All right, we'll go ahead and get started. I'm Justin Patterson. I lead the Internet Research Team. I'm excited to have Tim Yarbrough from ZipRecruiter with us today.
Hello.
Tim, welcome back.
Thank you very much.
Yeah, so to kick things off, Tim, could you provide just a brief overview for those who aren't familiar with it? Just what ZipRecruiter does, what problems you're solving for job seekers and employers.
Yep. ZipRecruiter is a two-sided jobs marketplace. We bring together both employers and job seekers using matching technology. ZipRecruiter was started back in 2010 by Ian Siegel, our CEO, and a couple of his co-founders. They were all working at separate tech companies trying to solve this onerous problem of hiring people. They would post a job in many different avenues. This is back in the days of Craigslist and Monster and all of those other job boards. They would post these jobs in many different places, and then it would come a lot of different resumes that they would print out and have to go through. They said, surely there has to be a different way.
What they wanted to do was create a button where you can press one button, and it would send your job across the internet, and all of the applications would come to you. And ZipRecruiter was born.
Awesome. Thanks for that, Tim. Let's step back and just talk about the macro picture. I know you've called it the Great Hiring Freeze for the past few years. I like to think it's just a middle school dance. Like, can somebody make a move within there?
Nobody's made the first move yet.
When you kind of step back and just look at the market you're seeing today, it sounds like you're actually a little more confident off this last quarter that things are starting to open up a little bit. Talk a little bit more about just what you're seeing today and what gives you this confidence heading into 2025.
Yeah, so the hiring cycle has been pretty interesting over the last couple of years. At the onset of COVID, unsurprisingly, we saw all of our metrics just fall off a cliff because the world was shutting down. I think to everybody's great surprise, things started to recover a bit faster than expected. Within a couple of months, we saw signs of life from our employers. Very soon, we were off into the races. Through the course of 2021 and then through the mid-part of 2022, we saw hiring just be white hot in the US. Really, since the mid-part of 2022, we've seen a gradual cooling of that. We are now, as of December, 28 months into year-over-year monthly declines in the hiring rate, as put out by the BLS.
That is a duration that is longer than we have seen even going back to 2008 during the Great Recession back then. We are in a very long cycle right now to the downside. Over the course of the last few months, really starting through December and into January and into February, we saw the number of paid employers in our marketplace start to come back with a little bit more higher velocity than we would typically see during a seasonally downtime. Our paid employer trends have been a bit better than they have been in the years past. All of that is showing up in our Q1 guidance of being down sequentially 2%. That is contrasted with the last two years where we were down 10%, 13%. We are seeing something different this time around.
Got it. Within that different thing you're seeing this time around, where are you starting to see that? Is that more enterprise? Is that SMB? Is it particular verticals? Just put a finer point on that.
Yeah, so it's not along any particular vertical. The strength that we've seen is primarily in SMBs, but enterprises are perking up as well. One of the things that you've seen is our Q4 paid employer numbers were a little bit higher than consensus out there. That's where you see the SMB strength showing up.
Got it. Got it. Stepping back, you've been pretty clear that you're going to invest when you see a cycle. You're going to invest in paid marketing, which brings more people to the site, and presumably some employers. How are you just gauging that return on marketing spend and making sure you're sizing that correctly so you're not necessarily getting over your skis from a P&L perspective?
Yes. We are scientists when it comes to marketing and not artists. Over time, we've demonstrated that we could flex our marketing spend up and down pretty quickly. A lot of that is because we have strategically committed very little of our sales and marketing spend to future periods. That gives us a tremendous amount of flexibility. We're also multi-channeled in our marketing approach as well. We can push and pull between different avenues like direct mail or TV or podcasts or digital channels, all of which have varying degrees of responsiveness to us being able to pull in and pull out. The other thing I'll say is when we measure the efficiency of our marketing spend, we do it over a couple of different channels. One would be a longer-term lifetime value over the customer acquisition cost of an acquired cohort of employers.
That is something that we can do reliably because we have now 15 years of data that we can draw on and draw pretty straight lines between the actual behavior we are observing with employers and what we expect to happen to the future. We can also look at more shorter-term cash-on-cash returns over multi-week periods. Lastly, we look at the impact of our marketing over the brand recognition that we have achieved over time. Over the course of our life, we have climbed up to 80% aided brand awareness on both sides of our marketplace. That is something that we keep a close eye on.
I'm glad you brought up the marketplace point because you are servicing two sides, the job seeker and the employer. Let's stick with the job seeker side so far. You've seen some healthy growth there. What's your hypothesis of just as job seekers come in there, what that really does to your business?
