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Edited Transcript of DHX.N earnings conference call or presentation 4-Nov-20 10:00pm GMT

·28 min read

Q3 2020 DHI Group Inc Earnings Call New York Nov 6, 2020 (Thomson StreetEvents) -- Edited Transcript of DHI Group Inc earnings conference call or presentation Wednesday, November 4, 2020 at 10:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Art Zeile DHI Group, Inc. - President, CEO & Director * Kevin Franklin Bostick DHI Group, Inc. - CFO ================================================================================ Conference Call Participants ================================================================================ * Aman Raj Gulani B. Riley Securities, Inc., Research Division - Associate Analyst * Joshua David Vogel Sidoti & Company, LLC - Analyst * Todd Kehrli MKR Group, Inc. - Co-founder & President ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good afternoon, everyone, and welcome to the DHI Group, Inc. Third Quarter 2020 Financial Results Conference Call. (Operator Instructions) You should also note, today's event is being recorded. At this time, I'd like to turn the conference call over to Todd Kehrli with MKR Investor Relations. Sir, please go ahead. -------------------------------------------------------------------------------- Todd Kehrli, MKR Group, Inc. - Co-founder & President [2] -------------------------------------------------------------------------------- Thank you, operator. Good afternoon, and welcome to DHI Group's Fiscal 2020 Third Quarter Financial Results Conference Call. With me on today's call are DHI's CEO, Art Zeile; and Chief Financial Officer, Kevin Bostick. Before I turn the call over to Art, I'd like to cover a few quick items. This afternoon, DHI issued a press release announcing its fiscal 2020 third quarter financial results. This release is available on the company's website at dhigroupinc.com. This call is being broadcast live over the Internet for all interested parties, and the webcast will be archived on the Investor Relations page of the company's website. I want to remind everyone that during today's call, management will make forward-looking statements that involve risks and uncertainties. Please note that except for the historical information, statements on today's call may constitute forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934. When used, the words anticipate, believe, expect, intend, future and other similar expressions identify forward-looking statements. These forward-looking statements reflect DHI management's current views concerning future events and financial performance and are subject to risks and uncertainties, and actual results may differ materially from the outcomes contained in any forward-looking statements. Factors that could cause these forward-looking statements to differ from actual results include delays in development, marketing or sales, the adverse impact and uncertainty surrounding the COVID-19 pandemic, and other risks and uncertainties discussed in the company's periodic reports on Form 10-K and 10-Q and other filings with the Securities and Exchange Commission. DHI undertakes no obligation to update or revise any forward-looking statements. Lastly, during today's call, management will be referring to specific financial measures, including adjusted EBITDA, adjusted EBITDA margin and net debt that are not prepared in accordance with U.S. GAAP. Information about and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are available in our earnings release and on our website at dhigroupinc.com in the Investor Relations section. I now turn the call over to Art Zeile, CEO of DHI Group. -------------------------------------------------------------------------------- Art Zeile, DHI Group, Inc. - President, CEO & Director [3] -------------------------------------------------------------------------------- Thank you, Todd. Good afternoon, everyone, and welcome to our Fiscal 2020 Third Quarter Earnings Conference Call. As always, we appreciate your interest in DHI. Let me first start with a quick update on our operations status as it relates to the COVID-19 pandemic. Our foremost concern at DHI is to ensure the health and safety of our DHI community. As such, the majority of our employees continue to work from home during the quarter using the best possible remote communication and collaboration tools. And our team members, including sales and support, marketing, and product development continue to be highly effective. We currently have several offices open, though we have made the return to office optional for all of our employees. We are looking forward to having more of our employees back in the office when it's safe. But rest assured, we are taking significant precautions to make sure we maintain the safety of our employees, whether they are in the office or working from home. Now let's jump into our view of the quarter. While the pandemic continues to challenge the way we all live and work, we actually saw job postings stabilize during the summer, although they were lower in total than the year before. The sentiment is that many companies paused their hiring during this time as they reformulated their hiring plans based on their view of