Q1 2023 Ziprecruiter Inc Earnings Call
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Ladies and gentlemen, good afternoon. My name is Abby and I will be your conference operator today.
At this time I would like to welcome everyone to the ZIP recruiter incorporated first quarter of 2023 earnings Conference call.
Today's conference he's being recorded and my wines have been placed on mute to prevent any background noise.
After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time simply prestige Starkey followed by the number one on your telephone keypad.
If you would like to withdraw your question Press Star one once again.
Thank you and I will now turn the conference over to drew Harold Some Investor Relations you may begin.
Thank you operator and good afternoon.
Thank you for joining us in our earnings conference call during which we will discuss ZIP recruiters performance for the quarter ended March 31, 2023 and guidance for the second quarter and full year 2023.
Joining me on the call today are G M Seagull co founder and CEO , David Travers, President and Tim Yarbrough CFO before we begin please be reminded that forward looking statements made today are subject to risks and uncertainties related to future events and or the future financial performance a zipper grader.
Actual results could differ materially from those anticipated in these forward looking statements.
A discussion of some of the risk factors that could cause actual results to differ materially from any forward looking statements can be found in zipper curious according to the report on Form 10-Q for the quarter ended March 31st 2023.
Will be available on our investor website in the sense website.
The forward looking statements in this conference call are based on the current expectations as of today and ZIP recruiter assumes no obligation to update or advise 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.
Substitute for our in isolation from GAAP results reconciliation because of non-GAAP metrics to the nearest GAAP metrics are included and ZIP recruiter shareholder letter and in our Form 10-Q.
Now I will turn the call over to yet.
Thank you drew.
Good afternoon to everyone joining us today.
You were on revenue of $183.7 million was down 19 per cent you over a year, but above the high end of the range of our guidance Q.
Q1, twenty-three adjusted EBITDA of 35.3 million and adjusted EBITDA margin of 19 per cent.
The high point of our guidance.
Strong profitability in the face of both deteriorating macro conditions and persistent interest rate increases is a testament to the flexibility of our business model and our ability to rapidly adjust expenses.
And our last call we highlighted the eight typically slow start to the year, which informed our guidance for the rest of the year.
January normally marks the beginning of the hiring season as employers kickoff annual hiring plans and operate with refreshed recruiting budgets.
Q1, twenty-three showed a sharp deviation from what those seasonal trends would have predicted.
Softening observed at the outset of Q1 has only accelerated and we see demand for recruiting services continue to decline.
The slowdown has been broad based across both S. M B as an enterprise as well as across the majority of industry.
From conversations with our customers, we see employers tearing back they're hiring in response to the uncertain economic backdrop, we now face.
Because of these trends, which are unlike anything we've seen in our 13 years of doing business, we are not providing full year revenue guidance.
Ever while there is a wide range of possible top line outcomes, we remain focused on delivering against our guidance of $185 million of adjusted EBITDA at the mid point.
One of our key strategic advantages of ZIP recruiter is our ability to rapidly respond to changing macro conditions.
We're doing what we've always done in a softening labor market decreasing expenses to increase profitability.
In spite of this deceleration there are several long term investments, which are now bearing fruit.
Organic job seeker traffic was up 40% in Q1.
56% of these new job seekers received an invitation to apply for a job directly from an employer within seven days of joining our marketplace.
It's R. A profitable flexible operating model along with our hard earned 80 per cent aided brand awareness on both sides of our market place and allow us to adapt to this cooling market.
Continuing to invest in improving our industry, leading matching technology and top rated user experiences.
Now I will turn it over to Dave to talk to you with some of our progress against the three pillars of our marketplace strategy.
Thank you <unk>.
There is no doubt that headwinds in the macroeconomic environment are impacting our customers hiring plants, regardless of the shape or duration of this currently remarket cycle. We firmly believe that ZIP recruiter will play an increasingly large role and bring your job seekers and employers together to that and I'm excited to share with you some of the progress.
