DHI Group, Inc. (DHX) Earnings Call Transcript & Summary

[Audio Gap] Third, DHI Group is at a turning point. I was brought on board as the CEO of the company 3 years ago with a singular mission to bring the company back to revenue growth. We've made a lot of significant structural changes to the company to put it on a different trajectory. A month ago, we reported a year-over-year revenue increase of 4% and stated publicly that we anticipate accelerating growth throughout the remainder of the year. Kevin will be providing more specific guidance on our revenue growth for the third and fourth quarters in his presentation today. We believe we can achieve sustainable double-digit revenue growth while maintaining a minimum of a 20% EBITDA margin. In our opinion, our current valuation doesn't reflect this growth rate. Let me go on to tell you more about the market we serve. For the past 20 years, the number of tech workers what we refer to as technologists has steadily increased. This chart illustrates this trend with only slight depressions for the dot-com bubble in Great Recession. It's important to understand that the tech sector is also fairly immune to recessionary pressures, even the pandemic had minimal effect on this sector's employment. About 10% of the overall U.S. workforce is now categorized as IT or tech. The Bureau of Labor Statistics forecast the total population of tech workers will grow 11% over the decade as the business world moves online. Also of note, the median annual salary for tech occupations was $91,000 last year, whereas it is $42,000 for all occupations. This is why the annual $7,000 subscription cost per seat for Dice is a bargain if it can assist in finding even a handful of tech professionals. Here is another indication of the growth trends in our market space. A report released by Microsoft in July of 2020, predicted that worldwide digital jobs will grow from 41 million in 2020 to 190 million by the year 2025. Of the 149 million new digital jobs to be created, 98 million are forecast to be in software development. There is no question that we are part of a shift to a tech-enabled world ahead. This chart comes from our Dice second quarter jobs report that was released 3 weeks ago. We saw an ever-increasing number of tech job postings start in November of last year. At the same time, the United States started distributing vaccines. Incredibly, the number of tech job postings in the second quarter of this year was up 9% over the same quarter in 2019. Although the U.S. average unemployment rate is 5.4% right now, the unemployment rate for the tech sector is much lower at 1.5%. The fundamental challenge of tech recruiting is the severe imbalance of supply versus demand. Even at the peak of the pandemic, the tech sector unemployment rate was barely over 3%. The bottom line is that tech professionals have many opportunities to engage in employment right now and recruiters need the right tools to successfully find and attract technologists for their job openings. Dice and clearance jobs are the right tools and constitute 2 of the largest databases for technologist profiles in the world. We've been operating Dice for over 30 years now, and we have amassed 4.6 million U.S. members. We believe that there are roughly 8 million skilled technologists in total in the United States. So we have approximately 60% coverage in this population. And we have similar statistical coverage for our clearance jobs. This is a very distinct community. And we've done studies to see how many of our Dice members also have profiles with CareerBuilder, Monster, LinkedIn and other platforms. The answer comes back consistently that only 1/3 do so. We give technologists a very different experience with Dice and ClearanceJobs, and I'll explain exactly why. The answer is that our candidate profiles are based on skills, not titles. Titles are fairly meaningless in the tech world. A senior Java developer at Microsoft means something completely different than the equivalent title at Oracle or Google. Moreover, a typical technology job posting today, like the one that you see here, asks for anywhere between 10 to 30 or even more very specific skills. This is a current job posting from DHI Group's own career page. And technologists likewise view their career through the lens of skills. Almost all of today's technology resumes contain a skills block. Technologists know that their careers are an amalgamation of skills and that they have to have the right skills to stay relevant. The half-life of any particular skill is roughly 5 years. As I always joke, I learned a program in Fortran, but there aren't many postings these days asking for Fortran programmers. So let me jump into our demo. Our skills algorithms are our secret sauce and makes us different than any other recruitment tool in the market. We have spent a decade creating search algorithms that understand the full set of tech skills and the relationship between them. And about 2 years ago, we started the process to patent these algorithms. This is how you start a search for a perfect technologist in Dice. You start with our IntelliSearch page. Instead of searching on Java developer in Denver, you cut and paste an entire job posting and put it into the search field. Here's a job posting from the DHI Careers page. As I indicate, you take the entire posting and cut and paste it into the IntelliSearch search field. Then you add the title and your ideal location and then just hit search. Our algorithms then strip out the skills that are being requested by the job posting, understand their priority and display the technology candidates that are the best match based on the skills that have been represented in their profile. And again, each job posting in the technology domain asks for very specific skills. So this allows a recruiter to generate a short list of the right candidates very quickly instead of sifting through hundreds of candidates that may have the right programming language, but they don't have all the correct skills represented by the job posting. And as you can see, the candidates' profile visibly shows that the skills that you've requested are a match. And we also provide a full resume. So let's get back to the main briefing. At the end of the second quarter, we had 5,541 subscription clients with Dice, representing approximately 30,000 recruiters active in our system. We classify our clients into 2 categories: staffing and recruiting companies; and commercial accounts. We have some of the largest staffing and recruiting clients as customers, including Adecco, Robert Half and Kforce. We know that there are roughly 18,000 staffing and recruiting firms in the United States that are our targets. Commercial accounts are firms that have their own internal recruitment teams. In these categories, we have clients like GEICO, LabCorp, Home Depot and American Express. We've done a lot of work to identify the characteristics of companies that make them a good fit for Dice and ClearanceJobs and believe that there are 80,000 commercial accounts targets to go after in the United States for Dice alone. ClearanceJobs has a similar upside opportunity. ClearanceJobs focuses on technology jobs that require a government clearance. And these jobs are mainly at government contractors, although we have a relatively new effort to sell our subscription licenses directly to government agencies, and have successfully landed contracts with the CIA, the FBI, Department of Navy and many other institutions. We ended the quarter with 1,753 ClearanceJobs clients, but believe that there are an incremental 10,000 military contractors in need of our ClearanceJobs platform. So what have we done to create a sustainable growth trajectory? First, we created a better product. In the old days, jobs were posted in the back of newspapers. Job boards were simply a matter of taking this very basic idea to the Internet. Identifying talent is an absolutely critical part of the recruitment cycle and value chain but not the only part. And job postings have lost their effectiveness in the technology community. Can you imagine posting a job with 10 to 30 very specific skills and have the exact right subset of 8 million U.S. technologists just happen to see it and apply? It's much more effective to find the exact right technologists for the job and approach them with your pitch on why your opportunity is the right one for their career progression. One byproduct of the pandemic is a recognition that most technologist positions are remote qualified, allowing the search to be nationwide in scope. The bottom line is that a 2-way conversation between recruiter and technologists is an absolutely critical determinant of success in today's environment and what differentiates a job board from a marketplace. A job board fundamentally is a one-way discussion. A company post a job and waits for applications. The candidate never knows the recruiter involved unless they call back. A marketplace allows for 2-way communication on the site itself. On Dice, we have our own private e-mail service that gives each candidate their own Dice-branded e-mail that translates to their personal e-mail account. We also have a chat system that looks and feels like Facebook Messenger. On ClearanceJobs, we go one step further and also have group broadcasts. ClearanceJobs, or CJ, is our innovation test bed in his 2 to 3 years ahead of any career marketplace in terms of its capabilities. We take the lessons learned from new releases in CJ and bring them to the Dice product road map. Evan Lesser, our ClearanceJobs Founder and President will explain our process for innovation in more detail in his second presentation today. Now that we have created the industry-leading online marketplaces for matching companies with the highest quality tech professionals, we are focused on executing our growth plan with our much improved sales organization. Our Chief Revenue Officer, Arie Kanofsky, will take you through the improvements he has made in his time here and the success that we're seeing as a result in his section of our briefing today. I want to reiterate that our leadership team is committed to sustainable double-digit revenue growth, while maintaining an EBITDA margin target of 20%. We believe we can capitalize on the millions of new technologist positions being created over the next several years. Again, at the end of our formal presentations, we'll have an extended Q&A. We will also have shorter Q&As after each of our individual briefings with the exception of mine. So thank you very much for taking the time out of your schedule to be here today. And now I'd like to introduce Aileen Holdridge, the VP of Talent Acquisition for Booz Allen Hamilton. She would like to provide you with her view on both Dice and ClearanceJobs. Thanks for joining us, Aileen.

