Q2 2022 Ziprecruiter Inc Earnings Call
Willow and CFO at pill pack during which time she helped lead pill packs successful sale to Amazon.
Emily Mcevilly currently serves as the Chief customer Officer, One Trust LLC.
Prior to that Emilie spent many years as the chief customer officer at Workday, Inc. One of the Premier Human capital management software companies in the World.
I am excited about how these appointments will strengthen our company as we continue to build a category defining marketplace that redefines how people find work.
We also announced that Brian Lee and Emily Choi have stepped down from the board after serving faithfully since 2015 and 2018, respectively.
Like to personally thank Brian and Emily for their valuable contributions to ZIP recruiter over the past several years, we wish them well in their future endeavors.
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.
ZIP recruiters continued execution against our three strategic pillars keeps us well positioned to win.
We made great progress in the second quarter and 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.
<unk> works for all employers no matter their size or industry. In 2010, we started by focusing on helping small and medium sized businesses hire the talent they need.
Over time, we've continued to win and grow business among larger enterprise employers.
These employers traditional use a separate applicant tracking system and prefer to pay for candidates on a performance basis.
In Q2 performance based revenue grew 66% year over year, which represents 22% of total revenue compared to 17% in Q2 of 'twenty one.
We continue to win with employers of all sizes, including the largest and most sophisticated enterprises.
During the quarter, we made a number of improvements to one of our employers favorite features invite to apply.
This feature allows employers to identify strong fit job seekers and invite them to apply to their job.
Introduced a number of Onboarding engagement improvements, which resulted in a 10% increase in the number of invitation sent and a 10% increase in responses.
In Q2 employers more than $1 million invitations to apply we believe this novel experience of employers going first is at the core of houses if recruiters disrupting the traditional labor market now.
Now I will discuss our second pillar, increasing the number of job seekers in our marketplace.
Over the last several quarters, we've been leaving our AI enabled personal recruiter named Phil.
Specific parts of our job seekers drinks in Q2, we introduced the world to our first end to end job search experience featuring Phil.
I'll now walks job seekers through their entire job search journey.
Greets the job seeker, the start and provides a unique experience based on the job seekers goals.
So it provides a curated list of great match jobs based on the job seekers inputs resume feedback on our interaction with other jobs and even data from other job seekers with similar goals and backgrounds.
Phil now also gives job seekers useful data such as market salary ranges and the number of job opportunities in their area.
To encourage them on their journey, providing a more personal experience during an otherwise dumping process.
Since our founding we focused our marketing efforts on attracting employers into our marketplace with hundreds of millions of dollars invested we enjoy over 80% aided brand recognition among U S. Employers in 2021, we began applying with disciplined marketing approach towards adding job seekers to our marketplace.
As with employers we market across multiple channels with multiple media assets.
We are early in our journey, but are excited by what we see already.
Aided brand awareness among U S job seekers is now over 70% an all time high for the printer.
I will conclude with our progress around our third pillar, making our matching technology smarter over time.
Our matching algorithms are constantly learning and improving from the actions taken by employers and job seekers overtime.
Put simply the longer of employer uses different trigger the better our matching algorithms work in fact during Q2, the average paid employer, who joined over a year ago receive four times more great matches than those joining within the past year.
Superior matching surfacing the right jobs to the right job seekers, we do this in many ways, including through E mail and in App notifications in Q2, we introduced an algorithmic improvement, which can better predict the job seekers interest in a given job.
With this algorithm now powering our email alerts our job seekers to enjoy a more individually curated set of results.
This resulted in a 6% increase in engagement will significantly streamline the presentation of job adds to the job seeker.
The progress we made in Q2 gives us greater confidence in our ability to execute going forward. We look forward to reporting future successes over the course of 2022 and beyond.
Now I'll turn it over to our Chief Financial Officer, Tim Yarbro to talk through the second quarter results as well as updated guidance for the third quarter and full year for 2022, Tim.
Thank you, Dave and good afternoon, everyone. Our second quarter revenue of $239 $9 million represented another record quarter exceeding the high end of the guidance we provided in May this.
<unk>, 31% growth year over year, and a 6% growth over the first quarter of 2022.
