Q4 2021 Ziprecruiter Inc Earnings Call
Impact of the pandemic.
2021 will also be remembered as the year of the great resignation and severe labor shortages.
A record number of workers quit their jobs, while many potential job seekers remained reluctant to return to the job market for a variety of reasons. These.
These two macroeconomic themes resulted in a stunning low of only <unk> six active labor force participants for every job opening.
In response employers rolled out the red carpet to attract workers raising wages, increasing benefits in adding flexible schedules, we're now seeing wage growth pick up across all industries.
The shortage of available talent compels employers across all sectors of the economy to use novel approaches to stand out.
<unk> ZIP recruiter technology employers are proactively recruiting talent, rather than just waiting for applicants to apply to open jobs jobs.
Job seekers, who previously spent countless hours searching for a great job are now getting showcased to employers and directly recruited.
We believe we are moving the industry away from an era in which job seekers shoulder the burden of searching for a job towards a new era in which employers take the initiative and go first.
We believe we are uniquely positioned for long term success. During these extraordinary times and in many twists and turns to come as the economy continues to expand.
Before I turn the call over to Dave I'd like to highlight several key promotions on our executive team, Dave travelers, who previously served as our CFO was promoted to president <unk>.
Jim Yarbro was promoted from Chief business officer to CFO .
Also <unk> was promoted from SVP of accounting to Chief Accounting Officer.
All three of these stellar teammates have been long standing high impact executives in the company.
Im also happy to announce the appointment of a fantastic. New addition to our board of directors three career Brie as the Chief marketing and Communications officer at Fedex. She is a dynamic and thoughtful business leader, who I look forward to welcoming to the board I am excited about how these well deserved promotions and break careers appointment will strengthen our company.
We continue to build a category defining marketplace that redefines how people find work.
After founding zipper crude or 12 years ago, I can say that I've never been so excited about the opportunities before us. We believe we have the right technology, the right team and the right strategies to address this huge market opportunity and our work has never been more relevant.
Now I'll turn it over to our President David travelers to talk through some of the progress we've made against the three pillars of our marketplace strategy.
Thank you Ian and good afternoon, everyone.
While 2021 with a unique period in the labor market is our continued execution against our three strategic pillars that allowed us to deliver such outsized results I'm excited to share some highlights with you. This afternoon.
Starting with our first pillar, increasing the number of employers and the ZIP recruiter marketplace, we implemented a variety of strategies during 2021 to drive growth.
From new product innovations to increased investments in ROI driven marketing campaigns.
Committed to attracting and delighting employers.
The results are clear to see in the numbers a record number of paid employees participated in our marketplace in 2021.
This growth came from employers of all sizes and industries, driven by both new and returning paid employers.
Our product strategy of using extremely simple user experiences to deliver cutting edge underlying technology.
You had to pay off in 2021.
There is no better way to judge the success of this strategy.
Employers in our marketplace explain it themselves for example, when you look at G. III employers continue to radar the number one employment job site in the U S. In addition in Q4 employer feedback led you to recognize the procedure be hiring solution users are most likely to recommend.
Yeah.
Since this is our first call going over full year financial results.
We want to provide you with additional color on employer cohort behavior that demonstrates how our marketplace is growing stronger over time.
The 2021 cohort contributed to a record number of employers in 2021 average monthly revenue per employer from the cohort was 15% higher than the 2020 cohort.
First year.
Additionally, revenue contribution across all your cohorts was exceptional with each annual cohorts showing increasing average monthly revenue in 2021.
These cohort results were consistent with our focus on deepening relationships with employers overtime.
The more employers get to know the power of the ZIP recruiter marketplace, the more confidence they have that.
Can pay more to get more with zipper program.
Our employer marketing efforts put our product in its competitive advantages in the spotlight for employers.
This investment coupled with positive word of mouth from companies using ZIP recruiter for recruiting has generated over 80% aided brand awareness as of January 2022.
This extraordinary level of awareness as a long term asset that makes all of our employer acquisition and retention initiatives more efficient.
