virginia, and is currently a candidate for an M.B.A. (Management) degree from Molloy College.
We have adopted a code of conduct and ethics that applies to all of our directors, officers and employees, including or chief executive officer, chief financial officer and persons performing similar functions. Our code of conduct and ethics is posted on the investors section of our website at www.dhigroupinc.com.
Diversity
Inclusion and diversity remain key priorities for the Company. The diverse backgrounds, skills and experiences of executive officers and board members is important to both our values and performance. We believe that a diverse board, management team and workforce that is reflective of our diverse customer base will position us to better understand customers’ wants and needs, which we believe drives our ability to deliver superior customer value and successfully innovate. Diverse perspectives amongst our management team and board allows them to evaluate issues through different experiences and perspectives and help guide the Company in a thoughtful way.
| |
Item 11. | Executive Compensation |
Item 11. Executive Compensation
The information called for by Item 11 pertaining to executive compensation will be set forth in the Proxy Statement and is incorporated herein by reference.
| |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information called for by Item 12 pertaining to security ownership of certain beneficial owners and management will be set forth in the Proxy Statement and is incorporated herein by reference.
| |
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information called for by Item 13 pertaining to certain relationships and related transactions will be set forth in the Proxy Statement and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
The information called for by Item 14 pertaining to principal accounting fees and services will be set forth in the Proxy Statement and is incorporated herein by reference.
PART IV
Item 15. Exhibits
|
| | | | | | | | | | |
| (a) | 1. | | Financial Statement Schedules |
| | | The consolidated financial statements are listed under Item 8 of this Annual Report. |
| 2. | | Financial Statement Schedules. |
| | | See (b) below. |
| 3. | | Exhibits. |
|
| | | See (b) below. |
2.1 | 3. | | Exhibits. |
| | | | | | | | |
| 2.1 | | |
| 3.1 | | |
| 3.2 | | |
| 3.3 | | |
| 4.1 | | |
| 4.2 | | |
| 4.3 | | |
| 4.4 | | |
10.1†4.5* | | |
| 10.1† | | |
| 10.2† | | |
| 10.3† | | |
| 10.4† | | |
| 10.5† | | |
| 10.6† | | |
| 10.7† | | |
|
| 10.10† | | |
10.10† | | |
| 10.11† | | |
| 10.12† | | |
| 10.13† | | |
| 10.14† | | |
| 10.15† | | |
| 10.16† | | |
| 10.17† | | |
| 10.18† | | |
10.19*10.19 | | Second Amended and Restated Credit Agreement dated as of November 14, 2018, among DHI Group, Inc., Dice Inc. and Dice Career Solutions, Inc., as Borrowers, the various lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Bank of America, N.A. and BMO Harris Bank N.A., as co-syndication agents and TD Bank, N.A., as documentation agent. |
| 10.20† | | |
| 10.21† | | |
| 10.22† | | |
| 10.23† | | |
10.24*†10.24† | | |
21.1*10.25† | | |
| | | | | | | | |
| 10.26*† | | |
| 10.27† | | |
| 10.28† | | |
| 21.1* | | |
31.1*23.1* | | |
| 31.1* | | |
| 31.2* |
| |
| 32.1* |
| |
| 32.2* |
| |
| 101.INS |
| XBRL Instance Document. |
| Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| 101.SCH | | |
101.SCH |
| XBRL Taxonomy Extension Schema Document. |
| 101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document. |
| 101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document. |
| 101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document. |
| 101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document. |
| 104 | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
________________
|
| | | | | | | |
| * | | Filed herewith. |
| † | | Identifies a management contract or compensatory plan or arrangement. |
| (b) | | Financial Statement Schedules. |
Item 16. Form 10-K Summary
None.
SCHEDULE II
DHI GROUP, INC.
