Good day. My name is Savannah, and I will be your conference operator for today. At this time, I would like to welcome everyone to the ZipRecruiter, Inc. Q1 2022 Earnings Call. Today's call is being recorded. [Operator instructions] Thank you. And I would now like to turn the conference over to Amy Garefis, Chief Accounting Officer. Please go ahead..

Thank you, operator, and good afternoon. Thank you for joining us in our earnings conference call during which we will discuss ZipRecruiter performance for the quarter ended March 31, 2022, and guidance for the second quarter and full year 2022.

Joining me on the call today are Ian Siegel, 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 relating to future events and/or the future financial performance of ZipRecruiter.

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 ZipRecruiter annual report on Form 10-K for the year ended December 31, 2021, which is available on our investor website and the SEC's website.

and on our quarterly report on Form 10-Q for the 3 months ended March 31, 2022, that we will file with the SEC. The forward-looking statements in this conference call are based on the current expectations as of today, and ZipRecruiter assumes no obligation to update or revise them, whether as a result of new developments or otherwise.

In addition, during today's call, we will discuss non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitution for, or in isolation from GAAP results. Reconciliations of the non-GAAP metrics to the nearest GAAP metrics are included in ZipRecruiter shareholder letter and in our Form 10-Q.

And now I will turn the call over to Ian..

Thank you, Amy, and good afternoon to everyone joining us today. Q1 2022 was another exceptional quarter for ZipRecruiter. Revenue grew to $227 million, an 81% increase over the first quarter of 2021. We saw continued strength on both sides of our marketplace and are delighted to raise our full year guidance for 2022.

In a few minutes, Dave will detail the progress we've made against our strategic growth pillars. Later, Tim will walk you through our results for Q1 as well as guidance for Q2 and the full year of 2022. First, I'd like to provide an update on the macroeconomic environment we are currently experiencing.

We finished the first quarter as the US labor market continues its record-setting run. The US economy added over 400,000 new jobs for the past 11 months in a row. We are also experiencing the tightest labor market in history with approximately one unemployed person for every two job openings.

Employers are struggling to find talent and need all the help they can get to widen the reach of their job postings and find great matches. We're also witnessing high turnover in the US labor force with over four million workers quitting their jobs every month for the past nine months.

Job seekers are looking for better matches, higher wages and more flexible schedules in a market with over 60% more job openings than before the pandemic. This creates an opportunity for employers to use the best technology to find talent.

While rising labor costs, inflation rates and global tensions remain a concern among employers, we beleive that the combination of surging demand for talent, high turnover and low unemployment, means hiring will remain a top priority for employers in the months to come.

As demonstrated by the record high revenue per employer this quarter, the ZipRecruiter marketplace has never been so highly valued by our customers. We're excited about the progress we made over the course of Q1 and the increased revenue and adjusted EBITDA guidance provided here.

These are unique times and ZipRecruiter remains well equipped to succeed. The technology and brand investments we've been making for years continue to pay off and we believe ZipRecruiter is perfectly positioned to achieve our mission to actively connect people to their next great opportunity.

Now I'll turn it over to our President, David Travers, 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. ZipRecruiter's continued execution against our three strategic pillars keeps us well positioned to win. We made great progress in the first 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. Total paid employers increased to 150,000 in Q1 '22, up from 147,000 in the prior quarter.

Employer hiring needs remained at record levels, and with continued growth on our sales team and investment in high-performing marketing, we were able to grow paid employers from Q4 to Q1. This is in contrast with prior pre-pandemic years in which we typically see a modest seasonal decline.

Revenue per paid employer was an all-time high of $1,513 in Q1 '22, up 38% year-over-year. ZipRecruiter allows employers to pay more to get more with employers able to choose from a variety of premium options where they can opt-in to getting more value from the ZipRecruiter marketplace.

We have a multiyear track record of increasing revenue per paid employer, and we believe this trend will continue. Now I'll discuss our second pillar, increasing the number of job seekers in our marketplace. 2021 ended as one of the tightest labor markets in US history.

Q1 '22 continued the strength with only 0.5 unemployed persons for every job opening. Given this unique labor market backdrop, it's more important than ever to understand how job seekers feel about their employment prospects. In Q1 '22, we launched the ZipRecruiter Job Seeker confidence survey.