Our long term philosophy when it comes to marketing is consistent where scientists not artists.
We invest measured results quickly adjust spend in each marketing campaign according to their ROI.
Disciplined employer acquisition and favorable revenue profiles.
Resulted in attractive cohort economics over the years.
Our 2021 cohort of big employers in particular had an excellent ROI highlighting the financial efficiency of our marketing strategy.
Now I'll shift to our second pillar, increasing the number of job seekers.
One of the tightest labor markets in history, we have 35 million active job seekers in our marketplace in 2021 compared to $36 million in 2020.
Our ability to attract and engage jobseekers at scale.
Right. Their historic scarcity was the result of our relentless effort to continue improving our job seeker experience.
<unk> secrets are rewarded our efforts with our number one rating for a job seeker apps, both the Apple and Google App stores.
As part of our effort to humanize the job seeker experience ZIP recruiter, we vastly expanded the prominence of fill our AI powered personal recruiter.
Bill now introduces himself to the job seeker during the Onboarding process and both our mobile apps BMO and the web.
The job seekers personal recruiter fill engages at key moments to capture job seekers specific preferences. So that he can improve his recommendations over time.
Armed with this insight fill directed job seekers attention to great matched hub opportunities tens of millions of times in 2021.
In 2021, we began making significant marketing investments in building our brand with job seekers much.
Much of this investment in 2021 centered around developing and launching job seeker focused TV spots highlighting the experiences job seekers have told us about.
Namely that working with Phil was the first time they ever felt like someone was truly on their side to help them through the job search process.
Wed love hearing these stories of job seekers positive experiences and intend to share more of these for many years to come.
Lastly, I will discuss our third pillar, making our mounting technology smarter over time.
As Ian noted earlier employers have never been more eager to fill their open jobs in response to the market wide shortage of people looking for work, we worked harder than ever to deliver more great matches data from our growing marketplace towers, our matching algorithms, which continuously learn and deliver better results.
This allows us to drive great match opportunities to job seekers across our marketplace using products like invite to apply.
Employers tell us our algorithms are working by rating applications as a thumbs up.
We were able to deliver 55% more total thumbs up great match candidates in 2021 versus 2020, despite a historically tight labor market.
We're proud of these results, we delivered and the team's execution across these pillars.
As we look ahead, you will hear more about scaling both the number of employers and job seekers in our marketplace drives more data that feeds our matching algorithms, enabling us to accelerate the rate of change in how people find work.
Now I will turn it over to our Chief Financial Officer, Tim Yarbro to talk through the fourth quarter results as well as guidance for the first quarter and full year for 2022, Tim. Thank.
Thank you, Dave and good afternoon, everyone.
Building on the momentum of Q3, our fourth quarter revenue of $220 million represented another record quarter exceeding the guidance. We provided in November this represents 93% growth year over year, and 3% growth over the third quarter of 2021.
Employers were 147000, representing a 64% increase year over year. The sequential decrease in paid employers in Q4 is consistent with what we experienced in pre pandemic period and represents somewhat of a return to normal in terms of seasonal pattern.
Revenue per paid employer increased by 17% versus Q4, 2019% sequentially during the quarter, demonstrating employers' confidence that they could pay more to get more by investing in various upsells hosting more John and increasing their total spend in our marketplace.
GAAP net income was $21 million in the fourth quarter of 2021 compared to net income of $53 million in Q4 of the prior year adjusted EBITDA was $48 million with by 22% margin compared to $34 million and adjusted EBITDA or 30% margin in the prior year fourth quarter.
The increase in revenue was offset by employee driven expenses as well as an increase in our sales and marketing activities.
After closing out another record quarter and an exceptional year, we're pleased to provide guidance for the first quarter and full year 2022, we expect $220 million in revenue in Q1 of 2022 at the midpoint, which translates to a 76% year over year growth.
Despite the unprecedented macroeconomic environment in 2021, our execution against the three key pillars of our strategy has given us confidence in our ability to achieve healthy revenue growth in 2022.
