DHI GROUP, INC. - Quarter Report: 2017 June (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________________________________

FORM 10-Q

______________________________________________

(Mark One)



R	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended June 30, 2017

______________________________________________



£	TRANSITION PERIOD PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 001-33584

_____________________________________________

DHI Group, Inc.

(Exact name of Registrant as specified in its Charter)

______________________________________________



Delaware		20-3179218
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1040 Avenue of the Americas, 8^thFloor
New York, New York		10018
(Address of principal executive offices)		(Zip Code)

(212) 725-6550

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

______________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes R No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes R No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer £ Accelerated filer R Non-accelerated filer £

Smaller Reporting Company £ Emerging Growth Company £

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No R

As of July 21, 2017, there were 50,409,527 shares of the registrant’s common stock, par value $.01 per share, outstanding.

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DHI GROUP, INC.

TABLE OF CONTENTS



		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016
	Condensed Consolidated Statements of Operations for the three and six month periods ended June 30, 2017 and 2016
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six month periods ended June 30, 2017 and 2016
	Condensed Consolidated Statements of Cash Flows for the six month periods ended June 30, 2017 and 2016
	Notes to Condensed Consolidated Financial Statements

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	30

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 5.	Other Information	31

Item 6.	Exhibits	32

SIGNATURES
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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PART I

ITEM 1. Financial Statements

DHI GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except per share data)



	June 30, 2017			December 31, 2016
ASSETS
Current assets
Cash	$	23,456		$	22,987
Accounts receivable, net of allowance for doubtful accounts of $1,863 and $3,181	32,335			43,148
Income taxes receivable	737			731
Prepaid and other current assets	4,508			3,312
Total current assets	61,036			70,178
Fixed assets, net	19,346			16,610
Acquired intangible assets, net	48,002			49,120
Goodwill	174,790			171,745
Deferred income taxes	361			306
Other assets	2,073			2,136
Total assets	$	305,608		$	310,095
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses	$	19,500		$	20,220
Deferred revenue	86,380			84,615
Income taxes payable	2,029			3,467
Total current liabilities	107,909			108,302
Long-term debt, net	69,922			84,760
Deferred income taxes	8,586			7,901
Accrual for unrecognized tax benefits	2,584			2,513
Other long-term liabilities	2,800			2,736
Total liabilities	191,801			206,212
Commitments and contingencies (Note 6)
Stockholders’ equity
Convertible preferred stock, $.01 par value, authorized 20,000 shares; no shares issued and outstanding	—			—
Common stock, $.01 par value, authorized 240,000; issued 83,026 and 81,989 shares, respectively; outstanding: 50,417 and 49,591 shares, respectively	830			820
Additional paid-in capital	371,517			366,247
Accumulated other comprehensive loss	(29,405		)	(32,276		)
Accumulated earnings	46,960			44,078
Treasury stock, 32,609 and 32,398 shares, respectively	(276,095		)	(274,986		)
Total stockholders’ equity	113,807			103,883
Total liabilities and stockholders’ equity	$	305,608		$	310,095

See accompanying notes to the condensed consolidated financial statements.

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DHI GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share amounts)



	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Revenues	$	52,400		$	57,673		$	104,590		$	115,959
Operating expenses:
Cost of revenues	7,668			8,079			15,065			16,614
Product development	6,356			6,245			12,807			13,305
Sales and marketing	19,751			18,646			39,650			39,148
General and administrative	10,046			11,508			21,325			22,721
Depreciation	2,819			2,563			5,127			5,161
Amortization of intangible assets	571			2,070			1,132			4,536
Disposition related and other costs (Note 8)	1,187			77			1,187			3,347
Total operating expenses	48,398			49,188			96,293			104,832
Operating income	4,002			8,485			8,297			11,127
Interest expense	(814		)	(820		)	(1,604		)	(1,692		)
Other income (expense)	9			(17		)	(7		)	(32		)
Income before income taxes	3,197			7,648			6,686			9,403
Income tax expense	1,375			2,794			3,524			3,438
Net income	$	1,822		$	4,854		$	3,162		$	5,965

Basic earnings per share	$	0.04		$	0.10		$	0.07		$	0.12
Diluted earnings per share	$	0.04		$	0.10		$	0.07		$	0.12

Weighted-average basic shares outstanding	47,953			48,607			47,775			49,034
Weighted-average diluted shares outstanding	48,268			49,279			48,308			49,850

See accompanying notes to the condensed consolidated financial statements.

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DHI GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

(in thousands)



	Three Months Ended June 30,					Six Months Ended June 30,
	2017		2016			2017		2016
Net income	$	1,822	$	4,854		$	3,162	$	5,965

Foreign currency translation adjustment	2,266		(5,217		)	2,871		(6,636		)
Total other comprehensive income (loss)	2,266		(5,217		)	2,871		(6,636		)
Comprehensive income (loss)	$	4,088	$	(363	)	$	6,033	$	(671	)

See accompanying notes to the condensed consolidated financial statements.

DHI GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)



	Six Months Ended June 30,
	2017			2016
Cash flows from operating activities:
Net income	3,162			5,965
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation	5,127			5,161
Amortization of intangible assets	1,132			4,536
Deferred income taxes	648			229
Amortization of deferred financing costs	162			162
Stock based compensation	4,588			6,423
Change in accrual for unrecognized tax benefits	70			115
Loss on sale of business	—			639
Changes in operating assets and liabilities:
Accounts receivable	11,231			4,857
Prepaid expenses and other assets	(1,082		)	(169		)
Accounts payable and accrued expenses	(1,007		)	(4,875		)
Income taxes receivable/payable	(1,465		)	(1,293		)
Deferred revenue	1,101			3,252
Other, net	45			(77		)
Net cash flows from operating activities	23,712			24,925
Cash flows from investing activities:
Cash received from sale of business	—			2,429
Purchases of fixed assets	(7,730		)	(5,506		)
Net cash flows used in investing activities	(7,730		)	(3,077		)
Cash flows from financing activities:
Payments on long-term debt	(15,000		)	(11,000		)
Proceeds from long-term debt	—			9,000
Payments under stock repurchase plan	—			(22,632		)
Proceeds from stock option exercises	403			1,028
Purchase of treasury stock related to vested restricted stock and performance stock units	(1,109		)	(2,520		)
Net cash flows used in financing activities	(15,706		)	(26,124		)
Effect of exchange rate changes	193			(313		)
Net change in cash for the period	469			(4,589		)
Cash, beginning of period	22,987			34,050
Cash, end of period	$	23,456		$	29,461

See accompanying notes to the condensed consolidated financial statements.

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DHI GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of DHI Group, Inc. (“DHI” or the “Company”) have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in annual audited consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been omitted and condensed pursuant to such rules and regulations. In the opinion of the Company’s management, all adjustments (consisting of only normal and recurring accruals) have been made to present fairly the financial position, results of operations and cash flows of the Company for the periods presented. Although the Company believes that the disclosures are adequate to make the information presented not misleading, these financial statements should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (the “Annual Report on Form 10-K”). Operating results for the six month period ended June 30, 2017 are not necessarily indicative of the results to be achieved for the full year.

Preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the period. Management believes the most complex and sensitive judgments, because of their significance to the condensed consolidated financial statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. Actual results could differ materially from management’s estimates reported in the condensed consolidated financial statements and footnotes thereto. There have been no significant changes in the Company’s assumptions regarding critical accounting estimates during the six month period ended June 30, 2017.

2. NEW ACCOUNTING STANDARDS

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers. The new standard outlines the principles an entity must apply to measure and recognize revenue and the related cash flows it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP. The updated standard becomes effective for reporting periods (interim and annual) beginning after December 15, 2017. The new standard can be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the change recognized at the date of the initial application. The Company is currently evaluating the impact on its various revenue streams and consolidated financial statements and will disclose the impact in connection with the Company’s third quarter 2017 results.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting. The Company adopted the standard during the three months ended March 31, 2017. The new standard requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled, rather than in additional paid-in capital. Accordingly, the new standard eliminates the requirement to reclassify excess tax benefits from operating activities to financing activities in the statement of cash flows. Additionally, the Company can now make a policy election to account for forfeitures as they occur. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement were applied prospectively. The tax effect of awards vested resulted in income tax expense of $0.2 million and $0.8 million during the three and six months ended June 30, 2017, respectively. The Company recast prior year cash flows to reflect the excess tax benefit as an operating activity, resulting in a reclassification of $0.3 million from “Excess tax benefit over book expense from stock based compensation” to “Income taxes receivable/payable” on the Condensed Consolidated Statements of Cash Flows. The Company will record forfeitures as they occur, rather than estimating in advance. On January 1, 2017, under the modified retrospective transition method as required by the standard, the Company recorded a cumulative-effect adjustment of $0.3 million to decrease accumulated earnings and increase additional paid-in capital to remove estimated forfeitures on all outstanding equity awards after December 31, 2016.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other. The new standard eliminates Step 2 from the goodwill impairment test and now requires the Company to compare the fair value of a reporting unit with its carrying amount. The Company should recognize an impairment charge for the amount by which the carrying amount exceeds the fair value. The standard is effective for fiscal years beginning after December 15, 2019. In the event an impairment is indicated, the Company will consider early adopting the new impairment standard.

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DHI GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3. FAIR VALUE MEASUREMENTS

The FASB ASC topic on Fair Value Measurements and Disclosures defines fair value, establishes a framework for measuring fair value and requires certain disclosures for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. As a basis for considering assumptions, a three-tier fair value hierarchy is used, which prioritizes the inputs used in measuring fair value as follows:


•	Level 1 – Quoted prices for identical instruments in active markets.


•	Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations, in which all significant inputs are observable in active markets.