<unk> to drive a generational shift and how technology enables job seekers and employers to come together using our industry, leaving faster technology.
We will start with our first strategic pillar, which is increasing the number of employers on the revenue prepaid and put her in a marketplace.
Even though current macroeconomic headwinds temporarily muted or progress in moving these keep your eyes sequentially.
Confident that our investments with building great products for employers will bear fruit in the long term.
Enterprise customers remain a top priority driving us to focus on eliminating for action in the hiring process for these larger customers.
In Q1, 23, we introduced a new tool, which simplifies the process of creating and activate a new campaigns for enterprise customers. We estimate the campaign creation tasks previously requiring hours now take minutes.
The new tool resulted in much faster creation of campaigns simultaneously improving the customer experience in creating a faster time to revenue for zipper crooner.
In addition to reducing friction in the hiring process. We also increase the certainty that enterprise employers will be able to spend their budgets are automated campaign optimization solution. The chiefs campaign targets, 34% more often than the previous manual processes.
Finally, employers often struggle with the laborious process of writing job descriptions and Q1 twenty-three we leveraged generative a the lunch over a thousand new searchable job template pages not only does this even further reduce friction in the hiring process for employers for job seekers also love These new.
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Now I'll move to our second pillar, increasing the number of job seekers in our marketplace.
It's no surprise that more job seekers of looking for work in fact, we saw 40 per cent increase in organic visits from job seekers in Q1.
This current backdrop provides an opportunity for zip recruiter to be there for job seekers in their time of need and makes the work we're doing to build the world's most innovative job seeking tools all the more important.
We've been providing regular updates about improvements we make to fill our AI personal recruiter for job seekers.
We're excited about Phil because he puts a human face on navigating the job search process engages with the job seekers during their onboarding and uses their real time feedback to curate the job search experience.
Continually expanding fills reached a cross our job seeker products.
While fills onboarding flow was previously launched to our mobile web and desktop users.
<unk> 123 still is now also featured in both of our number one rated native apps.
The ZIP recruiter addresses the information they cemetery inherent in the hiring process by equipping job seekers with useful information and insights to help them on their journey.
Q1, 23, we launched a new career advice hub containing hundreds of helpful articles with more on the way.
These articles help job seekers understand what employers are looking for and how to make your application stand out.
Job seekers loved the new content, which is a contributor to the large increase in job seeker traffic in Q1.
Salary remains one of the most important criteria for job seekers when looking for a job in Q1 23, we rolled out estimated pay ranges for when we have high confidence in the predictions and the employer doesn't provide the info.
Over 60% of jobs that are marketplace now show pay range either provided directly by the employer or via the new ZIP recruiter estimates.
These listings get more impressions clicks and applause.
Those without any form of pay data.
I'll conclude with our progress around our third pillar, making our matching technology smarter over time.
Our algorithms get smarter as job seekers interact with Phil and different jobs that are marketplace. In Q1, 23, we retrained our matching models for job seekers sure earlier in their journey and have less activity in our marketplace.
Increase the percentage of new job seekers, getting an invite to apply within their first seven days from 18% to 56%.
Over 68% of these new job seekers received an email within one day.
Now I'll turn it over to Tim to talk through the first quarter results and our guns.
Thank you, Dave and good afternoon, everyone. Our first quarter revenue of $183.7 million exceeded the high end of the guidance we provided in February .
Represents a 19 per cent decline year over year and is primarily a reflective of continued and accelerating softening in the hiring market.
Additionally, we face, particularly challenging comparisons against Q1 22, when we grew 81% year over year.
Quarterly paid employers, where 106000, representing a 29 per cent decrease versus Q1, 22, and a 2% decrease versus Q4 22.
This is primarily reflective of weakness amongst small and medium sized businesses, which make up the vast majority of our paid employers revenue per and paid employer was $1734 an increase of 15% year over year, but a sequential decrease of 11 per cent in prior years enterprise driven strength in queue for as a resulted in lower.