We estimate revenue for the full year 2022 to be $885 million at the midpoint, representing 19% growth versus 2021, our guidance reflects our belief in a gradual return to a more traditional macroeconomic and hiring pattern by the end of the year, which will drive revenue growth for us that is above our pre COVID-19 growth.
In 2019% to 18%.
We expect adjusted EBITDA of $27 million at the midpoint in Q1, 2022 and $130 million at the midpoint for the full year 2022, the full year 2022, adjusted EBITA guidance equates to an adjusted EBITDA margin of 15%, which is in line with 2021 and reflects an increase in investment in our internal teams to drive.
Continued product innovation as well as sales and marketing expenses aimed at growing both sides of our marketplace.
Our adjusted EBITDA margin guidance of 15% is above our pre COVID-19 adjusted EBITA margin of 2% in 2019, reinforcing our confidence in our ability to grow profitably. Despite the increased investment.
Additionally on January 12, 2022, we completed a private offering of $550 million aggregate principal amount of our 5% senior notes due in 2030, we.
We intend to use the net proceeds from the offering for general corporate purposes, which may include capital expenditures investments in working capital. These proceeds combined with our $255 million cash balance as of December 31, 2021, bolster our cash position as we begin 2022.
We also announced that the board has authorized buying back up to $100 million of our own stock the share repurchase program allows us to take advantage of market disruptions that offer extraordinary investment return opportunities.
$100 million authorization represents less than the cash flow, we have generated over the first three quarters as a public company and our strategy for growth based on both disciplined organic investment and pursuing select M&A opportunities remains unchanged.
We're excited to finish our first fiscal year end as a public company with such strong financial results and outlook, we remain even more excited than ever before that ZIP recruiter is at the center of transforming how people find work and continuing to actively connect people to the next great opportunity with that we can now open the line for questions operator.
At this time I would like to remind everyone in order.
Ask a question press Star then the number one on your telephone keypad.
Your first question comes from the line of Mark Mahaney with Evercore. Your line is now open.
Okay. Thanks, two questions. Please you talked about the introduction of nationwide candidates.
Two the invite to apply solution could you can you talk about just how broad that is one of the.
Enduring trends whatever takeaways from the Covid crisis Gotta be work remote work. So just how big of a feature is that is that how big is the demand for that that youre seeing on both the employer side and on the employee side. So just if youll talk on that and then thanks for the update on the thumbs up metric I thought you also had this great metric in the past.
Average days of jobs days are.
Posted or something like that do you have an update on that number.
Annual number how long the job.
Stays are posted for thank you very much.
Yes.
For those questions Mark and so let's start with nationwide recruiting demand nation.
Nationwide recruiting is the emerging trend in the future of work, it's something we've talked about extensively internally over half of job seekers.
Our currently looking for work that is a fully remote are hybrid in nature. It's there.
Number one demand if you will from employers and only about 40% of jobs can actually be done remotely at this point. If you look at the pre COVID-19 period less than 2% of jobs mentioned remote and the job description and if you look at the current period that we're in it's north of 10%. So theres been a five X in terms of.
Employers openness and willingness to accept nationwide recruiting is a viable solution in these incredibly challenging times in order to recruit talent as far as job days goes.
It's not a metric that we have updated but we continue to be impressed with the power of modern algorithmic matching techniques, particularly when you layer in scale. If you look at the introduction of sale, which is this persona that assist job seekers through the experience of searching for work just introducing sales to the on boarding experience increased.
The completion rate to Onboarding by 29% and these are these are the early parts of the process. So there are many many more optimizations in store.
We've talked about in previous calls this to US is not just a matching problem. This is a social problem. This is a human problem and we're trying to make the process feel more human by introducing fill as your guide and your feedback as you go through that process.
Yes, David just to jump on their mark.
<unk>.
In the current market environment with the scarcity of job seekers out there that we referred to.
By far talking to customers. The most important thing to them was delivering 55% more sums upgrade match rates.
Upgrade matches this year, which really drove.
