DHI GROUP, INC.
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
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Table of Contents 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 specialized services for technology 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. 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 30 years. Based on our operating structure, we have identified one reportable segment as follows:
•Tech-focused - Dice, Dice Europe (ceased operations on
Dice, Dice Europe (ceased operations
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 included Hospitality (soldMay 22, 2018 ), Rigzone (sold the RigLogix portion of the Rigzone business onFebruary 20, 2018 and transferred majority ownership of the remaining Rigzone business to Rigzone management onAugust 31, 2018 ), andBioSpace (transferred majority ownership toBioSpace management onJanuary 31, 2018 and sold the remaining minority interest toBioSpace management in 2020), which are reported in the "Other" category, and are not considered 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 packages purchased. Our Tech-focused segment sells recruitment packages that can include access to our databases of resumes and job posting capabilities. Hcareers (soldMay 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. AtDecember 31, 2020 and 2019, Dice had approximately 5,150 and 6,000 total recruitment package customers in theU.S. , respectively, and the average monthly revenue perU.S. recruitment package customer was$1,132 and$1,135 for the years endedDecember 31, 2020 and 2019, respectively. Deferred revenue, as shown on the Consolidated Balance sheets, reflects customer billings made in advance of services being rendered. Backlog consists of deferred revenue plus customer contractual commitments not invoiced representing the value of future services to be rendered under committed contracts. We believe deferred revenue and backlog to be important measures of 35 -------------------------------------------------------------------------------- Table of Contents our business as they represent our ability to generate future revenue. A summary of our deferred revenue and backlog as ofDecember 31, 2020 and 2019 are presented in the table below. 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 atDecember 31, 2020 declined$12.4 million fromDecember 31, 2019 due to the negative impacts of COVID-19, lower renewal rates in the Dice brand, and uncertainty around Brexit and political unrest inHong 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 endedDecember 31, 2020 compared to the same period of the 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 growth of 17.1%. The declines at Dice and eFinancialCareers were due to the negative impacts of COVID-19, lower renewal rates in the Dice brand, and uncertainty around Brexit and political unrest inHong Kong negatively impacting eFinancialCareers. See further discussion in the Comparison of Years EndedDecember 31, 2020 and 2019. The Company continues to evolve and develop new software products and features to attract and engage qualified professionals and match them with 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 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 endedDecember 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 DiceCandidate MatchTM, Dice Job Search and Job
Email, Dice Remote Jobs, Dice Recruiter Profile, Alerts
Dice Instant Messaging
ClearanceJobs Client Team Dashboard, ClearanceJobs
Workflow, ClearanceJobs Favorites, ClearanceJobs ClearanceJobs NextGen, ClearanceJobs Pulse,
Self-Serve BrandAmp, ClearanceJobs Candidate Search ClearanceJobs BrandAmp
and ClearanceJobs Broadcast Message upgrades
eFinancialCareers Messaging, Video and Voice eFinancialCareers Recruiter Profile, and
Calling, eFinancialCareers Follow and eFinancialCareers Candidate Profile
eFinancialCareers Job Alerts
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 more
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, positively impacting 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-value tasks, such as
posting resumes and applying to jobs.
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The largest components of our expenses are personnel 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
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 and/or access to a searchable database of candidates on the Dice, ClearanceJobs, and 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. 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.
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
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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 test for the Tech-focused reporting unit performed as of
October 1, 2019 resulted in the fair value of the reporting unit exceeding the
carrying value by 37%. 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 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 amount of goodwill as of December 31, 2020 allocated to the Tech-focused
reporting unit was $133.4 million . 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 and could result in an
impairment charge in the foreseeable future.
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 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 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.
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We determine whether the carrying value of recorded indefinite-lived acquired
intangible asset 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 asset 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, 2019 resulted in the fair value
of the Dice trademarks and brand exceeding the carrying value by 26%. 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. 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.
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Table of Contents 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.
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 could 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 time to time, we see market slowdowns, which can lead to lower demand for
recruiting technology, financial and security cleared professionals. If
recruitment activity slows in the industries in which we operate during 2021 and
beyond, our revenues and results of operations could be negatively impacted.