Sequential growth in Q1, and Q1 23. This trend was exacerbated by reduced hiring demand from both enterprises and that's M. B's. However, we remain confident that the growth trends, we've seen in all of our cohorts over the years will continue the longterm.
GAAP net income was $5 million in the first quarter of 2023 compared to $8.4 million and cute one of 2022.
Q1, twenty-three adjusted EBITDA was $35.3 million equating to a margin of 19% compared to $37.2 million a margin of 16 per cent in Q1 22.
Justin EBIT margin expansion year over year, primarily reflects lower sales and marketing expenses, which we reduced in response to the changing macroeconomic landscape and partially offset by increases in research and development expenses.
Cash cash equivalents and marketable securities was $519 $1 million as of March 31st 2023, compared to $570.4 million as of December 31st 2022, the decrease quarter per quarter was primarily due to $60 $2 million share repurchases. Additionally.
Additionally, we announced that our board of directors has authorized a 100 million dollar increase to the company's share repurchase program.
This is in addition to the previous authorizations of $450 million in total.
We know that this authorization is not a commitment we will remain diligent allocators of capital as we continue generating free cash flow, while also recognizing the uncertain macroeconomic environment.
Moving onto guidance the atypical softness we noted during our last call has increased in recent weeks, while Q1 twenty-three revenue was down 19% year over year revenue in April was down 27% year over year. This is reflective of a contraction in demand with both Seb and enterprises continuing to reduce the number of jobs, they post and the amount they spin.
N for job advertising.
It's these transmission former guidance considerable macroeconomic uncertainty remains and changes both positive and negative can continue to have an impact on our 2023 revenue.
R Q2, twenty-three revenue guidance of $170 million at the midpoint represents a 29% decline year over year given.
Given the increasingly uncertain macroeconomic environment, we are not providing annual revenue guidance. We will continue to take advantage of opportunities to win the business of new employers and deepen our relationships with existing employers, but recognize that further macroeconomic fluctuations that are impacting our customers will have a direct impact on our top line performance.
Alright, adjusted EBITDA guidance of $38 million at the midpoint or 22% just EBIT margin for the quarter. We flexor continued fully funded investments into new solutions for the labor market, while simultaneously moderating our sales and marketing investments during the slowdown.
Finally, we reiterate our ability and the majority of scenarios, we can reasonably foreseen to January 2023, adjusted EBITDA between $178 million and $192 million.
Well there are a wide range of top line possibilities the flexibility of our business model allows for many paths to this adjusted EBITDA range.
As always we will respond to our environment quickly, which means conserving capital and an increased focus on profitability during times of decreased demand from employers.
This further demonstrates the flexibility of our business model and our continued commitment to delivering value to shareholders over the long term across a broad range of economic environment.
With that we cannot open the line for questions operator.
Thank you.
As a reminder, if you would like to ask a question Press Star then the number one on your telephone keypad and we will pass for just a moment to compile the Q and a roster.
We will take our first question from Ralph Chakra with William Blair. Your line is open.
Good afternoon. Thanks for taking the question just first question on I guess acceleration.
Downwards for revenue sorry about ninth being down 19 per cent you over here for the quarter I think april's down 27, and the guide for next quarter's down 29, maybe just kind of speak to does that acceleration you know more pronounced and then or is it you know continuing obviously through cute to hear just any color on that and then <unk>.
<unk> just the confidence in the full year of the levers that you have to sort of maintain that that EBITDA guidance range that'd be helpful. As well. Thank you.
Hi, Thanks for the question. This is Ian and I think you have accurately summarize what we share today, which is that there has been an acceleration of the deceleration and the demand for recruiting services. We have clearly left behind what had historically been a standard.
<unk> and highly predictable seasonal hiring pattern and so our ability to predict.
Predict with accuracy, where the decline in the stock is somewhat impaired by the fact that there is no historical precedent in our company history for what we're seeing right now, but in spite of that and thanks in large part to the nimbleness of our financial model as well as are ongoing.
