Q1 2021 Ziprecruiter Inc Earnings Call
Good day, and thank you for standing by and welcome to the ZIP recruiter Q2 sort of sending one earnings call. At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session can I ask a question. During the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero.
I would now like to hand, the conference over to your Speaker today, Tim yard Brown Chief Business Officer. Please go ahead.
Thank you operator and good afternoon. Thank you for joining us in our earnings conference call during which we will discuss the pre treaters performance for the quarter ended June 30th 'twenty, 'twenty, one and guidance for the third quarter and full year for 2021.
Joining me on the call today are Ian Siegel co founder and CEO and David Travers CFO.
Before we begin please be reminded that forward looking statements made today are subject to risks and uncertainties relating to future events <unk> the future financial performance as depicted here.
Actual results could differ materially from those anticipated in these forward looking statements.
A discussion of some of the risk factors that could cause actual results to differ materially from any forward looking statements can be found in ZIP recruiters public registration statement on form S. One filed with the U S Securities and Exchange Commission on April 30th 'twenty, 'twenty, one and in our quarterly reports on Form 10-Q for the three and six months ended June <unk>.
<unk> 2021 both of these are available on our investor website, and the SEC's website.
The forward looking statements in this conference call are based on current expectations as of today and ZIP recruiter assumes no obligation to update or revise them, whether as a result of new developments or otherwise.
In addition, during today's call we will discuss non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to not as a substitute for or in isolation from GAAP results.
Reconciliations of the non-GAAP metrics to the nearest GAAP metrics are included in ZIP recruiters public S. One filing and in our Form 10-Q, and now I will turn the call over to Ian.
Thank you, Tim and good afternoon to everyone joining us today, we hope you're all staying safe and healthy.
The second quarter of 2021 was an exceptional one for the U S economy GDP growth exceeded 6%. The COVID-19 vaccine rolled out en masse and U S. Employers rushed to staff up according to July's jobs report released on August six 2021, we've now recovered almost 75%.
Of the jobs lost during the pandemic American businesses are ready to hire again.
We responded to the increased demand from employers by scaling up our sales and marketing efforts, resulting in nearly a 170000 quarterly paid employers participating in our marketplace and all time high.
Revenue of 183 million. This quarter was also the highest in zipper triggers history.
I'm proud of the execution by all of our teams and their commitment to our mission of actively connecting people to their next great opportunity.
While the employers are eager to higher job seeking activity still remains lower than pre pandemic periods that said over the past quarter, we've seen job seeker volume increasing we're excited to help these job seekers find work aided by their own personal recruiter, Phil our popular AI powered bot.
In the second quarter of 2021, we will fill throughout the product providing job seekers, and even more personalized and consistent experience.
Bill directs the job seekers attention to jobs that are a great fit and provides helpful tips to take the guesswork and mystery out of the job search experience.
We also introduced many improvements to our job matching algorithms, which have driven up the number of applications submitted by job seekers.
It's a competitive labor market, we were thrilled to have spent the quarter, adding many amazing new members to our own team specifically, we grew head count in the second quarter by 140, which is a record high for our company. We now have over 1000 zipper trigger in place our secret in a challenging environment is not so secret we.
ZIP recruiter to find great hires. These hires include key additions from across all of our teams, including technology product management and sales.
Our strongest second quarter results, where I truly believe we are just getting started.
Now I'll turn it over to our Chief Financial Officer, David travelers to talk through the second quarter results as well as third quarter guidance and our increased revenue and adjusted EBITDA expectations for the full 2021 year Dave.
Thank you Anne and good afternoon, everyone.
As Ian mentioned, our second quarter revenue of $183 million represented a record quarter exceeding the midpoint of our guidance range by $23 million. This.
This represents a 109% growth year over year, and 46% growth over the first quarter of 2021.
The growth in the second quarter was driven by stronger than expected demand from employers and our execution across sales and marketing activities.
The main driver of our revenue growth was the substantial increase in quarterly paid them floors.
At almost 170000 this represented an improvement of 120% year over year and another all time high physical crude.
GAAP net loss was $53 million in the second quarter of 2021 compared to net income of $21 million in the prior year.
Adjusted EBITDA loss was $2 million with a negative 1% margin compared to $26 million of adjusted EBITDA or 29% margin in the prior year.
Last year in the second quarter of 2020 in response to the pandemic, we substantially reduced our operating expenses.
Since then we have grown expenses as we scaled sales and marketing.
We were encouraged by the efficiency of our increased sales and marketing spend in Q2 of 2021 and have confidence in our ability to attract employers and job seekers toward marketplace.
In the second quarter of 2021, we incurred $64 million and stock based compensation expense $42 million of which related to the modification and expense of employee or skus to allow for vesting in the direct listing which impacted net loss.
