ZipRecruiter, Inc. (ZIP) Q2 2024 Earnings Call Transcript

ZipRecruiter, Inc. (NYSE:ZIP) Q2 2024 Earnings Convention Name August 7, 2024 5:00 PM ET

Firm Individuals

Andrew Haroldson – The Blueshirt GroupIan Siegel – Co-Founder and Chief Government OfficerDavid Travers – PresidentTimothy Yarbrough – EVP and Chief Monetary Officer

Convention Name Individuals

Douglas Anmuth – JPMorganDavid Yueh – Evercore

Operator

Thanks for standing by. My title is Jeannie, and I shall be your convention operator as we speak. At the moment, I want to welcome everybody to the ZipRecruiter, Inc. Q2 2024 Earnings Convention Name. All strains have been positioned on mute to forestall any background noise. After the audio system’ remarks, there shall be a question-and-answer session. [Operator Instructions].

Thanks. I’ll now like to show the convention over to Drew Haroldson, Investor Relations.

Andrew Haroldson

Thanks, operator, and good afternoon. Thanks for becoming a member of us in our earnings convention name, throughout which we’ll talk about ZipRecruiter’s efficiency for the quarter ended June 30, 2024 and steerage for the third quarter 2024. Becoming a member of me on the decision as we speak are Ian Siegel, Co-Founder and CEO; David Travers, President; and Tim Yarbrough, CFO.

Earlier than we start, please be reminded that forward-looking statements made as we speak are topic to dangers and uncertainties regarding future occasions and/or the long run monetary efficiency of ZipRecruiter. Precise outcomes might differ materially from these anticipated in these forward-looking statements. A dialogue of a number of the danger elements that would trigger precise outcomes to vary materially from any forward-looking statements may be present in ZipRecruiter’s quarterly report in Kind 10-Q for the quarter ended June 30, 2024, which is accessible on our investor web site and the SEC’s web site.

The forward-looking statements on this convention name are based mostly on the present expectations as of as we speak, and ZipRecruiter assumes no obligation to replace or revise them, whether or not because of new developments or in any other case. As well as, throughout as we speak’s name, we’ll talk about non-GAAP monetary measures. These non-GAAP monetary measures ought to be thought-about along with, not as an alternative to, or in isolation from GAAP outcomes. Reconciliations of the non-GAAP metrics to the closest GAAP metrics are included in ZipRecruiter’s shareholder letter and in our Kind 10-Q.

And now I’ll flip the decision over to Ian.

Ian Siegel

Thanks, and good afternoon to everybody becoming a member of us as we speak. Since day one, ZipRecruiter has been targeted on eliminating friction within the job search course of. Whereas we’re pleased with the progress we have now made, many ache factors nonetheless exist for each side of {the marketplace}. We consider ZipRecruiter’s model, proprietary information and expertise uniquely place us to additional disrupt the business over the long-term and speed up the shift from offline to on-line recruitment.

Regardless of the short-term challenges of navigating the post-COVID macroeconomic cycle, we consider that the developments we’re making in the direction of remodeling how the job search course of works positions us to thrive via many macroeconomic cycles to come back. In Q2 2024, income of $124 million was down 27% year-over-year. Web earnings in Q2 2024 was $7 million, whereas adjusted EBITDA was $28 million, equating to a web earnings margin of 6% and an adjusted EBITDA margin of 23%. Each income and adjusted EBITDA in Q2 2024 got here in above the excessive finish of steerage.

As we glance towards the second half of 2024, we proceed to navigate difficult labor market situations. Per the Bureau of Labor Statistics, seasonally adjusted hires have declined each month on a year-over-year foundation since August of 2022. The give up charge has fallen 9% under the typical charge in 2019. Even though hiring is down and staff aren’t quitting, our disciplined funding technique permits us to construct on our product momentum and expertise management. In Q2 2024, these investments contributed to a different quarter of job seeker progress.

Complete ZipRecruiter net visitors within the U.S. grew by 22% year-over-year, which is 12 share factors greater than any of our largest opponents. Ongoing investments in product model consciousness, paired with quite a few product enhancements, contributed to a 30% year-over-year improve in natural job seeker visitors. Over time, we consider rising job seeker visitors will result in significant income greenback shifts from each offline and on-line opponents.