Focus on product improvements, we live in both confident that in the short term we can deliver on the EBITDA, which is why we have reasserted the range and with specificity said that we still think we can hit the target reset for the air and further over the longterm. Thanks to those ongoing product improvements, we remain I'm confident and optimistic.
About our ability to grow our market share. This is very clearly a macroeconomic phenomenon. This downturn is affecting a multitude of players in our industry and just last week, we had an enterprise stomach, where I spoke to a 30 of the largest hires in America. These are companies that hire between thousands and tens of thousands of employers per year.
Across the board all of them have reduced their hiring plans in the face of the economic uncertainty their business in space.
Yeah, and <unk> and answer the question on Opex lovers. So we have several different levers that we can pull on the largest and most variable by far.
Being the sales and marketing line items. So Q1, you spent over eight $8 million in sales and marketing.
Very large portion of that spend is highly variable and not committed into future periods uhm, but that's not our only lever. We also have already pulled back on additional hiring focusing just on the highest impact text positions of we've taken a look at many of our more discretionary expenses like travel entertainment.
Professional services, etc. Uhm. So we're we have many different levers that we can pull in order to achieve that 185, an adjusted EBITDA under a wide range of revenue scenarios.
<unk> one other thing I would add is that 40 per cent growth and job seeker organic traffic is exactly what we would expect to see in a scenario like we're seeing right. Now this is an opportunity for us over the longterm to prove value to job seekers at a moment they need us more than review this for years.
And we're meeting that challenge and this will pay dividends for us for years to come as job seekers, we'll be able to experience with our product just continues to get better and so those would have a <unk> for a coupla years are now going to experience what <unk> can do for them the power of our great match.
What it's like to be invited to apply to a job.
You know most of the time within one week and so all those investments we've been making in both brands and product on that side of the marketplace is what's gonna powers through when employers come back.
Okay. Thanks, everyone.
And we will take our next question from Mark Mahaney with Evercore. Your line is open.
Okay. Thanks to questions. Please you talked about seeing that accelerated deceleration kind of equal a cross-section beeson enterprises could you give us a little color on the vertical of extra weakness or in the vertical is that are still showing some resilience like nursing I assume and then secondly, you know we've kind of gone out and and were coming back.
In in terms of work from home is that having any impact on your business as a whole I felt that the kind of increasing complexity of work from home may make some of the matching algorithms more valuable, but maybe they're less so now that we're going back to kind of more normal work environments, but.
Maybe that's not that materials just comment on that please thanks.
Oh, well I'll take the second question first which is on work from home so less than 10% of our listings advertise the opportunity to work remotely or in a hybrid format inter.
Interestingly those jobs, our our runaway winters in terms of the number of applicants that they receive however, it is at the menu must portion of the overall hiring market. So it doesn't have a major impact on our business. We have two into our algorithm such that we are experts at delivering candidates from anywhere to those jobs. So so.
<unk> as the market shifts that will continue to be an advantage, but the market overall has not kept that way uhm in spite of still having more than 60 per cent of job seekers looking for remote or fully or some form of hybrid work as their first choice.
Oh, yeah, Thanks, Mark Dave and then in terms of verticals you know as as you indicated you know health care as an example of a industry that continues.
To to show less cyclicality and it seems to be less.
Impacted by the slowdown.
On the flipside, Yeah, and you know for that matter travel and leisure still seems to be holding up reasonably well on on the flipside technology as you might imagine does seem to be more impacted so that we don't particularly overindexed any of these categories. We look more like the the.
Economy as a whole the the one that sticks out was maybe a little surprising based on recent headlines is that finance has not been particularly impacted yet despite headlines about banks and other things, but but overall you know the the the main those stick out a little bit but the main trend is that it's fairly.
Broad based across the economy, both from a geographic M from an industry standpoint, and we see patterns here and there but the abroad theme is that you know we talk to you starting about June last year about how we started to see slow down among S. M B's and as you know.
<unk> you know this quarter, whether that had to do with the evolution of the slowdown or annual budget cycles.
