Q3 2024 Earnings Summary
- Enterprise customers are showing robustness and represent a significant growth opportunity for ZipRecruiter. Enterprise customers contributed 22% of revenue and were more robust than SMBs during the quarter. The company is very optimistic about further growth in this segment.
- ZipRecruiter's significant growth in job seeker traffic surpasses competitors, positioning the company well for future revenue gains when hiring demand recovers. Despite the overall drop in the quit rate to under 2%, ZipRecruiter has seen job seeker growth both on an absolute basis and relative outperformance of any of our large competitors.
- Strong brand awareness is driving employers to return to ZipRecruiter without additional marketing efforts, especially among small businesses with intermittent hiring needs. This could lead to lower marketing and sales expenses and improved margins over time.
- Prolonged labor market downturn and reduced hiring demand from employers are negatively impacting ZipRecruiter's revenue and profitability. The company has experienced 26 consecutive months of year-over-year declines in hires, and the quit rate has fallen from 3% to under 2%, contributing to reduced hiring activity.
- New products and acquisitions may not materially contribute to revenue in the near term, limiting potential growth. Recent products like Resume Database and ZipIntro, as well as the Breakroom acquisition, are expected to "not be overly material to the full year results" in 2025.
- Weakness in key verticals such as transportation, storage, travel, leisure, finance, and technology may hinder revenue recovery. These sectors have shown "softer performance", which could affect ZipRecruiter's overall revenue.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q4 2024 | no prior guidance | $107 million | no prior guidance |
Adjusted EBITDA | Q4 2024 | no prior guidance | $9 million | no prior guidance |
Adjusted EBITDA margin | Q4 2024 | no prior guidance | 8% | no prior guidance |
Adjusted EBITDA margin | FY 2024 | low to mid-teens | 16% | raised |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Enterprise | Previously discussed as underpenetrated with strong strategic investments including ATS integrations and partnerships (Q1 2024 , Q4 2023 ). | Highlighted as showing robust performance with a 22% revenue percentage from performance marketing and enterprise customers representing approximately 50% of the market opportunity (Q3 2024 ). | Positive improvement: The sentiment has shifted from cautious expansion in the enterprise segment to greater confidence as enterprises demonstrate resilience, indicating a more favorable outlook. |
Job Seeker Traffic Growth | Consistently emphasized over multiple periods with very strong organic growth metrics—organic increases of 65% in Q1 2024 and impressive market share gains through superior engagement and visits (Q1 2024 , Q2 2024 ). | Reported a 21% year-over-year increase in total U.S. web traffic and a 23% boost in organic job seeker traffic, continuing to outperform competitors by a significant margin (Q3 2024 ). | Sustained positive momentum: The growth remains strong and consistent, solidifying the company’s competitive positioning in the job seeker market. |
Brand Awareness | Previously noted as a longstanding asset with around 80% aided awareness leading to reduced marketing spend by generating significant organic traffic (Q1 2024 , Q4 2023 ). | Continues to be highlighted as achieving over 80% brand awareness, translating into a surge in organic business and reduced reliance on paid marketing (Q3 2024 ). | Consistent strength: The enduring brand recognition is maintained, supporting organic growth and operational efficiency, which is viewed as a major long-term advantage. |
Labor Market Conditions | Historically described as challenging with muted hiring activity, the “Big Stay” phenomenon and low quit rates impacting revenue and employer engagement (Q1 2024 , Q2 2024 ). | The market is identified as experiencing a prolonged downturn with hiring activity declining for 26 consecutive months and a notably reduced quit rate, adding to uncertainty (Q3 2024 ). | Persistently negative near-term outlook: Labor market challenges continue to weigh on hiring demand, maintaining a cautious sentiment despite some signs of resilience on the enterprise side. |
Sector-Specific Performance | Earlier calls emphasized technology as a hard-hit sector while also noting differentiated performance across sectors, with mixed signals from finance, education, and government (Q1 2024 , Q4 2023 ). | In Q3 2024, performance in sectors such as transportation, storage, travel and leisure is described as weaker, whereas finance and technology are showing middle-range performance (Q3 2024 ). | Nuanced and mixed: While technology remains under pressure, some sectors display relative stability, indicating ongoing sector-specific challenges that require targeted strategies. |
New Product Introductions | In earlier periods, there was minimal or no discussion of new products (Q1 2024 did not mention them, Q2 2024 had initial conversation on ZipIntro and Breakroom) (Q1 2024 [no mention], Q2 2024 ). | Q3 2024 marked a significant focus on new initiatives such as ZipIntro, a next-generation Resume Database, and the acquisition of Breakroom, with these products showing promising early metrics (Q3 2024 ). | Emerging focus: The introduction and scaling of innovative products indicate a strategic pivot to diversify services, suggesting potential for significant long-term impact despite an expected material revenue contribution only later (2025+). |
