ZipRecruiter, Inc. — FY 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone Q4 filing; the company also reports selected quarterly operating metrics. ZipRecruiter operates a two-sided online employment marketplace, generating substantially all revenue from employer subscriptions and performance-based job advertising. Job seekers use the marketplace for free.
Financial performance and liquidity
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Revenue | $741.1 million | $418.1 million |
| Subscription revenue | $600.1 million | $346.8 million |
| Performance-based revenue | $141.1 million | $71.4 million |
| Gross profit / gross margin | $661.5 million / 89% | $364.0 million / 87% |
| Operating income (loss) | $(8.4) million | $64.4 million |
| Net income | $3.6 million | $86.0 million |
| Adjusted EBITDA / margin | $108.3 million / 15% | $80.1 million / 19% |
| Operating cash flow | $144.1 million | $88.0 million |
Revenue increased 77% year over year. Gross margin improved by 2 percentage points, while net income fell sharply and Adjusted EBITDA margin declined. Reported earnings included $107.3 million of stock-based compensation, versus $5.8 million in 2020, and $34.0 million of one-time general and administrative costs related to the May 2021 direct listing. Sales and marketing expense rose 115% to $410.7 million, including a $182.3 million increase in marketing and advertising.
Cash and cash equivalents were $254.6 million at year-end, up from $114.5 million. Current assets were $310.6 million and current liabilities $142.9 million. The company had no amounts outstanding on its $250 million revolving credit facility at year-end; $244.2 million remained available after letters of credit. After year-end, it issued $550 million of 5% senior notes due 2030. The facility is secured by substantially all assets and contains financial and other covenants. The company said cash, operating cash flow and revolver availability should cover working capital needs for at least 12 months.
Changes and operating trends
- Revenue growth reflected more paid employers, increased hiring demand and greater customer spending as the economy recovered. Subscription revenue grew 73%; performance-based revenue grew 98%.
- Quarterly Paid Employers reached 147,081 in Q4 2021, up 64% from Q4 2020; Revenue per Paid Employer was $1,497, versus $1,276. Employers increased across the year, while Q4 counts and hiring activity reflected typical seasonal deceleration.
- Operating results were affected by the direct listing and the board’s waiver of liquidity-event vesting conditions on outstanding RSUs, which led to substantial stock-based compensation expense. The company completed its NYSE direct listing in May 2021.
- Cash provided by operating activities increased to $144.1 million, partly reflecting noncash stock compensation and higher accrued expenses and payables. Investing cash use was $13.3 million, mainly software development and capital expenditures.
Outlook, risks and contingencies
Management provided no specific numerical revenue or earnings guidance in the filing. It expects to continue investing in marketplace technology, sales and marketing, employer and job-seeker acquisition, and personnel; it expects sales and marketing and research and development expenses to rise in absolute dollars. Management attributes 2021 growth to strong execution and economic recovery, but cautions that past growth is not indicative of future performance.
- Results depend on hiring demand and economic conditions, and are exposed to COVID-19 uncertainty, employer renewals and spending, competition, and seasonal hiring patterns.
- Key operating risks include attracting and retaining employers and job seekers, reliance on search and distribution partners, marketplace reliability, AWS hosting, cybersecurity and privacy, and potential bias or errors in AI-enabled matching.
- Substantially all revenue is generated in the United States and from job advertising. New and evolving privacy, data-transfer, tax and other regulations may increase costs or constrain operations.
- The company recorded $8.7 million of non-income tax expense in 2021. A former-employee class and representative action was agreed to be settled for an immaterial amount; a liability was recorded. Other ordinary-course legal matters remain subject to uncertainty.
- A February 2022 board authorization permits repurchases of up to $100 million of common stock, without a fixed expiration; the company is not obligated to repurchase shares.
- Class B shares carry 20 votes per share, compared with one vote per Class A share, concentrating voting control. The company does not expect to pay dividends in the foreseeable future.
The independent auditor issued an unqualified opinion on the consolidated financial statements. Management concluded disclosure controls were effective; the report did not include management’s assessment or auditor attestation of internal control over financial reporting under the transition provisions for newly public companies.
Important facts for investors to verify
- Whether paid-employer growth, customer spending and revenue growth persist as economic and hiring conditions change, particularly through seasonal periods.
- How stock-based compensation, public-company costs and marketing investment affect GAAP profitability and Adjusted EBITDA; evaluate the non-GAAP reconciliation and its exclusions.
- The company’s post-year-end $550 million notes, related interest and covenant obligations, and the use of proceeds alongside its revolver availability and liquidity.
- The nature, estimation and possible financial effects of non-income tax matters, legal contingencies, and privacy or cybersecurity incidents.
- Potential dilution from equity awards and share repurchases, and the implications of dual-class voting control.