the economic recovery to come. However, in September, we saw sentiment change for the better, as evidenced by a notable uptick in job posting as well as an increase in our bookings. Based on our Burning Glass feed, there are over 2,200 companies that have more than 20 open tech job postings right now, companies like Amazon, Microsoft, and JPMorgan-Chase have over 1,000 active tech jobs posted today. Both the staffing industry analyst and techserve alliance, industry research firms that focus on tech centric staffing and recruiting firms, are forecasting a bounce-back in the IT staffing market in 2021 to almost pre-pandemic levels. The SIA is forecasting year-over-year market growth of 7%, which would get the market back to 98% of 2019 IT staffing revenue levels, representing an almost complete rebound. As I mentioned last quarter, a report released by Microsoft in July predicts that the worldwide digital jobs will grow from 41 million in 2020 to 190 million in 2025. Of the 149 million new digital jobs to be created, 98 million are forecast to be in software development. It's clear that our collective future will be more online, and businesses will accelerate their efforts to digitize. These efforts will, of course, require technologists. As we continue to execute on our plan to create the best tech-focused career marketplaces using our technology skills data model, we stand ready to capitalize on these trends. Now let me provide some detail regarding our product development efforts during the quarter. Our product development team continued to deliver its usual high pace of product innovation. With the release of Dice IntelliSearch-based job alerts, job alerts are automatically generated based on the specific skill set and location found in a candidate's profile. This creates a virtuous circle that encourages candidates to register and keep their profile up to date. This new feature illustrates how our patent-pending tech skills data model can be used in several high-impact use cases within our platform. Dice Recruiter Profile, which we delivered last quarter, experienced the fastest adoption rate the company has ever seen from any of its product releases in the past 2 years. During the third quarter, 1/3 of all Dice Recruiters completed their new Dice Recruiter Profile. Dice Recruiter Profile allows our clients to enrich their profiles with photos, personal information, details about corporate brand and culture, news and latest hires, upcoming events, and future hiring needs, all of which create more transparency and personalize the recruiter behind the role. Dice Recruiter Profile was the first major release in Dice's transformation from a job board to a full-scale career marketplace. With the Dice marketplace, we're creating a trusted environment where recruiters and candidates can learn much more about each other to facilitate more effective career discussions. During the quarter, we also launched ClearanceJobs' client team dashboard, which allows clients to have a full view of the recruitment team activity on the site, linking activities to successful hiring patterns. ClearanceJobs continues to be DHI's test bed for key market-leading features. We also launched new features on eFinancialCareers called Follow, Voice, and Video. The Follow feature allows candidates to follow recruiters and get a new speed of their content on a weekly basis. Voice and Video allow finance and tech professionals and recruiters to connect virtually with video and voice calling as well as instant messaging through the EFC platform, all of which are highly relevant in the work-from-home environment. These capabilities were delivered as we announced the completion of the first iteration of the fully functional EFC marketplace, a huge milestone for the company. EFC follows CJ as the second brand to complete the transformation from job board to full-scale career marketplace. We have many new product releases planned for the fourth quarter. Dice is completing the design for its own messaging system with an expected launch at year-end. Recruiters and candidates will be able to message each other within the platform in the same pattern as Facebook messenger. This is the second critical ingredient for full marketplace capability and creates in-platform engagement and stickiness. Protecting our clients' and candidates' information is incredibly important to us. Therefore, in the fourth quarter, Dice has already released a new authentication and authorization system, which moves it to an industry standard secure log-in protocol. This feature is a stepping stone to multifactor authentication in early 2021. We are also working on delivering calendar and scheduled integration for ClearanceJobs, which will allow for recruiters and candidates to seamlessly schedule meetings and communicate in general from a system built into the platform, and will connect to the user's native email application. Lastly, EFC has already released IntelliSearch-based job alerts in the fourth quarter, similar to what I just described for Dice. Now let me touch briefly on our sales performance for each brand before I turn it over to Kevin. As I have said before, I believe we're experiencing a checkmark-shaped recovery versus a V-shaped recovery. As I