This nationally representative survey of US job seekers measures how optimistic or pessimistic they are about their ability to land jobs they want. Initial results indicate that job seeker confidence remains high. even as inflation climbs and interest rates rise.

The survey is now available on our website, and we plan to provide updates on a monthly basis. We believe it will be a valuable resource as we continue to track the labor market in 2022 and beyond. To compete in this new macroeconomic reality, ZipRecruiter has a simple product philosophy. We are a personal matchmaker.

The personification of this philosophy is Phil, an AI-driven personal recruiter who works with every job seeker. Phil learns who you are, curates great opportunities for you to consider and even pitches you to employers so they can recruit you. Our last letter described the growing impact of Phil on the job seeker experience.

Phil’s introduction to onboarding in Q4 2021 generated a 29% increase in onboarding completion rate. In Q1 '22, we introduced Phil into our Android mobile app to further improve our already number one rated job search mobile app. In Q1 '22, we also released several new TV spots featuring Phil.

These thank you Phil TV spots showcase the gratitude our job seekers feel after being matched with great job opportunities by our personal recruiter. Many job seekers find these stories as inspiring as we do. Finally, we recently deployed a UI improvement, enabling job seekers to more rapidly apply the jobs on our site.

This increased engagement with these jobs, resulting in a 13% increase in job seekers who completed applications. I'll conclude with progress around our third pillar, making our matching technology smarter over time.

Core to our mission of actively connecting people to their next great opportunity is bringing job seekers and employers together through smart AI-driven matching. In Q1 '22, we rolled out the newest version of our great match algorithm and saw immediate results.

Candidates scored as a great match were 10% more likely to receive a thumbs up under this latest version of the model. The software is learning, and this latest iteration introduced fundamental changes to our matching technology which enable deeper insight into exactly which job seeker’s qualifications or behaviors drive a better match rate.

Thanks to the combination of our personal recruiter Phil and our advancements with matching, we delivered over seven million great match candidates in Q1 '22 to employers. The progress we made in Q1 gives us greater confidence in our ability to execute going forward. We look forward to reporting successes over the course of 2022 and beyond.

Now I'll turn it over to our Chief Financial Officer, Tim Yarbrough, to talk through our first quarter results as well as our updated guidance for the second quarter and full year of 2022.

Tim?.

Thank you, Dave, and good afternoon, everyone. Q1 '22 was a strong start to what’s shaping up to be a great year. Our first quarter revenue of $227 million represented another record quarter, exceeding the high end of the guidance we provided in March. This represents 81% growth year-over-year and a 3% growth over the fourth quarter of 2021.

Paid employers were 150,000, representing a 31% increase year-over-year. The sequential increase from Q4 to Q1 is in contrast to historical pre-pandemic years in which we've seen modest quarter-over-quarter decreases following slower Q4 holiday period.

Revenue per paid employer increased by 38% versus Q1 2021 and 1% sequentially versus the prior quarter. Employers willingness to pay continue to grow in Q1 '22 as demand for talent remains high and the ZipRecruiter product continues to improve, offering more value for employers of all sizes.

GAAP net income was $8 million in the first quarter of 2022 compared to net income of $14 million in Q1 of the prior year. Adjusted EBITDA was $37 million compared to $20 million in the prior year first quarter. Adjusted EBITDA margins were 16% in both periods.

The increase in revenue was offset by an increase in our sales and marketing activities as we continue to invest in growing both sides of our marketplace. Cash and cash equivalents increased to $745 million as of March 31, 2022, compared to $135 million for the prior year first quarter and $255 million as of year-end.

The increase in cash and cash equivalents year-over-year and quarter-over-quarter was primarily due to earnings and a private offering of our senior notes due in 2030 totaling $550 million at a 5% coupon rate.

This was partially offset by the repurchase of Class A common stock at an aggregate cost of approximately $62 million, inclusive of the $50 million accelerated share repurchase program we announced in March.

After closing out another record quarter, we're pleased to provide guidance for the second quarter and raise our guidance for the full year in 2022. We expect $234 million of revenue in Q2 '22 at the midpoint, which translates to 28% year-over-year growth and reflects quarterly sequential growth similar to periods prior to the pandemic.