In Q2, we started the rollout of ZipIntro. ZipIntro allows the acceleration of face-to-face connections, delivering sturdy outcomes thus far, with over 90% of job seekers saying they’re doubtless to make use of ZipIntro once more and employers who’ve tried it obtain over 3x extra high quality purposes per job using ZipIntro. In July, we acquired Breakroom, a U.Okay.-based employer evaluation website targeted on frontline staff. Within the coming months, we anticipate launching Breakroom within the U.S., the place roughly 70% of the workforce is concentrated in frontline roles.

Our innovation is enabled by our versatile monetary mannequin and strong stability sheet, which provides us the flexibility to proceed to construct our model and improve our person expertise all through financial cycles. As we proceed to navigate this present cycle, we’re assured that our disciplined funding technique will put us in a robust place to reap the benefits of the inevitable restoration within the labor market to come back.

With that, I’ll now flip the decision over to Dave to evaluation progress on our progress methods. Dave?

David Travers

Thanks, Ian, and good afternoon. Q2 was one other sturdy quarter of execution in the direction of constructing out every of our three strategic pillars. Our first strategic pillar is to extend the variety of employers and the income per paid employer in our market. We consider that ZipRecruiter is on the forefront of a shift in on-line recruitment characterised by a give attention to interactive candidate experiences, elevated communication and lowered time to rent.

Our preliminary rollout of ZipIntro is an early instance of a product that epitomizes this shift. ZipIntro allows job seekers to attach with employers face-to-face by inviting high candidates to RSVP for a video interview with employers at a selected time. After the employer opinions candidate RSVPs, they’re linked for a video interview. Employers are having an amazing expertise with ZipIntro as employers that use ZipIntro for a job obtain over 3x extra high quality purposes for that job.

Job seekers are loving ZipIntro, too, with over 90% of job seekers who join with an employer saying they’re doubtless to make use of ZipIntro once more. Our objective is to spend money on product initiatives like ZipIntro to facilitate extra one-on-one interactions between employers and job seekers earlier within the search course of, creating extra worth for each side of our market. Our second pillar is rising the variety of job seekers in our market. As we have now noticed time and again in our class, market share shifts in job seeker exercise have been adopted by market share shifts in employer income {dollars}. We consider this sample will proceed, specifically that shift in employer spending shall be preceded by shifts in job seeker conduct.

In Q2, our momentum in each whole and natural job seeker visitors continued. As Ian talked about, in line with SimilarWeb, whole ZipRecruiter net visitors within the U.S. grew by 22% year-over-year from Q2 of ’23 to Q2 of ’24, which is at the very least 12 share factors greater than any of our largest opponents. This was pushed by year-over-year natural job seeker visitors progress of 30%. We consider this success is a testomony to not solely our enduring model consciousness, but additionally the energy of our providing and continued product enhancements.

As we take into consideration increasing our worth proposition to job seekers, we’re excited to announce our acquisition of Breakroom, a U.Okay.-based evaluation website targeted on frontline staff in industries like retail and hospitality. Breakroom collects information from staff on pay, hours, flexibility, work situations, tradition and extra to supply community-powered rankings for firms. These rankings give an genuine and clear view of what it is wish to work for various employers, which in flip helps job seekers apply for the best jobs for his or her particular person wants.

Consistent with our mission to actively join job seekers with their subsequent nice alternative, we plan to launch Breakroom in the USA to empower staff with the job insights they should apply with confidence. Moreover, within the quarter, we made a number of incremental enhancements to the job search expertise. First, we enhanced our job navigation expertise on the homepage of our iOS and Android apps, permitting job seekers to instantly browse jobs by classes resembling distant jobs, job suggestions based mostly on their most up-to-date utility, jobs requiring no prior expertise and others. This resulted in a ten% improve in house display engagement.

Moreover, we revamped our search expertise, permitting job seekers to extra simply see each key job highlights and the total job description immediately from the search outcomes web page, making it simpler than ever to see a very powerful details about a job opening with out clicking out to a brand new web page. This enhancement elevated job seeker engagement with job postings by over 30% whereas concurrently enhancing the standard of purposes by giving job seekers extra data, and due to this fact extra certainty, about jobs earlier than they apply.