•	Level 3 – Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The carrying amounts reported in the Condensed Consolidated Balance Sheets for cash, accounts receivable, other assets, accounts payable and accrued expenses and long-term debt approximate their fair values. The fair value of the long-term debt was estimated using present value techniques and market based interest rates and credit spreads. The estimated fair value of long-term debt is based on Level 2 inputs.

4. ACQUIRED INTANGIBLE ASSETS, NET

Below is a summary of the major acquired intangible assets (in thousands):



	As of June 30, 2017
	Total Cost		Accumulated Amortization			Foreign Currency Translation Adjustment			Acquired Intangible Assets, Net
Technology	$	5,228	$	(4,597	)	$	(631	)	$	—
Trademarks and brand names—Dice	39,000		—			—			39,000
Trademarks and brand names—Other	13,394		(8,236		)	(2,187		)	2,971
Customer lists	14,500		(6,357		)	(2,112		)	6,031
Candidate and content database	8,857		(8,354		)	(503		)	—
Acquired intangible assets, net	$	80,979	$	(27,544	)	$	(5,433	)	$	48,002



	As of December 31, 2016
	Total Cost		Accumulated Amortization			Foreign Currency Translation Adjustment			Impairment			Acquired Intangible Assets, Net
Technology	$	10,308	$	(9,677	)	$	(631	)	$	—		$	—
Trademarks and brand names—Dice	39,000		—			—			—			39,000
Trademarks and brand names—Other	23,194		(14,379		)	(2,286		)	(3,168		)	3,361
Customer lists	28,473		(13,518		)	(2,112		)	(6,084		)	6,759
Candidate and content database	15,918		(15,295		)	(623		)	—			—
Acquired intangible assets, net	$	116,893	$	(52,869	)	$	(5,652	)	$	(9,252	)	$	49,120

During the first quarter of 2017, the Company retired $26.7 million of fully amortized acquired intangible assets.

Based on the carrying value of the acquired finite-lived intangible assets recorded as of June 30, 2017, and assuming no subsequent impairment of the underlying assets, the estimated future amortization expense is as follows (in thousands):

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DHI GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



July 1, 2017 through December 31, 2017	$	1,069
2018	1,781
2019	1,476
2020	1,421
2021	1,149
2022 and thereafter	2,106
Total	$	9,002

5. INDEBTEDNESS

Credit Agreement—In November 2015, the Company, together with Dice Inc. (a wholly-owned subsidiary of the Company) and its wholly-owned subsidiary, Dice Career Solutions, Inc. (collectively, the “Borrowers”) entered into an Amended and Restated Credit Agreement (the “Credit Agreement”), which provides for a revolving loan facility of $250.0 million maturing in November 2020.

Borrowings under the Credit Agreement bear interest, at the Company’s option, at a LIBOR rate or a base rate plus a margin. The margin ranges from 1.75% to 2.50% on LIBOR loans and 0.75% to 1.50% on base rate loans, determined by the Company’s most recent consolidated leverage ratio. The facility may be prepaid at any time without penalty.

The Credit Agreement contains various customary affirmative and negative covenants and also contains certain financial covenants, including a consolidated leverage ratio and a consolidated interest coverage ratio. Borrowings are allowed under the Credit Agreement to the extent the consolidated leverage ratio, calculated on a pro forma basis, is equal to or less than 3.0 to 1.0. Negative covenants include restrictions on incurring certain liens; making certain payments, such as stock repurchases and dividend payments; making certain investments; making certain acquisitions; making certain dispositions; and incurring additional indebtedness. Restricted payments are allowed under the Credit Agreement to the extent the consolidated leverage ratio, calculated on a pro forma basis, is equal to or less than 2.0 to 1.0, plus an additional $5.0 million of restricted payments. The Credit Agreement also provides that the payment of obligations may be accelerated upon the occurrence of customary events of default, including, but not limited to, non-payment, change of control, or insolvency. As of June 30, 2017, the Company was in compliance with all of the financial covenants under the Credit Agreement.

The obligations under the Credit Agreement are guaranteed by four of the Company’s wholly-owned subsidiaries, eFinancialCareers, Inc., Targeted Job Fairs, Inc., Rigzone.com, Inc. and onTargetjobs, Inc., and secured by substantially all of the assets of the Borrowers and the guarantors and stock pledges from certain of the Company’s foreign subsidiaries.

Debt issuance costs of $646,000 were incurred and are being amortized over the term of the Credit Agreement. These costs are included in interest expense. Unamortized deferred financing costs from the previous credit facility of $973,000 are being amortized over the life of the new Credit Agreement.

The amounts borrowed as of June 30, 2017 and December 31, 2016 are as follows (dollars in thousands):



	June 30, 2017			December 31, 2016
Amounts borrowed:
Revolving credit facility	$	71,000		$	86,000
Less: deferred financing costs, net of accumulated amortization of $1,649 and $1,487	(1,078		)	(1,240		)
Total borrowed	$	69,922		$	84,760

Available to be borrowed under revolving facility, subject to certain limitations	$	179,000		$	164,000

Interest rates:
LIBOR rate loans:
Interest margin	2.00		%	2.00		%
Actual interest rates	3.25		%	2.81		%

There are no scheduled payments until maturity of the Credit Agreement in November 2020.

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DHI GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6. COMMITMENTS AND CONTINGENCIES

Leases

The Company leases equipment and office space under operating leases expiring at various dates through December 2026. Future minimum lease payments under non-cancellable operating leases as of June 30, 2017 are as follows (in thousands):



July 1, 2017 through December 31, 2017	$	2,536
2018	4,788
2019	4,287
2020	3,873
2021	3,183
2022 and thereafter	8,882
Total minimum payments	$	27,549

Rent expense was $1.2 million and $2.4 million for the three and six month periods ended June 30, 2017, respectively, and $1.1 million and $2.3 million for the three and six month periods ended June 30, 2016, respectively, and is included in General and Administrative expense in the Condensed Consolidated Statements of Operations.

Litigation

The Company is subject to various claims from taxing authorities, lawsuits and other complaints arising in the ordinary course of business. The Company records provisions for losses when claims become probable and the amounts are reasonably estimable. Although the outcome of these legal matters cannot be determined, it is the opinion of management that the final resolution of these matters will not have a material effect on the Company’s financial condition, operations or liquidity.

Tax Contingencies

The Company operates in a number of tax jurisdictions and is routinely subject to examinations by various tax authorities with respect to income taxes and indirect taxes. The determination of the Company’s worldwide provision for taxes requires judgment and estimation. The Company has reserved for potential examination adjustments to our provision for income taxes and accrual of indirect taxes in amounts which the Company believes are reasonable.

7. EQUITY TRANSACTIONS

Stock Repurchase Plans—The Company’s board of directors approved a stock repurchase program that permitted the Company to repurchase its common stock through December 2016. Management has discretion in determining the conditions under which shares may be purchased from time to time. The stock repurchase program expired as of December 31, 2016. The following table summarizes the most recent Stock Repurchase Plan approved by the Board of Directors:



	VI
Approval Date	December 2015
Authorized Repurchase Amount of Common Stock	$50 million
Effective Dates	December 2015 to December 2016

There were no stock repurchases during the six months ended June 30, 2017 and there is no stock repurchase program currently in effect.

8. DISPOSITION RELATED AND OTHER COSTS

During the three months ended June 30, 2017, the Company announced plans to divest a number of its online professional communities to achieve greater focus and resource allocation toward its core tech-focused business. The planned divestitures

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DHI GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

include: BioSpace, Hcareers, Health eCareers, and Rigzone. In connection with the planned divestitures and focus on the tech business, the Company incurred certain severance and other related costs to further these strategic objectives.

The following table displays the disposition related and other costs incurred during the periods noted in 2017:



	Accrual at		Three Months Ended June 30, 2017					Accrual at
	March 31, 2017		Expense		Cash Payments			June 30, 2017
Severance and retention	$	—	$	1,117	$	(264	)	$	853
Professional fees	—		70		—			70
Total disposition related and other costs	$	—	$	1,187	$	(264	)	$	923

In January 2016, the Company completed the sale of the Slashdot and SourceForge businesses (together referred to as “Slashdot Media”) for $2.8 million cash plus working capital of $0.4 million and incurred approximately $0.8 million of selling costs. A $0.1 million and $0.6 million loss on sale of business was recognized in the three and six months ended June 30, 2016, respectively. The Company incurred severance costs and additional stock based compensation expense for the acceleration of stock vesting.

Effective January 1, 2016, the Company reorganized leadership responsibilities to leverage operating capabilities more effectively across four of its brands which serve specific industries, and to optimize these brands for future growth by streamlining operations and development. This entailed combining four of its global brands (eFinancialCareers, Rigzone, Hcareers and BioSpace) to have one management structure under a combined group called Global Industry Group (“GIG”).

The following table displays the disposition related and other costs incurred during the periods noted in 2016:



	Three Months Ended		Six Months Ended
	June 30, 2016		June 30, 2016
Severance—Slashdot Media	$	—	$	981
Accelerated stock based compensation expense—Slashdot Media	—		900
Loss on sale of Slashdot Media	77		639
Severance related to other brands	—		827
Total disposition related and other costs	$	77	$	3,347

9. STOCK BASED COMPENSATION

Under the 2012 Omnibus Equity Award Plan, the Company has granted stock options, restricted stock and Performance-Based Restricted Stock Units (“PSUs”) to certain employees and directors. On January 1, 2017, as a result of ASU No. 2016-09 as discussed in Note 2, the Company recorded expense based upon the number of awards outstanding with no estimate for forfeitures. Previously, the Company estimated forfeitures that it expected would occur and recorded expense based upon the number of awards expected to vest.