mentioned earlier, we saw a notable uptick in sentiment and bookings in September. We had several sales teams reach or exceed their pre-pandemic bookings production for the quarter as a result of the rebound, including both CJ's new business and account management teams, as well as Dice's staffing and recruiting new business team. Renewal rates for all account management teams improved during the month. Dice commercial accounts continues to be affected by the current environment due to the uncertainty around hiring plans. As an example, we have worked with one very large enterprise that has dramatically changed their hiring plan 4 times in the past 4 months. The good news is that our sales team's pipeline of deal activity has continued to grow, despite sales cycles lengthening. We continue to see increased engagement from candidates in the current work-from-home environment. In addition, on the client side, we saw an increase in marketing qualified leads through the contact me form fills on our Dice site, which is a leading indicator of pipeline growth. The rebound in Dice's staffing and recruiting new business highlights that Dice is a necessity for staffing and recruiting firms focused on tech. And as I mentioned before, the need for technologists is expected to grow strongly in the new post pandemic economy. Due to the success that we're seeing in CJ and Dice's staffing and recruiting new business teams, we have shifted several sales reps from Dice's commercial accounts team to these 2 teams, with the mantra, sell to those who are buying now. ClearanceJobs has been relatively unaffected by the pandemic, as its performance is generally correlated to the U.S. Department of Defense budget, which remains relatively predictable. We continue to work hard on expanding CJ's addressable market through direct sales to U.S. government agencies, and expect ClearanceJobs to add more government customers as we close out the remainder of this year. Finally, eFinancialCareers remains our most challenged brand. It is still being affected by the protest in Hong Kong, uncertainty around a hard Brexit in its largest market, the U.K., and the expected longer recession for the global banking industry as credit quality remains uncertain and under continuous reassessment. There is no question that the uncertainty in the banking industry has weighed down EFC's performance to date and will continue to do so for the foreseeable future. As I conclude my remarks, I want to reiterate that we are successfully executing on our plan to build career marketplaces for matching tech professionals with employers, and we are doing so while exceeding our adjusted EBITDA targets. We believe we have created a better online platform than our competitors for matching companies with the highest quality tech professionals, and believe we can capitalize on the millions of new technologist jobs expected over the next 5 years. While this growth won't happen overnight, and COVID-19 certainly presents uncertainty, we are confident in our business plan and the continued progress we are making towards achieving our goal of returning to growth. With that, let me turn the call over to Kevin, who will take you through our financials, and then we'll take any questions you may have. Kevin? -------------------------------------------------------------------------------- Kevin Franklin Bostick, DHI Group, Inc. - CFO [4] -------------------------------------------------------------------------------- Thank you, Art, and good afternoon, everyone. I'll start by going through the financial results, then add a few comments about the business. For the third quarter, we reported total revenues of $33.3 million, which was down 2% from the second quarter and 11% year-over-year. Dice revenue was $19.8 million in the third quarter, down 3% sequentially and 13% year-over-year. We ended the third quarter with 5,300 Dice Recruitment Package customers, which is down 3% sequentially and 13% year-over-year. Our average monthly revenue per Dice Recruitment Package customer was down 1% versus the year-ago quarter to $1,122 or $13,064 on an annual basis. Over 90% of our Dice revenue is recurring and comes from recruitment package customers. Our Dice customer renewal rate was 63% for the third quarter, up from 57% last quarter but down 3 percentage points year-over-year. Our Dice revenue renewal rate was 66%, up 5 percentage points from last quarter, but down 10 percentage points when compared to the same period last year. While we did see lower in-period renewal rates, that is customers renewing prior to or at contract termination, we are maintaining an ongoing dialogue with these non-renewal customers with the expectation that they will resign when there is further recovery in the economy. As we mentioned last quarter, we hired a new leader for our client success organization, who has implemented new processes around onboarding and ongoing touch points that we believe should have a positive impact on both customer and revenue renewal rates. As we look at Dice, our strategy continues to be on larger customer relationships, we believe this will put us in the best position for stability and growth. Currently, approximately 13% of our customers generate 50% of our recruitment