Our execution in Q1 has increased our confidence for the rest of 2022. We now estimate revenue for the full year 2022 of $915 million at the midpoint, representing 23% growth versus 2021. We observed a number of headwinds and tailwinds impacting the labor market, including increasing inflation, labor costs and interest rates.

While the hiring environment remains strong through Q1, our guidance reflects our belief that these will have a moderating effect, bringing the US hiring numbers to more traditional levels. We expect adjusted EBITDA of $37 million at the midpoint in Q2 '22 and $149 million at the midpoint for the full year 2022.

The full year guidance equates to an adjusted EBITDA margin of 16%, which is higher than both our prior guidance and our margin in 2021.

This is a reflection of our increased investment in our research and development teams who continue to drive product innovation as well as our sales and marketing expenses aimed to grow both sides of our marketplace. We're delighted to finish our first quarter in 2022 with such strong results.

We remain more excited than ever before that ZipRecruiter is at the center of transforming how people find work and we will continue to actively connect people to their next great opportunity. With that, we can now open the lines for questions.

Operator?.

[Operator instructions] Our first question will come from Mark Mahaney with Evercore ISI..

Okay. Let me throw a couple of questions out, please. First is, it does seem like you had a stronger than seasonally normal growth in new paid employers.

So could you just double-click on that and explain why you think you saw that? And were there any particular sources of those new employers verticals, economic levels or whatever?.

Hi Mark, we did see continued robust demand from employers, and we invested into that demand both in sales and in marketing. So we were able to continue to spend across a wide variety of different forms of media.

And at the same time, we increased our sales force by 11% and the combination of those factors plus meeting that demand is what led to the outperformance in the quarter..

Okay. And then you talked about having record high revenue per paid employer. And I think David, I may have asked you this last quarter, but I want to try it again.

The -- your thoughts on where that number can go long term? And if you want to set realistic expectations, what are the bogeys when you look in the market and out in the marketplace and you see where others maybe have been able to get that revenue? Or just give us a sense of that number is a record high now.

What would be a record high a few years from now?.

Yes. Great question. So we see this as average revenue per paid employer to be a long-term growth lever with a lot more room to run.

And to that end we compare the fact that we're delivering for our average customer against multiple hiring needs in any given quarter, whereas their alternatives are to pay more than they pay us, thousands of dollars -- a few thousand dollars each for a hire when you think about what the offline alternatives are, and we're also the high-value, low-cost option that we see based on our data from the online alternatives.

So ultimately, where does that go over time? Over time, we see offline alternatives charging 20% or more of first year salary to drive a hire and we believe we can do it better and faster than those offline alternatives today, and we can do it more cost efficiently at a higher margin. So I see it being a multiple.

We haven't laid out a specific number to the extent that's what you're pushing for. I don't have a specific number for you, but I think it's a multiple of where we're at today..

And then we will take our next question from Trevor Young with Barclays. Please go ahead..

Great.

I guess for David, any color on how quarterly paid employers progressed throughout the quarter? Was there any softness after the Russia-Ukraine conflict? And then how is April trending thus far?.

Yes. We haven't seen any trends that have been sort of disjointed from or any rapid acceleration or change in current events.

What we've -- instead, what we've seen is that since the super spike of activity we saw in the middle of last year in Q2 and Q3 as the economy reopened we've seen obviously a gradual easing in hiring activity, but it's been modest and steady, I would say, and there hasn't been any sort of discontiguous big change in the past month or 2..

That's really helpful. And just dovetailing on that.

Then on the 2Q guide, can you unpack a little bit how we think -- we should think about the quarterly paid employers versus revenue per, I think, in '21 and '19, you had a bit stronger sequential growth in the employer count? And then the letter, I think you noted a strong trends throughout 1Q or a March just now.

Just wondering how we should think about that sequential growth in quarterly paids?.

Yes. Trevor, this is Tim. So we're coming -- we're easing off of the super spike that we experienced last year that Dave already referred to. So this year, we see quarterly paid employer number being a bit more moderate in terms of growth sequentially and throughout the balance of the year.

So we see most of the growth this year coming from the revenue per paid employer..