The Company recorded total stock based compensation expense of $2.1 million and $4.6 million during the three and six month periods ended June 30, 2017, respectively, and $2.8 million and $6.4 million of compensation expense, which included $0.9 million of accelerated compensation due to Slashdot Media as shown in Note 8, during the three and six month periods ended June 30, 2016, respectively. At June 30, 2017, there was $15.6 million of unrecognized compensation expense related to unvested awards, which is expected to be recognized over a weighted-average period of approximately 1.7 years.

Restricted Stock—Restricted stock is granted to employees of the Company and its subsidiaries, and to non-employee members of the Company’s Board. These shares are part of the compensation plan for services provided by the employees or Board members. The closing price of the Company’s stock on the date of grant is used to determine the fair value of the grants. The expense related to the restricted stock grants is recorded over the vesting period. There was no cash flow impact resulting from the grants.

The restricted stock vests in various increments on the anniversaries of each grant, subject to the recipient’s continued employment or service through each applicable vesting date. Vesting occurs over one year for Board members and over four years for employees.

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DHI GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A summary of the status of restricted stock awards as of June 30, 2017 and 2016 and the changes during the periods then ended is presented below:



	Three Months Ended June 30, 2017				Three Months Ended June 30, 2016
	Shares		Weighted- Average Fair Value at Grant Date		Shares		Weighted- Average Fair Value at Grant Date
Non-vested at beginning of the period	2,548,625		$	6.68	2,379,975		$	8.13
Granted	238,500		$	3.85	—		$	—
Forfeited	(213,500	)	$	6.82	(31,625	)	$	8.07
Vested	(156,325	)	$	6.91	(112,100	)	$	8.71
Non-vested at end of period	2,417,300		$	6.38	2,236,250		$	8.10



	Six Months Ended June 30, 2017				Six Months Ended June 30, 2016
	Shares		Weighted- Average Fair Value at Grant Date		Shares		Weighted- Average Fair Value at Grant Date
Non-vested at beginning of the period	2,226,375		$	7.87	2,122,225		$	8.54
Granted	1,224,500		$	4.78	1,033,500		$	7.56
Forfeited	(254,625	)	$	6.99	(151,500	)	$	8.30
Vested	(778,950	)	$	7.94	(767,975	)	$	8.55
Non-vested at end of period	2,417,300		$	6.38	2,236,250		$	8.10

PSUs—PSUs are granted to employees of the Company and its subsidiaries. These shares are part of the compensation plan for services provided by the employees. The expense related to the PSUs is recorded over the vesting period. These shares will vest on the dates the Compensation Committee certifies the Company’s achievement of stock price performance relative to the Russell 2000 Index, provided that the recipient remains employed through such date. Performance will be measured over three separate measurement periods: a one-year measurement period, a two-year measurement period and a three-year measurement period. For performance periods one and two, vesting is not to exceed total grant divided by three. For performance period three, vesting is no less than zero and no greater than 150% of initial grant less shares vested in performance periods one and two. There was no cash flow impact resulting from the grants. The fair value of PSUs is measured using the Monte Carlo pricing model using the following assumptions:



	Six Months Ended June 30,
	2017			2016
Weighted average fair value of PSUs granted	$	5.38		$	7.24
Dividend yield of DHI Group, Inc. stock	—		%	—		%
Dividend yield of Russell 2000 Index	1.4		%	1.7		%
Risk free interest rate	1.5		%	0.9		%
Volatility of DHI Group, Inc. stock	41.0		%	33.5		%
Volatility of Russell 2000 Index	16.7		%	16.7		%

A summary of the status of PSUs as of June 30, 2017 and 2016 and the changes during the periods then ended is presented below:

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DHI GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



	Three Months Ended June 30, 2017				Three Months Ended June 30, 2016
	Shares		Weighted- Average Fair Value at Grant Date		Shares	Weighted- Average Fair Value at Grant Date
Non-vested at beginning of the period	977,504		$	6.95	670,838	$	8.03
Forfeited	(86,666	)	$	7.21	—	$	—
Non-vested at end of period	890,838		$	6.92	670,838	$	8.03



	Six Months Ended June 30, 2017				Six Months Ended June 30, 2016
	Shares		Weighted- Average Fair Value at Grant Date		Shares		Weighted- Average Fair Value at Grant Date
Non-vested at beginning of the period	580,004		$	8.02	415,000		$	9.25
Granted	397,500		$	5.38	417,500		$	7.24
Forfeited	(86,666	)	$	7.21	(26,667	)	$	8.50
Vested	—		$	—	(134,995	)	$	9.25
Non-vested at end of period	890,838		$	6.92	670,838		$	8.03

Stock Options—The fair value of each option grant is estimated using the Black-Scholes option-pricing model using the weighted-average assumptions in the table below. This valuation model requires the Company to make assumptions and judgments about the variables used in the calculation, including the fair value of the Company’s common stock, the expected life (the period of time that the options granted are expected to be outstanding), the volatility of the Company’s common stock, a risk-free interest rate and expected dividends. The expected life of options granted is derived from historical exercise behavior. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury rates in effect at the time of grant. The stock options vest 25% after one year, beginning on the first anniversary date of the grant, and 6.25% each quarter following the first anniversary. There was no cash flow impact resulting from the grants. No stock options were granted during the six months ended June 30, 2017 and June 30, 2016.

A summary of the status of options previously granted as of June 30, 2017, and 2016, and the changes during the periods then ended is presented below:



	Three Months Ended June 30, 2017
	Options		Weighted-Average Exercise Price		Aggregate Intrinsic Value
Options outstanding at beginning of the period	1,350,182		$	9.18	$	—
Forfeited	(77,094	)	$	7.35	$	—
Options outstanding at end of period	1,273,088		$	9.29	$	—



	Three Months Ended June 30, 2016
	Options		Weighted-Average Exercise Price		Aggregate Intrinsic Value
Options outstanding at beginning of the period	2,363,699		$	7.91	$	2,326,963
Forfeited	(90,376	)	$	8.30	$	—
Options outstanding at end of period	2,273,323		$	7.89	$	539,367

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DHI GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



	Six Months Ended June 30, 2017
	Options		Weighted-Average Exercise Price		Aggregate Intrinsic Value
Options outstanding at beginning of the period	1,779,613		$	8.46	$	50,869
Exercised	(66,188	)	$	6.08	$	12,821
Forfeited	(440,337	)	$	6.43	$	—
Options outstanding at end of period	1,273,088		$	9.29	$	—
Exercisable at end of period	1,177,054		$	9.41	$	—



	Six Months Ended June 30, 2016
	Options		Weighted-Average Exercise Price		Aggregate Intrinsic Value
Options outstanding at beginning of the period	2,673,512		$	7.46	$	5,485,248
Exercised	(281,750	)	$	3.65	$	1,343,872
Forfeited	(118,439	)	$	8.18	$	—
Options outstanding at end of period	2,273,323		$	7.89	$	539,367
Exercisable at end of period	1,858,163		$	7.81	$	539,367

In connection with the Company’s sale of Slashdot Media, the Company accelerated the vesting of 130,375 shares of restricted stock and 24,001 stock options to certain former employees during the six month period ended June 30, 2016, the expense of which is recorded in Disposition Related and Other Costs in the Condensed Consolidated Statements of Operations.

The weighted-average remaining contractual term of options exercisable at June 30, 2017 is 2.7 years. The following table summarizes information about options outstanding as of June 30, 2017:



	Options Outstanding		Options Exercisable
Exercise Price	Number Outstanding	Weighted- Average Remaining Contractual Life	Number Exercisable
		(in years)
$ 7.00 - $ 7.99	356,750	3.6	292,842
$ 8.00 - $ 8.99	199,500	2.0	189,562
$ 9.00 - $ 9.99	480,000	2.8	465,312
$ 10.00 - $ 14.50	236,838	1.9	229,338
	1,273,088		1,177,054

10. SEGMENT INFORMATION

The Company has three reportable segments: Tech & Clearance, Global Industry Group and Healthcare. The Tech & Clearance reportable segment includes the Dice, Dice Europe and ClearanceJobs services. The Global Industry Group reportable segment includes the eFinancialCareers, Rigzone, Hcareers and BioSpace services. The Healthcare reportable segment includes the Health eCareers service. Management has organized its reportable segments based upon our internal management reporting.

The Company has other services and activities that individually are not more than 10% of consolidated revenues, operating income or total assets. These include Slashdot Media (business sold in the first quarter of 2016) and Brightmatter, which are reported in the “Corporate & Other” category, along with corporate-related costs which are not considered in a segment. The Company’s Open Web technology, which is in the WorkDigital reporting unit, resides in Brightmatter, which is included in the Corporate and Other category. Open Web is sold within the Tech & Clearance and Global Industry Group

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DHI GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

reportable segments. However, management does not allocate that revenue nor a royalty to Brightmatter in its internal reporting and management of the business. Accordingly, there is no internal allocation included in our segment reporting.

The Company’s foreign operations are comprised of the Dice Europe operations and a portion of the eFinancialCareers and Rigzone services, which operate in Europe, the financial centers of the gulf region of the Middle East, and Asia Pacific. The Company’s foreign operations also include Hcareers, which operates in Canada, and a portion of Brightmatter, which operates in Europe. Revenue by geographic region, as shown in the table below, is based on the location of each of the Company’s subsidiaries.

