Q1 2022 Ziprecruiter Inc Earnings Call
Good day my name is Savannah, and I will be your call correct. Operator for today at this time I would like to welcome everyone to the zipper greater in Q1, 2022 earnings call today's call is being recorded.
All lines have been placed on mute to prevent any background noise and after the Speakers' remarks, there will be a question and answer questions. If he would like to ask a question. During this time. Please press star one on your telephone keypad, if he would like to withdraw your question. Please press star one again.
And I would now like to turn the conference over to Amy Garaufis, Chief Accounting Officer. Please go ahead.
Thank you operator and good afternoon. Thank you for joining us on our earnings conference call during which we will discuss with recruiters performance for the quarter ended March 31, 2022 and guidance for the second quarter and full year 2022, joining me on the call today are.
Once the call co founder and CEO , David Chavez, President Antonio breast CFO before we begin please be reminded that forward looking statements made today are subject to risks and uncertainties relating to future events or the future financial performance.
Actual results could differ materially from those anticipated in the 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 <unk> annual report on Form 10-K for the year ended December 31, 2021, which is available on our investor website and the SEC's website.
And our quarterly report on Form 10-Q for the three months ended March 31, 2022, and we will file with the SEC. The forward looking statements. In this conference call are based on current expectations as of today.
Clear 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 substitution for or in isolation from GAAP results reconciliation of the non-GAAP metrics to the nearest GAAP metrics are included in the Pirquitas shareholder letter.
Form 10-Q , and now I will turn the call over to you.
Thank you Amy and good afternoon to everyone joining us today.
Q1, 2022 was another exceptional quarter for zipper greater revenue grew to 227 million and 81% increase over the first quarter of 2021.
We saw continued strength on both sides of our marketplace and are delighted to raise our full year guidance for 2022.
In a few minutes, Dave will detail the progress we've made against our strategic growth pillars later, Tim will walk you through our results for Q1 as well as guidance for Q2 and the full year of 2022.
First I'd like to provide an update on the macro economic environment. We are currently experiencing.
<unk> finished the first quarter as the U S. Labor market continues its record setting run U S economy added over 400000, new jobs for the past 11 months in a row.
We are also experiencing the tightest labor market in history with approximately one unemployed person for every two job openings.
Lawyers are struggling to find talent and need all the help they can get to widen our reach of their job postings and find great matches.
We're also witnessing high turnover in the U S Labor force with over 4 million workers quitting their jobs every month for the past nine months.
Job seekers are looking for better matches higher wages and more flexible schedules and a market with over 60% more job openings than before the pandemic.
This creates an opportunity for employers to use the best technology to find talent.
While rising labor costs inflation rates and global tensions remain a concern among employers we believe that the combination of surging demand for talent high turnover and low unemployment in tiring will remain a top priority for employers in the months to come.
As demonstrated by the record high revenue per employer this quarter. The ZIP recruiter marketplace has never been so highly valued by our customers.
We're excited about the progress we've made over the course of Q1 and the increased revenue and adjusted EBITDA guidance provided here.
These are unique times and zipper CDR remains well equipped to succeed the technology and brand investments, we've been making for years continue to pay off and we believe zipper CDR is perfectly positioned to achieve our mission to actively connects people to their next great opportunity.
Now I'll turn it over to our President David drivers 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.
Different triggers continued execution against our three strategic pillars keeps us well positioned to win.
We made great progress in the first quarter.
I'm excited to share some highlights with you.
We will start with our first strategic pillar, which is increasing the number of employers in our marketplace.
Pete employers increased to 150000 in Q1 dollars 22 up from 147000 in the prior quarter.
Employer hiring needs remains at record levels and with continued growth our sales teams and investment in high performing marketing, we were able to grow paid employees from Q4 to Q1.
This is in contrast, with prior pre pandemic years in which we typically see modest seasonal decline.
Revenue per paid employer was an all time high at $1513 in Q1, 'twenty, 238% year over year.
Zipper trigger allows employers to pay more to get more with employers able to choose from a variety of premium options, where they can opt in to getting more value from the computer marketplace.
We have a multiyear track record of increasing revenue per paid employer and we believe this trend will continue.
Now I will discuss our second pillar, increasing the number of job seekers in their marketplace.
2021, and it is one of the tightest labor markets in U S history.
Q1, 'twenty two continued strength with only 0.5 unemployed persons for every job opening.
Given this unique labor market backdrop, it's more important than ever to understand how job seekers feel about their employment prospects.
In Q1, 'twenty, two we launched the ZIP recruiter job seeker confidence survey.