Paid employers were 157000, representing a 7% decrease versus Q2, 'twenty, one and a 4% increase versus Q1 'twenty two.
The year over year decrease reflects heightened hiring demand last year, as employers and particularly small and medium sized employers rush to keep pace with the reopening of the American economy. The sequential increase from Q1 to Q2 is consistent with what we've seen during pre couple of years.
Revenue per paid employer was $533 another record for zipper career.
As a 42% increase versus Q2, 'twenty, one and a 1% increase sequentially.
Employers willingness to pay continued to grow in Q2, 'twenty two as demand for talent remains high and the ZIP recruiter product continues to improve offering more value for employers of all sizes.
GAAP net income was $13 1 million in the second quarter of 2022 compared to net income of $8 $4 million in Q1 of the current year.
Q2 was 22, adjusted EBITDA was $45 $4 million equating to a margin of 19% compared to $37 2 million.
A margin of 16% in Q1 'twenty two.
As we increase revenue, we also increased R&D activities as we continue to invest in improving and growing our marketplace.
Cash and cash equivalents decreased to $699 9 million as of June 32022, compared to $745 4 million as of March 31 2022.
The decrease in cash and cash equivalents quarter over quarter was primarily due to the repurchase of class a common stock at an aggregate cost of approximately $82 9 million.
Inclusive of the $50 million accelerated share repurchase program, we announced in June .
With a strong April and May and a much weaker June it is increasingly apparent that the record setting labor market is moderate we expect $220 million of revenue in Q3, 22 at the midpoint, which translates to 3% year over year growth. We now estimate revenue for the full year of 2022 to be $890 million at the midpoint.
20% growth versus 2021, we.
We expect the macroeconomic environment of increasing inflation rising labor costs and interest rates to have a more pronounced impact on the hiring environment in the second half of 2022.
At all stages of the macroeconomic cycle. However, our mission remains our guiding star is.
As hiring demand moderates the need to help job seekers will only become more pronounced tends to pretreat helps job seekers find great jobs to respond quickly and standout.
We expect adjusted EBITDA of $46 million at the midpoint in Q3 dollars 22, and $170 million at the midpoint for the full year 2022.
The full year guidance equates to an adjusted EBITDA margin of 19%, which is higher both in dollars and as a percentage of revenue in both our prior guidance and our margin in 2021, the increase in adjusted EBITDA reflects our dedication to investment discipline in all economic cycles.
While it's still allowing us to maintain significant investments in growing and improving our marketplace.
We're delighted to finish our second quarter in 2022 with such strong results, we remain more excited than ever before that zipper treaters that the center transforming how people find work as we will continue to actively connect people to their next great opportunity.
With that we can now open the line for questions operator.
Do you think you would like to ask a question on the phone lines. Today, you can press star one on your telephone keypad again, everyone that is star one to ask a question. We also ask that you. Please limit yourself to one question and one follow up question.
We'll take our first question from Aaron Kessler with Raymond James.
Great. Thanks, guys couple of questions, maybe first just on the guidance for the second half I know you've kind of talked about before kind of the.
Guidance for the year, implying more of a normalized hiring environment as the year went along just curious if kind of made a recent increased macro uncertainty and kind of recession concerns with.
Kind of worse than expected and resulted in the change in the guidance.
Second just any commentary on maybe a vertical performance, our SMB versus enterprise that youre seeing as well. Thank you.
Yes. This is Ian I will I will take the second question first and then address the verticals, which is in the back half of June we saw a broad based across all job categories in all seniority levels pullback any amount of open jobs that new jobs that were being posted and we have always said that we.
We are data driven and <unk>.
Our approach to how we manage our business and that has really been advanced if you look over our history. You can go back to 2020, when Covid first and you saw us pull down expenses in that year, we actually generated $71 million more in adjusted EBITDA than we did in 2019 in spite of revenue going backwards, 3% and.
Then you can go into 2021, when the economy reopens and you could see us aggressively invest into the ever growing number of employers that we're recruiting and the ever growing number of new jobs that we saw being posted and that here, we actually generated a 77% increase in top line revenue, while still maintaining 15% EBITDA.
Margins.
This year, we long foreshadowed unexpected that we would see some sort of a pullback in the economy in the back half of the year.