Similarly in the second quarter of 2021, we incurred $32 million in general and administrative expenses related to the direct listing completed during the quarter, which impacted both net loss and adjusted EBITDA loss.
Even with the investments discussed earlier and onetime expenses for direct with them.
We ended the quarter with over $153 million in cash an increase of $18 million from the first quarter of 2021.
Additionally, we secured a $250 million line of credit none of which was drawn as of quarter end.
After closing out an extraordinary quarter, we're pleased to increase our guidance for the third quarter and the full year of 2021.
Following the largest increase in quarterly revenue and ZIP recruiters history, we expect $185 million revenue in Q3 of 2021 at the midpoint, which translates to 80% year over year growth.
We're pleased to increase our midpoint guidance for the full year to $658 million up from $590 million shared last quarter.
This increase 2021 revenue guidance equates to 57% growth over 2012 at the midpoint.
We believe the second quarter of 2021 with a truly unique time for our country and their company.
Our third quarter guidance and full year expectations reflect our belief in a gradual return to a more traditional macroeconomic pattern by the end of the year as well as the seasonal softening of job activity in the fourth quarter.
While we did not see this trend last year due to the nation's economic recovery through the second half of the year. This is a seasonal trend we've consistently seen prior to the pandemic.
Our full year midpoint guidance for adjusted EBITDA of $34 million equates to an adjusted EBITDA margin of 5%.
This increased guidance reflects stronger revenue outlook offset by increased investment in sales and marketing activities in response to the stronger labor market environment. We're currently seeing.
This is above our pre COVID-19 adjusted EBITDA margin of 2% back in 2019.
<unk>, our investments to achieve substantially higher growth rate this year.
The second quarter of 2021 was exceptional by many measures.
We began our life as a public company delivered record revenue and served an all time high number of employers.
As encouraging as these results are we remain focused on what is yet to come we look forward to partnering with shareholders, who share our enthusiasm to actively connect people to their next great opportunity.
With that we can now open the line for questions operator.
As a reminder to ask a question. Please press star followed by the number one on your telephone keypad again that is star one to withdraw your question press the pound or hash key please standby, while we compile the Q&A roster.
Your first question comes from the line of Doug Anmuth from JP Morgan Your line is open.
Hey, it's Bryan Smith on for Doug.
Considering job seeker activity has lagged the broader recovery of job openings can you provide further color on how's. It manages a sequel dis equilibrium and then can you provide further color on timing and key levers to normalization of these trading space.
Yeah, Let me take the first whack at it thanks for that question.
So that when you enter a competitive job market like you see today, where you see voracious employer demand for talent, but job seekers lagging in terms of their participation, but we really try to focus on is the value of our matching algorithms can bring because of our service as soon as an employer posts.
Job their percentage of a list of potential candidates that they can then invite to apply and it's by doing that outreach that they can give themselves a really unique advantage in this otherwise intensely competitive environment first and foremost they can see exactly what talent is out there that matches their opportunity and second they can make their job.
Standout by reaching out to that job seeker, rather than requiring that John take her to discover that this job exists and that has been really a key to our success up to this point and it's particularly acute during this COVID-19 period.
Yeah, and then to add onto that in terms of how we see that equilibrium returning over the coming quarters.
We really believe that we have seen the early stages of job seekers coming back to the marketplace and some encouraging trends and.
Obviously, the shape of the pandemic and the related labor market dislocations as uncertainty.
But our operating assumption is we will slowly return to a more.
More normal whatever that means going forward normal equilibrium like we saw pre pandemic and like we've seen in other recoveries we've studied.
As the coming quarters come along but obviously, we don't have a crystal ball to tell you exactly what shape that is going to take.
Yeah.
Perfect. Thanks for taking my question.
Your next question comes from the line of Ralph Shanghai from William Blair. Your line is open.
Definitely in a couple of questions. If I could first just in terms of 2021 in terms of the operational drivers. Obviously paid employers are seeing some pretty explosive growth, but how should we think about the interplay between employer growth is in the back half of the year and revenue per paid employer growth. It's the first question and then second I under.
Stand that as if you're adding a bunch of new employers it puts a little downward pressure on the revenue per employer metric, but how long does it take to sort of you know sort of base out before that returns back to growth and I have a follow up thanks.
Great. Thanks, Ralph.
Yes, so so in terms of the.
The shape of paid employers again, our operating assumption is some return to normalcy over the next couple of quarters and obviously, we're incredibly pleased by growing paid employers north of 40% sequentially in the quarter, we do expect that among our two key drivers.
Paid employers is the one that will be more impacted by cyclical.
Swings in the economy like we saw in Q2.
So we do expect that.
There may be a little bit more choppiness there versus on the monetization side on revenue per paid employer, where.
Depending on what the shape of the recovery really is on the we certainly don't expect.
40%.