The following table shows the segment information (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
By Segment:
Revenues:
Tech & Clearance	$	31,303		$	34,153		$	62,993		$	68,159
Global Industry Group	14,504			16,546			28,262			33,100
Healthcare	6,565			6,955			13,279			13,913
Corporate & Other	28			19			56			787
Total revenues	$	52,400		$	57,673		$	104,590		$	115,959

Depreciation:
Tech & Clearance	$	1,695		$	1,770		$	3,151		$	3,508
Global Industry Group	247			230			472			452
Healthcare	537			495			1,045			1,091
Corporate & Other	340			68			459			110
Total depreciation	$	2,819		$	2,563		$	5,127		$	5,161

Amortization:
Tech & Clearance	$	—		$	729		$	—		$	1,457
Global Industry Group	363			1,074			727			2,545
Healthcare	163			218			325			436
Corporate & Other	45			49			80			98
Total amortization	$	571		$	2,070		$	1,132		$	4,536

Operating income (loss):
Tech & Clearance	$	10,712		$	13,291		$	22,156		$	25,124
Global Industry Group	510			2,477			628			3,123
Healthcare	(642		)	107			(1,092		)	(171		)
Corporate & Other	(6,578		)	(7,390		)	(13,395		)	(16,949		)
Operating income	4,002			8,485			8,297			11,127
Interest expense	(814		)	(820		)	(1,604		)	(1,692		)
Other income (expense)	9			(17		)	(7		)	(32		)
Income before income taxes	$	3,197		$	7,648		$	6,686		$	9,403

Capital expenditures:
Tech & Clearance	$	2,510		$	1,837		$	5,212		$	3,413
Global Industry Group	296			186			790			541
Healthcare	288			221			630			397
Corporate & Other	572			564			1,176			966
Total capital expenditures	$	3,666		$	2,808		$	7,808		$	5,317

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DHI GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
By Geography:
Revenues:
United States	$	39,106	$	42,323	$	78,157	$	85,000
United Kingdom	4,610		5,611		9,345		13,584
EMEA, APAC and Canada (1)	8,684		9,739		17,088		17,375
Non-United States	13,294		15,350		26,433		30,959
Total revenues	$	52,400	$	57,673	$	104,590	$	115,959

(1) Europe (excluding United Kingdom), the Middle East and Africa (“EMEA”) and Asia-Pacific (“APAC”)



	June 30, 2017		December 31, 2016
Total assets:
Tech & Clearance	$	173,971	$	179,985
Global Industry Group	100,177		98,821
Healthcare	13,417		14,375
Corporate & Other	18,043		16,914
Total assets	$	305,608	$	310,095

The following table shows the carrying amount of goodwill by segment as of December 31, 2016 and June 30, 2017 and the changes in goodwill for the six month period ended June 30, 2017 (in thousands):



	Tech & Clearance		Global Industry Group		Healthcare		Corporate & Other		Total
Goodwill at December 31, 2016	$	94,038	$	57,524	$	6,269	$	13,914	$	171,745
Foreign currency translation adjustment	$	393	$	1,910	$	—	$	742	$	3,045
Goodwill at June 30, 2017	$	94,431	$	59,434	$	6,269	$	14,656	$	174,790

On June 23, 2016, the United Kingdom (“UK”) held a referendum in which British citizens approved an exit from the EU, commonly referred to as “Brexit.” Brexit could cause disruptions to and create uncertainty surrounding our business, including affecting our relationships with our existing and future customers and employees based in the UK and Europe along with adversely impacting foreign currencies, particularly the British Pound Sterling as compared to the United States dollar. These disruptions and uncertainties could decrease demand for finance and technology professionals in the markets we serve. This decline in demand and any future declines in demand could significantly decrease the use of our finance and technology industry job posting websites and related services, which may adversely affect the related reporting unit’s financial condition and results of operations. If recruitment activity is slow in the industries in which we operate during 2017 and beyond, our revenues and results of operations will be negatively impacted. As a result of these factors, in the second quarter, the Company further evaluated the fair value of the Dice Europe reporting unit and believes it is not more likely than not that the fair value is less than the carrying value. If events and circumstances change resulting in significant reductions in actual operating income or projections of future operating income, the Company will test this reporting unit for impairment prior to the annual impairment test.

The fair value of the Finance and Hospitality reporting units was not substantially in excess of the carrying value as of the most recent annual impairment testing date of October 1, 2016. The percentage by which the estimated fair value exceeded carrying value for the Finance and Hospitality reporting units was 27% and 19%, respectively. As a result of the Company’s newly announced tech-focused strategy, continued uncertainty around Brexit for the Finance reporting unit and continued competition in the Hospitality reporting unit, the Company performed an interim goodwill impairment test of the Finance and Hospitality reporting units as of December 31, 2016. The percentage by which the estimated fair value exceeded carrying value for the Finance and Hospitality reporting units as of December 31, 2016 was 20% and 16%, respectively. As a result of these factors, in the second quarter, the Company further evaluated the fair value of the Finance and Hospitality reporting units and believes it is not more likely than not that the fair value is less than the carrying value. All other reporting units were not at risk

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DHI GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of experiencing a fair value less than carrying value. Therefore, no interim impairment testing was performed as of June 30, 2017.

11. EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed based on the weighted-average number of shares of common stock outstanding. Diluted EPS is computed based on the weighted-average number of shares of common stock outstanding plus common stock equivalents assuming exercise of stock options, where dilutive. Stock-based awards of approximately 4.1 million and 3.0 million were outstanding during the three and six month periods ended June 30, 2017, respectively, and approximately 2.7 million shares and 2.0 million shares were outstanding during the three and six month periods ended June 30, 2016, respectively, but were excluded from the calculation of diluted EPS for the periods then ended because the effect of the awards is anti-dilutive. The following is a calculation of basic and diluted earnings per share and weighted-average shares outstanding (in thousands, except per share amounts):



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Net income	$	1,822	$	4,854	$	3,162	$	5,965

Weighted-average shares outstanding—basic	47,953		48,607		47,775		49,034
Add shares issuable from stock-based awards	315		672		533		816
Weighted-average shares outstanding—diluted	48,268		49,279		48,308		49,850

Basic earnings per share	$	0.04	$	0.10	$	0.07	$	0.12
Diluted earnings per share	$	0.04	$	0.10	$	0.07	$	0.12


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this report. See also our consolidated financial statements and the notes thereto and the section entitled “Note Concerning Forward-Looking Statements” in our Annual Report on Form 10-K for the year ended December 31, 2016.

Information contained herein contains forward-looking statements. You should not place undue reliance on those statements because they are subject to numerous uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Forward-looking statements include, without limitation, information concerning our possible or assumed future results of operations, including descriptions of our business strategy. These statements often include words such as “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or similar expressions. These statements are based on assumptions that we have made in light of our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to execute our tech-focused strategy, the review of potential dispositions of certain of our businesses and the terms and timing of any such transactions, competition from existing and future competitors in the highly competitive market in which we operate, failure to adapt our business model to keep pace with rapid changes in the recruiting and career services business, failure to maintain and develop our reputation and brand recognition, failure to increase or maintain the number of customers who purchase recruitment packages, cyclicality or downturns in the economy or industries we serve, the uncertainty surrounding the UK’s future departure from the European Union (“EU”), including uncertainty in respect of the regulation of data protection and data privacy, failure to attract qualified professionals to our websites or grow the number of qualified professionals who use our websites, failure to successfully identify or integrate acquisitions, U.S. and foreign government regulation of the Internet and taxation, our ability to borrow funds under our revolving credit facility or refinance our indebtedness and restrictions on our current and future operations under such indebtedness. These factors and others are discussed in more detail in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, under the headings “Risk Factors,” “Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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Information contained herein contains certain non-GAAP financial measures. These measures are not in accordance with, or an alternative for, measures in accordance with U.S. GAAP. Such measures presented herein include adjusted earnings before interest, taxes, depreciation, amortization, non-cash stock based compensation expense, and other non-recurring income or expense (“Adjusted EBITDA”). See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

You should keep in mind that any forward-looking statement made by us herein, or elsewhere, speaks only as of the date on which it is made. New risks and uncertainties come up from time to time, and it is impossible to predict these events or how they may affect us. We have no obligation to update any forward-looking statements after the date hereof, except as required by federal securities laws.

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy and information statements and other material information concerning us are available free of charge on the Investors page of our website at www.dhigroupinc.com. Our reports filed with the SEC are also available at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549, by calling 1-800-SEC-0330, or by visiting http://www.sec.gov.

Overview

We are a leading provider of data, insights and employment connections through our specialized services for professional communities including the following industry groups: technology and security clearance, financial services, energy, healthcare and hospitality. Our mission is to empower professionals and organizations to compete and win through specialized insights and relevant employment connections. Employers and recruiters use our websites and services to source and hire the most qualified professionals in select and highly-skilled occupations, while professionals use our websites and services to find the best employment opportunities in and the most timely news and information about their respective areas of expertise.

In online recruitment, we target employment categories in which there has been a long-term scarcity of highly skilled, highly qualified professionals relative to market demand. Our websites serve as online marketplaces where employers and recruiters find and recruit prospective employees, and where professionals find relevant job opportunities and information to further their careers.

Our websites offer job postings, news and content, career development and recruiting services tailored to the specific needs of the professional community that each website serves.

Through our predecessors, we have been in the recruiting and career development business for more than 25 years. Based on our operating structure, we have identified three reportable segments.

Our reportable segments include:


•	Tech & Clearance— Dice, Dice Europe and ClearanceJobs


•	Global Industry Group— eFinancialCareers, Rigzone, Hcareers and BioSpace


•	Healthcare— Health eCareers

We have other services and activities that individually are not more than 10% of consolidated revenues, operating income or total assets. These include Slashdot Media (business sold in the first quarter of 2016) and Brightmatter and are reported in the “Corporate & Other” category, along with corporate-related costs which are not considered in a segment.

