ZIP - NYSE

Thank you for standing by. My name is Pam, and I will be your conference operator today. At this time, I would like to welcome everyone to the

Thank you, operator, and good afternoon. Thank you for joining us in our earnings conference call during which we will discuss

Thank you, and good afternoon to everyone joining us today. Q1 '24 revenue of $122 million was down 33% year-over-year, though it exceeded the midpoint of our guidance range. We generated $2 million in operating cash flow and $21 million in adjusted EBITDA, equating to an adjusted EBITDA margin of 17%. Though results were above expectations discussed in our last earnings call, the labor market industry backdrop has remained challenging through the first few months of 2024. Hiring levels continue to be subdued, and the number of people quitting their jobs also remains low as the Big Stay persisted into Q1. However, there are also positive signs emerging as we begin the year. Q1 '24 is the first quarter with a sequential increase in quarterly paid employers since 2022 and is a potential indicator of stabilization in the hiring market. While not yet a return to normal seasonality, where revenue ramps from Q1 to Q2, we see this as an early sign that the labor market downturn is potentially reaching a trough. Our balance sheet remains robust. With over $510 million on hand, we are well positioned to weather this industry-wide downturn and enter an eventual recovery from a position of strength. Therefore, we continue to lean into investments in product, technology and marketing that we expect to drive a significant long-term ROI. While we remain prepared for a wide range of scenarios as 2024 plays out, we are poised to increase investment as opportunities arise and alternatively are always prepared to show further cost discipline if conditions deteriorate. We have strong conviction that technology will fundamentally change how employers and job seekers connect to one another, and

Thank you, Ian, and good afternoon. As Ian mentioned, we are leaning into product and technology investments to capture the massive opportunity to transform how employers and job seekers come together. I will detail the continued progress we are making against our 3 strategic pillars to improve outcomes for employers and job seekers. Our first strategic pillar is increasing the number of employers and the revenue per paid employer in our marketplace. Growing revenue from enterprise employers is a massive opportunity for

Thank you, Dave, and good afternoon, everyone. Our first quarter revenue of $122 million represents a 33% decline year-over-year, primarily due to continued softness in hiring demand. Quarterly paid employers were 72,000, representing a 32% decrease versus Q1 '23, but a 1% increase sequentially. Notably, Q1 '24 is the first quarter with a sequential increase in quarterly paid employers since 2022, which is a potential sign of stabilization in the hiring market. Net loss was $7 million in Q1 '24 compared to net income of $5 million in Q1 '23 and $6 million in Q4 '23. Q1 '24 adjusted EBITDA was $21 million, equating to a margin of 17% compared to $35 million, a margin of 19% in the prior year period, and $42 million with a margin of 31% in Q4 '23. Net income and adjusted EBITDA decreases both year-over-year and quarter-over-quarter are primarily related to revenue declines. Cash, cash equivalents and marketable securities was $513 million as of March 31, 2024, compared to $520 million as of December 31, 2023. Moving on to guidance. Our Q2 '24 revenue guidance of $117 million at the midpoint represents a 31% decline year-over-year and a 4% decline quarter-over-quarter. Our adjusted EBITDA guidance for Q2 '24 is $15 million at the midpoint or a 13% adjusted EBITDA margin. While this is not a return to normal seasonality where revenue would ramp from Q1 to Q2, the midpoint of our revenue guidance would represent the lowest sequential decline we have seen since 2022. Our adjusted EBITDA guidance reflects a modest increase in operating expenses as we continue to hire top talent to invest in product and technology. Assuming continued signs of stabilization of the hiring market referenced above, we believe it remains prudent to continue long-term product, technology and marketing investments in our marketplace, yielding low- to mid-teens adjusted EBITDA margin in 2024. We are constantly assessing the state of the labor market, letting data lead our decision-making. We are poised to increase investment as opportunities arise and alternatively are prepared to show further cost discipline if conditions deteriorate.

[Operator Instructions] And your first question comes from the line of Trevor Young with Barclays.

First one, can you just talk about the cadence of growth throughout the quarter? I think you'd normally be expecting momentum to kind of build each month throughout the quarter and into 2Q. I don't think we saw that last year given some of the softness at that point. But I'm just wondering kind of in light of that implied sequential decline in rev, is that same softness playing out this year as well?

Yes, Trevor, this is Tim. Thanks for the question. So yes, last quarter, we talked about signs of labor market stabilization and what we saw throughout the course of Q1 largely reflected that. So our guidance right now sequentially is roughly flat, down just a tiny bit, but it's reflective of that kind of ongoing signs of stabilization that we saw in Q1 continuing through this quarter as well. So we're encouraged by those signs.