This nationally representative survey of U S job seekers measures, how optimistic or pessimistic they are about their ability to land jobs. They want.
Initial results indicate the job seeker confidence remains high even as inflation climbs and interest rates rise.
The survey is now available on our website and we plan to provide updates on a monthly basis.
I believe it will be a valuable resource as we continue to track the labor market in 2022 and beyond.
To compete in this new macroeconomic reality duplicate or has a simple product philosophy.
We are a personal matchmaker.
The personification of this philosophy, it's still an AI driven personal recruiter, who works with every job seekers.
We'll learn some of you are curious as great opportunities for you to consider and even pitches due to employers. So they can recruit you.
Our last letter described the growing impact of steel on the job seeker experience.
Its introduction to Onboarding in Q4, 2021, generating a 29% increase in Onboarding completion rates.
In Q1, 'twenty two we introduced built into our Android mobile App to further improve our already number one rated job search mobile app.
In Q1 'twenty two we also released several new TV spots featuring Phil.
Thank you Phil TV spots showcase.
Gratitude, our job seekers feel after being matched with great job opportunities by our personal recruiter.
Many job seekers find these stories as inspiring as we do.
Finally, we recently deployed a UI improvement, enabling job seekers to more rapidly acquired the jobs on our site.
This increased engagement with these jobs, resulting in a 13% increase in job seekers, who completed applications.
Well conclude with progress around our third pillar, making our matching technology smarter overtime.
Core to our mission of actively connecting people to their next great opportunity is dream job seekers and employers together through smart AI driven metric.
In Q1, 'twenty two we rolled out the newest version of a great match algorithm.
Immediate results.
<unk> scored as a great match for 10% more likely to receive a thumbs up under the latest version of the model.
Software is learning and this latest iteration introduced fundamental changes to our matching technology.
Which enabled deeper insight into exactly which job seekers qualifications or behaviors drive a better metric.
Thanks to the combination of our personal recruiter, Phil and our advancements with matching we delivered over $7 million great match candidates in Q1, 'twenty two to employers.
The progress we made in Q1 gives us greater confidence in our ability to execute going forward.
We look forward to reporting successes over the course of 2022 and beyond.
Now I'll turn it over to our Chief Financial Officer, Tim Yarbro to talk through our first quarter results as well as our updated guidance for the second quarter and full year of 2022, Tim.
Thank you, Dave and good afternoon, everyone Q1, 'twenty two with a strong start to what is shaping up to be a great year, our first quarter revenue of $227 million represented another record quarter exceeding the high end of the guidance we provided in March this.
This represents 81% growth year over year, and a 3% growth over the fourth quarter of 2021.
Paid employers were 150000, representing a 31% increase year over year.
This sequential increase from Q4 to Q1 is in contrast to historical pre pandemic years in which we have seen modest quarter over quarter decreases following slower Q4 holiday period.
Revenue per paid employer increased by 38% versus Q1, 2021, and 1% sequentially versus the prior quarter.
Here's willingness to pay continued to grow in Q1 'twenty two as demand for talent remains high and the ZIP recruiter product continues to improve operating more value for employers of all sizes.
GAAP net income was $8 million in the first quarter of 2022 compared to net income of $14 million in Q1 of the prior year.
Adjusted EBITDA was $37 million compared to $20 million in the prior year first quarter adjusted EBITDA margins were 16% in both periods.
The increase in revenue was offset by an increase in our sales and marketing activities as we continue to invest in growing both sides of our marketplace.
Cash and cash equivalents increased to $745 million as of March 31, 2022, compared to $135 million for the prior year first quarter and $255 million as of year end.
The increase in cash and cash equivalents year over year and quarter over quarter was primarily due to earnings in a private offering of our senior notes due in 2030 totaling $550 million at a 5% coupon rate.
This was partially offset by the repurchase of class a common stock at an aggregate cost of approximately $62 million inclusive of the $50 million accelerated share repurchase program, we announced in March.
After closing out another record quarter, we're pleased to provide guidance for the second quarter and raise our guidance for the full year in 2022, we expect $234 million of revenue in Q2, 22 at the midpoint, which translates to 28% year over year growth and reflects quarterly sequential growth similar to periods prior to the pandemic.
Our execution in Q1 has increased our confidence for the rest of 2022, we now estimate revenue for the full year 2022 of $915 million at the midpoint, representing 23% growth versus 2021, we observe a number of headwinds in tailwind impacting the labor market, including increasing inflation labor costs and interest rates, while the hiring.