Obviously this stuff is very difficult to predict but whats very true is that our business is durable and adaptable to these moments and once again, we're going to show that yes, we modestly took down the top line guidance.
But at the same time, we were able to meaningfully increase the adjusted EBITDA guidance moving it from 16% to 19% and that's just.
<unk> represents our philosophy, which is we are committed to growth, but also growing while staying profitable and so we're doing it once again highlighting again.
The durability of our business model and honestly, it's been a great quarter and this has long been expected and this is we were well prepared for this moment and so I think that as we look at the receding economy or the slowing job market.
We think of ourselves is in a great position, because we are able to make so many investments in our long term objectives, specifically around our matching technology and improving our brand awareness both of which we had real strides during the quarter.
Great. Thank you.
We will take our next question from Eric Sheridan.
With Goldman Sachs.
Thanks, so much for taking the questions maybe a two parter coming back to some of the initiatives you've talked around marketing over the last couple quarters is that a key variable you'd think about toggling up or down given some of the volatility we're seeing in this environment and maybe following up on Aaron's question and your answer just give us a better sense of how real time.
And may be applied to what percentage of your cost base. You think remains relatively variable. So if the environment were to improve or if the environment were to worsen. How are you thinking about the ability to react over certain time periods to the broader environment and tie it back to some of the broader marketing messages.
Thanks, so much.
Hey, Eric This is Tim Thanks for your question so.
One thing that's always been true for US is that we're very ROI focused when it comes to making capital allocation decisions and so when we see macroeconomic changes like this.
Impact business, we're able to flex our spend up or down accordingly, and so in situations like this we're showing that adjusted EBITDA is going to come up in the back end of the year as we make.
On the prudent allocation decisions and harvest some capital and so the largest area of savings for the balance of the year will come from the sales and marketing line items and that's because we're also benefiting from all the investments that we've made to date building job secret employer brand.
As well so.
That's in general that's where we see the vast majority of savings come from.
Dave just to add on there.
Exactly to Tim's point we.
We maintain a ton of flexibility.
In our investments so that we can make some cases minute to minute in some cases week to week.
Decisions about how we deploy.
Those dollars towards further growth so really the vast majority of those dollars remained very flexible until a handful of weeks in some cases days or minutes before we deploy the dollars and so the reason we have not only increasing confidence and the amount.
Of EBITDA this year, but also.
Our ability to hit that.
At that level as compared to the sort of more variable and hard to forecast revenue part of the equation is because of that flexibility, so regardless of which step where shape.
Economic environment.
Twist and turns over the course of the year, we feel very confident in our ability to hit that new risk guidance on EBITDA right.
Thanks, so much.
Okay.
As a reminder, everyone that is star one to ask a question.
We will take our next question from Doug Anmuth with Jpmorgan.
Okay.
Hi, Thanks for taking the question. This is westley on for Doug.
I thought the comment on the matching algorithm getting smarter over time.
Just staying with older cohorts getting forex more greater matches.
Yes.
How does that type of cohort trend really translate into a revenue per employer are you seeing the older cohorts spending a lot more in the newer ones and then I guess just kind of a follow up on the guide and the macro where you really kind of forecasting a softness to come from more on the number of employers or more on the spend higher or kind of both.
Thanks.
Hi, Ross.
And so.
So as it relates to the first part of your question.
<unk>.
The great thing about the type of algorithms, we have deployed into the job category as everybody talks about the wisdom of the crowd.
And so assuming we see some more new who comes in and posted job and is looking for a specific kind of talent instead of just matching keywords from job descriptions to resume its like job search engine has always used to work wherever the benefit from looking at the patterns across lots of other companies that looked like this company.
That just came in to <unk>, which candidates they are most likely to life and try to drive those candidates to them.
But the other cool thing about our service is it doesn't just learn from the wisdom of the crowd. It learns the specific preferences that use an employer possess and a big part of the reason why we're able to significantly drive up the number of great matches that we drive to your specific job first things is that we learn about.
As you both post jobs and engage with candidates we use those signals to specifically classify what you like that we can send you more of that and then the broader answer to your first question does getting more great naturally translate to more revenue indisputably customers are having success on the platform are.
So both stay on the platform.