Operational Efficiency and Margin Improvement | Previous periods showcased disciplined cost management with adjusted EBITDA margins improving modestly (e.g., 17% in Q1 2024 , 23% in Q2 2024 , and notable cost reductions in Q4 2023 ). | Q3 2024 reflects a lower adjusted EBITDA margin of 13% due to revenue pressures, though the company reiterates its long-term target of 30% and maintains its focus on flexible, cost-efficient operations (Q3 2024 ). | Ongoing focus amid pressure: Despite margin compression due to revenue declines, the company remains committed to operational discipline with a long-term view that underscores efficiency improvements as foundational for future recovery. |
Macro-Economic Headwinds | Consistently noted as a major drag on revenue, with previous discussions highlighting strong impacts on hiring demand and revenue declines (Q1 2024 , Q2 2024 , Q4 2023 ). | In Q3 2024, macroeconomic issues are again cited as central factors driving a 25% revenue decline, largely due to reduced SMB demand and continuing labor market woes (Q3 2024 ). | Persistent challenge: The negative impact of broader macroeconomic headwinds continues unabated across each period, underscoring a significant near-term risk to revenue performance. |
AI and Technology Investments | Earlier discussions centered on enhancing matching algorithms and the transformational impact of tools like “Phil” on engagement, with a focus on long-term capabilities rather than immediate revenue (Q1 2024 , Q2 2024 ). | Q3 2024 reaffirms investments in AI and technology that are improving job seeker engagement and overall matching accuracy, though the near-term revenue contribution of these initiatives remains limited (Q3 2024 ). | Steady strategic commitment: Investments in AI remain a cornerstone of long-term growth strategy, with enhanced product capabilities expected to yield benefits over time despite minimal immediate revenue impact. |
Visibility and Uncertainty | Prior calls consistently reflected low market visibility and uncertainty about recovery timing, with cautious forward guidance and acknowledgment of atypical seasonality (Q1 2024 , Q2 2024 , Q4 2023 ). | Q3 2024 maintains caution with similar themes of uncertainty driven by the labor market downturn and seasonal softness, leading to conservative near-term revenue guidance (Q3 2024 ). | Continued unpredictability: Visibility remains low and uncertainty high, reflecting the volatile macro environment and reinforcing the need for agile strategic planning in the near term. |
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Labor Market Recovery
Q: When will the hiring downturn end and how will it unfold?
A: Ian Siegel explained that for 26 months in a row, hires have declined year-over-year due to a significant drop in the quit rate—from 3% in January 2022 to under 2% most recently, a fall of more than one-third. Factors like employees holding onto top or above-market salaries, perks, and low-interest mortgages contribute to lower quitting. He believes that as the economy returns to normal, hiring will resume, and over the long term, the health of the U.S. labor market will lead to a more balanced future. -
Job Seeker Traffic Growth
Q: What tailwinds come from increased job seeker traffic?
A: David Travers noted that growing job seeker traffic strengthens their business by improving new business acquisition, matching technology, customer retention, and overall value proposition. Being the fastest-growing job seeker destination is a forward-looking indicator, and every major revenue move in the online job space has been preceded by a major move in job seeker market share. -
Enterprise Customers vs SMBs
Q: How are enterprise customers performing compared to SMBs?
A: Ian Siegel stated that enterprise customers were more robust than SMBs during the quarter, with revenue from performance marketing (driven by enterprises) ticking up to 22%. They see strong potential for growth, as enterprises represent roughly 50% of the U.S. market opportunity, and they're optimistic about further expanding in this segment. -
Q4 Guidance and Seasonality
Q: Does Q4 guidance reflect typical seasonal slowdown?
A: Timothy Yarbrough explained that the Q4 guidance accounts for a seasonal decline, primarily from SMBs—a typical pattern—and also considers the continued softness of the labor market. -
New Products and Monetization
Q: What's the timeline for launching Breakroom in the U.S., and how will new products be monetized?
A: David Travers said they're excited about integrating Breakroom, which is performing well in the UK, and plan to launch it in the U.S. in 2025. Ian Siegel added that new products like the Resume Database and ZipIntro have been deployed, and while they will contribute revenue over 2025, their impact won't be overly material to full-year results but will enhance customer satisfaction. -
Margin Profile and Investments
Q: How do you balance investments to maintain low to mid-teens margins?
A: Timothy Yarbrough stated their philosophy hasn't changed. They've responded to the dynamic environment by adjusting accordingly; over the year, they've delivered margins in the low to mid-teens, consistent with guidance, focusing on long-term performance. -
Employers Returning Without Marketing
Q: Are employers returning without marketing efforts, and is this a growing trend?
A: David Travers noted that with brand awareness above 80% on both job seeker and employer sides, they see significant numbers of employers returning as their hiring needs come back, especially in the SMB segment. While they continue to invest in branding, over time, marketing and sales expenses come down as businesses mature, giving them confidence in their 30% long-term adjusted EBITDA target since they won't need to scale go-to-market expenses as revenue scales. -
Vertical Performance
Q: Any pockets of strength or softness in verticals?
A: David Travers mentioned that while their business mirrors the overall U.S. economy, healthcare remained fairly robust despite softness, serving as a notable bright spot. On the negative side, transportation, storage, travel, and leisure were weaker, and finance and technology, which saw early weakness in mid-2022, were in between.