Okay. And kind of relatedly, QPE is firming up first time quarter-on-quarter in more than a year, and that's obviously pretty encouraging. Is that kind of a good level to model off of for the rest of the year? Or is it still just a fairly uncertain outlook from here on the QPE front?

Yes, it could play out in a couple of different ways. So the lift that we saw modestly Q4 to Q1 was again pretty encouraging, and that's largely driven by SMBs coming back. And you see kind of the opposite effect on revenue per paid employer with that ticking down a little bit, and that's more of a seasonal trend. So for the rest of the year, it really does depend on to the extent that the -- this flattening that we've been seeing continues out to the extent that it does, and I would expect that number to remain fairly flat throughout the course of the year.

Trevor, this is Dave. Just to add on to that, you're exactly right that the [ flat ] quarterly paid employer number is a really encouraging sign. And what we've seen -- as we've discussed in the past, what we've seen when there's a change in the macro environment, usually small businesses respond faster than large enterprises, and that quarterly paid employer number is really driven by small businesses. So we remain prepared for a wide range of scenarios, as we've said. But if that continues to be the case that we see signs of flattening that SMB-driven quarterly pay employer number is a good barometer for that.

Okay. Great. Hopefully, that positive momentum continues.

Your next question comes from the line of Ralph Schackart with William Blair.

Maybe just a bolt on to the prior question. Just curious what the trend line has been, I guess, post Q1, if you observed any sort of change in pattern or if it's sort of consistent with what you observed in Q1? That's the first question. I have a follow-up.

Yes. I think the pattern is largely consistent with what we saw in Q1. So definitely not a return to the seasonality that we would normally expect where Q2 would be sequentially higher than Q1. So we haven't seen that. So our guidance being down very modestly is basically showing the same signs of stabilization.

Great. Maybe just a follow-up. I know it's really early and tough to know whether you're dropping right now or if you see any further downturn. But just curious, is this a little bit more broad-based? Is it vertical-specific? But just any color you could provide on some of the stabilization trends that you're seeing in the paid employer number.

Sure. Ralph, this is Dave. So yes, what we see is that there's definitely strength in government and education, which we see largely as a catch-up from being industries that struggled to keep pace with wage increases during the post-COVID boom period. But with the year-over-year trends, we see broadly based are encouraging as we see signs of flattening. Clearly not looking across the broad scope of it, calling a bottom, but also seeing very encouraging signs.

Great. Maybe if I can just ask one more, Dave. Just curious, just in terms of technology vertical, what you have observed within technology.

Yes. Technology continues to be one of the hardest hit areas of job posting and hiring activity when we look on a year-over-year basis continues to be extremely impacted and is sort of an outlier on the negative end to the same extent that in a similar way that government and education are on the positive end of the spectrum.

Your next question comes from the line of Doug Anmuth with JPMorgan.

Guys, if you play out the scenario that things have troughed and maybe start to turn a bit here, can you just talk more about how that informs your investment approach? And what are some of the immediate steps you take as you lean back in more? And then maybe just on the -- also on the product side, can you provide an update on just how your AI matching technology is evolving and improving and perhaps what kind of lift you're seeing through different versions of the products?

This is Ian, and I'll take this question. I think one of the advantages that we have at

And this is Dave. Just to add on to that. To link the 2 parts to your question, we've talked many times about the flexibility of our cost structure and our business model, and we flex up and down as market sort of backdrop has changed. AI has really been the consistent area of ongoing investment throughout the cycle. And you can see how R&D has been the most resilient and stable part of our cost structure over the past many quarters. And that's because of the investments we've been making and continue to make like Ian just discussed. So that's an area where we're going to continue to press our advantage and we feel very good about the results we've generated so far, and we think we're just getting started.

Your next question comes from the line of Josh Beck with Raymond James.

Yes. Maybe just -- I wanted to kind of start off with the margins. Obviously, you came in kind of ahead of that kind of qualitative low- to mid-teens guidance in the high-teens, and you kind of left that in place the low- to mid-teens, just given the backdrop. So I guess what investments are kind of rising to the top? And what would you need to see, I guess, kind of one way or the other in terms of the macro to kind of adjust that framework?

Yes. Thanks for the question, Josh. This is Tim. Yes, so the margin structure came in at the 17%. So like you said, a bit better than the low- to mid-teens. We still feel very good about that for the rest of the year. There might be some puts and takes as we go through Q3 and Q4 towards the back end of the year. But overall, that all assumes, again, a relatively consistent flattening across the board. But to the extent that we see the market softening or deteriorating a little bit more, then we will take action to address that in terms of cost reductions. But on the other hand, if things improve substantially, then we can ramp up that investment, too. And the form of that investment in the near term would most likely be sales and marketing spend. Just as we see demand on the employer side opening up, we have a highly metric view of how we pursue those employers. And so we'd be happy to deploy capital with a long-term mindset.