<unk> enterprises also impacted by the slow down now and as we talk to customers large and small.
Businesses tend to you know remain pretty strong, but they feel cautious based on what they're seeing and hearing out there. So they're pulling back in the short term there long-term ambitions remain intact and will be a big part of those ambitions as they need to build their teams, but it certainly impacting short term hiring that's.
Thank you day, Thank you Ian.
I'll take our next question from Doug <unk> J P. Morgan and your line is open.
Hey, it's my phone for dark thanks for taking the questions I think just kind of with a lot of what's going on in the macro and broader layoffs, what you're seeing job seeker, tailwinds, but openings declining just should be good.
To get updated thoughts on competition more broadly you know with the two larger players as as well as some of the smaller ones and how things maybe <unk>. Secondly, I think you know you guys, who didn't get nice traction on the enterprise side, you know I think that step back a little bit this quarter at least in in terms of revenue share for that segment Uhm. How are you thinking about the progress of that tour.
That 50 per cent marker throughout this year kind of given the macro backdrop.
Yeah, Great Great question, so one on the competition fronts.
As we've talked about before we work with over a thousand different job sites. Many of the big offline players are customers of ours. What we're clearly seeing is economy why not just don't just zip recruiter specific.
So from a from a customer from Ah excuse me from a competitor standpoint, what we've seen is.
Like us they're also pulling back to the extent, they're investing and go to market marketing investments and things like that and we see them some of them pulling back in terms of more aggressive pricing that they had been attempting to rollout earlier in the year.
Those are the big things, we've seen on the competitive front, we spend most of our time thinking about our customers rather than our competitors and from a customer standpoint, what we're hearing is what I referred to earlier, which is in the short term cautiousness and the longterm big ambitions about where people want to go and we feel really.
Confident in the long term health of the U S labor economy, and and the rule will play in driving that forward over the long term in terms of enterprise great question, you're you're exactly right.
The Big theme is we're seeing a pullback across the board in short term demand for hiring and job openings, but but it's more broad base than it was in terms of creeping into enterprise part of our business not just S. M. B. So last quarter enterprise was that performance marketing component of our <unk>.
Revenue that was 23 per cent of revenue last quarter came down to 22%. So it decreased by slightly more but the much bigger trend was the across the board friend when we talk to enterprises you know they they have the plan more they have to budget. Further ahead, they have big infrastructure projects too.
To help them with their hiring needs when you need to hire thousands and thousands of people and they're looking for efficiencies. They were looking for ways to get more efficient in an environment like this but nothing is foundationally James about the fact that you need a lot more people to a just replace term that's normal within.
Their workforce and be to grow as they expand locations into new lines of business et cetera, and we're gonna be part of that and every indication. We have is we establish those relationships like human I just referenced here, we spend time with 30 of our largest customers last week, and we heard that loud and clear from them and about their longterm alignment.
With us in longterm need for great talent. So that's what we see in enterprise in and we will continue to focus on our customers and we feel confident that's the competition aspect to this will work itself out just fine when we're close to our customers.
Awesome fix there.
As a reminder to start one if you would like to ask a question.
And we will take our next question from Justin Patterson with Keybanc. Your line is open.
Alright, Thank you very much just thinking about.
Puts and takes some of the different drivers employers and revenue per pain employer, how should we think about just the ability to sandy let me put an employer grows.
His job postings, <unk> and a bit more and we just don't have that same scarcity of labor. So we had previously thank you.
Yeah, Hi, Justin does return yeah. So on the the to keep your eyes <unk> prepaid employer in Q1.
As we've already noted besides both kpis come in softer than what would typically be expected, but particularly on the revenue prepaid employer Simon that enable continue that trend as well the big drivers and Q1 were repaint employers primarily from S&P's because they make up.
The vast majority of us are paid employer number so decreased demand from them will disproportionately affect that caveat.
Whereas revenue prepaid employer.
Was affected by both Snb's and enterprise that's M B's.