The job seeker side of our marketplace is really the supply. That's the lifeblood of our marketplace. In this kind of uncertain time of hiring, we've seen we've been pleasantly surprised by the spike in job seeker growth that we've achieved. Over the last quarter, we were up 15% year-over-year in total traffic. That's outstripping all of our competition by 10-plus percentage points. If you look at just the organic search, organic traffic over the year was 30% up in 2024 versus 2023. We're pretty excited about that. All of that just means that there's more inventory for the demand side of the equation or the employer side of the equation when it's time to hire.
Right. The scientists are not just on the marketing side. You have a very built-out R&D team within there.
Absolutely.
When you see those job seekers come on, what type of product innovation do you have that's in place to help them find better results over time? I know there's been ZipIntro and some other capabilities here.
Yeah, so we'll go across, we'll go through a couple of them. One of the things that job seekers have really appreciated about our service as opposed to others out there is they are greeted at the front door by Phil. Phil is our Siri, Alexa, AI persona. If you go to ziprecruiter.com, you'll see him smiling at you and asking you what you want to do for a living. When job seekers go through the Phil onboarding process, it's a plain language, friendly way of being introduced into your job seeking journey, which is otherwise a pretty soul-crushing experience. Rather than sending a resume out into the void and never hearing back, you get feedback from Phil saying, "Hey, good news. Your resume has been viewed. Keep it up." Also, if you like this job, you should also look at this other job.
Phil is providing a face to the AI engine that's powering all the job recommendations to our job seekers. That's something that job seekers find really reassuring. The other thing that's really interesting here is the more conversational Phil gets, and he has gotten quite a lot more conversational through AI, the more data points we're able to glean from job seekers that makes our matching technology even better. One of the big competitive advantages we have in this space is that we're sitting on this trove of billions of data points of interactions between job seekers and employers. All of that is food for our matching algorithms. You wrap all of that up into a friendly face of Phil, and job seekers love it.
One of the pieces of evidence would be that we have the number one job seeker app in the marketplace.
That's great. I think another one of your big innovations recently, you've been working on just improving the resume experience. Talk about just what that new ZipIntro interface looks like and what your thesis is for what that does for both the job seeker and the paid employer side.
Yeah. So the resume database, it's an established product that's been in the market for quite a while. We're not the only ones that had one. What we did was launch a significant overhaul to how the product works. We introduced different ways of semantically searching through our large corpus of job seekers so that when you do make a search as an employer, you get instant results very immediately and accurately. If you're searching for the thing you want, you will get the thing you want. I know that sounds pretty pedestrian, but believe me, the other products don't do that. Employers love it. The number of new employers that are using it is up double digits already. The number of resume unlocks, which is how an employer interacts with the resume database, is also up by double digits.
That helps employers find the right candidates faster, which of course is good for the candidates as well. That's one of our big flagship employer products. The other one that you hinted at before was ZipIntro. ZipIntro is a video-based platform that allows an employer to go from posting a job to actually talking with people in a matter of hours. They sit down, fill out the job, post the job, and then sign up for a ZipIntro session. On the back end, our product is scouring our base of job seekers, finding candidates that we think are good matches, sending those matches to the employer that they can vet and say, "Yes, no, I want to talk to these people." The job seekers then queue up.
Like I said, within a couple of hours, they could be sitting and having real conversations with real job seekers. This is a great experience for employers because all they want to do is hire somebody fast. It's a great experience for job seekers because they just want to talk to somebody. When we do exit polling, we found that 90% of job seekers said that they would absolutely do this again. The quality of matches that our employers are getting are roughly 3x what they would get otherwise through the ZipIntro product. That's another example, another tool that we're giving to our employers so that they can find better matches faster.
Got it. Lastly, before I jump to the employer side, you've got one more kind of big product update, albeit through just tuck-in acquisition, Breakroom. We'd love to hear you just talk about what the Breakroom product does and what sort of internationally and how you're thinking about scaling that up domestically.
Yeah. Breakroom is an acquisition we did in the middle of last year, a smaller acquisition out of the U.K. Great team that we were very happy to bring on. What this is, is a product that gives job seekers real-life information about what it's like to work for specific employers. This is focused on frontline workers, so those that are in the fast food business or hospitality, places like that. What this does, it's not subject information that it's pulling out, but rather objective data. Like if you ask for 10 hours of work, how often do you get the schedule that you request? How many hours per week are you spending on your feet? What is it really like to work in these places?
What we're doing is getting this information from actual employees of these companies and then turning that around into actual insights for other job seekers to view what it's like to work for that place. It gives them a lot of great information. In turn, as we build the number of ratings and recommendations that we have from employers, we can turn that around into an employer page. In the last quarter, we have 1,500 employer pages and counting right now. That provides even more tools for job seekers to assess what it's really like to work for specific places.