Yes, Josh, this is Dave. Our go-to-market teams are exceptionally good at this. So as we read very rapidly what the results of go-to-market investments are, as an example, we then adjust. And so in Q1, you saw that level of investment appropriate to what we were seeing in the market. And to the extent things change, we will not be hesitant to change our level of investment based on the returns we see. And those returns, we measure those in 3 different ways. We think about the cash-on-cash returns, we think about the long-term ROI or [ LTV, CAC ] kind of returns, and we also think about the brand value we've built over time. And so there, it's been an investment of hundreds of millions of dollars or over $1 billion over a decade that has led us to have 80% brand awareness on both sides of the marketplace. And we see even as we pull back over the past few quarters on that investment, that brand investment remains enduring. And so we're measuring all those things in calibrating our level of investment based on that.

I'll just add to that, this is Ian, that where we will persistently invest is in R&D because much like we think of our brand as one of our assets, the quality of the experience we're delivering is a huge part of the reason for the incredible surge in traffic that we're experiencing year-over-year this year. Our traffic is up 60%, yes, because we do a lot of advertising, but also because the experience is fundamentally improving. And I can't say enough about Phil, who has become a conversational UI that's guiding job seekers through their entire search experience. He's really an ally for these individuals as they try to find work. And I think we're feeling really excited about the future. So R&D is going to continue to be an area of focused investment. And then on top of that, if we see a market turn, we will, of course, invest into it with our sales and marketing know-how.

Okay. That's all super helpful. Maybe a follow-up just around enterprise, this iCIMS partnership seems pretty substantial. I was looking up. It seems like they facilitated over 5 million hires last year, and they're a leader in the ATS space. So could that move the needle? And then just maybe more broadly, like how should we be thinking about just the pacing in terms of enterprise mixing up?

Thanks, Josh. This is Dave. Great question. Yes, iCIMS is a significant player in the applicant tracking system space well into the top 10 of a very fragmented market. So they're a very significant one and have some very large Fortune 500 clients as well as a lot of more mid-market enterprise clients. And so it's an important one for us. It's part of our overall strategy, where we have 150 and growing ATS integrations where the software systems that are really the dashboard and the starting point every day for recruiters at these large enterprises to manage their entire workflow and for hiring managers to manage their workflow, having our candidates seamlessly show up in their workflow without ever having to leave the

Your next question comes from the line of Brian Fitzgerald with Wells Fargo.

This is Stan Velikov for Brian. I guess on focusing the question on one of the growth pillars in our marketplace, the jobseeker. So can you share more about the level of jobseeker activity that we're seeing on the platform? Any trends like incremental profiles created, resumes added or updated visits engagement? And has the jobseeker activity increased in the past few months given the incremental changes in the most recent job market reports?

This is Ian. And what I would say is, first, broadly top of funnel jobseeker traffic coming in, which is the 65% growth year-over-year that we talked to you about, is just way up. And there are a variety of contributing factors to that. But what I'm very excited about is not just the top of funnel traffic. It's the down funnel metrics. It's the number of job seekers who are being actively propositioned by an employer without having to go reach out to them first. It's the number of applications per job that we're delivering to jobs in the SMB space. It's the number of times job seekers are shown jobs that they actually have interest in. And should they apply, they will, in fact, be a top candidate for that job because the algorithmic matching just continues to improve. So really, it's the engagement metrics in addition to the top of funnel metrics, which have all been climbing. And there's a variety of inputs that have been driving these metrics up. Some of it is Phil and the process of having a human voice guiding the jobseeker through the experience. It's been a force multiplier everywhere that we have put him. Some of it is just straight technological algorithmic improvements and some of it is just site experience, which we also continue to improve. But across the board, it's not just top of funnel traffic, it's also the engagement metrics on our site. And you can see that in a variety of different places that we have reported on. But also it's interesting to see that the number of downloads of our mobile app, which is the preferred method of search for the really serious jobseeker has also been going up pretty significantly. And so just generally, it's been a very good season for job seekers.

I just want to add on to -- double-click on what Ian said about the 65% organic jobseeker growth and how we think about that. So over that same year-over-year period, we've seen our sales and marketing investment come down by 38%. And so when you add up organic and paid according to third-party data we have in March, our total U.S. visits was up 13% despite that reduction by 38% in sales and marketing. So that's the power of those product investments and improvements that Ian was just talking about and those brand investments we -- that are over the long term that we referenced earlier. And the net impact of that is that we're growing over -- in March over 10 percentage points faster than any of our largest competitors on the jobseeker front in the U.S.

Your next question comes from the line of Mark Mahaney with Evercore.