Tend to reduce if they did not if they did not drop hiring altogether. They reduce the number of jobs are they are posted within the marketplace, which reduces revenue per employer and then the broad based pullback in enterprise hiring that he in a day for very spoken about that will obviously directly impact revenue prepaid employer.
I think what we see with revenue prepaid employer will will it was muted in Q1, I think we have a lot of confidence that the long term trends that we've seen in that metric born out over many years of cohort data that we have we will continue to play out over time, even if that's temporarily disrupt.
<unk> by these macro economically driven.
Reduction demands that we're seeing and the same thing will be true for paid employers over the long run as well that will that number has gift up and down a little bit more based on kind of the macroeconomic wins, but from peak to peak and trough trough. We think that that number is gonna continue declined to climb as well.
Great. Thank you.
Yeah, we will take our final question from Eric Sheridan with Goldman Sachs. Your line is open.
Thanks, So much for taking the question of what to ask a big picture. One you talked earlier to Ralph's question about.
<unk> and and another question about competition, but you know you guys were very early investors in a I on the platform and positioning the platform for where technology was going with the medium to long term and leaving aside some of the things that are outside of your control and the short to medium term. How do you think about some of the investment you made and continue.
New to me cause as competitive differentiators coming out of the macro dynamic looking up to 24 and 25 and what do you think that even as some folks tried to play catch up on that that could be an area, where you're back to a position of share taker and how we should be thinking of quantifying that thanks. So much.
Hi, Yeah. This is Eric <unk> and this is exactly the question I spend the most time thinking about because in my mind. The job industry has really gone through three arrows. The first one was on volume.
And then the second era was about quality of candidates and now the third one is we have awesome matching algorithms that can tell us, which two parties should be talking to each other.
<unk> can we generate enthusiasm and engagement between them can we get them to rapidly converse with each other and hopefully actually both make a higher and get hired and so in my mind. The real future competition lies any experienced that we provide more so than in the matching technology explicitly but.
Make that mistake, having a strong brand and a large market place where you can then to play awesome matching algorithms to then even begin the experimentation with improving your experience those are all the pre whack prerequisites in order to becoming a major competitive player in the space not only do we have all that.
Things in place, but we are laser focused on the quality of the experience that we give both employers and job seekers. It's why we continue to be so highly rated it's where so much of our focus of R&D is going right now as opposed to looking at things and optimizing them that you can't see the future innovation since you ever figure all gonna be things you can see.
And that stuff like making sure that 60 per cent of our listings have salary data on them, which is something that we brought out this past quarter why does it generates 40 per cent more applicants for I'm Claire so when we do that job seekers want that information.
Generating I'm getting 57 per cent of the job seekers, who are new to our service to get directly invited by an employer to apply to a job within seven days, that's an awesome experience for a job seeker. That's a differentiated experienced that they will talk about with others and it is non trivial to deliver that kind of experience it requires.
Excellence and matching in a quantum of employers using our platform in order to make it true.
Those advantages are only going to grow and I am still confident and excited about our product roadmap I think we're not just onto something but well into it and so I'm I'm very excited for 24 I'm 25.
<unk> I'm just to add onto that the the thing I often think about is the job seekers over the past decade or two has been trained to expect a series of search results in response to a search query and what technology is increasingly allowing us.
<unk> is giving them to expect to hear from a great employer in response to who they are as a whole person and so we bring an incredible set of data to that that his heart. Even if you have a great algorithms, it's hard to replicate that amazing data set we have.
So over years, and then we apply incredible technology to that to connect employers and job seekers and that's with the power of a is for US as we focus deeply on this one major part of People's lives, which was how they connect the opportunity as opposed to you know using a for some broad general set of.
Trivia questions were really thinking deeply about exactly this problem and how we can impact People's lives.
A lot of them were gonna, you're gonna see from us over the coming years.
Great. Thanks, everyone.
And ladies and gentlemen, this concludes today's conference call and we thank you for your participation you may now disconnect.
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