Thanks, Art. To set the stage first and an introduction to Booz Allen Hamilton. Booz Allen is a technology and consulting firm founded over 100 years ago, with deep expertise in analytics, digital, engineering and cyber. Headquartered in McLean, Virginia, there are 28,600 employees. We work with a diverse base of public and private sector clients across multiple industries in the U.S. and internationally, helping them tackle their most complex challenges. Fiscal year 2021 revenue was $7.9 billion. To our prospective candidates, we in part at Booz Allen, we believe that your talents are the gateway to tomorrow. Working with the leading edge of AI, data science, digital transformation, cybersecurity and engineering, we uncover and solve the emerging challenges of our time. Ours is the culture of innovation rooted in a collective desire to make a lasting impact that you will realize. The skills we bring to our team, coupled with the unparalleled missions we'll serve will shift the way the world works and lead us into the future. Change is within reach, and it all starts with you. During the last 5 years, Booz Allen's talent attraction capability has embarked on a transformative journey, building and stretching it to become an industry influencer. ClearanceJobs and Dice has been an important part of our journey to attract and engage talent in a highly competitive talent marketplace, especially for Clear Talent. ClearanceJobs and Dice are important to Booz Allen, partnership, products and performance. Partnership, while we've worked with ClearanceJobs and Dice for over 10 years, our partnership has greatly evolved in the past 5 years, especially the use of the ClearanceJobs platform. Booz Allen has developed into a trusted adviser role serving on the advisory councils for both brands. Our feedback is solicited and incorporated into product development and process improvement. Products and performance, they go together. In general, if a product doesn't perform well over a period of time, you don't reinvest in it. it's about return on investment. ClearanceJobs and Dice provide an array of products and services to support our talent attraction objectives and activities to our target audiences. We're continually trying and layering on new products, especially with media and providing feedback. In partnership, we have developed performance insights needed to maintain or improve our performance. Let's get into some specifics by platform. Dice helps us identify technical talent predominantly for our clearable work. Booz Allen sourcers consider Dice's sourcing tool to be an important part of their sourcing tool portfolios. The easy-to-use interface with multiple search options, IntelliSearch, AI skills matching, ability to search social profiles, new chat functionality and more help our sources be more productive and efficient with identifying technical talent, both with traditional and emerging technology skill sets. The Dice branded Booz Allen page showcases our organization, social posts and trending skills that are in demand with our jobs posted on Dice, all of which allow candidates to gain greater insight into who we are and what we do. While we use Dice to source clearable technical talent, our primary target audience, Clear Talent is on ClearanceJobs. With 90% of our current positions requiring a clearance or the ability to obtain one, ClearanceJobs is an integral part of our overall candidate attraction channel management mix. Clear Talent is a highly sought-after group of finite talent who are typically passive. This group is actively employed but often open to hearing about other opportunities. We're part of an esteemed group of ClearanceJobs clients such as Microsoft, Amazon and the FBI, among others that are all buying for the same Clear Talent. Within this marketplace, ClearanceJobs cultivated for both candidates and employers, Booz Allen has a platform to share its culture and mission-driven work through multiple touch points, from employer branding opportunities through targeted ads, to candidate nurturing and engagement through targeted e-mails, sponsored articles, videos and social networking, to job visibility and interactive, efficient sourcing tools, the robust ClearanceJobs platform supports Booz Allen's candidate attraction approach. Given the nature of Clear Talent, nurturing and engaging this audience is paramount. The level and nature of content and media served candidates increases the likelihood that they will apply to a job posted on ClearanceJobs or interact with our recruiters. In addition to the paid media products, the Clear Network, a social network allows recruiters and candidates to further engage with one another. The ClearanceJobs sourcing tool offers automation and efficiencies for our sources through AI-driven intelligent search skills matching, team collaboration, organizational tools and web source integration into our Avature CRM. More importantly, it provides valuable engagement mechanisms, including chat, voice calls, connections and targeted messaging. In closing, Booz Allen's talent attraction transformation continues to evolve. We look forward to a continued partnership with ClearanceJobs and Dice by providing input into and use of their products and successful performance that returns -- provides return on our investment. Art, back to you.

Thank you so much, Aileen, and for your support of our 2 platforms for over a decade. And I do believe that we have time for a couple of questions if there are questions in our audience.

[Operator Instructions] I see one has come through from Josh Vogel.

You can hear me okay?

We can hear you.

All right. Great. Aileen, nice to meet you. I'm curious, do you use other career marketplaces for your talent searches in addition to what both Dice and CJ offer? And maybe if you could talk a little bit about what you find differentiates their platform and offerings relative to other providers?

Yes. Thank you, Josh. Yes, we do use other platforms. I will say CJ, ClearanceJobs, in particular, what really sets that apart is it's a dedicated platform for Clear Talent. There aren't many dedicated clear platforms out there, and ClearanceJobs certainly is the most robust and sophisticated. Dice helps us get out in front of technical talent that may not necessarily know us otherwise, especially in the commercial space and outside of the D.C. metro market.

I appreciate those insights. I just have a follow-up. When you think about cleared professionals or helping clear professionals maintain their clearance protocols. Is that something you do internally? Or does CJ help you with that?

In terms of maintaining the clearance, that's something that we work with internally in maintaining work against proper billets, et cetera. And even up clearing individuals.

Thanks, Josh. Maybe time for one additional question.

Yes. We have another question and that's from Zach Cummins.

Great. Can you hear me okay?

Sure, can.

Great. Aileen, I really appreciate the insight on their behalf. But I mean, you talked about some of the capabilities that you're using at this juncture with ClearanceJobs. I mean as you're thinking about your evolving recruiting practice over time, I mean, are there other capabilities that you're hoping that CJ can provide going forward?

More and more Clear Talent. And they've been great in helping us showcase our work on their platform. We haven't added any new feature requests recently, providing input on how to improve on some of the existing products is some -- an ongoing process for us and certainly is part of the advisory councils and our ongoing partnership. That's something that we will continue to provide feedback, but there's nothing immediately that comes to mind to add to the platform capability.

Thanks, Zach. And thank you sincerely, Aileen once again, for being here today. Really appreciate your support. And we're going to move us along to the next section, which is Christian Dwyer, our Chief Product Officer, and talking about differentiation in the context of Dice.

Great. Thank you, Art, and thank you, everyone, for the opportunity to share our product strategy for differentiating Dice in this dynamic market. I'd like to first start out with grounding us in our mission, which guides everything that we do. Our mission is to be the trusted partner for every technologist throughout their career and the organizations who rely on them by providing unparalleled access to meaningful opportunities connections and information. It truly speaks to the 2-sided marketplace we operate in with a balanced focus on addressing the needs of our clients and technology candidates who rely on Dice to achieve their goals. Our North Star is a key measure of success that defines the relationship between client and technologist opportunities we're working to solve and the revenues we aim to generate by doing so. For clients, that North Star is to be the first choice one-stop destination to reliably find all technologists in the market, enabling them to search, match and connect with the highest quality candidates for the technology resource needs. For technologists, our North Star is to be the first choice one-stop destination for all technology opportunities in North America and a dependable resource to help technologists grow their careers. We believe by achieving both of these goals, the value of our platform is fully realized. A successful online marketplace provides value to users in ways that create a virtuous reinforcing loop that builds upon itself. Dice certainly has the scale as a technical vertical specialist and the historical data at its foundation to further grow our career marketplace. Very simply, technologists come to our site for jobs and content. The more job opportunities and relevant content that we present, the more technologists we attract. And the more technologists that we attract, the more indispensable are site audience and profile database are for our clients. This reinforcing loop drives revenue growth, retention, and higher annual contract values for Dice. Based on our research with clients and through regular customer advisory board meeting that Aileen referenced, we organized our clients' needs into the following 3 buckets. First, it's important that we provide the ability to easily search, match and connect with the highest quality technologists; second, intelligent automation that integrates into their applicant tracking systems and their workflow management tools; and third, the ability to differentiate their brands and attract high-quality candidates that align with their values. In guiding our approach are these key attributes that all clients require, solutions that deliver quality tenants at the right volume with relevant speed and ease that saves time and effort and establishes trust and confidence in our solutions. Over the past years, our product development has focused on helping clients to find the right talent as efficiently and effectively as possible. We retooled our candidate database to be the most current comprehensive and accurate source of technology talent in the U.S. for both active and passive candidates. We upgraded our talent search platform and our IntelliSearch capabilities to make it easier to find, match and connect with the right technology talent. And we've seamlessly integrated new sourcing automation capabilities into leading applicant tracking platforms to enable clients to work faster and smarter. We are now focused on enabling clients to differentiate their brands and attract the right technologists to their organizations. As we look forward, our efforts will focus more heavily on the candidate experience to ensure that we're balancing their needs in the marketplace. And based on our research, we've distilled the technologists value proposition into 4 areas. First, access to the widest selection of job opportunities in the U.S.; second, the ability to find the best matches for jobs, recruiters and companies based on their expressed and their implied interest; third, the ability to learn and proactively engage with the recruiters and companies that extend beyond the traditional application process; and fourth, to help technologists build their personal brands and promote what makes them unique. As we continue to evolve our marketplace, we are leveraging our intellectual property, our data and our insights to deliver against 4 strategic product priorities. First is connections, creating meaningful connections between technologists and recruiters is core to our mission. Technologists want to directly connect with the recruiters who can help them find their ideal roles. And recruiters want to quickly engage with scarce technologists before another opportunity catches their eye. Over the past year, we've launched several key capabilities that enable recruiters and technologists to showcase their expertise and their desires through profiles, enabling real-time chats with our instant messaging solution and reinforcing trust and relevance through private e-mail. Our strategy here is to further enhance these capabilities and evolve how recruiters and candidates connect. The connections on Dice create a richer, more satisfying talent acquisition process for all Dice members. Second, is personalization. Creating a personalized experience is essential to building trust with our users. Our personalization strategy leverages our unique taxonomy and match models to uncover relationships amongst skills, titles and roles to deliver the most relevant recommendations to technologists and employers. This delivers the right opportunities, content and experiences at the right time. We'll be investing further here to make matches and recommendations more prominent, giving our users more ways to refine their preferences and create their completely unique Dice experience. Third is employer branding. Our research shows that technologists consider companies and their mission, their vision, their tech culture, their teams and growth opportunities as crucial criterion when exploring new opportunities. In a world where the competition for tech talent is intense and escalating, employers, especially nontraditional tech companies know that they need to differentiate their brands to attract the right talent. Our focus is on building solutions that enable employers to promote what makes them unique in order to gain a competitive advantage among technologists. And to that end, we're proud to announce that we have partnered with Amuse, a leader in the employer branding solutions to integrate and co-develop solutions specific to our unique audiences. And lastly, is user experience. Essential to our strategy is delivering a user experience that is intuitive, clean and modern. Our strategy incorporates these differentiating features into an intuitive UI that makes our products useful and usable for all members. Our goal is to make the Dice experience delightful to use, enabling our audiences to easily discover the most relevant tech opportunities, content, and connections, the ease of use with our products and tools as a key way Dice stands apart from its competitors. So -- and executing well against this Dice product strategy creates a positive and long-term impact for DHI. First, we improved our retention rates by -- that are driven by product performance, growing the number of unique high-quality technologists on our platform increases the performance of our products and drives renewals and new business. And integrating into applicant tracking systems creates stickier solutions as part of a client's workflow and improves retention rates. Second, our product strategy increases the annual contract values with employer branding solutions by adding in the value of employer branding solutions will significantly grow our annual contract values and ultimately change the way we go to market. Employer branding is particularly valuable for commercial account growth that enables these clients to promote and differentiate their brands. Thirdly, our product strategy reinforces the loyalty value relationship through connections. At scale, as a one-stop shop for jobs and candidates, the more connections are made and the more those deliver relevant opportunities, the more loyal clients and technologists are to our platform. And lastly, our product strategy optimizes resources for strategic value creation, meaning by building a stronger candidate experience we will increase the direct and organic traffic freeing up marketing resources to focus on building and reinforcing our brand value to our customers, which adds momentum to our economic flywheel. Dice has the foundation in place and the runway ahead to further cement itself as a career marketplace that is indispensable to technologists and employers alike. I want to thank you for the opportunity to share a little bit of our product strategy with you. And with that, I'll take any of your questions.