This is Luke on for Mark. What are some key data points suggesting just general market share shifts or any evidence you can offer that you're successfully gaining share versus your competitors? And then just a kind of second question. In the peak of the cycle, how high can the revenue per paid employer go? Like what are some opportunities out there to grow revenue per paid employer over time?

Great. This is Dave. I'll take the first part of that. So the 2-sided marketplace, and so I would think about market share in 2 different ways. One, I just referenced, which is growing the jobseeker side in terms of visits year-over-year by 10 percentage points faster than any other major player in our space. So clearly there, and we've seen, over time, a good historical correlation that when there's a major move in jobseeker market share, employer dollars will follow and we've seen that over multiple players over multiple years. And then on the employer side of things, we've seen large public staffing firms release. We don't have any pure play online comps, but large public staffing firms have released quarterly performance for Q1. And we saw U.S. permanent placement revenue as low as 40% down year-over-year, which we think as we look across the market and our partners' data and our scope of the entire U.S. labor market, that's a pretty good indicator of what's going on out there. And so just stepping back about where we are in the macro and how to make sense of that. The U.S. Bureau of Labor Statistics released that in March, the total hires in the U.S. was 5.5 million, seasonally adjusted. And so if you look back over the last couple of recessions in 2007, right before the GFC, we were actually above 5.5 million in 2007. And then back to the previous recession before the dot-com crash in early January 2001, we were also above 5.5 million. So if you think back over the past 23 years, the GDP of the U.S. adjusted for inflation in real terms has grown 61%. The labor force or the number of employed people has grown 19%. But over that same time period, the number of hires last month was down 4%. And so that's an extremely unusual set of backdrop conditions. And so when we think about how we're doing in the broad scope of that and our games with the 65% growth in organic jobseeker growth, we feel very good about how we're doing against the market.

Luke, this is Tim. I'll take the second part of the question about revenue per paid employer and where we see that going. So one of the long-term trends that we've seen in this business is that the revenue per paid employer has reliably trended up over time. And so that's true when you look at it on a consolidated quarterly basis, and that's also true, perhaps more interestingly, when you look at it on an employer cohort basis. So we disclosed this a couple of times in the past in our annual filings. But if you look at the monthly revenue per employer per annual cohort, reliably those numbers trend up into the right as each cohort ages. And what we've seen in this last super cycle and the downside is that there have been just a few exceptions, but the larger trends, I think, still hold to be very clearly true. Now where do we see this number going? We have a lot of confidence that there's a lot of headroom in revenue per paid employer. And to that, we can look at the offline solutions out there right now that are often charging anywhere from 15% to even 30% of first-year salary. We're not in the same ballpark as that. And so as our technology gets better and as this overall addressable market and -- of $250 billion starts shifting more towards the online solutions, we feel like we have much more pricing power as our technology gets better and better as we continue to win share away from the offline competition.

Your last question comes from the line of Justin Patterson with KeyBank Capital Markets.

This is Miles Jakubiak on for Justin. First, just would love to know or hear your thoughts around visibility currently compared to the beginning of the year. And then second, just would love to hear more about the efforts to improve application rights -- or application rates now that you are seeing strong jobseeker trends and the impact that can have to the business.

Yes, this is Tim. I'll take the first part of the question. So on visibility, I would say the future is still pretty murky because we haven't seen that return to seasonality that we would normally see in a year much more like 2019, for example. So while we're encouraged by these signs of stabilization and by paid employers being up modestly on a quarter-over-quarter basis, I wouldn't say that we're calling a trough or anything like that. So I would say our level of visibility still remains fairly low, which is why we're still guiding 1 quarter out. But again, there's more optimism around the trends that we've seen.

And this is Ian, who will -- I'll take the back half of your question. And when -- so when we look at our marketplace, we're very keen to understand what drives good connections between employers and job seekers. That is where a lot of our science goes. And that manifests itself in a number of the product decisions we make, whether it's driving employers to outreach to job seekers so that it's the employer going first, which job seekers love, or it's explaining to employers in such clear terms and making it so easy to display that they have salary on their job descriptions because that materially increases the number of applicants who will actually apply to said job. And so in our marketplace, we are always looking for the different levers that we can take advantage of in order to increase that application rate. Over the last several quarters, I mean we have launched a number of improvements that have been driving up this application rate, which is consequently been driving up jobseeker satisfaction, which is now manifesting in the surge in traffic that you are seeing today. This is not just about advertising. This is also about actually delivering. And we feel really confident that we are delivering already an exceptional experience, but we're particularly excited about where this will go over time. And like I said, it's not just top-of-funnel traffic, it's engagement metrics that are up. And we believe that, that is a trend that we can persistently drive up into the right. As just as Tim was talking about revenue per paid employer, we think satisfaction is something where we still have headroom to grow.