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    ZIPRECRUITER (ZIP)

    Q3 2023 Earnings Summary

    Reported on Jan 27, 2025 (After Market Close)
    Pre-Earnings Price$11.40Last close (Nov 8, 2023)
    Post-Earnings Price$11.80Open (Nov 9, 2023)
    Price Change
    $0.40(+3.51%)
    • Significant growth in organic job seekers, with three consecutive quarters of over 40% year-over-year growth in organic visits, driven by long-term investments in the company's AI personal assistant Phil, and brand awareness increasing to over 80%, positions ZipRecruiter well for future growth as the labor market recovers.
    • The campaign optimization solution for enterprise customers is showing extremely promising results, with campaigns using the solution being 40% more likely to achieve their targets than those that were manually managed, potentially driving increased revenue from enterprise customers as adoption grows.
    • Despite the challenging macroeconomic environment, ZipRecruiter achieved an all-time high adjusted EBITDA margin of 35% in Q3, demonstrating strong financial strength and operational efficiency, and remains confident in achieving long-term adjusted EBITDA margins of 30% as the company scales.
    • Continued Revenue Declines and Steeper Sequential Declines: ZipRecruiter has not seen any return to normal seasonality and expects a sequential revenue decline that is steeper than in previous Q4s, indicating ongoing revenue challenges.
    • Reduced Hiring Demand from SMBs Affecting Paid Employers: The vast majority of ZipRecruiter's paid employers are small and medium-sized businesses, which tend to hire less during the holiday season. This is expected to result in a material tick down in paid employers in Q4, potentially impacting revenue.
    • Employer Uncertainty Causing Reluctance in Hiring: Employers are expressing profound uncertainty about the economic outlook, leading them to hesitate in investing in long-term hiring, which may negatively affect ZipRecruiter's business as employers delay or reduce recruiting activities.
    1. Revenue Trends and Outlook
      Q: How did revenue trend in Q3 and into Q4?
      A: In Q3, revenue trended roughly in line to slightly down towards the end, yet we finished a couple of million dollars better than our guidance . We haven't seen a return to normal seasonality and anticipate a sequential decline steeper than previous Q4s, reflecting current conditions .

    2. Margin Philosophy and Outlook
      Q: Is there a target margin level during this down cycle?
      A: We don't have a specific target margin. Q3 adjusted EBITDA margin was strong at 35%, driven by investment opportunities we saw . While margins may fluctuate based on our response to the environment, we remain confident in our long-term adjusted EBITDA margin of 30% as we grow and scale .

    3. Capital Return Strategy
      Q: Will excess cash above $250M be returned to investors?
      A: Our capital allocation strategy prioritizes organic investments first; we're cash flow positive and well-funded . We've been actively repurchasing shares opportunistically, approaching it with a long-term mindset, and will continue to do so when we see dislocations in the stock price .

    4. Business Outlook and Fed Impact
      Q: Do employers need Fed rate easing to increase hiring plans?
      A: Employers' uncertainty about the outlook is profound, making them hesitant to invest long term despite strong business results . Increased confidence—whether through Fed actions or improved sentiment—is needed for employers to ramp up hiring .

    5. Paid Employers and Revenue Dynamics
      Q: How will paid employers and revenue per paid employer trend in Q4?
      A: Typically, paid employers decline more materially in Q4 as SMBs hire less, while revenue per paid employer increases due to a mix shift toward enterprises . Although we haven't seen typical seasonality lately, we expect this pattern to hold this time .

    6. OpEx Seasonality and R&D Expenses
      Q: Can you refresh us on OpEx seasonality and explain lower R&D expenses?
      A: Historically, operating expenses—especially in sales and marketing—follow hiring market seasonality, but we haven't seen typical patterns for a while . R&D expenses decreased due to personnel reductions made in Q2, with the full impact reflected in Q3 .

    7. Job Seeker Growth and Platform Impact
      Q: What impact does growing job seekers have on the platform?
      A: We've had our third consecutive quarter of organic job seeker growth . This growth enhances our marketplace's liquidity, improves our product, and validates our long-term strategy .

    8. Job Seekers' Engagement Channels
      Q: Where are job seekers engaging—mobile app, web, or desktop?
      A: Job seeking is predominantly a mobile activity; desktop isn't a major factor . Job seekers access us via mobile web and mobile app, benefiting from our AI assistant "Phil" and high brand awareness .

    9. Campaign Optimization Adoption
      Q: Is the campaign optimization solution widely available to enterprises?
      A: It's largely available to larger enterprises . The solution depends on agreeing on specific campaign goals with employers, and early results are extremely promising as more employers hit their targets .

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