Growth in paid employers every quarter on the monetization side of things what we see is despite the.
Very unique nature of the quarter, what we see as the underlying trends are the same where when we look at cohorts over time, we see continued improvements in monetization as employers get to know us better they are more and more willing to pay us more and we deliver more and more comfortable with them.
The value we deliver to them so over time that is going to be.
Reliably going up into the right as those cohorts.
Sort of take their natural journey, obviously as you as you referenced depending on the size of new cohorts in a given quarter and depending on how back loaded they may or may not be there can be a little bit of disruption to that but we expect to see.
Quarter to quarter disruption like we've had.
The past quarter or two that we will see that revenue per paid employer number go up reliably overtime.
Great. That's helpful. David and just one more if I could and you called out the improvement in the algorithm change I think the job recommendations for seekers and led to increased applications in the quarter I'm sure you've met a lot of kind of improvements through the years, but just curious is this a more significant change sort of more part of the continuum just kind of curious any more color you could add on that.
Yeah, when we look at our algorithmic matching its an effort not measured in weeks or months, but rather in years and it's a discipline that we've been practicing over that long period of time and what happens is we're getting better and better at training these algorithms, but on top of.
Of that we're getting better and better at understanding the psychology of the interplay between job seekers and employers and we're deploying features and we're using language between them to facilitate a feeling of rapid communication and examples of that include things like we've mentioned in the past work.
When an employer reads of job seekers resume who has applied we send a notification to that job seekers. So that they are aware that something is happening when an employer rates that candidate we send a notification to that job seekers. So they know they have been rated it's this feeling of momentum that keeps the job seeker invested in it.
<unk> and its features like that that we continue to deploy on top of that training and retraining of our algorithms, which has led to such persistent growth in the sums up rate and the quality of the matches that we've generated and also the outcomes that our service has been able to generate for both sides of our marketplace.
Okay, great Thanks, and thanks, David.
As a reminder to ask a question. Please press star followed by the number one on your telephone keypad again that is star. One. Your next question comes from the line of Chad.
Every young from Barclays. Your line is open.
Great. Thanks first one for Ian.
Just made some comments were helpful on that.
Operating and I know another key Kpis that you have is the time to fill jobs given some of the narrative. We're hearing about the supply demand mismatch between seekers and employers are you seeing that manifest and like extended time to phil's or or anything like that or are you still seeing kind of that continued improvement that you've been seeing up the long term and then one for David just on the.
Implied <unk> guide, obviously, implying a D cell and your commentary was helpful about expecting some normal seasonality in tougher compares but just trying to unpack that a little bit as to how much is conservatism or do you think there's been some pull forward in <unk> and <unk>.
Yes.
Well I'll take the matching question first and fundamentally the simplest answer to your question is we continuously improve its one of the things I literally saying the orientation to every one of our new members on our team, which is the fun thing about zipper Criteria's every month, we get better and so yes.
Our average I think matching continues to improve and outcomes continue to improve but we are facing what is a.
Once in a lifetime pandemic that is having a ripple effect through many job categories and it's having a different effect on different job category. So you look at something like when you try and hospitality or indeed are industries that are in need of people to work in close proximity with the public and those industries are particularly challenged right.
Now when it comes to attracting talent and those industries are the ones that are having to reevaluate things like salary and benefits and flexible work schedules. So you're starting to see variation between job categories in terms of the outcomes and the speed to hire but overall and taken in aggregate, we continue to relentlessly improve and that's.
The advantage of software that learns that is the foundation of what our product is and even learn to accommodate for the changes that are occurring in the job market as they happen.
Yes.
And then to the second part of your question.
In terms of seasonality.
Trevor the.
The what we saw last year in 2020 was the shape of the recovery was so strong even though it was incredibly early last year in Q4 that it basically overtook the normal seasonality. So there wasn't a seasonal dip in Q4, what we saw several years going back before that was there is a seasonal dip.
In Q4 related to holiday slowdown in job seeking activity in the lake and so whats embedded in our guidance here is mainly just a return to normalcy is probably on the margin slightly more than normal.
The embedded assumption is.
I mentioned earlier is that we're on this glide path, where we're going to return between the Super Spike in activity we've been seeing.
Recently to more normal like labor market early recovery.
Type conditions.
The early part of next year, and then going on to a recovery to the extent to which that's conservative or not really depends on the extent to which that.
Overarching.
Outlook on the labor market ends up being accurate or not.
Obviously, our like I've said, many times before our Crystal ball is cloudy on that the pandemic has not taken.
A smooth glide path as everyone as everyone knows but despite all that we.
We feel very good based on the assumptions I just laid out about the guidance. We just laid out that is significantly stronger than what we've put out just a few months ago.
Super helpful. Thank you both.
Your next question comes from the line of Mark Mahaney from Evercore ISI. Your line is open.