Amazing results for our customers and that's what we really focused on the the time.
At the time of job being posted was not a material change this year.
Thank you Dave Thank you Ian.
Your next question comes from the line of Eric Sheridan with Goldman Sachs. Your line is now open.
Thank you for taking the questions and hope everyone on the team as well maybe coming back to some of the comments in the prepared remarks. If you think about revenue contribution and you take your comments on cohort and long term philosophy with respect to marketing I think the first question would be how should we be thinking about the evolution of the LTV to CAC or return on your.
<unk> spend both in the current environment, whether you have any updated views in terms of the longer term return on marketing spend given the momentum you see on the platform and given that same momentum on the platform. The second question would be are there elements of investments either one on the marketing side of the product side that youre thinking about maybe accelerating or leaning into.
As we go into 'twenty, two given the broader labor backdrop. Thanks, so much.
Sure Dave.
So great question, so on the on the LTV to CAC and ROI.
<unk>.
2021 was an exceptional year across all three major areas in which we measure the effectiveness of our go to market spending so one.
In terms of the payback period.
And two in terms of the total return of LTV to CAC over any long term as we project out.
What the five year impact might be or something like that our ltvs have never been higher our tax never been lower.
And then finally in.
Potentially most importantly, as we experienced both through the downturn and the upturn of the cycle. The power of the brand. We're building is an enduring asset and we've seen that.
The lows of 2020 and in the highs of 2021 and continue to see it today, where the 80% plus brand awareness.
<unk> is where you'll see us continuing to double down.
Rest on our laurels there because we know that when we are top of mind for a job seeker top of mind for an employer as they even consider entering the market for their next great opportunity that we then will have an outsized return for being right there.
When they think about even considering jumping into the job market. So we'll continue to invest there.
And then in terms of.
In terms of other marketing investments, where we might go I think the biggest area, where youll see us go and you've already seen US go over the past few months is investing behind Phil and making sure the job seekers understand that the power of modern technology, which they have long known that recruiter for has come.
Bind with humanizing now the job search experience, which not jobs.
Jobseekers aren't necessarily used to seeing a technology platform to do that.
We don't necessarily have the historical experience of viewing going online to search for jobs is being the uplifting and humanizing experience and you will increasingly see us invest behind that in a way that differentiates us and points out how compelling and different experiences in our marketplace.
I'll just add one more thing which is from the employer perspective, if you look at our job market, where there is less than one active job seeker currently for every open job.
That is a distressing landscape, if you're an employer who is recruiting talent. So it is imperative that you find solutions that are differentiated that allow you to stand out and nothing less few standout more than being employer, who can identify a strong candidate reach out and directly recruit them before they have applied and fundamentally thats our <unk> product.
That's what it does it flips the market on a headset of employers can go first job seekers love getting these messages from employers the highest response rate that we've ever had from job seekers and when they apply after receiving that outreach they get the highest thumbs up rate that we've seen from any matching technology. We've ever deployed. This is just a solution that makes sense.
Heavily investing behind it and accelerating investment in it because right now more than ever. This is a solution that is needed.
Thanks for all the great color.
Okay.
Your next question comes from the line of Doug Anmuth with Jpmorgan. Your line is now open.
Thanks for taking our questions I just wanted to follow up on the.
Product investments.
And if you could talk a little bit more.
I guess, if you think about matching an invite to apply and then Phil just said.
Hoping you could talk about how you build on those more in 'twenty, two or do you see another wave of kind of new improvements in terms of product. So that's number one and then two if you could talk a little bit about just mix in terms of 'twenty to top line growth from a feed employers versus spend per paid employer perspective. Thanks.
Yes, I mean, I can talk about the improvements as it relates to fill so he'll personnel recruiter.
And that has that is a product that has never existed before almost all job sites and history.
Have been self service portals, where you as a job seeker go in and guide yourselves through the process of searching for work and it's a process that no one ever trains you on and its a process thats remains fundamentally unchanged you enter a job title and a city youre showing a list of results when you try to navigate to the right jobs for yourself to apply to <unk>.