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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, 2020 , 2019 and 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 %
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Table of Contents Comparison of Years EndedDecember 31, 2020 and 2019 Revenues Year Ended December 31, Increase Percent Foreign Exchange 2020 2019 (Decrease) Change Impact(2) (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$6.4 million , or 19.9%, compared to 2019, due to the COVID-19 pandemic, uncertainty around Brexit, and political unrest inHong Kong due to the imposition of its new security law. Cost of Revenues Year Ended December 31, Percent 2020 2019 Increase Change (in thousands, except percentages) Cost of revenues$ 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$0.8 million . Product Development Expenses Year Ended December 31, Percent 2020 2019 Decrease Change (in thousands, except percentages) Product development$ 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 . 42
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Sales and Marketing Expenses
Year Ended December 31, Percent
2020 2019 Decrease Change
(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, Percent
2020 2019 Increase Change
(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, Percent
2020 2019 Increase Change
(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, Percent
2020 2019 Increase Change
(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, Percent
2020 2019 Increase Change
(in thousands, except percentages)
Impairment of goodwill $ 23,626 $ - $ 23,626 - %
Percentage of revenues 17.3 % - %
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-------------------------------------------------------------------------------- Table of Contents 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 endedSeptember 30, 2020 . See also Note 10 of the Notes to the Consolidated Financial Statements. Disposition Related and Other Costs Year Ended December 31, Percent 2020 2019 Decrease Change (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 endedDecember 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, Percent
2020 2019 Increase Change
(in thousands, except percentages)
Other operating income (loss) $ - $ (537) Percentage of revenues - % (0.4) % Other operating income (loss) for the year endedDecember 31, 2019 included a loss of$0.5 million on the 2018 sale of Hcareers due to the finalization of the working capital terms and related contingencies. See also Note 4 to the Consolidated Financial Statements. Operating Income (Loss) Year Ended December 31, Percent 2020 2019 Decrease Change (in thousands, except percentages) Revenue$ 136,878 $ 149,370 $ (12,492) (8.4) %
Operating income (loss) (29,605) 17,025
Percentages of revenues (21.6) % 11.4 %
Operating loss for the year endedDecember 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$1.7 million in the 2019 period. Interest Expense and Other Year Ended December 31, Percent 2020 2019 Increase Change (in thousands, except percentages) Interest expense and other$ 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 endedDecember 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$0.2 million gain recognized in the second quarter of 2020 on the sale of the Company's 20% interest inBioSpace . 44 -------------------------------------------------------------------------------- Table of Contents Impairment ofEquity Investment Year Ended December 31, Percent 2020 2019 Decrease Change (in thousands, except percentages) Impairment of equity investment$ (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
(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.
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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
Comparison of Years EndedDecember 31, 2019 and 2018 Revenues Year Ended December 31, Increase Percent Foreign Exchange 2019 2018 (Decrease) Change Impact (6) (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 onAugust 31, 2018 . (3) The Company sold Hcareers onMay 22, 2018 . (4) The Company sold the RigLogix portion of the Rigzone business onFebruary 20, 2018 and majority ownership of the remaining Rigzone business was transferred to Rigzone management onAugust 31, 2018 . (5) The Company transferred majority ownership of theBioSpace business toBioSpace management onJanuary 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$2.9 million , or 1.9%, which was driven by Dice Europe's decline of$3.0 million due to its ceasing operations onAugust 31, 2018 . Excluding Dice Europe and the impacts of foreign exchange, revenue for the Tech-focused segment increased 1% year over year. Revenue at DiceU.S. decreased by$1.9 million , or 2.0%, for the year endedDecember 31, 2019 compared to the same period of 2018, an improvement from the 6.9% decline experienced during the year endedDecember 31, 2018 . Renewal rates have improved over the prior year period while recruitment package customer count was down slightly year over year. Revenues for ClearanceJobs increased by$3.7 million , or 17.4%, for the year endedDecember 31, 2019 as compared to the same period in 2018, 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 onU.K. revenue from the uncertainty around Brexit and the impacts of foreign exchange. 46 -------------------------------------------------------------------------------- Table of Contents Revenues for Other decreased$9.3 million , which was due to the non-tech businesses which were divested during 2018. Cost of Revenues Year Ended December 31, Percent 2019 2018 Decrease Change (in thousands, except percentages) Cost of revenues$ 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 onAugust 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, Percent
2019 2018 Decrease Change
(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, Percent
2019 2018 Decrease Change
(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 . Other decreased $3.2 million due to the non-tech
businesses being divested during 2018.