So we'd like to open up for questions right now, for Christian, in terms of anything you have on your mind from a product perspective, especially with a focus on differentiation.

All right. We have a question and it's from Aman Gulani.

Can you hear me?

Yes.

Can you hear me?

Yes.

Okay. Christian, I guess my first question is about the recent investment in The Muse and how that fits in with their existing career marketplace platform, yes?

Yes. Yes. So being able to provide for both technologists and employers, the opportunity to truly differentiate their brands. When you think about technologists and when they're making career decisions, they're both looking at the role itself that they're actually considering, but they're also considering the company culture, the company environment, what the tech teams are like and so forth. And we know through our research that that's a really important part of the criterion for how they actually think about which company they want to go to work for. And we think there's a really excellent opportunity to really expand our company profile capabilities and our -- the ability to promote our employer basically differentiation to help them actually attract and engage and ultimately recruit the right talent.

Great question, Aman. And from my perspective as the CEO, what's remarkable is The Muse has really been working on this idea of what is the ideal company page to promote their brand for over almost 10 years now. And so they've gone through a lot of hard lessons, and we're hoping that we're going to be able to take advantage of that in the next evolution of our own corporate homepages on Dice and ClearanceJobs.

Yes. We have another question and it's from William Hamilton. Well, it looks like William's individual line is muted. But his question is, does the product need to evolve to attract more corporate accounts?

So from a commercial account perspective, I think what's really important for commercial accounts is the ability to attract the right talent. And so yes, our evolution of the product really is geared towards that employer branding angle that I mentioned, that is really key to the commercial account growth. And then being able to promote their jobs and their capabilities while adjacently promoting their unique differentiation is a really important part of our strategy moving forward. And I think the additional services that we offer with our virtual career events, our sourcing services capabilities are also really unique offerings for the commercial accounts space.

And from my very simplistic view, I would say we have seen our commercial accounts team beat their plan every single month this year. And we've actually been increasing the size of the team because we really do believe that there is a unique growth opportunity right now with the existing platform. We could always do better, but we are seeing a lot of good success. So I appreciate that question, Will.

And we have one more question, and that's from Zach Cummins.

Yes, Christian, I know you've made a lot of progress on developing Dice over the past 3 years from really transitioning this from more of a job-posting board into more of an evolving tech-enabled marketplace. But can you give us a sense of where you think you ultimately are in the product development road map kind of I guess, to use a baseball analogy, kind of what inning are we in right now in terms of that product development road map and ultimately, where you want to get dice in the future?

Yes. I would say that we are in the mid-innings of our execution. We have a very solid product that actually meets the needs of our user base today. And I think what we're focused on over the next 18 to 24 months is really going to really start to drive a lot of unique differentiation and start to leverage a lot of our unique IP into the technologist experience. And so I'm really excited about where we're going. I think we did a great job in the beginning innings of our game, focused on our clients' experiences and making sure that those were really meeting the needs of our customers with the likes of Aileen and others who have given us a lot of feedback along the way. And I feel very blessed to actually be able to work with Evan who's been out in front of us leading the marketplace. And I've been able to actually take a lot of his lessons learned and been able to bring them into the Dice experience. And so a fair assessment would be we're in the mid-innings with a very solid product that is going to get better over the next 18 to 24 months.

Thanks, Zach. I really appreciate that question. And thank you very much, Christian. I'm going to move us along to our next presentation, which is Evan Lesser, our Founder and President of ClearanceJobs, and his first presentation of 2 today.