Recent Developments

The Company announced on May 3, 2017 plans to divest a number of its online professional communities to achieve greater focus and resource allocation toward its core tech-focused business. The planned divestitures include: BioSpace, Hcareers, Health eCareers, and Rigzone. The Company has engaged a financial advisor and is in the process of evaluating opportunities to conduct value enhancing divestitures of these non-tech businesses. There can be no assurance that the process will result in a transaction for the disposition of one or more of our businesses, or if a transaction is undertaken, as to its terms or timing.

In the fourth quarter of 2016, we decided to explore strategic alternatives to ensure we have an ownership structure that best optimizes shareholder value and the execution of our strategic plan. We retained a financial advisor to assist us in conducting our process. In April 2017, we formally concluded the process of exploring strategic alternatives and determined that we will continue to operate as an independent company.

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Our Revenues and Expenses

We derive the majority of our revenues from customers who pay fees, either annually, quarterly or monthly, to post jobs on our websites and to access our searchable databases of resumes. Our fees vary by customer based on the number of individual users of our databases of resumes, the number and type of job postings and profile views purchased and the term of the packages purchased. Our Tech & Clearance segment sells recruitment packages that can include both access to our databases of resumes and Open Web profiles, as well as job posting capabilities. Our Global Industry Group and Healthcare segments sell job postings and access to our resume databases either as part of a package or individually. We believe the key metrics that are material to an analysis of our businesses are our total number of Dice recruitment package customers and the revenue, on average, that these customers generate. Average monthly revenue per recruitment package customer is calculated by dividing recruitment package customer revenue by the daily average count of recruitment package customers during the month, adjusted to reflect a thirty day month. We use the simple average of each month to derive the quarterly amount. At June 30, 2017 and June 30, 2016, Dice had approximately 6,750 and 7,300 total recruitment package customers in the U.S., respectively, and the average monthly revenue per U.S. recruitment package customer decreased from $1,124 and $1,121 for the three and six months ended June 30, 2016, respectively, to $1,108 and $1,109 for the three and six months ended June 30, 2017, respectively. Deferred revenue is a key metric of our business as it indicates a level of sales already made that will be recognized as revenue in the future. Deferred revenue reflects the impact of our ability to sign customers to longer term contracts. We recorded deferred revenue of $86.4 million at June 30, 2017, and $84.6 million at December 31, 2016.

We also generate revenue from advertising on our various websites or from lead generation and marketing solutions provided to our customers. Advertisements include various forms of rich media and banner advertising, text links, sponsorships, and custom content marketing solutions. Lead generation information utilizes advertising and other methods to deliver leads to a customer.

The Company’s revenues for the three and six month periods ended June 30, 2017 declined year-over-year in each of our brands except ClearanceJobs. The declines are due to many factors including competition and evolution in the digital recruitment market, as well as macroeconomic impacts. The digital recruitment market continues to be challenged by attribution, which reflects our ability to receive the proper credit for value delivered to customers based on our customers’ internal tracking systems, contributing to lower renewal rates in recruitment packages at Dice. Macroeconomic drivers include the prolonged down-turn in the energy market resulting in revenue declines in our Rigzone business. Foreign currency and uncertainty around Brexit have also contributed to lower revenues in eFinancialCareers and Dice Europe.

The Company continues to evolve and present new products to the market such as Lengo, OpenWeb, getTalent, Shift and others. Our ability to grow our revenues will largely depend on our ability to grow our customer bases in the markets in which we operate by acquiring new recruitment package customers and advertisers while retaining a high proportion of the customers we currently serve, and to expand the breadth of services our customers purchase from us. We continue to make investments in our business and infrastructure to help us achieve our long-term growth objectives, such as the products noted above.

Other material factors that may affect our results of operations include our ability to attract qualified professionals that become engaged with our websites and our ability to attract customers with relevant job opportunities. The more qualified professionals that use our websites, the more attractive our websites become to employers and advertisers, which in turn makes them more likely to become our customers, resulting positively on our results of operations. If we are unable to continue to attract qualified professionals to engage with our websites, our customers may no longer find our services attractive, which could have a negative impact on our results of operations. Additionally, we need to ensure that our websites remain relevant in order to attract qualified professionals to our websites and to engage them in high-value tasks, such as posting resumes and/or applying to jobs.

The largest components of our expenses are personnel costs and marketing and sales expenditures. Personnel costs consist of salaries, benefits, and incentive compensation for our employees, including commissions for salespeople. Personnel costs are categorized in our statement of operations based on each employee’s principal function. Marketing expenditures primarily consist of online advertising, brand promotion and lead generation to employers and job seekers.

Critical Accounting Policies

There have been no material changes to our critical accounting policies other than ASU No. 2016-09 as described in Note 2 in the Notes to the Condensed Consolidated Financial Statements, as compared to the critical accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

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Three Months Ended June 30, 2017 Compared to the Three Months Ended June 30, 2016

Revenues



	Three Months Ended June 30,				Increase (Decrease)			Percent Change
	2017		2016		Increase (Decrease)			Percent Change
	(in thousands, except percentages)
Tech & Clearance	$	31,303	$	34,153	$	(2,850	)	(8.3	)%
Global Industry Group:
eFinancialCareers	7,978		9,053		(1,075		)	(11.9	)%
Rigzone	1,785		2,435		(650		)	(26.7	)%
Hcareers	3,791		4,034		(243		)	(6.0	)%
BioSpace	950		1,024		(74		)	(7.2	)%
Global Industry Group	14,504		16,546		(2,042		)	(12.3	)%
Healthcare	6,565		6,955		(390		)	(5.6	)%
Corporate & Other	28		19		9			47.4	%
Total revenues	$	52,400	$	57,673	$	(5,273	)	(9.1	)%

We experienced a decrease in revenue in the Tech & Clearance segment of $2.9 million, or 8.3%. Revenue at Dice decreased by $3.2 million compared to the same period in 2016, primarily due to the decline in recruitment package customer count in the U.S. from 7,300 at June 30, 2016 to 6,750 at June 30, 2017. Additionally, average monthly revenue per U.S. recruitment package customer decreased approximately 1% for the three month period ended June 30, 2017 compared to the three month period ended June 30, 2016. Dice Europe revenue decreased by $0.4 million as compared to the same period in 2016 due primarily to less revenue from the U.K. market and the negative impact of foreign exchange in 2017. Revenue for ClearanceJobs increased by $0.7 million for the three months ended June 30, 2017 as compared to the same period in 2016, primarily due to increased volume and pricing supported by favorable market conditions and enhanced product offerings.

The Global Industry Group segment revenue decreased $2.0 million, or 12.3%. This decrease was primarily due to a decrease in revenue at the Rigzone business of $0.7 million as a result of difficult conditions in the energy market. Foreign exchange in 2017 negatively impacted eFinancialCareers revenue by approximately $0.6 million and lower activity in the North America region negatively impacted eFinancialCareers revenue by $0.2 million. Hcareers revenue decreased $0.2 million due to increased competition in the Hospitality industry and BioSpace revenue decreased $0.1 million.

Revenue for the Healthcare segment, consisting of Health eCareers, decreased by $0.4 million, or 5.6% from the comparable 2016 period, mainly due to decreased usage of job posting products.

Cost of Revenues



	Three Months Ended June 30,						Decrease			Percent Change
	2017			2016			Decrease			Percent Change
	(in thousands, except percentages)
Cost of revenues	$	7,668		$	8,079		$	(411	)	(5.1	)%
Percentage of revenues	14.6		%	14.0		%

Cost of revenues in the Corporate & Other segment decreased $388,000 primarily due to $199,000 from lower compensation related costs. Healthcare decreased $160,000 primarily due to decreased royalty payments from lower activity with healthcare associations and Tech & Clearance increased $107,000.

Product Development Expenses



	Three Months Ended June 30,						Increase		Percent Change
	2017			2016			Increase		Percent Change
	(in thousands, except percentages)
Product development	$	6,356		$	6,245		$	111	1.8	%
Percentage of revenues	12.1		%	10.8		%

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Product development expenses increased primarily due to higher compensation related costs at Tech and Clearance, Healthcare, and Global Industry Group, partially offset by reductions at Brightmatter.

Sales and Marketing Expenses



	Three Months Ended June 30,						Increase		Percent Change
	2017			2016			Increase		Percent Change
	(in thousands, except percentages)
Sales and marketing	$	19,751		$	18,646		$	1,105	5.9	%
Percentage of revenues	37.7		%	32.3		%

The Tech & Clearance segment increased by $585,000 primarily due to the timing of discretionary marketing spend of $1,042,000, partially offset by reductions to employee related costs of $387,000. Brightmatter increased $459,000 due to increased headcount. The Healthcare segment sales and marketing expense increased $248,000 in the quarter primarily due to discretionary marketing spend.

General and Administrative Expenses



	Three Months Ended June 30,						Decrease			Percent Change
	2017			2016			Decrease			Percent Change
	(in thousands, except percentages)
General and administrative	$	10,046		$	11,508		$	(1,462	)	(12.7	)%
Percentage of revenues	19.2		%	20.0		%

In the quarter ended June 30, 2017, as compared to the same period in 2016, the Corporate & Other segment decreased $861,000 resulting primarily from $640,000 of professional fees in 2016 that did not recur in 2017. The Tech and Clearance segment decreased $213,000, while the Global Industry Group segment increased $464,000 primarily due to compensation related costs and professional fees.

Stock-based compensation expense was $2.1 million, a decrease of $0.7 million compared to the same period in 2016, primarily due to the lower value of equity awards in the current period and forfeitures of prior awards granted.

Depreciation



	Three Months Ended June 30,						Increase		Percent Change
	2017			2016			Increase		Percent Change
	(in thousands, except percentages)
Depreciation	$	2,819		$	2,563		$	256	10.0	%
Percentage of revenues	5.4		%	4.4		%

The increase was primarily due to higher levels of capital expenditures focused on the tech business, including costs of internally developed software.