package revenue, though no one customer makes up 1% of revenue. We think this is a good balance of a strong, stable revenue base without having a significant customer concentration risk. ClearanceJobs' third quarter revenue was $7.3 million, an increase of 3% sequentially and 16% year-over-year. This continued solid double-digit revenue growth year-over-year is reflective of ClearanceJobs' strong, innovative products and competitive differentiation, as well as the somewhat insulated market it serves. Third quarter revenue for eFinancialCareers was $6.1 million, which was down 1% sequentially and down 25% year-over-year when excluding the impact of foreign exchange rates. As expected, COVID negatively impacted our performance for EFC during the quarter. In the U.K., which is our largest geography by revenue for EFC, we were impacted by the COVID shutdown as well as the U.K. furloughs, which were extended through October of this year. In the APAC region, EFC's second largest geography, we continue to experience difficulties primarily due to the impact of the coronavirus pandemic. Turning to operating expenses. Third quarter operating expenses were $61.8 million, which includes non-cash impairment charges of both the Dice trade name of $8 million and goodwill of $23.6 million, both of which I will address in a moment. Excluding the impairment charges, operating expenses were $30.2 million, representing a decrease of $1.7 million or 5% year-over-year. This decrease in operating expenses was primarily the result of the comprehensive cost management exercise, which began in late March and continues currently, as well as more efficient third-party marketing spend. Income tax benefit for the third quarter was $1.5 million, resulting in an effective tax rate of 5%, which includes the impact of the noncash impairment charges. This rate is lower than our expected statutory rate of 25% due to nondeductible impairment charges and the allocation of loss between jurisdictions. As I mentioned, during the third quarter, we recorded non-cash impairment charges related to the Dice trade name of $8 million and goodwill of $23.6 million. The impairment charge for the trade name was primarily driven by a decline to the royalty rate used in valuing the Dice trade name, an assumption driven by the impact of COVID-19. The $23.6 million goodwill impairment is the result of the impact of the pandemic and the expectation that a broader recovery will extend into 2021, whereas previously, we expected the recovery towards the end of 2020. Including these non-cash impairment charges, we recorded a net loss for the third quarter of $27.3 million, a loss of $0.57 per diluted share compared to net income of $4.4 million or $0.08 per diluted share a year ago. This quarter's net loss was negatively impacted by $29.3 million of charges, substantially from the non-cash impairments of goodwill and intangible assets. Last year's net income was positively impacted by $500,000 from discrete tax items. Adjusted diluted earnings per share for the quarter was $0.04 versus $0.07 last year. Adjusted EBITDA for the third quarter was $7.6 million, a margin of 23%, which was consistent with the second quarter of this year and the third quarter of last year. As we stated on our last call, our goal is to manage the business to approximately 20% adjusted EBITDA margins. We continue to focus on supporting our customers as well as investing in sales, marketing and product, while also being equally mindful of the overall cost structure of the business. With this, our current cost structure has become our new normal for how we think about headcount, marketing, and other third-party spend. We generated $4.4 million of operating cash flow in the third quarter compared to $4.6 million in the prior year quarter. From a liquidity perspective, at the end of the quarter, our total debt was $37 million. We had $26.8 million of cash, resulting in net debt of $10.2 million. Even with the incremental borrowing we did in the first quarter, we still have significant borrowing capacity available to us under our credit facility. We do expect to begin reducing our debt outstanding in the coming quarters as we have better visibility into cash flow, notably around customer payments. Deferred revenue at the end of the quarter was $41.9 million compared to $47.2 million in the second quarter and $51.1 million in the year ago quarter. This is due to the impacts of COVID-19, more contracts having monthly or quarterly payment terms, and the normal seasonality of bookings. When we add the unbilled portion of our contracts to deferred revenue, our committed contract backlog at the end of the quarter was down 12% from the end of the third quarter last year. During the quarter, we repurchased approximately 349,000 shares for $854,000, or $2.45 per share. In total, we have used approximately $1.4 million of the current $5 million buyback program, which runs through May of 2021. We continue to believe the buyback is a recognition of the strength and the long-term prospects of our business. Consistent with our previous programs, we will continue to evaluate investment opportunities in the business against buying back shares. As you know, we also use the buyback program as an