Thank you, Art. Great. Well, thanks for the time today. And before we dive in a bit deeper, I know that not everyone on today's call may have a good understanding of how security clearances work. So we're going to walk through a 60-second primer. So first, know that a security clearance isn't like an ID card. It's actually a positive determination from the federal government that after a background check you've been deemed suitable to access classified information that is related to national security. That positive determination can be revoked at any given time. So ClearanceJobs does work with cleared professionals to instruct them on how to maintain their suitability. Next, having a security clearance, doesn't mean that you've then got access to the entire range of national security information. In fact, you only have access to whatever content you need to do your job. In our industry, this is called need to know. Next, also part of need to know is the concept that clearance suitability and access must be tied to a specific job. If you lose that job, you lose your clearance. Next, only U.S. citizens can obtain clearance. That's the #1 requirement. There are 3 basic levels of clearance, confidential is lowest level, secret and top secret. The higher the clearance, the more sensitive the information is that you'd have access to. And lastly, anyone undergoing the clearance process will be fully investigated. The investigative criteria ranges from financial to criminal substances, use of technology, foreign connections, and more. So hopefully, that gives you a good overview of security clearances 101. Next, to really understand how ClearanceJobs serves our clients and the value that we bring to the table, I'll clue you into 4 dynamics that all employers in our space are facing. And these 4 dynamics are impacting all employers, large, small startups, direct hire companies, staffing firms and even government agencies, too. So first, the total population of security-cleared people has dropped year after year until recently, back in around 2013, there were 4.6 million U.S. citizens with DoD clearance. Over the years, that number dropped from 3.5 million in 2020 and has only recently risen to 3.8 million. Now keep in mind that the 3.8 million U.S. citizens that currently hold security clearance includes 1.4 million active duty military. Now most of the active duty military with clearance are pretty planted, and they're not looking for jobs. So that leaves just a very small 2.4 million people with security clearance for employers to choose from. And secondly, while the total number of cleared people remains low, demand is off the chart. So ClearanceJobs hosts around 58,000, 59,000 active job postings for cleared workers today. And that's about 65% of all publicly posted clear jobs on the Internet. So high demand and lower supply creates a tightness in the market, and that really drives our clients' activity. At the same time, while the government has made some good strides in reducing the time it takes for someone to get a new final security clearance, the times are still lengthy. Presently, it's taking about 112 days to obtain a secret clearance and around 160 days to obtain a top secret clearance, which is most popular. So until those numbers are reduced to maybe a month or so, most employers that need cleared workers prefer to look at the existing pool of people that already have clearance rather than trying to pull someone off the street and get them a brand-new clearance. And last but not least is the fact that 81% of all people with security clearance are employed. So that means only 19% of cleared workers are actively job seeking. So the bulk of our candidate audience is employed and passive. So here's what's important to understand with most cleared workers being employed and passive, the way that employers approach them is to entice them with new opportunities, and they have to be very tuned the opportunities and their messaging. So if an employer throws a job description in front of a passive candidate that's already employed, it's just not going to work. These passive candidates, they may be career-minded and open to new opportunities, but the hard call of a job posting is just not affected. What does entice an employed and passive candidate is content, articles, photos, videos, podcasts, webinars, events, tweets. You have to nurture these passives to get them interested in you and your company and to gain their trust. It takes time, but the ClearanceJobs platform is based around this concept. So if we shift focus towards the federal government, first, I want to quickly touch on why ClearanceJobs has remained the industry leader for cleared worker recruiting. Our success to date with industry is based on 4 pillars. First, ClearanceJobs has the most cleared candidates. We have the most jobs. We also have the widest reach into a huge cleared ecosystem of talent. And lastly, we have unparalleled tools, features and functionality for employers to find, attract, engage and hire cleared workers. As Art mentioned, later on today, we'll dig more into the ClearanceJobs platform specifically, and we'll talk about why we have the most innovative career marketplace on the Internet. Next, taking a look at the government specifically, the government has distinctive challenges, but the challenges they have are fairly similar to industry, and that's where ClearanceJobs thrives. The government's hiring cycles can be lengthy and encumbersome and that can actually turn off some good candidates. An industry can hire so much faster. So any time savings we can offer to government is going to go a really long way. A second, while it's improving, the government has less ability to find, engage and hire security-cleared talent directly, much like industry can do. And finally, the government right now doesn't do a very good job of conveying their employment brand that Chris had mentioned before, which is so critical for attracting the most skilled and best fitting talent. And these are all areas that ClearanceJobs specializes in, and we've already been working with a number of government entities to help them solve their specific cleared hiring challenges. So the ClearanceJobs employer platform is built for speed, from finding candidates to engaging them to hiring. The tools and features on our platform are really unparalleled in online recruitment. Again, we'll talk about more of these later today. In ClearanceJobs case, bigger is better. Since 2002, we've been leading the cleared recruiting market. We have over 1.3 million registered candidates, a giant e-mail list, a huge social media presence and most importantly, a commanding voice in the security cleared world. Candidates and employers turn to us for information and opportunities more than anybody else. And our cleared ecosystem of talent is the largest available anywhere. Similarly, we know branding, plain and simple. We know what marketing, branding and advertising works on cleared people and what doesn't. We gather tons of data, watch feedback closely and relentlessly experiment. ClearanceJobs remains the cleared employment branding expert, and we're increasing our capabilities in this area. So what have we done with government to date? Needless to say, the opportunity for federal sales on ClearanceJobs is extensive. The government, specifically the Department of Defense is the largest employer in the entire United States and the need for cleared workers is critical. While we've had plenty of sales success to date, there's also plenty of room for sales growth. Typically, we'll engage a government agency and work to understand their challenges. Each agency has unique situations and rules and requirements, sometimes with even same agency. So discovery is a big part of how we start. Then we'll usually suggest a pilot. So the agency can trial our products and services, figure out what works for them and try to work out any kinks. And after that pilot, we evaluate the performance and work towards a larger, longer agreement. We've had good success to date. Feedback has been very positive and some of our federal clients can be seen here on screen. Next, there's a lot of room for growth, and we've got a plan together to proceed. We've worked through an updated federal market assessment, and it's been tuned to security cleared hiring. And this market assessment details where the opportunity lies and strategies to get there. We're putting together a cohesive go-to-market strategy for 2022. We know that we'll need more expertise in-house. So we'll be building out a federal sales team who has the knowledge and the connections to get clearance jobs directly in front of decision-makers within government. And finally, just like we do for our industry customers, we'll continue to make ClearanceJobs invaluable to our government clients. So many of our industry customers can't do their daily work without ClearanceJobs. And that's the end goal for government as well. We're well on our way. So I thank you for your time. I will pop on my camera here and see if there's any questions that I can answer for you before we move on to our next presenter Arie Kanofsky, our Chief Revenue Officer.

Thank you very much, Evan. Rachel, I'm not sure if we have any questions for Evan specifically, but we'd love to entertain them right now.

Yes, we do. Aman has a question for Evan.

So I guess, can you talk about the sales cycle for ClearanceJobs with some of your government agency customers? And do you see the sales cycle potentially getting shorter over time as you get more agencies onto the platform?

Yes. I would say that if you put them all together in general, the sales cycle is getting shorter, but for government, a short sales cycle is still pretty long compared to industry. But that said, one of the things I touched on is direct hiring authority. And years and years ago, one of the key things we ran into with government agencies is that they could not directly talk to candidates like our government contracting clients can. But over the years, the government has realized that that's been a hindrance in terms of hiring. So over the last number of years, the government has increased their direct hire authority, and that means that recruiters have the ability to directly contact candidates. So that's been a big help. But in terms of the sales cycle, the changes that have been going on within government have been beneficial, not only for them but for us as well. We're able to get government clients on board faster and get them utilizing our platform faster and give them the same tools and capabilities that our industry clients have. That said, every government agency is different. And within each government agency, you've got sub agencies and each agency and each office can have different rules and regulations and red tape. So it really takes a lot of discovery work. But to answer the question, in general, yes, I think we've seen the sales cycle reduced, but that's still not anywhere close to industry.

That's helpful. And I guess one last question from me. Can you talk about the renewal rate with the government agencies? I imagine those customers once on the platform, they're fairly sticky and typically stick around for a while. So yes, if you could provide more color on that front.

Yes. So the renewal rates for our government clients is high. And I would say it's higher for the ones that employ a mix of strategies. The agencies that are allowed to just advertise typically have less candidate response than an agency that can advertise and do content marketing and attend events and get on to a platform directly to interact with candidates. It's a tough market. And just like any other employer out there, the more avenues that you have to reach out the candidates, the more you can engage with them, the more of our tools that you can use the higher your chance of success and the higher those renewal rates are. So we do push our government clients to use as many of our tools and strategies as possible. And those that are able to do that are definitely renewing at a very high cliff.

The next question comes from Josh Vogel.

You can hear me, okay?

Yes.

Yes. Sure, can hear you.

I guess my first question, you mentioned 1.3 million clear professionals in the database, you've along with the contacts. I guess how active are these 1.3 million on your site? How do you measure that? And what are some of the key highlights or capabilities you have that you employ to drive more engagement or traffic from these professionals to your site?

Yes. So not every clear professional is the same. And I know that's a simplistic thing to say, but you've got engineers and software developers. You've got database folks. You've also got on the ClearanceJobs platform some nontech. It's not a majority, but some nontech would be linguists, intelligence professionals, logistics, et cetera. So our cleared ecosystem that I talk about, make sure that we can touch cleared candidates wherever they are. And some people, it's easier to get them through e-mail. Some, it's easier to get them through our platform messaging system directly. Some, it may be an event or live chat, some, content is the way to go. So mixing all of these things together really gives us these kind of tendrils into our ecosystem that helps us reach the right people. When a client comes to us and they tell us the exact type of people they're looking for from skills to clearance, to location and all the other factors, we're able to kind of plug that into our system, and we know how we can reach out to that audience. So it's not a one-size-fits-all strategy. It's pretty tuned and specific to each client. That said, the marketplace approach is geared towards passive candidates. It's geared to those candidates that are already employed, but they're career-minded. And that's really one of the main things that you'll hear thematically through our conversation today is that a job board hits those active job seekers. Whereas a marketplace, it's not just active job seekers but passive employed candidates who are doing career maintenance as well. So a huge part of our platform. It's all about those people that just want to do career maintenance. They want to see who's hiring. They want to learn what salaries they can command. They want to get feedback on the resume. They want to network with recruiters. They want to follow companies. They want to get articles and content on how to best maintain their security clearance. So the way that we keep candidates engaged is through our huge editorial engine, through our marketplace and the product that literally draws candidates back on a daily basis. The messaging system we've got built in, it all kind of comes together like a big puzzle. There's not any one single thing that's the predominant driver of candidate engagement. It all works together, and it's all tied together. And the puzzle analogy, I think, is pretty fitting.

Yes. That's helpful. And just shifting gears a little bit. Do you have any examples of collaboration between government agencies where you have contacts that perhaps work together at different agencies that share candidates or even a situation where you were working with one agency that gave you an in at another?

Let's see. Honestly, as much as I would like to say that one agency that falls underneath, let's say, the Department of Homeland Security is able to refer us to another sub agency underneath the DHS. It just doesn't work that way. They're all fairly siloed, especially in terms of recruiting. What has been helpful is for us to be able to go to one federal agency that we've never worked with and then show them a case study from another government agency and say, listen, these 2 agencies that may be completely different, they may have different priorities, but they need similar candidates. And if we're able to take a case study from one agency and use that as an example for an agency that we're not working with that does resonate very well. So as much as I'd love to have the agencies talking to each other and drumming up ClearanceJobs. It just doesn't work that way, but we do have some strategies around building that -- building those ties, if that makes sense.