Amortization of Intangible Assets



	Three Months Ended June 30,						Decrease			Percent Change
	2017			2016			Decrease			Percent Change
	(in thousands, except percentages)
Amortization	$	571		$	2,070		$	(1,499	)	(72.4	)%
Percentage of revenues	1.1		%	3.6		%

Amortization expense for the three months ended June 30, 2017 decreased due to certain intangible assets at the Global Industry Group and Tech & Clearance segments becoming fully amortized or written off during the prior year.

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Disposition Related and Other Costs



	Three Months Ended June 30,						Increase		Percent Change
	2017			2016			Increase		Percent Change
	(in thousands, except percentages)
Disposition related and other costs	$	1,187		$	77		$	1,110	n.m.
Percentage of revenues	2.3		%	0.1		%

The disposition related and other costs as described in Note 8 to the Condensed Consolidated Financial Statements, of $1.2 million in 2017 are primarily due to severance and other related costs in connection with the current divestiture process and the focus on the tech business.

Operating Income

Operating income for the three months ended June 30, 2017 was $4.0 million, margin of 7.6%, compared to $8.5 million, margin of 14.7%, for the same period in 2016, a decrease of $4.5 million or 52.8%. The reduced operating income and margin are due to a revenue decline of $5.3 million, partially offset by an operating expense decline of $0.8 million. The lower operating expense decline relative to revenue reflects our continued investments in the business to achieve revenue growth.

Interest Expense



	Three Months Ended June 30,						Decrease			Percent Change
	2017			2016			Decrease			Percent Change
	(in thousands, except percentages)
Interest expense	$	814		$	820		$	(6	)	(0.7	)%
Percentage of revenues	1.6		%	1.4		%

Interest expense for the three months ended June 30, 2017 was equivalent to the same period in 2016 due to lower weighted-average debt outstanding in the three months ended June 30, 2017, offset by higher interest rates.

Income Taxes



	Three Months Ended June 30,
	2017			2016
	(in thousands, except percentages)
Income before income taxes	$	3,197		$	7,648
Income tax expense	1,375			2,794
Effective tax rate	43.0		%	36.5		%

The effective income tax rate was 43.0% and 36.5% for the three month periods ended June 30, 2017 and 2016, respectively. The higher rate in the current period was primarily driven by tax expense of $180,000 related to share-based compensation awards which vested or were settled in 2017, related to the adoption of ASU No. 2016-09, as discussed in Note 2 in the Notes to the Condensed Consolidated Financial Statements.

Earnings per Share

Earnings per share was $0.04 and $0.10 for the three month periods ended June 30, 2017 and 2016, respectively. The decrease was primarily due to a decrease in net income.

Six Months Ended June 30, 2017 Compared to the Six Months Ended June 30, 2016

Revenues

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	Six Months Ended June 30,				Increase (Decrease)			Percent Change
	2017		2016		Increase (Decrease)			Percent Change
	(in thousands, except percentages)
Tech & Clearance	$	62,993	$	68,159	$	(5,166	)	(7.6	)%
Global Industry Group:
eFinancialCareers	15,836		17,958		(2,122		)	(11.8	)%
Rigzone	3,446		5,333		(1,887		)	(35.4	)%
Hcareers	7,361		7,846		(485		)	(6.2	)%
BioSpace	1,619		1,963		(344		)	(17.5	)%
Global Industry Group	28,262		33,100		(4,838		)	(14.6	)%
Healthcare	13,279		13,913		(634		)	(4.6	)%
Corporate & Other	56		787		(731		)	(92.9	)%
Total revenues	$	104,590	$	115,959	$	(11,369	)	(9.8	)%

We experienced a decrease in revenue in the Tech & Clearance segment of $5.2 million, or 7.6%. Revenue at Dice decreased by $6.2 million compared to the same period in 2016, primarily due to the decline in recruitment package customer count in the U.S. from 7,300 at June 30, 2016 to 6,750 at June 30, 2017. Additionally, average monthly revenue per U.S. recruitment package customer decreased approximately 1% for the six month period ended June 30, 2017 compared to the six month period ended June 30, 2016. Dice Europe revenue decreased by $0.6 million as compared to the same period in 2016 due to the negative impact of foreign exchange in 2017 of $0.4 million. Revenues for ClearanceJobs increased by $1.6 million for the six months ended June 30, 2017 as compared to the same period in 2016, primarily due to increased volume and pricing supported by favorable market conditions and enhanced product offerings.

The Global Industry Group segment revenue decreased $4.8 million, or 14.6%. This decrease was due to a decrease in revenue at the Rigzone business of $1.9 million as a result of difficult conditions in the energy market. Revenue at eFinancialCareers declined $2.1 million due to reduced activity in the North America region of $0.6 million and the negative impact of foreign exchange of approximately $1.4 million. Hcareers revenue decreased $0.5 million due to increased competition in the Hospitality industry and BioSpace revenue decreased $0.3 million.

Revenue for the Healthcare segment, consisting of Health eCareers, decreased by $0.6 million, or 4.6% from the comparable 2016 period due to decreased usage of job posting products.

Revenues from the Corporate & Other segment, which consists of revenue from Slashdot Media and Brightmatter, decreased by $0.7 million or 92.9% due to the sale of the Slashdot Media business in January 2016.

Cost of Revenues



	Six Months Ended June 30,						Decrease			Percent Change
	2017			2016			Decrease			Percent Change
	(in thousands, except percentages)
Cost of revenues	$	15,065		$	16,614		$	(1,549	)	(9.3	)%
Percentage of revenues	14.4		%	14.3		%

Cost of revenues in the Corporate & Other segment decreased $884,000, including a decrease at Slashdot Media of $252,000 since the business was sold in January 2016 and due to $632,000 from lower compensation and infrastructure related costs. Healthcare decreased $359,000 primarily due to decreased royalty payments from lower activity with healthcare associations while Global Industry Group decreased $265,000.

Product Development Expenses



	Six Months Ended June 30,						Decrease			Percent Change
	2017			2016			Decrease			Percent Change
	(in thousands, except percentages)
Product development	$	12,807		$	13,305		$	(498	)	(3.7	)%
Percentage of revenues	12.2		%	11.5		%

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Product development expenses decreased mainly due to $427,000 of lower employee related costs at Brightmatter and $395,000 at Slashdot Media since the business was sold in January 2016. This was partially offset by increased headcount of $440,000 at Tech & Clearance.

Sales and Marketing Expenses



	Six Months Ended June 30,						Increase		Percent Change
	2017			2016			Increase		Percent Change
	(in thousands, except percentages)
Sales and marketing	$	39,650		$	39,148		$	502	1.3	%
Percentage of revenues	37.9		%	33.8		%

Sales and marketing expenses increased due to increased headcount and discretionary marketing costs at Brightmatter of $835,000 and Healthcare of $484,000. This was partially offset by lower compensation related costs for sales of $314,000 at the Global Industry Group and $137,000 at Slashdot Media since the business was sold in January 2016.

General and Administrative Expenses



	Six Months Ended June 30,						Decrease			Percent Change
	2017			2016			Decrease			Percent Change
	(in thousands, except percentages)
General and administrative	$	21,325		$	22,721		$	(1,396	)	(6.1	)%
Percentage of revenues	20.4		%	19.6		%

General and administrative expenses decreased due to lower costs at the Corporate & Other segment including employee related costs of $260,000, a net reduction of professional fees of $181,000, and a decrease at Slashdot Media of$172,000 since the business was sold in January 2016.

Stock-based compensation expense was $4.6 million, a decrease of $1.8 million compared to the same period in 2016, primarily due to the lower value of equity awards in the current period, forfeitures of prior awards granted, and acceleration of $900,000 at Slashdot Media in 2016, which is included in disposition related and other costs.

Depreciation



	Six Months Ended June 30,						Decrease			Percent Change
	2017			2016			Decrease			Percent Change
	(in thousands, except percentages)
Depreciation	$	5,127		$	5,161		$	(34	)	(0.7	)%
Percentage of revenues	4.9		%	4.5		%

Depreciation expense for the six months ended June 30, 2017 approximates the same period of the prior year.

Amortization of Intangible Assets



	Six Months Ended June 30,						Decrease			Percent Change
	2017			2016			Decrease			Percent Change
	(in thousands, except percentages)
Amortization	$	1,132		$	4,536		$	(3,404	)	(75.0	)%
Percentage of revenues	1.1		%	3.9		%

Amortization expense for the six months ended June 30, 2017 decreased by $3.4 million due to certain intangible assets at the Global Industry Group and Tech & Clearance segments becoming fully amortized or written off.

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Disposition Related and Other Costs



	Six Months Ended June 30,						Decrease			Percent Change
	2017			2016			Decrease			Percent Change
	(in thousands, except percentages)
Disposition related and other costs	$	1,187		$	3,347		$	(2,160	)	(64.5	)%
Percentage of revenues	1.1		%	2.9		%

The disposition related and other costs, as described in Note 8 to the Condensed Consolidated Financial Statements, of $1.2 million in 2017 are primarily due to severance and other related costs in connection with the current divestiture process and the focus on the tech business.

The disposition related and other costs of $3.3 million in 2016 are primarily due to the sale of Slashdot Media, including severance of $981,000, stock based compensation acceleration of $900,000, and a loss on sale of $639,000. Also included in disposition related and other costs is other severance primarily related to the consolidation of the Global Industry Group of $827,000.

Operating Income

Operating income for the six months ended June 30, 2017 was $8.3 million, for a margin of 7.9%, as compared to $11.1 million, a margin of 9.6%, for the same period in 2016, a decrease of $2.8 million or 25.4%. The reduced operating income and margin are due to a revenue decline of $11.4 million, partially offset by an operating expense decline of $8.5 million. The lower operating expense decline relative to revenue reflects our continued investments in the business to achieve revenue growth.