Phil is completely different as an experienced so Phil is going to give you a perspective on.
Where you stand in the market how much your worth how much competition. There is how many employers are hiring for your skills that you have context as you go into the process and then further fill as a curator. So it is going to find the jobs for which you're most likely to be a top 10 candidate highlight those jobs for you specifically as soon as they come online and give you the opportunity.
To be one of the first to apply.
On top of that sale is also your advocate Phil is going to literally picture to employers before you have applied presenting it as a potential candidate so that they in turn reach out and directly recruitment, which as I said before is the preferred experience of job seekers effectively everywhere in the United States that we've tested and we believe that this is the future of the job market fundamentals.
It just makes sense.
Players with identified a candidate.
Candidates that theyre interested in and do the first part of the outreach process that removes all of the uncertainty for job seekers and then it starts to much more fundamentally successful conversation and it's driving an ever increasing amount of the hiring that <unk> is able to generate.
Hey, Doug This is Tim I'll take the second part of that question. So of the two metrics that we disclosed pay employers and revenue per paid employer 2021 was a pretty unique year for us and a couple of respects, but one of them was the surge in paid employers that we had into our marketplace over the course of Q2 and Q3, specifically and so with that.
Came a temporary dampening of revenue per paid employer, but I think what that math was the the.
More general Truism of our business, where we see revenue per employer March steadily up into the right consistently over time and you see that show up in the annual cohort metrics that we disclose as well.
Paid employer number itself might be a little choppy on a quarter to quarter basis.
But we expect that from peak to peak or trough to trough as you measure it at that number also will climb up until that right over time as well.
Great. Thank you for the details.
Your next question comes from the line of Aaron Kessler with Raymond James Your line is now open.
Great. Thanks couple of questions. Maybe first just maybe follow up to that question on kind of the outlook for employer growth versus revenue per employer as we look into 'twenty two.
Then maybe good to get your thoughts on any kind of macro trends youre seeing in the quarter and obviously, we're still at a pretty elevated level of job openings your thoughts and kind of do we continue to see that level of job openings throughout pointing to or we get some more normalized levels, maybe by the end of the year. Thank you.
Yes.
Yes, I think what we are.
In Q1, so far is pretty consistent with publicly available jobs data that you're referring to so.
Things seem to be going along just fine and the macroeconomic picture and so I think that maps to the guidance that we provided.
Over the course of the year.
Guidance, we do give does assume more of a gradual returning to normalcy as we mentioned before and we don't know exactly how it's going to flow out throughout the course of the year, but I think it's reasonable to expect it to kind of come in Ratably as we go quarter to quarter and so I think that will.
Have an impact on on a couple of metrics I pay employers for example.
With high confidence in the revenue per paid employer number continued to decline.
Got it.
Yes.
Yes so.
Exactly to Tim's point.
We're north of 10 million job openings right now we were closer to seven pre pandemic. So embedded in our guidance is the idea that we're going to get closer back to seven over the course of the year, maybe not all the way there obviously, we thought our 'twenty one guidance, we thought we'd get there.
Sooner so it's taken longer than we thought but we still think that we're headed back somewhere maybe it's eight something like that.
Gradually over the course of the year, but but obviously it has taken longer than we thought but we still think we're headed back towards something more normal than what we see today, but thats just our best guess and it were.
If we're wrong in one direction or another that will that will impact the guidance numbers. We've put out there got it great and a quick question on gross margin. It looks like they are pretty high in the quarter was anything one time or is it just some.
Nice leverage that you saw sequentially.
Yes, nothing onetime in the quarter.
91% overall.
Great. Thank you.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Your next question comes from the line of Ralph <unk> with William Blair. Your line is now open.
Good afternoon, and thanks for taking the question in 2021, you had a larger sales and marketing head count investment.
Maybe if you could talk to some of the benefits you might be seeing from this investment both within SMB, perhaps with enterprise customers are you seeing the ramp that you would expect by now and as you look towards 2022 are there any further investments also expected. Thanks.