Sure. Yes. Makes sense. And if I could just sneak in one more, a more higher level here, but does your go-to-market strategy evolve at all when a new administration comes in? Or is it usually a nonevent?

We've seen a lot of administrations over our history since 2002. And honestly, I think when a new administration comes in, you've got a couple of questions. The first is, what does that administration think and feel about defense in general? And then you've got some of the dynamics around budget. And to be honest, it's been less volatile than we would have expected. It doesn't matter who's in the White House. It doesn't matter who's in Congress. There's generally a pretty level consideration for national security and for budgets. So the DoD budget, which is obviously the largest part of the U.S. federal budget has been pretty consistent over the last 12 or 13, 14 years. It's actually gone up over years, but it's been generally the same even back when the budget was only $550 million -- sorry, $1 billion or so for defense, ClearanceJobs was growing at double digit. So you would think that there'll be more volatility with the new administration, but honestly, it really hasn't been that way. So far, we have not really seen much of a change regardless of who's in the White House or who's in Congress, if that helps answer that question.

Thanks, Josh. So I just want to make sure that we move along so we stay on schedule. And everybody should know that Evan also has a second presentation that's coming up, so he's going to have another Q&A as well. But for now, I'd like to introduce our Chief Revenue Officer, Arie Kanofsky, will appreciate the title of this particular presentation, which is Capitalizing on Commercial Accounts. And I'll let Arie take it from here.

Thank you, Art. And it's a pleasure to present our 2021 growth strategy today. So you've heard about our best-in-class products, a road map for the future. You may be wondering why invest now. What's actually changed? Before I dive into our strategy for growth, I thought it would be more impactful to give you a glimpse of where the revenue team was just 1.5 years ago to demonstrate really how far we've come. From day one, it was evident to me that a significant gap existed that impeded our progress but also showed me that there was an incredible opportunity at DHI. Overall, the heritage process for managing the business was weak. There was no real sales force functionality, no reporting, which leads to core forecasting. There wasn't a strong enablement arm sales process or methodology. So you have a lot of people doing a lot of different things with mixed results. And because there was no process, we have a team of order takers versus consultative salespeople with extremely fast sales cycles, small deal sizes, insufficient pipelines and consistent misses to sales plan. Taking things a bit further, the teams were organized in a hybrid model, so you add hunters and farmers on the same team. You also had misaligned sales territories, an account management function that focused on renewals versus a great customer experience. We had comp plans that drove the wrong behaviors and really an overall lack of accountability. And 60 days into my tenure here was the state of the state in terms of our numbers and a result of some of the challenges that I just highlighted. What's not listed is we lost 54 customers that month, which was a trend that the company also faced. So in early 2020, the team began the journey of reimagining the entire revenue function. Believe it or not, there were over 30 major initiatives that the team accomplished last year. Starting with a complete reorg to where leaders and reps are now singularly focused on either new business or customer success, we continue to strategically execute on what we thought would be the most impactful first and began to chip away at our list. We implemented a new sales process, made a significant amount of headcount changes, including bringing in 7 key leadership hires. We created new levels of accountability, new levels of reporting metrics, forecasting, training with coaching tied to certifications. We created a new prospect pilot process, revamped the quarterly business review process. We reengineered the entire new customer onboarding process, including what we measure today to ensure the health of our customer relationships. We also placed a real emphasis on selling multiyear contracts that had auto renewal clauses. And with the help of our IT team, we also launched 2 new sales automation platforms, one for new business, and the other for customer success. So fast forwarding where we are today, there are 5 strategic initiatives that are truly the foundation of our 2021 growth strategy, all are key drivers to increase average deal size, client retention and client spend. Our first initiative is account segmentation. And with the help of Allysky consultants, we now know what our ideal client looks like, which ones have the highest potential spend? What verticals were most successful selling into? And how many reps we ideally need to maximize our future potential in the enterprise the mid- and small market segments for both our new business teams as well as our customer success teams. It even guides us to where we should be making our future investments. And what's equally exciting to me is we now know the commercial market alone is an opportunity worth roughly 10x what the commercial team generates today. And 2021 is the year of our customer, where reps better engage our clients, we reduce churn, and we begin to grow our client base. And by leveraging our account segmentation results, our customer service reps now understands who the most valuable clients are. And as a result, how they should be spending their time. This, coupled with our new customer engagement platform, ChurnZero, our team can now automate literally everything from customer satisfaction surveys, requests for training, playbooks and even understanding of client's health score well in advance of the renewal date. We are now realizing not only amazing results in product adoption, number of users trained, client satisfaction, but more importantly, the highest renewal rate on customer count we've had in years. And we continue to see significant velocity with multiyear contracts where the team has locked up nearly another $5 million in annual contract value for 2 or more years and is pacing far ahead of our goal by the year's end. And with another 1,400 contracts that contain the auto renewal clause accepted by our clients in Q2, roughly 75% of our customers to date have accepted an agreement that has this type of language. Having said that, I thought I'd share the positive results that we're starting to see in connection with the auto renewal clause, especially with Dice's mid-market customers, which represents our largest volume of clients. Specifically, in the last 2 months, 88% of our customers that had an auto renewal cause in their agreement renewed versus 76% of those that didn't. And while our #1 goal is to give our clients an amazing experience so they stay with us, we realize not everybody will. So our last strategic initiative this year was to build a win-back program to go after lost customers, to win them back and to help rightsize our revenue. First, we move lost accounts out of customer success faster than we've done historically, giving them to new business team who will leverage our account segmentation data and focus on the highest value prospects first. Marketing then creates a -- we fixed it or a we want you back type of campaign, specifically on the reasons why the client left us in the first place. And finally, we've created in addition to our commission plan that first incentivizes the win back. And second, pays the rep more to increase the customer's previous spend and third, to sign a multiyear agreement. To date, this initiative has brought back $1.7 million in customer bookings. So 1.5 years later and a very big transformation complete. We aren't just talking about results. We're actually seeing them. We're looking at a much, much different team, one that's stronger and getting stronger every single day. We're seeing a team that has a significantly better go-to-market strategy and a team that's far more engaged with our customers than ever before. And as a result, we have a team that's generating the results you see here. So what's next? In order to continue driving great results like the ones I just shared, there are 4 strategic initiatives the team will be focusing on in 2022. First, we will start with an increased focus on year one customers. I think everybody on this call would agree, first impressions are everything. We want to ensure these and obviously, all of our customers are onboarded correctly, making certain they have a great experience and they get a great return on their investment, so they increase their spend and ultimately decide to stay with us because we become an indispensable trusted partner. The second strategy capitalizes on the account segmentation study that I shared and the incredible opportunity that's in front of us, where we will look to significantly expand our new business and customer success teams to further penetrate those accounts and attack the vast white space that exists even in our own customer base. Now keep in mind, this growth is on top of the 20 people we've already hired on this team since January. Third, in order to help our customers continue to attract and retain great candidates, employer branding, just as Christian mentioned, will be a key product set that the team will be selling next year. And lastly, having a maniacal focus on what got us here in the first place, which is continuing to increase our average deal size, continuing to build amazing relationships with our customers, so we ensure a higher numbers of repeats and as well as increasing the profitability of those customers is paramount to achieving amazing results in 2022. So before I pass it back to Evan, I guess who has the first question?

Thanks, Arie. Rachel, do we have any questions queued up?

Yes. The first question is from Josh Vogel.

All right. Good to see you, Arie. My first question, I'm not looking for any guidance here. But when I'm thinking about white space opportunities, commercial accounted Dice, government agencies at CJ. And then Art had comments that you can achieve sustainable double-digit growth rates for the company. So directionally speaking, how should we think about growth rates of commercial versus recruiters at Dice and government agencies versus third parties when we're looking at 2022 and beyond?

Sure. Well, specifically in commercial, we believe, as I mentioned, there's at least a tenfold opportunity sitting in front of us versus what the commercial accounts produced today. In terms of the staffing industry or recruiters, we believe there's also an incredible opportunity as, again, this team is just getting started. Federal is something that obviously, I'm going to be working on with Evan and the team in building a federal sales team to attack that market. We believe the opportunity there is significant, but that's just getting started.

All right. Great. And I'll sneak in one more. The clients you won back just under $2 million in revenue year-to-date. What type of contracts are they usually putting in place when they come back? How many profiles, are they multiyear? Because I just want to get an idea around the growth opportunity within this subset, the win backs.

The win backs are huge. And again, I think a lot of the win backs that we're starting to see it's because the company or the sales team has taken just a different approach in terms of overall engagement, right? So we're finally getting them to give us an opportunity to come back to leverage the amazing products that we have and obviously tapping into the cannabis that Dice and CJ have as well. But the opportunity where we -- what we see is many millions of dollars in terms of revenue as well as whether coming back, they're usually coming back for multiyear contracts.

The next question comes from Aman Gulani.