Hey, Thanks, and I apologize if you've already covered this but you usually disclose some metrics around the speed of matching and the quality of matching.
Could you just provide an update on those and.
Testing, whether you did that mousetrap that.
Provide the data in the past it suggests that the speed of the matches has been increasing as that continues to be and your thoughts on just how far you can take that thanks a lot.
Sure Yeah, we touched on a little bit earlier Mark.
You're absolutely right, it's something we spend a lot of time thinking about what we've seen over the course of the quarter is one it's such an extraordinary quarter, it's hard to draw too many long term.
Lessons from it but what we have definitely learned during the quarter as a R.
Our teams have executed in such a way that has allowed us to really take advantage of extraordinary circumstances that includes on the technology side of things, where despite extraordinary circumstances, our confidence in those long term trends remains robust if anything strengthened by what we've seen during the quarter. Despite the tightening of the labor market.
Et cetera, So we really feel like our matching algorithms continue to drive on those metrics you mentioned and other important ones that we that we follow and specifically we feel very confident that over time, it's going to take employers less time to make great hires with less toil.
On our platform and everything we've learned during the course of the quarter. Despite some extraordinary miss baked in there is only reinforced that.
And then one follow up question. Please on sales and marketing you know you noted this spike in sales and marketing intensity in the quarter just talk about the path for that going forward should we expect that to come down as a percent of revenue I assume that's the case long term, but you may well be.
Hitting heavy against or leaning into a newer market opportunity maybe you held back you'd likely did for awhile. There during the pandemic. So just talk about what the outlook should be there for sales and marketing spend new channels of interest and the rate at which we should see leverage as it quickly or.
Overtime.
Good question Mark So the way we are we are quantitative and our approach to marketing and we let the industry dynamic dictate how much we're investing at any given time I have said before and I'll say again, we are scientists more than we are artists when it comes to marketing and right now we're invest.
Aggressively into what is probably the strongest tailwind we have seen in the 11 year history of the company you should expect though that as we see that tailwind diminish we will bring down marketing costs and that is a lever that we have to pull and we will continue to tune it to the appropriate level of investment as the market dictates and warrants based on that.
Behavior, we're seeing from employers and job seekers.
We agree with that and just to add on the.
The metrics have been very strong over the course of the past couple of quarters on the marketing front and as a result, you've seen us increase those investments significantly we're encouraged by both the near term ROI in the long term brand building that we see happening on both sides of our market.
Place related to that it continues to be highly diversified.
When you think about what's implicit in our guide is that we're going to stay on the front foot for the balance of the year given.
Given the extraordinary circumstances.
And obviously, we'll adjust as in one way or another.
As the data dictates as Ian just referenced but we feel very good.
Even in an uncertain market about what we're doing and then in terms of your long term question, we laid out during the.
Registration process before the direct listing a very clear.
View that we could get to 30% EBITDA margins over time adjusted EBITDA margins, we remain very confident if anything our confidence has grown and as you can.
Can see that as we raised our guidance, we haven't put a specific.
<unk> line on that but.
To large extent the timeline will be dictated by the opportunity we see to really grow the marketplace on both sides and build a durable.
<unk> advantage in terms of our brand.
So I don't have a specific.
One for you, but what I do have us increasing confidence in our ability to get to that the target EBITDA margin.
Okay. Thank you David Thank you.
And your last question comes from the line of Ana on the Kessler from Raymond James Your line is open.
Great. Thanks, guys and congrats on the quarter couple of questions. First can you just give us a sense for how many of these employers were new to.
Recruiter versus returning it looks like obviously with them being at an all time high a lot of these were new and then can you talk about how they're coming to the platform that is it mostly through self service is it through some of the sales force etcetera and then my second question. Just do you think youre, gaining kind of meaningful market share in this environment as well. Thank you.
Yeah. So we.
Right.
We have experienced basically record levels of interest in zipper Critter from every class and cohort of customers. So that new customers coming in it's a record number of reactivation from prior customers, which for US is one of the great signals in our business of the value that we deliver increases our.
<unk> and our strategic product approach because clearly it's resonating with a large segment of the market and I think unquestionably right now separate critter is in a market share grabbing mode said during this process. When it was back at the initial direct listing and I'll say it again now that we have effectively been disrupting ourselves by being so focused.
On reducing the time to hire and that has been our primary goal and continues to be our primary goal and we're really.
Reaping the rewards of that during this period, where we have such a significant tailwind in our business and so yes. It is a blend of both new customers and we're turning past customers at record levels that is creating the swell of total active customers on the platform and yes, we are definitely gaining market share.
During this period.
Great. Thank you guys.
And there are no further questions over the phone line at this time.
This concludes <unk> earnings conference call. We thank you all for participating and you may now disconnect.
Okay.
Everyone else has left to come.
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