<unk> remained strong through Q1, our guidance reflects our belief that these will have a moderating effect, bringing U S hiring numbers to more traditional levels.
We expect adjusted EBITDA of $37 million at the midpoint in Q2, 'twenty, two and $149 million at the midpoint for the full year 2022, the full year guidance equates to an adjusted EBITDA margin of 16%, which is higher than both our prior guidance and our margin in 2021.
This is a reflection of our increased investment in our research and development teams, who continue to drive product innovation as well as our sales and marketing expenses aimed to grow both sides of our marketplace.
We're delighted to finish our first quarter in 2022 with such strong results, we remain more excited than ever before that Zip recruiter or is that the center of transforming how people find work and we will continue to actively connect people to their next great opportunity with.
With that we can now open the lines for questions operator.
Thank you and if you would like to ask a question that is star one and we will pause for a moment to compile the Q&A roster.
Our first question will come from Mark Mahaney with Evercore ISI.
Please go ahead.
Okay, Let me throw a couple of questions. Please first is it does seem like you had.
Stronger than seasonally normal.
<unk> new paid employers so could you just double click on that and explain why you think you saw that and were there any particular sources of those new employers verticals.
Economic levels or whatever.
Hi, Mark.
We did see.
Continued robust demand from employers and we invested into that demand.
In sales and in marketing. So we were able to continue to spend across a wide variety of different forms of media and at the same time, we increased our sales force by 11% and the combination of those factors plus meeting that demand is what led to the outperformance in the quarter.
Okay.
And then you talked about having record high revenue per paid employer and I think David I May have asked you. This last quarter I want to try it again.
Your thoughts on where that number can go long term and.
If you want to set realistic expectations what are the Bogeys. When you look in the market and out in the marketplace and you see where others maybe have been able to get that revenue or just give us a sense of that.
That number is a record high now what would be a record high a few years from now.
Yeah, Great question, So we see this.
Average revenue per paid employer to be a long term growth lever with a lot more room to run.
<unk>.
To that end.
Compare the fact that we're delivering for our average customer against multiple hiring needs in any given quarter, whereas their alternatives are to pay more than they pay us.
A dollar a few thousand dollars each.
For a higher when you think about what the offline alternatives are and where we're also the high high value low cost option that we see based on our data from the the online alternative so ultimately where does that go over time over time, we see offline alternatives charging 20% or more of a first year Sal.
Laurie to drive a higher <unk>.
And we believe we can do it better and faster than those offline alternatives today.
And we can do it more cost efficiently at a higher margin.
So I see it being a multiple we haven't laid out a specific number.
To the extent Thats, what youre pushing for I don't have a specific number for you, but I think it's a multiple of where we're at today.
And then we will take our next question from Trevor Young with Barclays.
Please go ahead.
Great. Thanks.
I guess for David any color on how quarterly paid employers progressed throughout the quarter was there any softness after the Russia, Ukraine conflict and then how is April trending thus far.
Yes, we haven't seen any trends that have been sort of a disjointed from or any rapid acceleration or change in current events.
Instead, what we've seen is that since the super Spike of activity. We saw in the middle of last year in Q2, and Q3 is the economy.
<unk> opened we've seen obviously a gradual easing.
And hiring activity, but it's been modest and steady I would say.
And there hasnt been any sort of discontinuous big change in the past month or two.
That's really helpful and just dovetailing on that then on the <unk> Guide can you unpack a little bit how we think it makes you think about the quarterly paid employers versus revenue per I think in 'twenty, one and 19, you had a bit stronger sequential growth in the employer count.
And then the letter I think you noted a strong trend throughout <unk>.
Mark just now just wondering how we should think about that sequential growth in quarterly page.
Yes.
Tim So we're coming we're easing off of the Super spec that we experienced last year that they've already referred to so this year, we see quarterly paid employer number being a bit more moderate in terms of growth sequentially and throughout the balance of the year. So we see most of the growth this year coming from the revenue per <unk>.
<unk>.
Great. Thank you both.
And again that is star one if you would like to ask a question. Our next question will come from Doug Anmuth with J P. Morgan.
Please go ahead.
Hey, This is David I'll productions for taking our questions.
Mrs.
When you guys talk about the job market normalization on thinking through Hollywood Hotel market right now.
I guess in your view on what's implied in the outlook is that.
Return to pre pandemic levels.
But is there a scenario where.
That competencies.
More of a normal basis.
Or it can be the case like what would be some of the drivers that cash.
And sustain that level of imbalance going forward.
Yes.
Yeah.
Well, we definitely see this is Ian hi.
Sure.