opportunity to offset the impacts of our employee equity incentive plan. As we look ahead, bookings are improving for the company as a whole. As Art mentioned, for Dice, we saw a notable uptick in job postings and bookings in September as companies increase their use of technology in this environment. We are seeing strength in our staffing and recruiting business as these firms realize they need our technology to effectively do their job. With regards to ClearanceJobs, we expect them to continue to grow because their success is correlated to the U.S. Department of Defense budget, which relatively speaking, has been immune to the environment we find ourselves in. For eFinancialCareers, we continue to expect significant headwinds as our 2 largest regions, the U.K. and APAC, continue to be impacted by COVID, the ongoing geopolitical issues in Hong Kong, as well as a potential impact to hiring in the banking sector. Looking forward, we believe we have the right ongoing cost structure in place to operate the business and to support our customers, while at the same time, continuing to invest in our business to drive long-term revenue growth. While not providing specific guidance, we continue to manage the business to margins in the 20% range. Let me sum up by saying that while we continue to find ourselves in very challenging times, we feel our business model provides us some protection and predictability, and we are confident in the investments we have made in innovation and sales. We remain focused on the continued execution of our business plan and look forward to reporting on our progress as we finish 2020 and enter into 2021. And with that, let me turn the call back to Art. -------------------------------------------------------------------------------- Art Zeile, DHI Group, Inc. - President, CEO & Director [5] -------------------------------------------------------------------------------- Thanks, Kevin. I'd like to close by once again thanking all our employees around the globe for their hard work this last quarter. It is a pleasure to be part of such a great team. With that, we're happy to take your questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) And our first question today comes from Aman Gulani from B. Riley Securities. -------------------------------------------------------------------------------- Aman Raj Gulani, B. Riley Securities, Inc., Research Division - Associate Analyst [2] -------------------------------------------------------------------------------- First, I guess, on the first question, given that EFC continues to have declining revenues with fairly low visibility. Have you considered potentially spinning off or divesting that piece of the business? -------------------------------------------------------------------------------- Art Zeile, DHI Group, Inc. - President, CEO & Director [3] -------------------------------------------------------------------------------- Aman, appreciate the question. And EFC is certainly our most challenged business, and it continues to face those significant headwinds that we indicated and will for the foreseeable future. I think it's -- there's no question that the banking industry is going to be in a longer-term recession than many of the other industry sectors across the globe. When we compare ESC to CJ, which is continuing to grow really nicely as well as Dice, which we expect to benefit from the expansion of tech jobs in the United States over the next 5 years, I think it's fair to say that any continued poor performance by EFC would offset the positive performance of C.J. and Dice, and mask their growth effectively. So we are definitely looking closely at the EFC business in evaluating all our options, quite frankly. So I'd say the answer is yes. -------------------------------------------------------------------------------- Aman Raj Gulani, B. Riley Securities, Inc., Research Division - Associate Analyst [4] -------------------------------------------------------------------------------- Got it. And maybe a bit greater clarity, how -- like how do you expect the recovery of 2Q lows in renewals and bookings? And when do you think DHI can begin to inflect back to sequential growth? -------------------------------------------------------------------------------- Art Zeile, DHI Group, Inc. - President, CEO & Director [5] -------------------------------------------------------------------------------- So each team within the individual brands have its own dynamics. I think we saw in October, more so than the earlier part of the summer, that we were growing our renewal rates from a revenue perspective, so we look at revenue and renewal accounts themselves. If we think about the business broadly speaking, especially for Dice, the largest brand, we have a large amount of our revenue tied to staffing, recruiting, and consulting agencies. I think that they feel better about their future. We're seeing those renewal rates improve. We've seen many customers that paused on their subscriptions with Dice come back, especially at the end of the quarter. And new business, I would say, is the bigger challenge across all of our brands. And that makes sense because if it's a new relationship, the client is -- has to be pretty firm about their hiring