I will conclude with our third pillar, making our matching expertise smarter over time. In Q2, our crew made a number of enhancements to our matching algorithms. Our redesigned matching job index allows ZipRecruiter to extra effectively serve suggestions to job seekers, enhancing their engagement with ZipRecruiter’s market. Our crew additionally made enhancements to how we make suggestions to job seekers with comparatively mild exercise, rising engagement by as much as 6% and affording us the chance to raised perceive what the job seeker is focused on and certified for.

We consider our relentless give attention to enhancing our matching expertise results in compounding enhancements in our algorithms quarter after quarter, and this quarter was no totally different. These compounding enhancements improve our conviction in continued investments to additional our benefit in matching expertise for employers and job seekers and can higher allow us to attain our mission of actively connecting individuals to their subsequent nice alternative.

I will now flip the decision over to Tim to evaluation monetary outcomes and steerage. Tim?

Timothy Yarbrough

Thanks, Dave, and good afternoon, everybody. Our second quarter income of $124 million represents a 27% decline year-over-year, primarily resulting from continued softness in hiring demand. Nonetheless, income elevated 1% quarter-over-quarter, our first sequential improve since Q2 2022. Quarterly paid employers had been 70,000, representing a 31% lower versus Q2 ’23 and a 2% lower sequentially. The year-over-year lower in quarterly paid employers is primarily reflective of lowered demand from SMBs. The slight decline quarter-over-quarter displays the continued uncertainty and volatility of the labor market.

Income per paid employer was $1,755, up 5% year-over-year and up 3% sequentially. The will increase year-over-year and quarter-over-quarter are primarily because of the slight combine shift from subscription income to efficiency income. Web earnings was $7 million in Q2 ’24 in comparison with web earnings of $14 million in Q2 ’23 and a web lack of $7 million in Q1 ’24. Q2 ’24 adjusted EBITDA was $28 million, equating to a margin of 23% in comparison with $43 million, a margin of 25% in Q2 ’23 and $21 million with a margin of 17% in Q1 ’24. Web earnings and adjusted EBITDA decreases year-over-year had been primarily associated to income declines, whereas quarter-over-quarter will increase had been pushed by increased income and decrease working bills. Money, money equivalents and marketable securities was $523 million as of June 30, 2024.

Transferring on to steerage. Our Q3 ’24 income steerage of $112 million on the midpoint represents a 28% decline year-over-year and a 9% decline quarter-over-quarter. Our adjusted EBITDA steerage for Q3 ’24 is $10 million on the midpoint or a 9% adjusted EBITDA margin. Whereas we noticed indicators that we had been doubtlessly approaching a trough for a lot of Q2, traits in the previous few weeks of June and thru July make us extra cautious in our expectations for Q3. We consider it stays prudent to proceed long-term product, expertise and advertising investments in our market. Our working plans proceed to name for low to mid-teens adjusted EBITDA margins in 2024. We’re consistently assessing the state of the labor market, letting information lead our resolution making.

We’re poised to extend funding as alternatives come up, and alternatively are at all times ready to indicate additional value self-discipline if situations deteriorate. The timing and form of restoration stay unsure. And whereas there are encouraging indicators that the labor market downturn is bottoming out, there continues to be a excessive diploma of uncertainty and volatility. We proceed to lean into investments that we consider will seize market share over time and are nicely positioned to emerge from this present business slowdown as a stronger firm.

With that, we will now open the road for questions. Operator?

Query-and-Reply Session

Operator

Thanks. The ground is now open for questions. [Operator Instructions]. And your first query comes from the road of Doug Anmuth with JPMorgan. Please go forward.

Douglas Anmuth

Nice. Thanks for taking the questions. Final quarter, Tim, you form of hit this in the direction of the tip of your feedback, however final quarter you expressed some optimism simply across the labor market doubtlessly troughing, and I believe that was largely based mostly on the flattish sequential paid employer numbers. However perhaps you’ll be able to elaborate just a bit bit on the traits that you simply noticed in late June and July, they’re making you extra cautious in form of shifting your view relative to 3 months in the past. And I do know that was an early — form of early potential optimism as nicely.