[Operator Instructions] Our next question will come from Doug Anmuth with JPMorgan. Please go ahead..

This is David on for Doug. When you guys talk about the job market the normalization and thinking through how the job market has been balanced right now. I guess, in your view on what's impacting the outlook is that return to pre-pandemic levels.

Is there a scenario where that can potentially stay in balance more on a normal basis? And if that were to be the case, like what would be some of the drivers that can unsustain that level of imbalance going forward?.

Well, we definitely see -- this is Ian.

We definitely see a number of macroeconomic variables that have the potentiality to impact the labor market right now and whether you're talking about inflation or rising labor costs or the war in the Ukraine, and it's hard to predict how these variables will either directly impact or as is the case with the war in Ukraine, say, the cost of transportation indirectly impact how businesses are operating, and therefore, how they're hiring.

Certainly, it is difficult to have a crystal ball. And when we assess these various situations. We are -- we have an imperfect view on what their ultimate impact will be. So it's possible that we will be overestimating their impact or underestimating their impact.

But what we're trying to do with the guidance we're giving you is give you our best guess as to what the impact will be based on the information we already have at our disposal..

Yes, this is Dave. Just to pile on there, exactly to Ian's point. In the range of uncertainty about what might happen, I think the scenario you're talking about where we stay at this super tight labor market is possible. That's not embedded in our guide. So we would be too conservative if that is the case.

But what would drive that is the imbalance between the slack in the labor market represented by unemployed folks and those actively looking for work. We gave some data from the - citing publicly available data in the letter there about the 0.5 unemployed persons per job opening right now.

And so if that remains the case, which it very well could, then we would expect the labor market would remain quite tight, and job openings might remain high because there's a backlog of jobs still to be filled as new jobs come open.

So that's in the wide range of scenarios we're prepared for and that our teams are nimble and prepared for, that is one of them. And just as on the other side of the ledger, if things cool off faster than expected, we're completely ready for that as well..

Got it. And as a follow-on question to that.

I mean what would be the -- in your view, what would be the biggest driver of job market normalization? Do you think it's more businesses not needing as many jobs as before due to inflationary or the consumer discretion and pressure? Or do you think it's -- it will be more driven by more job seekers coming to the market?.

So this is Dave again. So from a supply and demand standpoint, it could be either. What's most notable now in the market versus pre-pandemic is the fact that a bunch of job seeker -- a bunch of labor -- potential labors out there still haven't come back into the market. We're still a few million short.

And so the labor market and the economy would benefit from those folks coming back into the labor market. So that's on the supply side of things. That's what we most clearly see is somewhat easing the tightness.

But certainly, if some of these macroeconomic factors come to bear, it could occur -- change could occur on the demand side as well, which would be businesses reducing their need for labor based on softness in the macroeconomic environment. So we've seen a little bit of both of those things occurring.

But overall, the need for labor has still been outstripping the growing supply as people come back to work..

Yes, this is Ian. I'd just add that you had the shutdown of the economy as it related to COVID last year, and then you had the super spike of demand from employers as effectively economy reopen and businesses had to hire back up. And they never got back to where they were pre-COVID from a staffing level standpoint.

And then on top of that, you now had your ninth consecutive month of 4 million people quitting their jobs. So I think we're a few months out, at least from a true reversion to the normalized economy that we had experienced back in, say, 2019. But we are definitely seeing signs of the softening has been referenced by both Dave and Tim.

So we have baked that into our forecast..

Our next question will come from Eric Sheridan with Goldman Sachs. Please go ahead..

I know we've talked about this over the last couple of quarters, but I want to come back to the point you made in the prepared remarks driving deeper levels of the AI into the platform. Any greater sense we can get about how deep you are in the investment cycle on the AI side.

And it seems like you're starting to get some increased momentum on matches and what you're able to show folks.

How should we think about that as a driver irrespective of the broader labor market or the macro environment just independent and organic of how those investments can drive greater levels of retention, engagement and volume?.

Well, I mean, certainly core to our strategy of building a matchmaker and not a job board is the infusion of AI into the job market and into our product.

And the face of that AI is Phil and everywhere we've experimented with Phil to date, Phil has been a driver of engagement, and ultimately, that engagement leads to an increase in the amount of data we have to inform the algorithms of the bright matches between employers and job seekers, that is why the software keeps learning.