We definitely see a number of macroeconomic variables that have the potentiality to impact the labor market right now and whether you are talking about inflation are rising labor cost.
For the war in Ukraine, and it's hard to predict how these variables will either directly impact or as is the case with the wiring Ukraine say the cost of transportation indirectly impact how businesses are operating and therefore, how theyre hiring.
Yeah.
Certainly it is difficult to have a crystal ball and when we SaaS. These various.
Situations.
We are we have an imperfect view on what their ultimate impact will be so it's possible that we will be overestimating their impact or underestimating their impact, but what we're trying to do with the guidance. We're giving you is give you our best guess as to what the impact will be based on the information we already have at our disposal.
Yes. This is David just to pile on there exactly the endpoint in the <unk> in the range of uncertainty about what might happen I think the scenario you are talking about where we stay at the super tight labor market as possible that's not embedded.
In our guide so we would be too conservative if that is the case, but what would drive that is the the imbalance between.
The slack in the labor market represented by unemployed.
And those actively looking for work we gave some data from the siting publicly available data and the letter thereabout.
One 0.5.
Unemployed persons per job opening right now.
And so if that remains the case, which it very well could.
And then we would expect.
Labor market would remain quite tight.
Job openings might remain high because there is a backlog of jobs still to be filled as new jobs.
So thats what in the wide range of scenarios, we're prepared for and that our teams are nimble and prepared for that as one of them just as on the other side of the ledger if things.
Cool off faster than expected, we are completely ready for that as well.
Got it and as a follow up follow on question to that.
I mean, what will be the well.
There will be what will be the biggest driver.
So it's all market normalization do you think it's more.
Businesses.
I'm not.
Not moving as many jobs us before due to inflationary or consumer discretionary spend pressure or do you think it'll be more driven by more jobs that could come to the market.
Okay.
So this is Dave again.
Our supply and demand standpoint, it could be either what's.
What's most notable now in the market versus pre pandemic.
Is the fact that a bunch of job seekers a bunch of.
Labor potential labor is out there still haven't come back into the market. We are still a few million dollars short and so the the labor market and the economy would benefit from those folks coming back into the labor market.
On the supply side of things Thats, what we most clearly see as somewhat easing the tightness, but.
But certainly if some of these macroeconomic factors come to bear it could occur change could occur on the demand side, as well which would be businesses.
Reducing their need for labor based on softness in the macroeconomic environment. So we've seen a little bit of both of those things occurring but overall the need for labor has still been outstripping the growing supply as people come back to work and I would just add that.
You had to.
The shutdown of the economy as it related to the Covid last year and then you had the super Spike of demand from employers is effectively the economy reopen and businesses had to hire back up and they never got back to where they were pre COVID-19 from a staffing level standpoint, and then on top of that and now have your ninth consecutive.
Second half month of 4 million people quitting their jobs, so I think.
A few months out at least from a true reversion to the normalized economy that we had experienced back in say 2019, but we are definitely seeing signs of the softening as has been referenced by both David and so we have baked that into our forecast.
Got it makes sense. Thank you.
Okay.
Our next question will come from Eric Sheridan with Goldman Sachs. Please go ahead.
Thanks, so much for taking the question I know we've talked about this over the last couple of quarters, but I wanted to come back to the point you made in the prepared remarks about driving deeper levels of the AI into the platform any greater sense, we can get about how deep you are in the investment cycle on the AI side and it seems like Youre starting to get some increased momentum on.
Matches, and what you're able to show folks how should we think about that as a driver irrespective of the broader labor market or the macro environment, just independent and organics of how those investments can drive greater levels of retention engagement and volume. Thanks, so much.
Well I mean, certainly core to our strategy.
A matchmaker and not a job board is the infusion of AI into the job market and to our product and the face of that AI is scale and everywhere. We've experimented with sell today. So it has been a driver of engagement and ultimately that engagement leads to an increase in the amount of data.
We have to inform the algorithms are.
Bright matches between employers and job seekers that is why the software keeps learning we have a data advantage as it relates to the deployment of AI and the utilization of AI to play that matchmaker role. We are still in the early phases of it we're still rolling sell out across the entirety of.
Our product and we're also expanding the sales feature set and you'll be hearing more about sell in subsequent earnings calls however.
Clearly this is our strategy and it will be key to both our near term and long term success.
Yes, Eric this is Dave to pile on about the investment cycle part of that.
We continue to believe we are in the early stages of how AI is going to transform our business. Despite the significant investments and returns we've already seen in our products. So.
To put it another way.