Thanks, Rob.
So we did significantly ramp.
<unk> of our go to market.
Efforts, including our sales head count in 2021, the returns on that were excellence.
As indicated by our early returns I should say.
Because they will continue to come.
Do expect to continue to ramp those head count.
Numbers in 2022 based on.
Demand. So those teams will grow maybe not quite as much as they did in 2021.
But we do anticipate seeing those grow and we are scientists.
And the way, we do head count planning just like we've spoken about when it comes to marketing and so it's really a judgment based on the available data that we have at the time like.
<unk> counts in the <unk>.
Quota attainment of reps on many different teams and we'll twist dials and knobs based on upsizing, one team and shifting over from another team and increasing hiring goals and another team based on the data we see at any given time.
So we will continue to adjust that over the course of 'twenty, two and we should see the benefits of that on the SMB side. It takes three or six months on the on the enterprise side and the outside sales teams that may take 12 months or more to see the full benefit of that but we do anticipate ramping those teams in 2022.
Okay.
Okay, great. Thanks, David.
Your last question today comes from the line of Trevor Young with Barclays. Your line is now open.
Great. Thanks, two if I may just first on the full year revenue guide at the high end it basically looks to me like it's just the $2 23 at the high end on <unk> annualized.
Just how should we think about revenue seasonality this year versus what it was probably kind of pre Covid and then second question again on the full year guide, 18% to 20% revenue growth, but not assuming margin improvement how should we think about some of the continued gross margin expansion and possible leverage in G&A now that you have the pump.
Company costs layered into the base is that really going to get eaten up by the incremental investments I think you mentioned in R&D and <unk>. Thank you.
Yeah, Greg So I think all of.
This is tenant so regarding the full year 'twenty two guide so a couple comments I want to throw out there first so we had a couple of quarters of very strong performance in 'twenty, one and so that makes difficult year over year comps for <unk> 22 per share. So as to your point I think looking at more sequential growth is probably more helpful.
For the year and our guidance does reflect two things one a glide path more back to a normal hiring environment, but then also a trends.
Trends that are more similar to what we saw in pre pandemic periods. So specifically 2019.
A couple extra points to consider for context, just looking at overall revenue.
Adjusted EBITDA guidance, so our midpoint for 'twenty two is 19% growth.
Compared to 18% in 2019.
Secondly, the 80 to 85.
At the midpoint for 'twenty to 'twenty two is over two times, what our 2019 revenue of $430 million was.
With adjusted EBITDA margins coming up from 2% to 19 up to 15% at the midpoint in 'twenty two.
And so all of this boils down to you.
A year or two.
Two year compounded annual growth rate of 27% from 2019 to 22 so.
More directly to your question I think the seasonal pattern of quarterly revenue within the year will reflect something more akin to what we saw pre pandemic. So with Q1 being roughly in line with Q4, Q2, Q3 being relatively stronger with Q4 being relatively slower as we enter into a more seasonal period.
And then your second question with respect to overall margins.
For the year, we're showing adjusted EBITDA margins at 15%, we don't expect anything meaningfully different.
Gross margins, so we do see.
Now that we have some of the large onetime direct listing related costs.
In 'twenty, one we will see some normalization within G&A and.
As was mentioned earlier in the call we're going to continue investing some of these big initiatives like Phil and our.
Their job seeker marketing campaigns.
Ill just jump in there to add a couple points. There one is embedded in the guidance is continued aggression toward investing in the business for the long term, we very much believe we're still in the early stages of building this business and so we believe there are a number of opportunities that will show.
<unk> not just in 2022, but well beyond.
And to just add the embedded in the guidance and as we look out across the business. We remain extremely confident in our ability to get to our 30% long term EBITDA margin.
Over time, and nothing has changed in that regard, except perhaps our confidence increasing and our ability to do that over the long term.
Yes.
Great. Thank you both.
Okay.
This concludes our question and answer session for today and the conference. Thank you for all attending you may now disconnect.
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