Can you maybe talk a little bit about your initiative for 2022 on your focus on employer branding. Maybe elaborate on that? And how do you see that driving success in commercial accounts?

Sure. Well, as Christian mentioned before, this is something that we are entering into. And we've been doing it for quite some time, but the news obviously is, we believe, is a really terrific partner for us. Where the commercial accounts are really needing to improve their branding to capture the right candidates across the board. So in terms of the go-to-market strategy going forward, this is going to be a key initiative we believe, with The Muse. We have an amazing upside also considering the fact that we have 100-plus sellers on our side that can drive the velocity of that. I don't know if that answered your entire question.

Thanks, Aman. Rachel, any further questions?

We do have a couple of more questions. This next question is from Alex Silverman. So I'm going to ask your question for you. And that question is how many accounts subscribed to both Dice and CJ? And is that a focus? Is there a difference in churn?

Say that one more time?

So how many accounts subscribed to both Dice and CJ? And is that a focus? And is there a difference in churn?

In terms of the total number, I would have to get back to you on that. But I can say that it's certainly an initiative that we've had since I got here because there's a lot of overlap in customers, I mean, from Booz Allen, obviously, is a very big example of that. In terms of churn, what we've seen historically on Dice, there's been significantly more churn, which we have rightsized. And the churn on CJ has been I would say, pretty much on the low level, and it's only getting better. But it's a big opportunity in front of us in terms of the overlap for sure.

Okay. I think we have time for one more question, Art.

Yes. Just one more. One more.

Yes. And this question is from William Hamilton. And the question is, how does commercial revenue split today between enterprise, mid-market and small? And over the next 2 to 3 years, which segment will be biggest in the revenue growth contributor?

Yes. So today, the mid-market makes up a significant amount, if not the majority of the revenue on Dice Commercial. Enterprise is really starting to take hold. We're seeing much, much larger contracts and bigger, bigger names come to play as the team has gotten better every single day. I believe over time, the enterprise team or the enterprise dollars will be the predominance of the company and the predominance of the spend for sure. And I also think there's a really big opportunity, candidly, in the small market in leveraging some of the smaller companies out there that are looking for tech talent. So I would say we're going to rightsize the business. Enterprise will certainly take up the lion's share. Next will be mid-market as it should be, but with a larger amount of customers with a smaller amount of spend and then a small subset that have very small spend, maybe more transactional, but a very, very big opportunity there. The opportunity is enormous.

Well, thank you, Arie. Greatly appreciate it. And I'm going to move us along to our next presentation, which is once again from Evan Lesser. Evan is, of course, our Founder and President of ClearanceJobs. But beyond his day job, he is also in charge of our Advanced Research Projects team, which is really the heart of our innovation for all of DHI Group. So I'll let Evan explain exactly what that means for us.

Great. Thanks, Art. Appreciate it. All right. So as we dive in deeper to discuss what a future career marketplace will look like. First, we're going to examine the clearance comps platform and how it's evolved and how it drives innovation at DHI. So here's a little bit of a history. When ClearanceJobs launched in 2002, we were a standard job board with pretty little candidate to employer engagement happening on site. Next, by 2010, we understood that the world was changing and communication between stakeholders on our site was going to be critical for establishing value for our users. In 2010, we launched the first version of our career marketplace, and we made the successful transition from transactional job board, to 2-sided marketplace. Next, Fast forward to 2021 and ClearanceJobs sits firmly at the top of our niche. With more than 11 years of learnings and experience, our career marketplace is actually quite mature. And our clients and candidates engage constantly on their own. They're exchanging opportunities and having rich conversations about career prospects without us having to do anything. So our marketplace model, large candidate ecosystem and deep features and functionality have really driven our success with double-digit revenue growth for years and highly satisfied customers. Next, what does the future hold for a career marketplace. We're going to take a sneak peek at what lies in store, and we're going to get a better understanding of our current innovation process within DHI. So what does it mean to really be a career marketplace? Consider all the most invaluable marketplaces on the Internet, services like Amazon, Uber, Spotify, Yelp, Tinder and so many others what do these marketplaces have in common? Well, they're 2 sided with buyers and sellers. Each side provides user-generated content to keep eyes on site at information fresh. There's risk communication methods with the majority of engagement occurring right on the platform itself. There's robust search and match capabilities and there are constant signals being sent between users to express interest and show engagement. Now for many years, ClearanceJobs has taken its product queues from the best marketplaces and what solidified into the population thinking from social media. These days, ClearanceJobs has far more in common with Amazon Airbnb, Spotify and Uber than we do with traditional job boards. Now as noted, the ClearanceJobs career marketplace is broken down into buyers and sellers into candidates and employers. For those employers, our customers, they utilize ClearanceJobs as a fully featured candidate relationship management system, or CRM, very similar to how sales and marketing professionals use Salesforce to organize sales leads, nurture those sales leads and the prospects and convert those prospects into wins, the ClearanceJobs CRM is really the same. In our platform, employers find and explore security-cleared talent and organize those candidates into leads. And our platform is a host of tools that easily facilitate this. As recruiters fill up their talent networks or pipelines, they can then warm up those candidate leads through bulk messaging and branding into real actionable prospects. On ClearanceJobs, recruiters have unlimited ability to post content to attract and engage clear professionals from photos and videos to podcasts and articles, polls and links and surveys, even animated gifts, the more content that recruiters post, the more visibility they get in front of our ecosystem of candidates. And finally, as candidates become more familiar with the recruiter and their company, trust is built and one-to-one direct live engagement can happen. Top to bottom, many the few. And those tools are unparalleled in the online recruiting world. ClearanceJobs features live, real-time recruiter and candidate chat, push-to-talk voice communications, a powerful machine learning and artificial intelligence search engine to facilitate matching, deep recruiter and company branding capabilities, full talent pipelining, rich analytics, instant alerts when favorite candidates are online and ready to engage, calendar integrations, full recruitment and process marketing automation and so much more. ClearanceJobs has a long history of running a highly successful career marketplace. We've tried a huge range of product and process ideas. Some have failed and some have been wildly successful. But over 11 years, we've been able to take our learnings and work to bring them to Dice.com. So ClearanceJobs is the innovation test bed, the guinea pig, if you will, for DHI. Our size and agility allows us to test and evaluate, retool and try again and learn a long way. So this has been so successful. We've created a team of researchers and innovative thinkers that help push the envelope and think about ways to improve not just our product, but our processes and business as well. This team is called the DHI Advanced Research Projects team, which I lead. The team utilizes both qualitative and quantitative research to put ClearanceJobs and Dice ahead of the curve with regards to innovation. The Advanced Research Projects team mission is to submit DHI as market leader by injecting impactful cross-functional innovation into our product, our processes and priorities. We act as internal consultants, and we can help solve some of our most critical problems through deep research and analysis. The way that the process works, as I determine new problems and ideas to research, what the team will normally do is work through a series of steps to fully examine the topic at hand, ideate, validate and present our findings. Depending on the project, we may create prototypes, wire frames, proofs of concept and other deliverables. But by the end of the project, we've entrenched ourselves deep into the topic at hand, and we have developed strong internal knowledge of that subject that we can then advise on. I'm going to give you a couple of examples next of some research projects that we've completed and whose learnings are now baked into our business strategies. So for our clicks-to-bricks project, we took a look at how digital native brands that started fully online have established real-world brick-and-mortar physical locations. We've actually envisioned a physical career center where employers could engage prospective hires for interviews, seminars, hackathons, social events and other community-building efforts. Another research project had us digging into the $300 billion world of video games. The top priority of games is player engagement. Similarly, the top priority we have for ClearanceJobs users is also engagement. As we examine game dynamics, games theory and gamification, we really began to better understand how people are motivated to take action and so much of it can be applied to our career marketplaces. You've heard Christian talk a little bit earlier about employer branding and some of the research we've done. Another recent project had us examining the retail sales, consumer buying cycle and applying its learnings to the candidate decision-making process for considering jobs. There's so much to be learned from the gigantic world of retail sales and much of it applies to our career marketplaces. We've always known how important employer branding was to our customers, but this project really shed light on how that branding directly impacts candidate motivations and recruiting. So as we take this innovation and research and kind of lay it on top of our career marketplaces, you can more clearly see where we've been, where we are now and where we're headed. As we discussed earlier, online job boards are akin to classified advertisements in newspapers. They're not intelligent. They focus solely on active job seekers, and they're all about that transaction, converting eyeballs to job applications. For an early to mid-stage career marketplace, there's more of a bent towards lead gen, understanding which candidates might be the best prospects, nurturing those prospects, warming them up and starting to save recruiting teams, both time and money. It's a smarter system with the platform making informed decisions on behalf of the user. It isn't perfect but it's a far step away from the basic transactional job board. And finally, the mature career marketplace is almost uncanny in its omnipresence. The future career marketplace is smart, and it focuses heavily on retrieving and presenting the best candidates, so it's quality over quantity. ClearanceJobs is somewhere between the mid- and late-stage career marketplaces with a highly mature and futuristic feature set. Dice is firmly planted in their post job board legacy with the rapidly maturing career marketplace. So let's dive in just a bit deeper on what the endgame looks like for our career marketplaces in the future. So the 3 key tenets of a mature career marketplace are automation, integration and anticipation. Automation means having the platform take action on the recruiters' behalf in a smart way. It means looking for the most time-intensive busy work and applying intelligence to those recruiter processes. So the automation frees up recruiters' time for what they do best, and that's human-to-human engagement directly. ClearanceJobs launched workflow, and workflow is our innovative recruitment process and marketing automation tool. We released it last year, and it has been wildly successful. The integration piece means that the career marketplace has ties into other necessary tools and functions that recruiters do in their daily work. For example, file storage, note-taking calendars, assessment tools and more. ClearanceJobs recently launched meetings, and meetings integrates recruiters' Google and Microsoft calendars into the ClearanceJobs site. With this integration, they can invite candidates to meetings and candidates can self-select open days and times on the recruiters' calendar. The meetings are then scheduled and calendars are synced, reminders are sent out, and there's no back and forth e-mailing required. Next, the anticipation part means that the career marketplace has learned and evolved to be essentially crushing. And by employing predictive analytics, our career sites can make suggestions for action preemptively and can anticipate outcomes in advance. In an ideal state, recruiters may actually spend less time on our career marketplaces, but gain more and better results. Why? Because automation and artificial intelligence almost takes over and gets the job done for the recruiter. So as we talk about the future career marketplace, here's an example process for how it might work. So a new recruiter enters the Dice or ClearanceJobs platform and they point our systems to their open jobs. So our marketplaces would digest those jobs and quickly understand who that recruiter needs, how our database of candidates stacks up and calculations for success are generating almost immediately. Next, the recruiter can tune the marketplace to focus in on certain types of candidates to set their priorities easily and ensure they get alerts when extremely high-value candidates present themselves for engagement. Then the platform watches and waits and it surveys the candidate landscape. When targeted candidates send signals that they're considering a career change, recruiters are brought in and can review a prioritized ranked set of candidates. Meetings can be automatically scheduled and synced, the recruiter just needs to show up. So that's what a future career marketplace might look like. And again, we'll stop and take some questions if you have them before we move on to our next presenter, Kevin Bostick, our Chief Financial Officer.