General and Administrative Expenses
Year Ended December 31, Percent
2019 2018 Decrease Change
(in thousands, except percentages)
General and administrative $ 31,003 $ 37,589 $
(6,586) (17.5) %
Percentage of revenues 20.8 % 23.3 %
47
-------------------------------------------------------------------------------- Table of Contents 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$1.3 million due to the non-tech businesses being divested during 2018. Depreciation Year Ended December 31, Percent 2019 2018 Increase Change (in thousands, except percentages) Depreciation$ 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, Percent 2019 2018 Decrease Change (in thousands, except percentages) Amortization $ -$ 482 $ (482) (100.0) % Percentage of revenues - % 0.3 % Amortization expense decreased by$0.5 million to zero due to the removal of amortizable intangible assets related to the non-tech businesses divested during the year endedDecember 31, 2018 . Disposition Related and Other Costs Year Ended December 31, Percent 2019 2018 Decrease Change (in thousands, except percentages) Disposition related and other costs$ 1,700 $ 7,619 $ (5,919) (77.7) % Percentage of revenues 1.1 % 4.7 %
The disposition related and other costs of
The disposition related and other costs of$7.6 million in 2018 are primarily due to severance, lease exit, and other related costs in connection with the non tech businesses divestiture process and the reorganization to the tech-focused strategy. Other Operating Income (Loss) Year Ended December 31, Percent 2019 2018 Decrease Change (in thousands, except percentages) Other operating income (loss)$ (537) $ 3,369 $ (3,906) (115.9) % Percentage of revenues (0.4) % 2.1 % 48
-------------------------------------------------------------------------------- Table of Contents Other operating income (loss) for the year endedDecember 31, 2019 , included a loss of$0.5 million on the 2018 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 Consolidated Financial Statements. Other operating income for the year endedDecember 31, 2018 included a gain of$4.6 million related to the sale of the RigLogix portion of the Rigzone business onFebruary 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 onMay 22, 2018 of$0.8 million , the transfer of majority ownership of the remaining Rigzone business to Rigzone management onAugust 31, 2018 of$0.7 million and the transfer of majority ownership of theBioSpace business toBioSpace management onJanuary 31, 2018 of$0.5 million . See also Note 4 of the Notes to Consolidated Financial Statements. Operating Income Year Ended December 31, Percent 2019 2018 Increase (Decrease) Change (in thousands, except percentages) Revenue$ 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 endedDecember 31, 2019 was$17.0 million , a margin of 11.4%, as compared to$11.7 million , a margin of 7.2%, for the same period in 2018. The increased operating income and percentage margin were driven by cost savings initiatives, a reduction in disposition related and other costs in 2019, higher utilization of the Company's employees in the design and development of product enhancements and features for the Company's sites, and the closure of Dice Europe in 2018, which had a lower operating margin. Interest Expense and Other Year Ended December 31, Percent 2019 2018 Decrease Change (in thousands, except percentages) Interest expense$ 701 $ 2,054 $ (1,353) (65.9) % Percentage of revenues 0.5 % 1.3 % Interest expense decreased by$1.4 million , or 65.9%, from the same period in 2018 due to lower weighted-average debt outstanding during the year endedDecember 31, 2019 . Income Taxes Year Ended December 31, 2019 2018 (in thousands, except percentages) Income before income taxes$ 16,324 $ 9,602 Income tax expense 3,773 2,428 Effective tax rate 23.1 % 25.3 % 49
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A reconciliation between tax expense at the federal statutory rate and the reported income tax expense is summarized as follows:
Year Ended December 31,
2019 2018
Federal statutory rate $ 3,428 $ 2,016
Gain (loss) on sale of businesses 84 (6,111)
Stock-based compensation 380 2,112
State taxes, net of federal effect 467 (38)
Difference between foreign and U.S. rates (192) (102)
Change in accrual for unrecognized tax benefits 107 (1,179)
U.S. tax on global intangible low-taxed income, net of credits 84 229
Executive compensation 147 126
Currency translation gains (losses) (67) 219
U.S. transition tax on foreign earnings 140 368
Research and development tax credits (557) (481)
Change in valuation allowances 12 5,117
Other (260) 152
Income tax expense $ 3,773 $ 2,428
Our effective income tax rate was 23.1% and 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 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.
Earnings per Share
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 $0.24 and $0.14 for the years ended December 31,
2019 and 2018, respectively, an increase of $0.10 . The improvement in earnings
per share was primarily driven by the improved net income year over year.
Liquidity and Capital Resources
Non-GAAP Financial Measures
We have provided certain non-GAAP financial information as additional measures
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.
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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 and reorganizations of the Company,
and losses related to legal claims and fees that are unusual in nature or
infrequent, minus (to the extent included in calculating such net income)
non-cash income or gains, 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.
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, 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, cash
provided by operating activities, or any other performance measures derived in
accordance with GAAP as a measure of our profitability or liquidity.
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A reconciliation of Adjusted Revenues for the years ended December 31, 2020 ,
2019 and 2018 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 .