plans for the future. And this is still a period of time which is uncertain for many industries about their hiring plans. But in general, we saw a better end of the quarter than the beginning of the quarter, and we feel more confident moving into 2021. Obviously, when I talk about these kind of figures, I'm really talking about bookings. And if we book $1 of revenue today, that has to be divided by 12 into the next subsequent 12-month period. So it doesn't reflect itself in revenue immediately, but over the long run. So these -- this firming up of bookings, we expect to essentially allow us to have better revenues towards the end of 2021, and that's how we would fundamentally look at the situation as it's evolving today. -------------------------------------------------------------------------------- Aman Raj Gulani, B. Riley Securities, Inc., Research Division - Associate Analyst [6] -------------------------------------------------------------------------------- Got it. Okay. And then just last question for me, can you just talk about some of the trends you're seeing in renewal rates in October and the start of November relative to what you saw in the third quarter? -------------------------------------------------------------------------------- Art Zeile, DHI Group, Inc. - President, CEO & Director [7] -------------------------------------------------------------------------------- Yes. I'd say that in terms of renewal rates themselves, October feels like it's another month that is softer than -- well, I shouldn't say, it's a little bit softer than September, but it's still in the same trajectory, meaning that we feel like we are moving towards that checkmark-shaped recovery in bookings. And there are certain teams that are just doing fantastic. I mentioned them in my portion of the earnings call, we've seen the CJ new business team exceed their pre-pandemic level bookings, and we have seen the account management team do the same. The staffing and recruiting and consulting new business team has also exceeded what they were producing at the beginning of January and February of this year. So there are certain teams that appear to be acting as a possible engine for growth. That's the reason why we transferred sales reps to those teams with the idea that we just want to facilitate more bookings wherever the bookings are taking place right now. And the great thing about Arie Kanofsky's leadership of our sales program is that we can be that nimble and take advantage of the trends that we're seeing in real time. Another important thing that we're doing as part of our strategy is using the Burning Glass feed, that feed that shows how many tech postings are open each night across the United States, and we're being very targeted towards going after those particular clients that we don't have today that have a large number of postings and trying to sell the value proposition there. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- Our next question comes from Josh Vogel from Sidoti & Company. -------------------------------------------------------------------------------- Joshua David Vogel, Sidoti & Company, LLC - Analyst [9] -------------------------------------------------------------------------------- My first question is, second quarter in a row, talking about how you did see some clients pause subscriptions, but starting to come back, or you're hoping for a win back there. So maybe not so much anyone who bought subscriptions that came up in Q3. But of those that were paused in Q2. Is that where you're starting to see some of those subscriptions come back? -------------------------------------------------------------------------------- Art Zeile, DHI Group, Inc. - President, CEO & Director [10] -------------------------------------------------------------------------------- Yes. And in fact, the real key to understanding the Dice business, especially, is that a lot of our customers are in the staffing, recruiting, and consulting category. And we believe that you fundamentally can't do your job unless you have Dice as a tool if you're looking for technologists. So when they paused, in Q2, they could still rely on the contacts that they had essentially harvested from Dice over the course of the previous period of time. But at a certain point, that data becomes stale. The information about the candidates become unusable from a practical perspective. So we believe that Q3 was an important quarter for those staffing and recruiting agencies to make a decision as to how they view their future, especially moving into 2021, and how they would be able to essentially use Dice and other recruitment tools to ensure they're getting a flow of candidates to their clients. -------------------------------------------------------------------------------- Joshua David Vogel, Sidoti & Company, LLC - Analyst [11] -------------------------------------------------------------------------------- I appreciate the insights there. Some encouraging data points put out by some of the industry research firms like SIA, and kind of thinking about where they see the market next year and then kind of maybe building off one of the prior questions, thinking about getting back to sequential growth in Dice, but is 7% growth number