We remain very confident in our long term, 30% EBITDA margins, but the least likely place where operating leverages is going to come from is R&D.
Great. Thanks for the color.
Our next question will come from Aaron Kessler with Raymond James.
Please go ahead.
Hi, This is Alex Bolton on for Aaron Kessler.
I was wondering if you could touch on I guess the progress.
Kind of the sales and marketing effort.
I guess on both sides of the marketplace and kind of further sales and marketing investments Youre planning to make.
Well.
Job openings remain at record highs.
Sure.
Dave.
Thanks, Alex So yes, we remain on our front foot on our go to market investments because despite we talked a little bit about the easing we've seen from the Super Spike last summer we are still at very robust levels in the labor market.
<unk>.
And so the way we measure our go to market.
Philosophy behind measuring go to market investments, both sales and marketing remain the same we measure it in three different ways Juan.
The bottomline acid test is what is our time to cash on cash return how fast do we get our money back to over a longer period of time say five years. What is the total return on that investment and then three over the very long term what is the brand building return that we're getting.
By increasing awareness of ZIP recruiter and also increasing the sentiment and the quality of the sentiment people have towards ZIP recur. So we use all three to measure each different sales and marketing investment might have a slightly different mix of how we view the returns in each of those three different categories and what you can see over the core.
For the quarter as we increased our sales and marketing investment overall as we referenced earlier, we increased our sales head count specifically across multiple teams.
That are servicing new clients existing clients smaller businesses larger businesses et cetera, et cetera, It's working right now.
Return on those investments and the rate at which those teams are executing are very good and as long as that's the case, we're going to keep investing.
And so that is the sort of philosophical bend, we bring to it and we're going to continue to innovate and try new things as we have over the past quarter. In addition to doubling down on things that are working and will continue to measure and as long as it's working and we'll double down again.
Okay.
Okay, Great and then maybe just one follow up.
I guess I saw some leverage on G&A.
Sequentially and I guess, maybe a reduction in G&A ex stock based compensation can you touch on that and maybe what we should expect.
Okay.
Yes, I think where you see G&A coming in this is Tim we see G&A coming in.
For Q1 is a bit more of a steady state that we we intend to stay out for for the foreseeable future. So.
There was a little savings sequentially versus Q4, but Q1 I think is a pretty good landing 0.1st for a while.
Okay, great. Thanks for the answers.
Okay.
Okay.
My question is a follow up from Mark Mahaney with Evercore.
Please go ahead.
Thanks, I'm, sorry, I got cut off earlier, maybe avaya couldn't hire a few more people.
Two questions.
Okay.
You talked about increasing marketing spend that was in kind of your prepared comments for the back for the balance of the year. So what's in that Tim.
Yes, so it's a combination of a few things so.
We've been talking a lot about Phil over the past couple of quarters, and so with the product innovation comes a concerted marketing effort as well.
And of course with Q1, you probably have seen a couple of new TV spots are as an example, and so what youre seeing in our guidance is for that.
We're fully funded plan, where we're continuing to lay the groundwork for Phil.
As well as building the <unk>.
80, plus percent brand awareness that we have as an employer site.
And all of that is in addition to continued robust head count growth in our sales and marketing teams as well.
Okay, and then Ian I Wonder if I could ask you a kind of a philosophical question about.
Employment trends are hiring trends.
You lived this day to day, what do you think is really driving this great resignation.
That $4 million I think it was a month that are just exiting the workforce and that has this material ripple greater than ripple impact on the rest of the on the economy. So just your thoughts on why that and I know.
Other people have written about it but youre in a day in and day out why do you think thats occurring.
Okay.
Well.
It seems from my vantage point and from the survey we did of over 2000 job seekers, who got hired in the last six months.
That the number one thing that job seekers are looking for right now 62% of them said they are either looking for hybrid or fully remote work.
Remote work is the number one search term on zipper trigger two day and all of 2020 tail.
And this desire to continue in this flexible work style that people discovered during the post COVID-19 recovery.
It seems to be driving a lot of the job market and when you look at that survey of those 2000 people who've got hired in the last six months one of the really telling data points that jumps off the page at 40% of them changed jobs to jobs that offers greater flexibility. So it looks like job seekers are voting with their feet right.
Now, we're entering a new and interesting period, where a lot of employers across America are compelling workforces returning to the office full time, and so we're going to have to see whether that abates or aggravates the rate at which the currently employed are quitting their jobs and looking for new work.
Okay, alright, thanks, a lot Ian.
Yes.
And that will conclude today's conference. Thank you for your participation and you may now disconnect.
[music].
Yeah.
Yes.