Thank you very much, Evan. Greatly appreciate it. Rachel, do we have any questions that are queued up?

We don't have a question yet. I'm just pausing for a moment. So we don't have a question right now. But if anyone has a question, we can ask it during the other Q&A that we have coming up after Kevin's section.

Perfect. Well, what I'd like to do is I would like to introduce our Chief Financial Officer, Kevin Bostick, who will spend a good amount of time talking about the core business model behind DHI Group as well as give us updated guidance for third and fourth quarter of this year.

Great. Thank you, Art, and hello, everyone. As you have heard throughout the day, both Dice and ClearanceJobs have evolved over the years from commoditized job boards where customer relationships were transactional in nature with no engagement between recruiters and candidates to now full-fledged, tech-enabled marketplaces with a broad array of features, functionality and product offerings. My discussion today will focus on our Software-as-a-Service business model and the related economic drivers of that model, notably the set of products our customers buy and how that translates to revenue and valuation. Our marketplace has several key features. First, our profiles. This includes personal and employer branding and self-generated content. Second, our connections. This includes network building to facilitate introductions, formalize relationships and build trust. Third is communication. We created a platform where messaging is used to exchange opportunities and grow relationships. These features drive the products we sell, which include recruiting tools, sourcing services, advertising and career events, which are all available to our clients to assist in finding talent, driving engagement and amplifying customer brands. Let me describe our customer base through the recruiting hierarchy of needs. The top of the hierarchy include our larger customers who look to Dice and CJ to meet a broad range of recruiting needs they have in their recruitment of technologists. These customers, both commercial accounts and staffing and recruiting firms, will buy a full suite of products. While most notable is the recruitment package, which provides both access to our database of candidates and the ability to post jobs, many customers will also buy advertising and branding to better highlight a company's culture, workplace, benefits and diversity. In addition, they will often add to those products, sourcing services and career events. These larger customer contracts often range from a low of $15,000 to $20,000 per year to as high as multiple hundreds of thousands of dollars. Historically, these have been sold as annual contracts. But recently, our customers have been signing multiyear agreements as they continue to see the value in the product enhancements we have made in the last several years. Next, we have customers who buy our core products, specifically access to our candidate profile database as well as posting jobs on the site. Currently, this is the bulk of our customer base. We are focused on moving these customers up the stack as we look to gain a higher percentage of wallet share from them. Lastly, we have customers who specifically use our platform to post a smaller number of jobs and collect resumes. These are often shorter-term agreements and often the service is purchased directly off our website, what we call our web store. With that, let me go into a bit more detail about our business. As we have shared, over 90% of our bookings and, therefore, revenues come from annual licenses that grant recruiters the right to use our site. Access to the site then allows the user to access our profile database as well as to post jobs. Pricing for each customer contract is based on which products they intend to use, the quantity of that product and the duration of the agreement. As an example, customers will acquire seat licenses and a predetermined number of profile views. These profile views can be unlimited, capped on a per month basis or a total bucket of use available over the contract period. Similarly, a customer may purchase a license with unlimited monthly or annual number of job postings. And most often, customers buy a combination of profile views and job postings. Our contracts are typically 1 year; however, we are seeing more multiyear contracts. And as Arie shared, we are including auto renewals in many of our agreements. When we reference bookings, it is the total contract value signed in that period that will be recognized as revenue over the next 12 months from the start date of the contract. If a contract is a multiyear contract, bookings will only include that portion of the contract that will be recognized as revenue for those first 12 months. Then the next year of revenue will be included in bookings on the contract's anniversary date. As an example, a 2-year $24,000 contract will have $12,000 of bookings on its service start date and $12,000 of bookings on its anniversary date. Also note, all of our bookings refer to contracts with a service start date in the period being identified. If a contract is signed in November with a service start date of February, that is considered a February booking. Lastly, within our bookings totals are contracts for specific services, such as career events, sourcing services and brand advertising, which are similarly based on contract commencement date but which revenue will be recognized at the time the service is provided or the work is completed. Our revenue recognition policies are consistent with other SaaS companies. And here are our revenue recognition policies. For subscription products, which is inclusive of access to our platform, revenue is recognized ratably over the contract term. A $100,000 annual contract will result in $25,000 of revenue recognized each quarter. For our other products, such as sourcing and career events, revenue is recognized as the work is completed. Sourcing is often over a several month period, so revenue is recognized ratably over that work period and career events revenue is recognized when the event takes place. Now let me dive into a bit more detail on how changes in bookings translate to changes in revenue. When bookings are flat year-over-year, revenue will then be flat as well. You can see this in year 1 of our example. However, as bookings begin to grow, there is a lag to the impact of this growth on revenue. This is because the increase in bookings will manifest itself over the next 4 quarters, while the existing quarter of revenue still as bookings being amortized from previous periods. In our example here, a 10% increase in bookings in year 2 took a full year for that improvement to be seen in year-over-year revenue growth as this is seen in Q4 of year 2. For a total calendar year, when bookings grow 10%, GAAP revenue will only grow 6.25%. Let me provide a real-world example. This is a 36-month period for Dice, which had both bookings decreases and bookings increases during the period shown. This chart shows changes in bookings on a year-over-year basis. That is Q1 of the current year over Q1 of the prior year, Q2 of the current year over Q2 of the prior year, et cetera, on the solid blue line. These are percentage-based changes. The dotted green line shows the corresponding year-over-year changes in revenue, again, Q1 of the current year over Q2 (sic) [ Q1 ] of the prior year, et cetera. As you can see, both when bookings declined and then when bookings recovered, there was a 2- to 3-quarter lag of seeing that impact to revenue. Other impacts to actual changes in revenue include the dollar amount and seasonality of bookings and, to a lesser extent, the composition of the products purchased in a period. Nevertheless, we do think this graphic does a great job of illustrating how changes in bookings result in changes in revenue. Let me hit on 2 additional concepts for revenue in a SaaS-based model. First, revenue is very predictable. This is based on the annual nature of our contracts, which provide great visibility into near-term revenue growth. In any year, approximately 50% of our revenue for that year is already contracted as of January 1. Another 30% to 35% of our annual revenue will be locked in, assuming historical levels of renewals. That leaves 15% to 20% of our revenue in any year attributable to new business and transactional products. This chart also illustrates that as renewal rates increase as we have seen in 2021 and new bookings continue to get traction, our total revenue growth will benefit significantly from these 2 combined dynamics. On the far right of this graph, the new business wins, renewals and bookings in December then become the starting backlog in January of the following year. The other point I will make is if you specifically look at January through March months on this chart, you can see a significant amount of Q1 revenue is in backlog and renewals. While this shows calendar months, this dynamic is true for any quarter. This gives us confidence in saying we expect revenue to continue growing for the balance of 2021. The contractual nature of our business provides that visibility. This is a similar but slightly different way of looking at it. In the first quarter of any year, over half of the revenue for that year is committed. By the second quarter, 75% of that year's revenue is committed and increases as the year goes on. With the recent positive trends we have seen in bookings and the corresponding level of visibility into revenue that these annual contracts provide, we are confident in our revenue growth for the next 2 quarters. For Q3, we expect to see year-over-year revenue growth approaching 10%. And for Q4, we expect year-over-year revenue growth rates a few percentage points higher than that. Lastly, let me discuss our valuation, notably around comps. We believe our public market comps are those companies that are technology-based companies servicing the human capital management industry. Dice and CJ are not recruiting firms, but rather provide the technology that recruiters need to perform their jobs. Again, very similar to Salesforce, where sales teams need that technology to maximize sales performance. Dice and CJ provide those technology tools the recruiters need to maximize their own performance. We pulled these comps from a leading research report covering the HCM technology space. As you can see, the average trading level on a revenue multiple is 11.4x 2021 estimated revenue with a median of 10x 2021 estimated revenue. As you see on the right, DHI is significantly below both of those multiples. And as we look forward over the next 12 to 18 months, we believe our growth will mirror many of those comparable companies. As we have stated several times, we view ourselves as a SaaS model and believe these valuation metrics are appropriate for our business and are indicative of the value we can create for our investors. And with that, I'll turn the call back to Art.