Interest Expense



	Six Months Ended June 30,					Decrease			Percent Change
	2017		2016			Decrease			Percent Change
	(in thousands, except percentages)
Interest expense	1,604		$	1,692		$	(88	)	(5.2	)%
Percentage of revenues	1.5	%	1.5		%

Interest expense for the six months ended June 30, 2017 decreased from the same period in 2016 due to lower weighted-average debt outstanding in the six months ended June 30, 2017, partially offset by higher interest rates.

Income Taxes



	Six Months Ended June 30,
	2017			2016
	(in thousands, except percentages)
Income before income taxes	$	6,686		$	9,403
Income tax expense	3,524			3,438
Effective tax rate	52.7		%	36.6		%

The effective income tax rate was 52.7% and 36.6% for the six month periods ended June 30, 2017 and 2016, respectively. The higher rate in the current period was primarily driven by tax expense of $824,000 related to share-based compensation awards which vested or were settled in 2017, related to the adoption of ASU No. 2016-09, as discussed in Note 2 in the Notes to the Condensed Consolidated Financial Statements.

Earnings per Share

Earnings per share was $0.07 and $0.12 for the six month periods ended June 30, 2017 and 2016, respectively. The decrease was primarily due to a decrease in net income, partially offset by decreased weighted-average shares outstanding due to stock repurchases made during 2016.

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Liquidity and Capital Resources

Non-GAAP Measures

We have provided certain non-GAAP financial information as additional information for our operating results. These measures are not in accordance with, or an alternative for measures in accordance with GAAP and may be different from similarly titled non-GAAP measures reported by other companies. We believe the presentation of non-GAAP measures, such as Adjusted EBITDA and free cash flow, provides useful information to management and investors regarding certain financial and business trends relating to our financial condition and results of operations.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP metric used by management to measure operating performance. Management uses Adjusted EBITDA as a performance measure for internal monitoring and planning, including preparation of annual budgets, analyzing investment decisions and evaluating profitability and performance comparisons between us and our competitors. We also use this measure to calculate amounts of performance based compensation under the senior management incentive bonus program. Adjusted EBITDA, as defined in our Credit Agreement as “Consolidated EBITDA,” represents net income plus (to the extent deducted in calculating such net income) interest expense, income tax expense, depreciation and amortization, non-cash stock option expenses, losses resulting from certain dispositions outside the ordinary course of business, certain writeoffs in connection with indebtedness, impairment charges with respect to long-lived assets, expenses incurred in connection with an equity offering or any other offering of securities by the Company, extraordinary or non-recurring non-cash expenses or losses, transaction costs in connection with the Credit Agreement up to $250,000, deferred revenues written off in connection with acquisition purchase accounting adjustments, writeoff of non-cash stock compensation expense, and business interruption insurance proceeds, minus (to the extent included in calculating such net income) non-cash income or gains, and interest income.

We also consider Adjusted EBITDA, as defined above, to be an important indicator to investors because it provides information related to our ability to provide cash flows to meet future debt service, capital expenditures and working capital requirements and to fund future growth, as well as to monitor compliance with financial covenants. We present Adjusted EBITDA as a supplemental performance measure because we believe that this measure provides our board of directors, management and investors with additional information to measure our performance, provide comparisons from period to period and company to company by excluding potential differences caused by variations in capital structures (affecting interest expense) and tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses), and to estimate our value.

We present Adjusted EBITDA because covenants in our Credit Agreement contain ratios based on this measure. Our Credit Agreement is material to us because it is one of our primary sources of liquidity. If our Adjusted EBITDA were to decline below certain levels, covenants in our Credit Agreement that are based on Adjusted EBITDA may be violated and could cause a default and acceleration of payment obligations under our Credit Agreement. See Note 5 “Indebtedness” for additional information on the covenants for our Credit Agreement.

Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of our profitability or liquidity.

We understand that although Adjusted EBITDA is frequently used by securities analysts, lenders and others in their evaluation of companies, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our liquidity or results as reported under GAAP. Some limitations are:


•	Adjusted EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;


•	Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;


•	Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments on your debt;


•	Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and

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•	Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

To compensate for these limitations, management evaluates our liquidity by considering the economic effect of excluded expense items independently, as well as in connection with its analysis of cash flows from operations and through the use of other financial measures, such as capital expenditure budget variances, investment spending levels and return on capital analysis.

A reconciliation of Adjusted EBITDA for the six months ended June 30, 2017 and 2016 (in thousands) follows:



	For the six months ended June 30,
	2017			2016
Reconciliation of Net Income to Adjusted EBITDA:
Net income	$	3,162		$	5,965
Interest expense	1,604			1,692
Income tax expense	3,524			3,438
Depreciation	5,127			5,161
Amortization of intangible assets	1,132			4,536
Non-cash stock compensation expense	4,588			5,523
Severance--Slashdot Media	—			981
Accelerated stock based compensation expense--Slashdot Media	—			900
Loss on sale of business	—			639
Costs related to strategic alternatives process	807			—
Costs related to divestitures	70			—
Other	7			32
Adjusted EBITDA	$	20,021		$	28,867

Reconciliation of Operating Cash Flows to Adjusted EBITDA:
Net cash provided by operating activities	$	23,712		$	24,925
Interest expense	1,604			1,692
Amortization of deferred financing costs	(162		)	(162		)
Income tax expense	3,524			3,438
Deferred income taxes	(648		)	(229		)
Severance--Slashdot Media	—			981
Change in accrual for unrecognized tax benefits	(70		)	(115		)
Change in accounts receivable	(11,231		)	(4,857		)
Change in deferred revenue	(1,101		)	(3,252		)
Costs related to strategic alternatives process	807			—
Costs related to divestitures	70			—
Changes in working capital and other	3,516			6,446
Adjusted EBITDA	$	20,021		$	28,867

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Cash Flows

We have summarized our cash flows for the six months ended June 30, 2017 and 2016 (in thousands).



	For the six months ended June 30,
	2017			2016
Cash from operating activities	$	23,712		$	24,925
Cash (used in) from investing activities	(7,730		)	(3,077		)
Cash used in financing activities	(15,706		)	(26,124		)

We have financed our operations primarily through cash provided by operating activities and borrowings under our revolving credit facility. At June 30, 2017, we had cash of $23.5 million compared to $23.0 million at December 31, 2016. Cash held by foreign subsidiaries totaled approximately $18.4 million at June 30, 2017, of which $1.8 million was held by the Canada subsidiary. The remaining cash of $16.6 million held outside the United States and Canada is indefinitely reinvested. Cash balances and cash generation in the United States, along with the unused portion of our revolving credit facility, are sufficient to maintain liquidity and meet our obligations without being dependent on cash and earnings from our foreign subsidiaries.

Liquidity

Our principal internal sources of liquidity are cash, as well as the cash flow that we generate from our operations. In addition, we had $179.0 million in borrowing capacity under our $250.0 million Credit Agreement at June 30, 2017, subject to certain availability limits including our consolidated leverage ratio, which generally limits borrowings to three times annual Adjusted EBITDA levels. We believe that our existing U.S. and Canadian cash, cash generated from operations and available borrowings under our Credit Agreement will be sufficient to satisfy our currently anticipated cash requirements through at least the next 12 months and the foreseeable future thereafter. However, it is possible that one or more lenders under the Credit Agreement may refuse or be unable to satisfy their commitment to lend to us, we may violate one or more of our covenants or financial ratios contained in our Credit Agreement or we may need to refinance our debt and be unable to do so. In addition, our liquidity could be negatively affected by a decrease in demand for our products and services. We may also make acquisitions and may need to raise additional capital through future debt financings or equity offerings to the extent necessary to fund such acquisitions, which we may not be able to do on a timely basis or on terms satisfactory to us or at all.

Operating Activities

Net cash flows from operating activities primarily consist of net income adjusted for certain non-cash items, including depreciation, amortization, changes in deferred tax assets and liabilities, stock based compensation, and the effect of changes in working capital. Net cash flows from operating activities were $23.7 million and $24.9 million for the six month periods ended June 30, 2017 and 2016, respectively. Cash inflow from operations is driven by earnings and is dependent on the amount and timing of billings and cash collection from our customers. The cash provided by operating activities during the 2017 period decreased due to lower earnings, partially offset by cash generated from working capital, primarily collection of accounts receivable from customers.

Investing Activities

During the six month period ended June 30, 2017, cash used by investing activities was $7.7 million compared to $3.1 million in the same period in 2016. Cash used by investing activities in the six month period ended June 30, 2017 was attributable to the acquisition of fixed assets, including costs of internally developed software. Cash used in investing activities in the six month period ended June 30, 2016 was primarily attributable to $5.5 million used to acquire fixed assets, including costs of internally developed software, partially offset by cash received on sale of Slashdot Media of $2.4 million.

Financing Activities

Cash used in financing activities during the six month period ended June 30, 2017 was $15.7 million as compared to $26.1 million in the six month period ended June 30, 2016. The cash used during the current period was primarily due to $15.0 million used in repayments on long-term debt. During the six months ended June 30, 2016, the cash used in financing activities was primarily due to $22.6 million of payments to repurchase the Company’s common stock.

Credit Agreement

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In November 2015, we entered into a new Credit Agreement, which provides for a revolving loan facility of $250.0 million, maturing in November 2020.

Borrowings under the Credit Agreement bear interest, at the Company’s option, at a LIBOR rate or base rate plus a margin. The margin ranges from 1.75% to 2.50% on LIBOR loans and 0.75% to 1.50% on base rate loans, determined by the Company’s most recent consolidated leverage ratio.