After which individually, natural visitors grew 30% year-over-year. I believe it was 65% final quarter. Are you able to simply speak about that? Is that extra comp dynamics or one thing that you simply’re significantly seeing within the exercise ranges there? Thanks.

Timothy Yarbrough

Sure. Thanks, Doug. That is Tim. So far as the traits go, what we noticed over the course of the quarter was principally according to the identical indicators of stabilization that we famous in prior calls via the primary a part of the quarter. So — however as we approached June and into July, we noticed basic softening traits. You’ll be able to form of see that present up within the lighter sequential — mild sequential lower in paid employers over the course of Q2. And our steerage that we’re giving is assuming that that very same softness that we have famous in June and July continues all through the quarter.

David Travers

Hey, Doug, that is Dave. On the natural visitors progress, to your level, not solely this quarter and final quarter, however for nicely over a 12 months now, each single quarter we have been calling out our natural visitors progress actually outpacing the market. And so 30% this quarter is the results of painstaking work on product and on constructing model and investments which have been paying off for over the — over a few years.

By way of how they range over time, the natural visitors progress would not come from tremendous simple sequential actions taken in any given quarter. So the long-term pattern line, as we glance out again over many quarters, could be very clear that we’re taking visitors a lot quicker and the combo shift of our visitors is rather more pushed such that our whole visitors, as we indicated, is up 22%, powered by the 30% progress in natural, and that is over 12% quicker than any of our largest opponents.

So we really feel excellent in regards to the type of investments we have been making. We’re making new and extra investments in that class that — a few of which we’re speaking about as we speak, a few of which you may hear about in coming quarters, however the momentum there was lengthy and sustained and we really feel nice about it.

Ian Siegel

Sure. I simply wish to say actual fast, Doug, that the sequential progress in natural visitors is a technique to take a look at it. However I believe whole visitors might be the easiest way to take a look at it as a result of that is the summation of all our efforts. And we hold saying this, which is we’re not making an attempt to anticipate the place the market goes. We attempt to be very fast in our reactions. So as soon as once more, you are seeing us quickly react the place we received an early learn on a downward pattern in the way in which the labor market was heading.

However what’s true is that no matter which a part of the cycle we’re in, we have now been persistently investing in enhancing our product. And you’ll see the 2 massive examples of that this quarter being the acquisition of Breakroom in addition to the preliminary rollout of ZipIntro. And people sorts of persistent product enhancements have been ongoing for the final a few years. And what you are seeing now’s the harvest from all of that funding the place each a part of our job seeker visitors natural and nonorganic has been rising. And we predict that seeing that aspect of our market develop throughout this downturn is what optimally positions us to take market share as what we consider is an inevitable restoration will ultimately start right here.

Douglas Anmuth

Thanks all. Admire it.

Operator

Your subsequent query comes from the road of David Yueh with Evercore. Please go forward.

David Yueh

Hello, thanks. That is David from Mark. You referred to as out QPEs being decrease resulting from lowered demand from SMBs. Are there any particular verticals the place you are seeing decrease demand versus others? Thanks.

David Travers

Thanks, David. That is Dave. Sure, nice query. In order we take a look at the year-over-year traits, we proceed to see areas like retail and authorities type of outperforming. However clearly, in a market like this, there are extra verticals which might be underperforming. And so, apparently, verticals like finance and expertise stay weak as they’ve been, and verticals like schooling, which was sturdy for a very long time as there was a catch-up within the variety of academics that wanted to be employed after the pandemic, has began to weaken on a year-over-year foundation now.

And so that is what we see. However clearly, the stability — as you look throughout all sectors and geographies of the financial system, the stability continues to be tough. As latest authorities information reveals, we’re now 6% or 8% under the variety of hires final month that we averaged monthly in pre-COVID 2019. And so zooming out for even the type of general form and mixture of the financial system, we’re in a reasonably irregular interval at present.

David Yueh

Thanks.

Operator

There aren’t any additional questions at the moment. That concludes our Q&A session. Thanks for attending. This concludes as we speak’s convention name. Chances are you’ll now disconnect.