52
-------------------------------------------------------------------------------- Table of Contents A reconciliation of Adjusted EBITDA for the years endedDecember 31, 2020 , 2019 and 2018 follows (in thousands): Year
Ended
2020 2019 2018
Reconciliation of Net Income (loss) to Adjusted EBITDA:
Net income (loss) $ (30,015) $ 12,551 $ 7,174
Interest expense 1,073 703 2,054
Income tax expense (benefit) (2,419) 3,773 2,428
Depreciation 12,019 9,743 9,280
Amortization of intangible assets - - 482
Non-cash stock based compensation 6,327 5,704 6,606
(Gain) loss on sale of businesses, net - 537 (3,369)
Disposition related and other costs - 1,700 7,619
Legal contingencies and related fees - 149 1,965
Impairment of intangible assets 15,200 - -
Impairment of goodwill 23,626 - -
Impairment of equity investment 2,002 - -
Gain on sale of equity investment (200) - -
Divested businesses - - (2,243)
Severance and related costs 2,285 - -
Other 26 (1) 36
Adjusted EBITDA $ 29,924 $ 34,859 $ 32,032 Reconciliation of Operating Cash Flows to Adjusted EBITDA: Net cash provided by operating activities
$ 18,683 $ 22,923 $ 14,918 Interest expense 1,073 703 2,054 Amortization of deferred financing costs (147) (147) (342) Income tax expense (benefit) (2,419) 3,773 2,428 Deferred income taxes 2,918 (2,493) (2,699) Change in accrual for unrecognized tax benefits 446 (107) 1,179 Change in accounts receivable (859) (1,694) (11,947) Change in deferred revenue 8,193 4,583 18,866 Disposition related and other costs - 1,700 7,619 Legal contingencies and related fees - 149 1,965 Divested businesses - - (2,243) Severance and related costs 2,285 - - Changes in working capital and other (249) 5,469 234 Adjusted EBITDA$ 29,924
A reconciliation of Adjusted EBITDA Margin for the years ended
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 %
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-------------------------------------------------------------------------------- Table of Contents Cash Flows We have summarized our cash flows for the years endedDecember 31, 2020 , 2019 and 2018 as follows (in thousands): Year Ended
2020 2019 2018
Cash from operating activities $ 18,683 $ 22,923 $ 14,918
Cash from (used in) investing activities (15,904) (11,505) 7,489
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. At December 31,
2020 , we had cash of $7.6 million compared to $5.4 million at December 31, 2019 .
Cash held by foreign subsidiaries totaled approximately $3.1 million and $1.9
million at December 31, 2020 and 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, we had $70.0
million in borrowing capacity under our $90.0 million Credit Agreement at
December 31, 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, 2020 and 2019
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 $18.7 million and $22.9 million for the years ended December 31, 2020 and
2019, respectively, a decrease of $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, 2020 decreased primarily due to lower billings to
customers resulting from the COVID-19 pandemic, partially offset by cost savings
implemented by the Company in response to the COVID-19 pandemic.
Investing Activities
During the year ended December 31, 2020 , cash used 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
$0.5 million primarily due to $10.0 million of net borrowings on long-term debt
and $10.5 million of repurchases of common stock. Cash used during the year
ended December 31, 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
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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 $8.0 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 financing activities during the year ended December 31, 2019 was
$12.4 million primarily due to $8.0 million of net repayments on long-term debt
and $2.5 million of repurchases of common stock. Cash used 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 repurchase of common stock.
Financings and Capital Requirements
Credit Agreement
InNovember 2018 , the Company, together withDice 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 inNovember 2023 , and replaced the previously existing credit agreement datedNovember 2015 . The Credit Agreement provides for a revolving loan facility of$90 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 London 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 ofDecember 31, 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. 55 -------------------------------------------------------------------------------- Table of Contents The obligations under the Credit Agreement are guaranteed by two of the Company'sU.S. based wholly-owned subsidiaries 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.
Other Capital Requirements
We anticipate capital expenditures in 2021 to be approximately$16 million to$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
Payments due by period
Less Than 1 More Than 5
Total Year 1-3 Years 3-5 Years Years
(in thousands)
Credit Agreement $ 20,000 $ -
18,984 4,040 7,334 6,089 1,521
Total contractual obligations $ 38,984 $ 4,040 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 ofDecember 31, 2020 , we had$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 11 "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 2.19% (the rate in effect onDecember 31, 2020 ) on our current borrowings, interest payments are expected to be$0.4 million per year in 2020-2023. As ofDecember 31, 2020 , we recorded approximately$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 atDecember 31, 2020 are$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$0.4 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. 56
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