Thank you very much, Kevin. Really appreciate that. And given that we have 10 minutes remaining, I'd like to open up for any and all Q&A, including questions you might have for Kevin as a result of that last presentation. So let's go to the questions that might have already been queued up. Rachel?

[Operator Instructions] The first question comes from Aman.

Kevin, I appreciate the additional color on the third and fourth quarter. So I wanted to ask, looking at DHX as a SaaS company, I know a lot of the analysts like to look at SaaS companies using the Rule of 40 where you're growing 20% and making a 20% EBITDA margin. How long do you think it will take DHX to get to that point where they're approaching the Rule of 40 and they're in line with the peers that are able to sort of deliver 20% EBITDA margin with a 20% year-over-year growth?

Are you're on mute, Kevin?

Sorry about that. We're very familiar with the Rule of 40 and something that we spend a lot of time talking about. We have stated that we believe that our business model and our platform has significant operating leverage built into it. However, in the near term, over the next 12 to 18 months, we intend to continue to invest in sales and marketing, keeping our EBITDA margins at that lower 20% range. We do believe as we get out into 2023, 2024 that we'll have margins similar to other SaaS-based models, which are approaching high 20%, potentially 30% margins, with top line revenue growth rate of 10%, 12%, 15%. So while we're very aware of the Rule of 40, and we are targeting it, we do believe the opportunity for revenue growth is still significant, and we're going to continue to invest in sales and marketing, which purely from the economics of the business, you invest in marketing that drives leads to the sales organization which then drives a booking, and as I shared with you, then takes 2 to 3 months to manifest itself in revenue. So that sales and marketing investment is often 6, 9, 12 months in advance of seeing the benefit to revenue. But we are very much targeting that Rule of 40 as we think out 18 to 24 months.

Got it. That's helpful. And then maybe shifting gears a little bit, I wanted to ask -- can you maybe comment on the growth trajectory and margin profile of The Muse, the investment you announced today? How does that compare to DHX? And yes, how should we be thinking about that?

Art, do you want to take that, and then I'll add some comments?

So right now, I would say that The Muse has proven themselves to be successful in terms of creating a great product, great experience for the users, not only the clients themselves, but also the candidates that search their site to understand more about the values and the culture of the companies that they're investigating. They are growing at what I believe to be is double-digit revenue growth rates, and they are, relatively speaking, EBITDA neutral, meaning that they are putting their money fundamentally into investments associated with product as well as sales. Arie did mention earlier that we are in the midst of working out our partnership dynamics, where we would ultimately think about selling their platform through our sales team. We would also be able to repurpose the content that is created by The Muse for both The Muse itself as its own stand-alone website, but also Dice and ClearanceJobs. So we're really excited about this partnership. We have been working together for a number of months now with the idea that we would be essentially launching a real more meaningful partnership in Q4 between our sales teams.

Yes. And just a quick comment, that will be carried on our balance sheet as a minority investment. We will have to revalue that periodically. But given that it's a private company, we don't expect the valuation to swing significantly over quarter-over-quarter or year-over-year.

Our next question comes from Bill Dezellem.

My apologies. I should now be unmuted. Is Aileen still on the line and available for questions?

She isn't on the line anymore, Bill, but we can make sure that we can pass along a question to her or set up a separate session for you, if you'd prefer that.

No worries. I'll jump to a couple of others. Relative to Christian, are there any capabilities that will be unique to Dice that would not be applicable to ClearanceJobs? And I'm really trying to think of the inverse of ClearanceJobs as being the leader in the capabilities and Dice taking those a couple of years later.

It's a great question. There are some unique differences in terms of our audience. But generally speaking, no, I think most of the feature functions that you see on ClearanceJobs are applicable to Dice. One area that I think is interesting and it pertains a lot more to our customer base is the deep integrations with the applicant-tracking systems tools and the workflow management tools that our recruiting clients particularly leverage as part of their day-to-day job. And I'd say there, I think we're kind of leading that area in some areas right now.

Great. And then one additional question for Evan. After you have penetrated an agency and just for sake of discussion, they've decided to choose CJ for 10 seats, and you've gone through that long laborious process, is the process vastly shortened and maybe nearly instantaneous when they decide they want to go to, let's say, from 10 seats to 50 seats? Or does that whole process take a long time again?

No. It's extremely fast. We can upgrade a client from a certain number of seats to another certain number of seats, literally in minutes. As long as we have the data of who will occupy those seats, it's very quick. We have a very robust back end that will let us do that type of administration.

So is the implication then and therefore that as you penetrate more of these agencies that CJ's growth rate could actually accelerate from where -- what we've been seeing?

Good question. Art, Kevin, Arie, I don't know. Kind of threw the growth rate question back...

I'd say we're comfortable with thinking about CJ's growth rate being in the 15% to 20% range from a revenue perspective. And clearly, the history of the platform itself proves that, that is sustainable. We're excited about the fact that we did this study literally second quarter that indicates that we have 10,000 additional military contractor clients to go after in addition to the federal agencies. So I don't want to be too, I guess, over the top of my skis to use the Colorado phrase and talk about growth rates above 20%, but we're pretty comfortable in that range of double-digit 15% to 20% revenue growth. Maybe 1 more question, Rachel, if we have the time.

Yes, we have 1 more question, and it's from Zach Cummins.

Thanks, Kevin, for the additional commentary there and an update on the outlook. I guess my biggest question here, I mean, you have a lot of momentum in the business going into the second half of the year, already eclipsing that 10% revenue growth metrics, especially as we get into Q4 of this year. What do you guys view as the biggest challenge to being able to sustain a double-digit revenue growth trajectory going forward?

I could answer that at least give you my perspective and then maybe hand that over to Kevin afterwards. I'd say the biggest challenge is just growing the sales organization itself in terms of the new business teams because it takes splitting up territories, new assignments, sales development representatives, the right number of marketing qualified leads. So it's an ecosystem that essentially allows these new business reps to succeed. And so we want to expand to the degree that we can in a manner that really just respects that all the supporting infrastructure has to be there. Like I said, from marketing qualified leads to the training systems to the actual software systems themselves that have to be put in place to support an individual rep. But we feel pretty good about the fact that this is a sustainable growth track that we're on. You can see it just visibly in our DHI careers page. We're continuously hiring new business reps, which should show you evidence of our kind of underlying confidence. Kevin, anything else to add? Unmute, Kevin.

Thank you, Art. I did that twice now. No, I think we're very confident in our ability to grow. Art mentioned the TAM, right, the total addressable market for the customer set that we can go after, but also just purely the number of technology jobs. But with that, we do spend a significant amount of time making sure that our investments in marketing are tied directly to the investments we're making in sales, that the investments we're making in sales have the appropriate number of customer service reps, that we've got the right account management team size than when we support a larger customer base. So it's that -- it's the totality of that ecosystem that we look at frequently to make sure that we're connecting all of those dots to take advantage of the TAM and the growth in technologists.

Really appreciate it, Zach. And I'm just going to make sure that we close things out because I know that we're a little bit over time. I just wanted to say thank you to everybody that has attended today. I want to thank all of our speakers, including, of course, our client, Aileen, who did a great job in her testimonial. And I do want to say that as folks should always know, we are available for one-on-one meetings. So if you'd like to arrange for that, please just send that request to myself or Kevin or to Todd Kehrli. And again, thank you, everyone, for attending today. Hope you have a great rest of your week.

Thanks so much. Bye.

Bye-bye now.