that we can maybe try to benchmark you against? I know that the subscription model is different than a straight recruiting model. But how can we -- what can we deduce from taking that data point from SIA and comparing it to your business? -------------------------------------------------------------------------------- Art Zeile, DHI Group, Inc. - President, CEO & Director [12] -------------------------------------------------------------------------------- Yes, I think it's a good benchmark. I think that's the right way to even frame it out. And in fact, it actually correlates to some other studies that we've seen where the online recruitment tools market as a whole, historically has been growing -- or I shouldn't say not historically, but it has been projected to grow with a 7% CAGR over the next 5 years. We believe that the tech sector part of that overall market is growing faster, but 7% is a pretty good benchmark. It just happens to be the same as SIA's figure for how they look at the rebound. We have a good, close relationship with SIA, and we sat down with the Head of Research, and they're not predicting the month-by-month progression for that. I think that's a little bit too aggressive in today's uncertain world, but they feel confident that we'll get back on track and that the IT staffing sector itself is becoming healthy, healthier than it was at the beginning of the pandemic. -------------------------------------------------------------------------------- Joshua David Vogel, Sidoti & Company, LLC - Analyst [13] -------------------------------------------------------------------------------- All right. Great. I know that CJ is correlated to the defense budget, but I don't have statistics from prior elections. But does whoever ends up in the White House potentially have an effect on the prospects of ClearanceJobs, in your opinion? -------------------------------------------------------------------------------- Art Zeile, DHI Group, Inc. - President, CEO & Director [14] -------------------------------------------------------------------------------- I think it does over the long term, and it really comes down to whether or not the president who proposes the budgets associated with all forms of the government has a real bullish view of the need for defense. And so my view, just based on even Biden's background and experiences that he is pro-defense. Clearly, President Trump today is pro-defense and has sequentially increased military budgets, the DoD budgets. I think that you can say that both of them have a common view that it's an uncertain world that we live in, and we need to be strong on defense. But if one president in the future was to be less aggressive about defense posture, and that represented itself in smaller defense budgets, I think that would affect CJ. There's no question about it, that it would work in the reverse, in other words, if someone did lower the budget. -------------------------------------------------------------------------------- Joshua David Vogel, Sidoti & Company, LLC - Analyst [15] -------------------------------------------------------------------------------- Okay. And just one more, and I'll let someone else ask some questions. The gross margin has been coming in the last couple of quarters. And I was just curious, is that due to pricing mix, or is there something else going on there? -------------------------------------------------------------------------------- Art Zeile, DHI Group, Inc. - President, CEO & Director [16] -------------------------------------------------------------------------------- Â Kevin, do you want to address that? -------------------------------------------------------------------------------- Kevin Franklin Bostick, DHI Group, Inc. - CFO [17] -------------------------------------------------------------------------------- Yes, well, I think it really comes down to us being very cost-conscious about where we spend our money. We're very careful about hiring backfills. We're very focused on making sure that our marketing spend is getting the appropriate IRR. I don't think there's any one particular area, but rather just cost containment around the entire income statement. And that mentality is across the company. So I don't think it is any one particular initiative or one particular line item,, just us being cost-conscious across the whole business. And clearly, we are seeing a little bit of benefit when it comes to digital advertising rates, which have come down. It's a little bit of a less competitive environment. So that's helpful as well. -------------------------------------------------------------------------------- Operator [18] -------------------------------------------------------------------------------- And ladies and gentlemen, at this time, we'll conclude today's question-and-answer session. I'd like to turn the conference call back over to Art Zeile for any closing remarks. -------------------------------------------------------------------------------- Art Zeile, DHI Group, Inc. - President, CEO & Director [19] -------------------------------------------------------------------------------- Thanks, everyone, for your interest in DHI Group, and thanks for joining us on our call today. And have yourself a great day.