The facility may be prepaid at any time without penalty.

The Credit Agreement contains various customary affirmative and negative covenants and also contains certain financial covenants, including a consolidated leverage ratio and a consolidated interest coverage ratio. Negative covenants include restrictions on incurring certain liens; making certain payments, such as stock repurchases and dividend payments; making certain investments; making certain acquisitions; and incurring additional indebtedness. Restricted payments are allowed under the Credit Agreement to the extent the consolidated leverage ratio, calculated on a pro forma basis, is equal to or less than 2.0 to 1.0, plus an additional $5.0 million of restricted payments. The Credit Agreement also provides that the payment of obligations may be accelerated upon the occurrence of customary events of default, including, but not limited to, non-payment, change of control, or insolvency. As of June 30, 2017, the Company was in compliance with all of the financial covenants under the Credit Agreement. Refer to Note 5 in the Notes to the Condensed Consolidated Financial Statements.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Commitments and Contingencies

The following table presents certain minimum payments due and the estimated timing under contractual obligations with minimum firm commitments as of June 30, 2017:



	Payments due by period
	Total		Less Than 1 Year		2-3 Years		4-5 Years		More Than 5 Years
	(in thousands)
Credit Agreement	$	71,000	$	—	$	—	$	71,000	$	—
Operating lease obligations	27,549		2,536		9,075		7,056		8,882
Total contractual obligations	$	98,549	$	2,536	$	9,075	$	78,056	$	8,882

We make commitments to purchase advertising from online vendors which we pay for on a monthly basis. We have no significant long-term obligations to purchase a fixed or minimum amount with these vendors.

Our principal commitments consist of obligations under operating leases for office space and equipment and long-term debt. As of June 30, 2017, we had $71.0 million outstanding under our Credit Agreement. Interest payments are due quarterly or at varying, specified periods (to a maximum of three months) based on the type of loan (LIBOR or base rate loan) we choose. See Note 5 “Indebtedness” in our condensed consolidated financial statements for additional information related to our Credit Agreement.

Future interest payments on our Credit Agreement are variable due to our interest rate being based on a LIBOR rate or a base rate. Assuming an interest rate of 3.25% (the rate in effect on June 30, 2017) on our current borrowings, interest payments are expected to be $2.2 million for April through December 2017, $5.9 million in 2018-2019 and $2.7 million in 2020.

As of June 30, 2017, we recorded approximately $2.6 million of unrecognized tax benefits as liabilities, and we are uncertain if or when such amounts may be settled. Related to the unrecognized tax benefits considered permanent differences, we have also recorded a liability for potential penalties and interest. Included in the balance of unrecognized tax benefits at June 30, 2017 are $2.6 million of tax benefits that if recognized, would affect the effective tax rate. The Company believes it is reasonably possible that as much as $556,000 of its unrecognized tax benefits may be recognized in the next twelve months.

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Cyclicality

The labor market and certain of the industries that we serve have historically experienced short-term cyclicality. However, we believe that online career websites continue to provide economic and strategic value to the labor market and industries that we serve.

Any slowdown in recruitment activity that occurs will negatively impact our revenues and results of operations. Alternatively, a decrease in the unemployment rate or a labor shortage, including as a result of an increase in job turnover, generally means that employers (including our customers) are seeking to hire more individuals, which would generally lead to more job postings and database licenses and have a positive impact on our revenues and results of operations. Based on historical trends, improvements in labor markets and the need for our services generally lag behind overall economic improvements. Additionally, there has historically been a lag from the time customers begin to increase purchases of our recruitment services and the impact to our revenues due to the recognition of revenue occurring over the length of the contract, which can be several months to over a year.

Persistent low oil prices since 2014 is an example of how economic conditions can negatively impact our revenues and results of operations. As a result, we have seen decreased demand for energy professionals worldwide. This decline in demand and any future declines in demand for energy professionals could further decrease the use of our energy industry job posting websites and related services. From the second half of 2011 into 2014, we saw tougher market conditions in our finance segment and a less urgent recruiting environment for technology professionals. If recruitment activity continues to be slow in the industries in which we operate during 2017 and beyond, our revenues and results of operations will be negatively impacted.


Item 3.	Quantitative and Qualitative Disclosures about Market Risk

We have exposure to financial market risks, including changes in foreign currency exchange rates, interest rates, and other relevant market prices.

Foreign Exchange Risk

We conduct business serving multiple markets, in four languages, mainly across Europe, Asia, Australia, and North America using the eFinancialCareers name. Rigzone, Dice Europe and Hcareers also conduct business outside the United States. For the six months ended June 30, 2017 and 2016, approximately 25% and 27% of our revenues, respectively, were earned outside the United States and certain of these amounts are collected in local currency. We are subject to risk for exchange rate fluctuations between such local currencies and the British Pound Sterling and between local currencies and the United States dollar and the subsequent translation of the British Pound Sterling to United States dollars. We currently do not hedge currency risk. A decrease in foreign exchange rates during a period would result in decreased amounts reported in our Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, Comprehensive Income, and of Cash Flows. For example, if foreign exchange rates between the British Pound Sterling and United States dollar decreased by 1.0%, the impact on our revenues and expenses for the six months ended June 30, 2017 would have been a decrease of approximately $130,000 and $135,000, respectively.

On June 23, 2016, the UK held a referendum in which British citizens approved an exit from the EU, commonly referred to as “Brexit.” As a result of the referendum, the global markets and currencies have been adversely impacted, including a decline in the value of the British Pound Sterling as compared to the United States dollar. Volatility in exchange rates is expected to continue in the short term as the UK negotiates its exit from the EU. We currently do not hedge our British Pound Sterling exposure and therefore are susceptible to currency risk. In the longer term, any impact from Brexit on us will depend, in part, on the outcome of tariff, trade, regulatory and other negotiations. Although it is unknown what the result of those negotiations will be, it is possible that new terms may adversely affect our operations and financial results.

The financial statements of our non-United States subsidiaries are translated into United States dollars using current exchange rates, with gains or losses included in the cumulative translation adjustment account, which is a component of stockholders’ equity. As of June 30, 2017 and December 31, 2016, our translation adjustment decreased stockholders’ equity by $29.4 million and $32.3 million, respectively. The change from December 31, 2016 to June 30, 2017 is primarily attributable to the position of the United States dollar against the British Pound Sterling.

Interest Rate Risk

We have interest rate risk primarily related to borrowings under our Credit Agreement. Borrowings under our Credit Agreement bear interest, at our option, at a LIBOR rate or base rate plus a margin. The margin ranges from 1.75% to 2.50% on the LIBOR loans and 0.75% to 1.50% on the base rate, as determined by our most recent consolidated leverage ratio. As of

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June 30, 2017, we had outstanding borrowings of $71.0 million under our Credit Agreement. If interest rates increased by 1.0%, interest expense in 2017 on our current borrowings would increase by approximately $355,000.


Item 4.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have established a system of controls and procedures designed to ensure that information required to be disclosed in our periodic reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified by the Exchange Act and in the rules and forms of the Securities and Exchange Commission (the “SEC”). These disclosure controls and procedures have been evaluated under the direction of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) as of June 30, 2017. Based on such evaluations, our CEO and CFO have concluded that the disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the SEC, and that such information is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Controls

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) occurred during the quarter ended June 30, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II


Item 1.	Legal Proceedings

From time to time we may be involved in disputes or litigation relating to claims arising out of our operations. We are currently not a party to any material pending legal proceedings.


Item 1A.	Risk Factors

We have disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K the risk factors which materially affect our business, financial condition or results of operations. As of July 27, 2017 there have been no material changes from the risk factors previously disclosed. You should carefully consider the risk factors set forth in the Annual Report on Form 10-K and the other information set forth elsewhere in this Quarterly Report on Form 10-Q. You should be aware that these risk factors and other information may not describe every risk facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Repurchases of Equity Securities

There were no stock repurchases during the quarter ended June 30, 2017 and there is no stock repurchase program currently in effect.

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Item 5. Other Information

On May 3, 2017, the Company filed its Quarterly Report on Form 10-Q for the period ended March 31, 2017 which included a description of the matters voted on at its annual meeting of stockholders held on April 28, 2017. In accordance with the recommendations of the Company’s board of directors, and the results of the votes reported under Item 5 of such Form 10-Q, the Company will hold a non-binding advisory vote every year to approve the compensation of the named executive officers listed in its proxy statement for their annual meeting of stockholders until the Company conducts the next non-binding advisory vote on the frequency of holding advisory votes on executive compensation.

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Item 6. Exhibits



10.1		Separation Agreement, dated as of June 16, 2017 among DHI Group, Inc., Dice Inc., and Shravan Goli (incorporated by reference from Exhibit 10) to the Company's Current Report on Form 8-K (File No. 001-33584) filed on June 29, 2017.
31.1*		Certifications of Michael Durney, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certifications of Luc Grégoire, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certifications of Michael Durney, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certifications of Luc Grégoire, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

_______________



*		Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



Date:	July 27, 2017	DHI Group, Inc.
		Registrant

		By:	/S/ Michael P. Durney
			Michael P. Durney President and Chief Executive Officer
			(Principal Executive Officer)

			/S/ Luc Grégoire
			Luc Grégoire Chief Financial Officer
			(Principal Financial Officer)

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EXHIBIT INDEX



10.1		Separation Agreement, dated as of June 16, 2017 among DHI Group, Inc., Dice Inc., and Shravan Goli (incorporated by reference from Exhibit 10) to the Company's Current Report on Form 8-K (File No. 001-33584) filed on June 29, 2017.
31.1*		Certifications of Michael Durney, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certifications of Luc Grégoire, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certifications of Michael Durney, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certifications of Luc Grégoire, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

_______________



*		Filed herewith.