I mean, they have ongoing hiring needs as well as invest more into the platform and use more of our features and functions. So.
Definitely success breeds hiring success breeds revenue success, and we've talked about that in our cohorts before and I don't know if you want to add anything to that yes. So on that point exactly to what Ian was saying, there's a virtuous cycle.
In our business, where as our software learn and get smarter about you as an employer, we deliver more great matches that creates more confidence in the employers part to give us more jobs and to put more budget behind those jobs. So that we deliver even more great matches and you can see it in our revenue.
Cohorts over time that we've talked about many times or elsewhere in our investor presentation.
Every single cohort every single year, what the trend lines are in terms of how we monetize better overtime.
The way our technology gets smarter and smarter over time is a huge driver behind that and then correlating that into the second part of your question about the guidance for paid employers and per average revenue exactly the phenomenon gives us tremendous confidence on the average revenue per paid employer.
Because in the SMB part of our business.
What is the bigger driver of the paid employer number I would expect to see some softness in paid employers over the back half of the year, but the strength of the average revenue per paid employer is going to be driven by our pricing power across customers, but especially in the fact that youre seeing among the largest most sophisticated enterprises in the world.
They are increasingly turning to ZIP recruiter and you can see that the most of the sophisticated customers are in the performance based pricing part of our business, which has grown to 22% of total revenue in the quarter growing 66% year over year, and you'll see real momentum there and that among many other things.
We will drive the average revenue per employer continually up.
Okay.
Okay.
Alright, and our final question will come from Ralph <unk> with William Blair.
Good afternoon, thanks for taking the question.
In terms of the softness you saw in.
I guess the ended June just curious what that trend line looked like in July and August .
First question and then follow up is are you seeing any differences that you'd call out between private versus public companies and I have one more follow up.
Yes, thanks, Ralph so.
Tim as far as the softness that we saw in June we saw that same softness continue after the fact as well so going into July as well as August .
Yeah.
I think there is public.
You want to take that yes, so in terms of our customer base.
Private versus public we definitely see that the buy.
By size of company some difference in the performance and the last part of June where the larger companies, who do tend to be more public.
Companies still have with some notable exceptions, but broadly based still tremendous strength in the enterprise part of the business, where those public companies to underlie the smaller tends to be private companies were the ones that were more impacted by the slowdown we saw towards the end of the quarter. So there.
We're certainly a difference there.
Great and just maybe one more.
Foreman space continues to grow.
Rapidly and I think you said, 22% of your revenue how does that impact the model going forward either from a profitability standpoint, or just more broadly. Thank you.
Yes, so great question.
There is a couple of different ways that impacts the model from a from a margin standpoint.
All sizes of customers are incredibly profitable from a gross margin standpoint, so it shouldnt have a major impact there obviously were at 90% in north on gross margins.
No.
Plans to see that change where the where the difference is is in the visibility that that.
Larger enterprise.
Revenue stream provides because those customers have very consistent hiring needs. So unlike our smaller businesses where success for our customer and therefore success for us is getting them through their hiring process, where you can get back to running their business and so that we remain top of mind. The next time, they have a hiring needs the largest most sophisticated there.
Prices in the world have very consistent hiring needs that provide tremendous revenue visibility over time, so it becomes easier to plan around.
And as you can imagine over the long term the lifetime value of those customers is incredibly high given the gross margins in the visibility they provide year after year after year.
And the data we have observed thus far so that's really the the difference that we see.
And as we think about our investments in building brands.
Our go to market functions overall, one of the reasons. We are so confident in our ability to get from 20% at the midpoint of our guidance for adjusted EBITDA. This year to our long term adjusted EBITDA target of 30% that we've talked about so many times is that long term revenue visibility as we scale from existing large.
Enterprise customers.
In combination with the fact, we're already with significant investments already as we scale and marketing gives us the confidence that we are already reaching a very high percentage of customers and potential customers throughout the United States that that marketing and sales and marketing line item in particular will drive scale.
Bill.
As we scale will drive greater margin.
Improvement so that we can get from the 20% at the midpoint this year to our long term target of 30%.
Okay.
Okay. That's great helpful. Thank you.
Okay.
And that does conclude todays presentation. Thank you for your participation and you may now disconnect.
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