Q3 2021 Ziprecruiter Inc Earnings Call
Your guidance does imply an overall increase in operating expenses when compared to previous guidance driven by a larger investment in sales and marketing expenses in the early part of the quarter before the holiday slowdown.
As exciting as these financial results and our raised guidance are we are even more motivated by the millions of job seekers, who we help find work by using different Cougar and the employers who as a result have found a great new hires during the singular moment in economic history. We believe our work is more important than ever.
With that we can now open the line for questions operator.
At this time, if you would like to ask a question. Please press star followed by the number one on your telephone keypad.
First question comes from <unk> <unk> with William Blair. Please go ahead.
Good afternoon, and thanks for taking my question first just on monetization. It was exceptionally strong in the third quarter, even though you're onboarding record levels paid in players and I think historically when you've on boarded.
Lawyers that come in at sort of lower tiers, and it's taken a while to sort of.
Increase that revenue per paying player. So I guess my first question is how are you able to sort of achieve these high levels of revenue.
Our employer when they have been at record levels.
<unk> added.
Sure. Thanks Ralph.
Question, Nico, Yes, youre exactly right about that historical pattern.
I'd say a couple of things allowed us to have the exceptionally strong average revenue. One is obviously in the current environment employer willingness to pay is proven to be robust.
And secondly that the cohorts that we're also very large in the first couple of quarters of the year are going through those oversized cohorts are also going through the natural process.
Getting comfortable with paying us more as they get to know us better and realizing the value from dip recruiter and so we got great strength from those cohorts, who are performing exceptionally well.
Yes, I'd add to that so we have older or I should say the last two quarters worth of cohorts maturing as is the normal pattern, but also on our site.
Very much like an auction based marketplace, where you can pay more to get more and there is a variety of sounds that players can opt into and then this intensely competitive environment. Certainly there was a lot of self selection and willingness to pay amongst employers who are willing to spend that because they were getting results and they wanted more results.
Okay that makes sense and then maybe a follow up to that is I think David talked about on the call in the letter you called out as well about.
Return to more sort of I guess more normalized macro economic trends is that something youre seeing in the quarter or is that just maybe conservatism.
Anticipating eventual sort of return to that type of environment.
Yes, very good question. So we did.
Although we did experience more robust results than we expected.
Last quarter, we do see signs of that at the end of last quarter that we still believe we're on this glide path back to normal so that is not.
Speculation, but the shape of that has been uneven.
The over performance in the quarter.
Versus our expectations indicators and so we certainly feel the we're still in this period of uncertainty where we've never been in these waters before so to speak.
And so we're certainly slightly on the margin more cautious about how we approach that but we do certainly it's not just speculation we do see signs we're headed back toward a more normalized environment and embedded in our guidance is the assumption.
Next year, we will be back in some sort of new normal that looks more like the pre COVID-19 period.
Okay, Thanks, Jay and thanks, David.
Your next question comes from Doug Anmuth with Jpmorgan. Please go ahead.
Hi, This is David on for Doug Thanks for taking the questions.
First of all going back to your quarterly pit employers presenting at an all time high levels I'm curious, if that's still something that youre expecting in <unk> and if you can provide more color on opex and.
Key drivers.
Staying at this level.
Shifting from Opex going forward and related to that you mentioned in your letter about 30%.
Increasing sales and marketing head count over the last two quarters.
You talk about which parts of your shows.
The marketing organization that received this investment then in your color on the types of returns are you expecting from them.
Well.
We have developed over time.
Sophisticated and capable sales and marketing operation, we can adjust based on what we're experiencing in the market and the strength of the return on our investment led us to continue increasing that investment and Thats part of the reason why we over perform time quarterly paying employers.
Also I believe persistent optimization and the strategies, we use to bring employers and and let's not forget that it wasn't just new customers coming in that created that number. It was also the reactivation of previous customers who were satisfied that there is I'll take out the first time and we're coming back to US again, so we saw how ifs.
Actively across the platform in every class and category of both new customer and returning customer on the platform.
Yes.
Add on that.
Quarterly paid employers exactly right. We were very pleased with the results given how much they've grown.
The quarter before to stay flat this quarter to your question about going forward. Obviously, we don't provide guidance on quarterly paid employers however, looking back for historical <unk>.
Analogues.
We did not experience normal seasonality in Q4 of 2020, but in prior years, including 2019 and 2018 those before them. We did experience Q4 seasonality, where especially in the latter half of the quarter.
There is.
Contraction somewhere in the high single digit percentage quarter over quarter contraction in quarterly paid employers overall in Q4 versus Q3.
And we do expect that we will see more normal seasonality given historical patterns. This quarter and if we're if we're correct to state or uncertainty around the macroeconomic environment that we're also on a glide path back to normal we could even see that would be slightly higher.
Than normal because of seasonality plus the glide path back to normal so.
Slightly higher than high single digits.
Quarter over quarter percentage contraction of quarterly paid employers.