We have a data advantage as it relates to the deployment of AI and the utilization of AI to play that matchmaker role. We're still in the early phases of it. We're still rolling Phil out across the entirety of our product, and we're also expanding the Phil feature set. You'll be hearing more about Phil and subsequent earnings calls.

However, Clearly, this is our strategy, and it will be key to both our near-term and long-term success..

Yes. Eric, this is Dave. The pile on about the investment cycle part of that. We continue to believe we're in the early stages of how AI is going to transform our business despite the significant investments and returns we've already seen in our product.

So to put it another way, we remain very confident in our long-term 30% EBITDA margins, but the least likely place where operating leverage is going to come from is R&D..

Our next question will come from Aaron Kessler with Raymond James. Please go ahead..

This is Alex Bolton on for Aaron Kessler.

I was wondering if you could touch on, I guess, the progress of kind of the sales and marketing effort, I guess, on both sides of the marketplace and kind of further sales and marketing investments you're planning to make, I guess, while job openings remain at record highs?.

a, we increased our sales and marketing investment overall. As we referenced earlier, we increased our sales headcount, specifically across multiple teams that are servicing new clients, existing clients, smaller businesses, larger businesses, et cetera, et cetera. It's working right now.

The return on those investments and the rate at which those teams are executing are very good. And as long as that's the case, we're going to keep investing.

And so that is the sort of philosophical bent we bring to it, and we're going to continue to innovate and try new things as we have over the past new quarter in addition to doubling down on things that are working, and we'll continue to measure. And as long as it's working, we'll double down again..

Okay. Great. And then maybe just 1 follow-up. I guess I saw some leverage in G&A sequentially and, I guess, maybe a reduction in G&A ex stock-based compensation.

Can you touch on that and maybe what we should expect?.

Yes. I think where you see G&A coming in -- this is Tim. We see G&A coming in for Q1 is a bit more of a steady state that we intend to stay at for the foreseeable future. So there was little savings sequentially versus Q4, but Q1, I think, is a pretty good point for us..

And our final question is a follow-up from Mark Mahaney with Evercore..

I'm sorry, I got cut off earlier. Maybe Avaya could hire a few more people. Two questions talk about increasing, you talked about increasing marketing spend that was in kind of your prepared comments for the balance of the year.

So what's in that, Tim?.

Yes. So it's a combination of a few things. So we're -- we've been talking a lot about Phil over the past couple of quarters. And so with the product innovation comes a concerted marketing effort as well. Over the course of Q1, you probably have seen a couple of new TV spots there as an example.

And so what you're seeing in our guidance is for that competitor, we're a fully funded plan where we're continuing to lay the groundwork for Phil as well as building the 80-plus percent brand awareness that we have on the employer side. And all of that is in addition to robust head count growth in our sales and marketing teams as well..

Okay. And then, Ian, I wonder if I could ask you kind of a philosophical question about employment trends or hiring trends, you love this day to day.

What do you think is really driving this great resignation that 4 million, I think it was a month that are just exiting the workforce and that has this material ripple -- greater than ripple impact on the rest of the -- on the economy.

So just your thoughts on why that? And I know other people have written about it, but you're in a day in and day out.

Why do you think that's occurring?.

Well, it seems from my vantage point and from the survey we did of over 2,000 job seekers who got hired in the that the #1 thing that job seekers are looking for right now, 62% of them said they're either looking for hybrid or fully remote work. Fully remote work is the #1 search term on ZipRecruiter 2-day and all of 2022.

And this desire to continue in a flexible work style that people discovered during the post-COVID recovery seems to be driving a lot of the job market.

And when you look at that survey of those 2,000 people who got hired in the last 6 months, one of the really telling data points that jumps off the page is 40% of them change jobs to jobs that offered greater flexibility. So it looks like job seekers are voting with their feet right now.

We're entering a new and interesting period where a lot of employers across America are compelling workforces to return to the office full time. And so we're going to have to see whether that abates or aggravates the rate at which the currently employed are quitting their jobs and looking for new work..

Okay. All right. Thanks a lot Ian..

And that will conclude today's conference. Thank you for your participation, and you may now disconnect..