Great. Switching over to the employer side of the equation, talk about just the different go-to-market strategies you have here, since you've got SMBs on one side, enterprise on the other, very different sales motions.
Very different sales motions. Yeah. Of our total revenue, SMBs comprise roughly 80%, with the balance being larger enterprises. SMBs, they tend to have they do not have their own applicant tracking system. For examples, I would cite Taleo or iCIMS or Workday. These are larger pieces of software that more experienced talent acquisition teams would use to manage their hiring. Instead, they come to places like ZipRecruiter where they pay us on a per job, per day basis or on a monthly basis for a certain number of job slots. They sign into the dashboard that we give them, and they can see all their job postings. They can see their candidates, and they can rate them up or down and invite them to apply or invite a ZipIntro session, et cetera.
It's a great solution because the SMBs want price certainty, and they oftentimes have just one or two jobs to hire for. They'll pay us on a per job, per day basis. It's a really hand-in-glove solution for SMBs. On the enterprise side, we have larger enterprises that have more sustaining hiring needs. They have their own applicant tracking system, and they want to buy on a per-click basis. It's really performance-based. That cost per click can vary based on the job and the location of it, supply and demand at its finest. That comprises roughly 20% of our revenue. The go-to-market motion between those two segments is quite different.
We have an inside sales team that works our small, medium-sized business customer leads that come in, and then a longer sale-minded enterprise sales team that goes after the 20% as well. Functionally, both sides of the marketplace work very similar. No matter how it's priced, it's an auction-based product. We have the same gross margins, high in 90% gross margins on both sides. For both sides of the marketplace, the more you pay, whether you're an SMB or an enterprise, the more you get.
Got it. To go full circle here, I mean, you're investing in product growth, which should benefit both the job seeker and the employer side. You're starting to invest in marketing coming out of this great hiring freeze. Talk about just where your market share is today and what you think that could look like as we start to see this recovery happen.
This is a big market. When you look at hiring overall, inclusive of offline recruiting solutions, we're looking at $250 billion-$300 billion of TAMs. Really big. Of that, the online portion in which we play directly is only $15 billion. A comparatively small percentage. Put simply, software has not eaten this part of the world yet, and we feel very good that it will. Of that $15 billion of TAM, there are really three main players. There's ZipRecruiter, LinkedIn, and Indeed. Our approach is fundamentally different from, and then others also have a very long tail, many of whom are partners of ours. Our approach to solving this problem is fundamentally different. Rather than being a social network or verticalized search, like I said before, we're focusing on driving connections on a very personal basis between job seekers and employers.
That's evidenced by the product set that we already talked about. Overall, we're pretty excited about the category because, like I said, the 15 is a small but faster-growing part of the whole picture. Over time, we think this market will gravitate more towards the tech-enabled solutions like ours. Of those tech-enabled solutions, there's just a few that have what it takes to really scale and win in the long run. That's the 80% aided brand awareness that I mentioned before. That's the fact that we have this guarded set of proprietary data that any matching technology would need in order to provide better matching over time.
I mean, to that point, I know we always look at it as revenue per paid employer, even though that's somewhat of an output, a function of just the SMB versus enterprise mix. It seems like if I look at that and look at the value you're providing to these employers and the job seekers, there's a bit of a disconnect in there. What do you think that just from the CFO perspective, what do you think that means for long-term pricing? Where could that number theoretically go to?
We feel very good about the trajectory of revenue per employer. We ended up in Q4 at $1,900. It is hard to get an apples-to-apples comparison of that price point with others because there are different pricing mechanisms out there. If you take, for example, a given offline staffing firm, they will often charge a flat % of first-year salary. That number alone is much higher than the $1,900 per employer per quarter because each employer will have multiple jobs. There is quite a bit of distance between where we are today and where we can go. Over time, if you zoom out and look at our revenue per paid employer, it has been scaling up reliably up and to the right over time. That is true when you look at it aggregated on a sequential basis.
That is also true when you look at it on an employer cohort basis as well. When you look at that information, which we disclose annually in our case, you can see that every year one, revenue per employer on an annual basis has been going up reliably over time. As that cohort matures and grows, that number also grows. A couple of exceptions over the last couple of years, as we've seen some softness in the market, but the overall trends are pretty clear to me.
Got it. Got it. If I kind of rewind the clock, your revenue base before the great hiring freeze was significantly higher. You were north of a 20% margin business. If I look at where guidance is for today, it sounds like you're kind of managing toward mid-single-digit EBITDA margins.