On the other side of the Ledger. What happens then is that contraction in Korea, we pay the quarters, if that were to happen and as happened in previous Q4s.
The contraction comes from a lack of brand new paid employees, which to our previous comments are the ones that pay us the least so on a weighted average basis sort of mathematically and mechanically the average revenue per paid employer will come up and we.
We feel that that is.
A trend that is coming up over time very consistently as we've discussed many times before but that will bump it up a little bit even more to largely offset the impact of the contraction in quarterly paid employers if thats what happens like has happened in other key for us.
Got it thank you.
As a reminder, if you would like to ask a question at this time. Please press star followed by the number one on your telephone keypad.
And your next question comes from Jeffrey <unk> with Barclays. Please go ahead.
Great. Thanks, just back to the sales head count ramp.
How long does it typically take those hires to be like full productivity like six to nine months or are they already kind of hitting their stride now just trying to understand like the implications of the hiring now versus <unk>.
<unk> and <unk> growth.
And then also any update on back filling the CFO role.
Yes.
The second one first we're very pleased to announce a couple of weeks ago that chasm safety, who is our chief marketing officer has been elevated to chief operating officer.
You can read a little bit more about cause in our shareholder letter this quarter and we look forward to getting to meet with and hear from him, but he has been with us for quite some time it was really a spectacular leader.
The team has done.
Back to your sales ramp question, it really depends a little bit between the type of salesperson. So.
Handful of months.
For SMB oriented inside salespeople broadly speaking and it's a handful of quarters for enterprise salespeople, we're growing and have been growing both teams.
And are very pleased with the high bar, we've been using to grow those teams, even though we've been growing quickly. Obviously, it's very helpful. When you're growing your team to have a secret weapon, which is we eat our own dog food, we use if recruiter and it's working.
And so we expect we will continue to see a high return on investment from the head count and we're constantly looking for opportunities to continue to invest there.
Great. Thank you.
Your last question comes from Aaron Kessler with Raymond James. Please go ahead.
Great. Thanks couple of questions, maybe if you can discuss a little bit maybe a competitive market share kind of how you think youre doing this year relative to some of the key players that you say.
Second just the maybe the impact of the unemployment insurance running off.
AGA is kind of what impact is that having on that kind of a company's ability to hire right now as well. Thank you.
Yes, well, let's take the market share question first and I don't know.
As evidenced by the results we posted in Q3 I think we feel really good about how we're performing relative to the competition right now and I would just like to reiterate something that we said during the original roadshow back when we first Republic, which is when you look at the total.
<unk> category over 200 billion Tam and if you take the three largest players who represent the bulk of what happens online.
What you find is that online is still a definitive percentage of that total $200 billion. So we don't really look at our competition as the other online players as much as we look at the opportunity of moving and taking a larger share of sort of the offline recruiting world and getting paid for the tools that we deliver to those who provide those services.
Offline World and then going to the second question.
Which one is the impact of unemployment benefits running out there was also the.
Mortgage forgiveness programs, there would be waiting for the vaccination to be widely available and distributed for schools to reopen we have watched every one of these developments closely and monitor to see whether or not they can lead to an uptick in job seeker activity and I think what we're starting to access is that there has.
It's been a fundamental change in what.
The job seekers are looking for from work and that's evidenced not just by the reluctance of the unemployed.
Searching for work, but also the great resignation, where people who were currently in play who now feel safe are now, leaving their jobs at record levels Youre seeing in employer reaction to that is predictable with a record increase in wages a record number of jobs that offer benefits flexible schedules and are even remote work. So.
It seems like the job market is still in a state of flux as it reacts in response to what happened during Covid and it's yet to settle down and play itself out as of yet job seekers remain.
Searching in a very different pattern and looking for very different types of work than they were in a pre COVID-19 period.
Great. Thank you.
Your next question comes from Mark Mahaney with Evercore ISI. Please go ahead.
I just want to follow up on that last question and I want to stay macro.
Im overstating the case, but it does seem like it's an employee's job seekers.
<unk>.
Hi.
Higher wages more benefits for your business model like is there a goldilocks marketing environment <unk> been running this business for multiple years now in a couple of different market environments is there one market environment, that's better for years, when it's a job seekers or if it's an employer's market or somewhere in the middle just comment about the macro.
Macro environment that you that you painted is that on the margin neutral positive or negative for us they procure.
When the business started more than 10 years ago unemployment was close to 10% and today unemployment of closer to 4% and in both of those different reality. The business did one thing which is grow and I think a big part of the reason why that happened is because we're so focused on improving the process really.
On both sides of the marketplace perspective, both current players and for job seekers that.
It doesn't matter what the market conditions are what is truly always going to be ubiquitous need is employers finding talent and job seekers, finding work and as long as our product keeps getting better and the time to hire keeps coming down. We just had a lot of confidence that by building the best solution on the market, we're going to be okay.
Okay. Thanks, a lot makes sense.
There are no further questions. This does conclude today's conference call. Thank you for your participation and you may now disconnect.
Yeah.
Okay.
Okay.