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
As of December 31, 2016, 20172018, 2019 and 20182020
(in thousands)
| | | Column A | Column B | | Column C | | Column D | | Column E | Column A | Column B | | Column C | | Column D | | Column E |
| | Balance at Beginning of Period | | Charged to Income | | Deductions | | Balance at End of Period | | Balance at
Beginning
of Period | | Charged
to Income | | Deductions | | Balance
at End of
Period |
| Description | | | | | | | | Description | | | | | | | |
| Reserves Deducted From Assets to Which They Apply: | | | | | | | | Reserves Deducted From Assets to Which They Apply: | |
| Reserve for uncollectible accounts receivable: | | | | | | | | Reserve for uncollectible accounts receivable: | |
| Year ended December 31, 2016 | $ | 2,945 |
| | $ | 1,435 |
| | $ | (1,199 | ) | | $ | 3,181 |
| |
| Year ended December 31, 2017 | 3,181 |
| | 1,556 |
| | (3,049 | ) | | 1,688 |
| |
| Year ended December 31, 2018 | 1,688 |
| | 1,069 |
| | (2,110 | ) | | 647 |
| Year ended December 31, 2018 | $ | 1,688 | | | $ | 1,069 | | | $ | (2,110) | | | $ | 647 | |
| Year ended December 31, 2019 | | Year ended December 31, 2019 | 647 | | | 882 | | | (821) | | | 708 | |
| Year ended December 31, 2020 | | Year ended December 31, 2020 | 708 | | | 1,129 | | | (655) | | | 1,182 | |
| Deferred tax valuation allowance: | | | | | | | | Deferred tax valuation allowance: | |
| Year ended December 31, 2016 | $ | 1,746 |
| | $ | (713 | ) | | $ | — |
| | $ | 1,033 |
| |
Year ended December 31, 2017(1) | 1,033 |
| | (809 | ) | | — |
| | 224 |
| |
Year ended December 31, 2018(2) | 224 |
| | 5,081 |
| | — |
| | 5,305 |
| |
Year ended December 31, 2018(1) | | Year ended December 31, 2018(1) | $ | 224 | | | $ | 5,081 | | | $ | 0 | | | $ | 5,305 | |
| Year ended December 31, 2019 | | Year ended December 31, 2019 | 5,305 | | | (233) | | | 0 | | | 5,072 | |
| Year ended December 31, 2020 | | Year ended December 31, 2020 | 5,072 | | | 271 | | | 0 | | | 5,343 | |
____________________
| |
(1) | Reduction primarily due to utilization of foreign tax credits. |
| |
(2) | Increase primarily due to valuation allowance for tax capital loss carryforward resulting from Rigzone sale. |
(1)Increase primarily due to valuation allowance for tax capital loss carryforward resulting from Rigzone sale.
See notes to the DHI Group, Inc. consolidated financial statements included elsewhere herein.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
|
| | | | | | | | | | | | | |
| Date: | February 7, 201910, 2021 | | DHI Group, Inc. |
| | | By: | /S/ Art Zeile |
| | | | Art Zeile |
| | | | President and Chief Executive Officer |
| | | | (on behalf of the registrant) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.
| | | | | | | | | | | | | | |
| Signature | | Title | | Date |
| | | | |
| /S/ Art Zeile | | President, Chief Executive Officer and Director | | February 10, 2021 |
| Art Zeile | | (Principal Executive Officer) | | |
| | | | |
Signature | | Title | | Date |
| | | | |
/S/ Art ZeileKevin Bostick | | President, Chief Executive Officer and Director | | February 7, 2019 |
Art Zeile | | (Principal Executive Officer) | | |
| | | | |
/S/ Luc Grégoire | | Chief Financial Officer | | February 7, 201910, 2021 |
Luc GrégoireKevin Bostick | | (Principal Financial and Accounting Officer) | | |
| | | | |
/S/ John W. Barter | | Chairman and Director | | February 7, 2019 |
John W. Barter | | | | |
| | | | |
/S/ Carol Carpenter | | Director | | February 7, 2019 |
Carol Carpenter | | | | |
| | | | |
/S/ Golnar Sheikholeslami | | Director | | February 7, 2019 |
Golnar Sheikholeslami | | | | |
| | | | |
| /S/ Brian Schipper | | Chairman and Director | | February 7, 201910, 2021 |
| Brian Schipper | | | | |
| | | | |
/S/ Burton GoldfieldScipio Carnecchia | | Director | | February 7, 201910, 2021 |
Burton GoldfieldScipio Carnecchia | | | | |
| | | | |
| /S/ Jim Friedlich | | Director | | February 7, 201910, 2021 |
| Jim Friedlich | | | | |
| | | | |
| /S/ Jennifer Deason | | Director | | February 7, 201910, 2021 |
| Jennifer Deason | | | | |
| | | | |
| /S/ David Windley | | Director | | February 10, 2021 |
| David Windley | | | | |
| | | | |
| /S/ Elizabeth Salomon | | Director | | February 10, 2021 |
| Elizabeth Salomon | | | | |
| | | | |
| /S/ Kathleen Swann | | Director | | February 10, 2021 |
| Kathleen Swann | | | | |