Yes.
As we see this recovery take place, how do you think about just the timeline to get back to where you used to be?
A lot of that will depend on the shape of the recovery. The mid-single digits that we're talking about right now for Q1, and in our earnings call, we presented a view that the positive trends that we're seeing right now in Q1, that's embedded in our guidance, plus the positive signs that we're seeing anecdotally in the data, all that can materialize into a pretty solid recovery throughout the course of the year. In that type of scenario, we'd be happy to manage to something like a mid-single digit EBITDA margin because we invest where there's strength. That's something that we've shown in the past.
The opposite is also true. To the extent that the market does deteriorate, we can also be just as flexible on the downside and produce higher adjusted EBITDA margins. The reason why we're happy with Q1 adjusted EBITDA margins of 5% in this example is because we're led by our data that we see. This is not a top-down metric that we manage to, but it's a bottoms-up formulation based on the opportunity in front of us.
Right. Draining the drain, growth is back, you're throwing off free cash flow. How do you think about just the incremental reinvestment areas? Does it go right back to marketing, or do you start to look at some more tuck-in opportunities since you do have a good track record there?
Yes. Yeah, I think our eyes are wide open for both of those. Our first priority, far and away, is looking at more organic investment. We're fully funded, and we're loaded and ready to go on that one. Secondly, we are looking at M&A opportunities all the time. We haven't been terribly acquisitive, just small ones here and there, but our eyes are wide open to any opportunities that come around. Thirdly would be looking at shareholder returns through share buybacks and things like that. We're participants where we see an opportunity there.
Got it. Just how do we think about international these days?
International is not a near-term priority right now. All of the large TAM numbers that I've given already are just US alone. That's a big market. We are much more focused on excelling and taking advantage of the opportunity in front of us right now versus expanding to other international markets right now. That won't be true forever, but in the near term, that's our focus.
Got it. I'll pause there, see if there's any questions from the audience. Otherwise, I'll close out with one or two more.
I'm actually just kind of curious about, this is a macro question. What kind of cohorts are you seeing in terms of the highest growth in seekers?
Interesting, yeah, it's an interesting question. The growth that we're seeing right now is really across the board. No specific segment is outpacing one versus the other right now.
The flip side is, are there any particular verticals or areas on that?
Yeah, those areas of strength would largely mirror what you'd see in the economy overall. Generally speaking, healthcare has been pacing pretty well. Depending on the quarter, retail has been holding up okay. Areas like technology, mortgage lending really took a beating for a while. Financial services, those areas have been down, as you would expect.
Is that a hand or a scratch?
Scratch. Sorry.
All good. All good. GenAI, you've talked a lot about just using AI throughout the business. How has GenAI just changed your approach to product development?
It's showing up in a couple of different ways. One would be, I referred to this briefly before, but Phil in his evolution has gotten much more conversational, and that's not by accident. That helps us to communicate with job seekers in more plain English, which helps them have a better experience. They offer more information. We give them better results. We've also used GenAI to eliminate some of the high friction points in the job search and the job filling process. If you're a job seeker, one of the most painful points is creating a resume. We can help job seekers do that by using GenAI. If you're an employer looking to fill a job, one of the most painful parts is creating a job description. By the way, both sides are notoriously terrible at this anyway.
What we've done is create many, many templates for different jobs so that they can just say, "Oh, you're looking for a senior accountant? Does it look like this?" And we provide them with a job template, and then they can post it, and they're on their way. Those are a couple of different ways that we're using it to just eliminate friction points in the hiring process.
Got it. To that point, what gets you most excited about the product portfolio going forward?
There are a couple of things. We launched a couple of those flagship products that we talked about already. We are still very early stages in optimizing and monetizing those. I mean we have a strong bias towards creating lots of value in our marketplace and then monetizing over time. Expect to see more from us there. A lot of the work that's done in the matching world is incremental and compounding. These are changes that are made on the edges to our code so that we are A/B testing our way into bigger and bigger matching wins over time. That does not show up in a shareholder letter necessarily, but this is the reality of the business where as you're slowly iterating over time, the value in quantity of your data keeps getting bigger and better.
It's going to provide for better matching experiences for both sides of the marketplace.
Right. So effectively, you just outlined an unstructured data problem. The more data you're ingesting through Phil and the rest within there, that's going to drive better matches. In turn, to the degree that some of the employers are comfortable with it, if they're willing to share who has good outcomes, bad outcomes, that's further going to help just do lookalike right targeting for some of these people.
That's right.
Cool. I don't see any more questions. With that, we'll close it there. Tim, thanks so much for coming back.
Thank you.