ZipRecruiter, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Unaudited results are compared with the corresponding 2022 periods. ZipRecruiter operates an online two-sided marketplace connecting employers and job seekers; substantially all revenue comes from employer fees.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $155.6 million | $227.0 million | $509.8 million | $694.2 million |
| Gross profit | $141.1 million | $205.1 million | $459.0 million | $629.0 million |
| Operating income | $32.7 million | $29.5 million | $66.2 million | $68.8 million |
| Net income | $24.1 million | $20.6 million | $43.5 million | $42.1 million |
| Diluted EPS | $0.23 | $0.17 | $0.41 | $0.34 |
| Adjusted EBITDA (non-GAAP) | $54.4 million | $51.7 million | $132.9 million | $134.3 million |
- Q3 revenue fell 31% year over year; nine-month revenue fell 27%. Subscription revenue declined 30% in Q3 and 25% year to date; performance-based revenue declined 36% and 32%, respectively.
- Gross margin was 91% in Q3 versus 90% a year earlier; nine-month gross margin was 90% versus 91%. Net income margin rose to 15% from 9% in Q3 and to 9% from 6% year to date. Adjusted EBITDA margin was 35% versus 23% in Q3, and 26% versus 19% year to date.
- Q3 Quarterly Paid Employers were 89,668, down from 101,634 in Q2 2023 and 135,703 in Q3 2022. Revenue per Paid Employer was $1,736, up from $1,677 in Q2 and $1,673 in Q3 2022.
- Cash provided by operating activities was $68.8 million for the first nine months, down from $84.3 million. Investing activities provided $89.4 million, principally reflecting marketable-security maturities and redemptions; financing activities used $142.2 million, largely for share repurchases.
Liquidity, debt and capital allocation
- At September 30, 2023, cash and cash equivalents were $243.3 million and marketable securities were $253.7 million, totaling $497.0 million. Current assets were $546.1 million and current liabilities $90.8 million.
- Long-term borrowings had a carrying value of $542.3 million. The company had $550.0 million principal amount of 5% senior unsecured notes due January 2030. The notes’ estimated fair value was $434.5 million.
- No amounts were drawn on the $250 million credit facility; $245.2 million remained available after letters of credit. The company reported compliance with its financial covenants.
- Management said existing liquidity, operating cash flow and available borrowing capacity should meet working-capital needs for at least 12 months.
- The company repurchased 8.9 million Class A shares for $138.9 million in the first nine months under its $550 million authorization; approximately $71.8 million remained available. Cash and marketable securities together declined from $570.4 million at year-end 2022 to $497.0 million.
Changes, outlook and risks
- Management attributed weaker revenue and fewer paid employers to a cooling labor market, high inflation and interest rates, employer hiring-plan moderation, and reduced recruiting budgets. It described hiring demand as declining through the first three quarters and seasonal patterns as atypical.
- Lower sales and marketing spending—especially advertising—more than offset revenue declines and supported higher operating income and margins. Research and development expense rose 17% year to date, while general and administrative expense fell 15%.
- The May 2023 restructuring reduced the global workforce by approximately 20%. Net restructuring costs were about $7.9 million for the first nine months; $0.5 million of the liability remained at quarter-end and was expected to be paid by year-end.
- Management said it plans to continue investing in the marketplace, including technology and sales and marketing. The filing provides no specific revenue or earnings guidance.
- Q3 other income, net increased to $4.7 million from $0.3 million, primarily reflecting marketable-security accretion and higher interest income. The nine-month effective tax rate rose to 26.1% from 12.3%, partly because of reduced stock-based compensation tax benefits.
- The filing highlights competition, macroeconomic sensitivity, employer renewals and spending, platform performance, cybersecurity and privacy, AI-related risks, and dependence on third-party distribution and cloud services. It also notes that October 2023 conflict in Israel temporarily closed the company’s local office and could disrupt operations; the impact was uncertain.
- Legal proceedings and indemnification matters arise in the ordinary course; the filing provides no clear quantified estimate of potential losses. Disclosure controls were reported effective, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether paid-employer counts and employer spending stabilize, and whether the sequential decline continues.
- Whether margin improvements persist if revenue remains weak and marketing spending changes.
- Operating cash generation relative to debt service, ongoing share repurchases and the $550 million note obligation.
- Progress and realized savings from the workforce reduction, alongside continued technology investment and stock-based compensation.
- Developments affecting employees and operations in Israel, and any material cybersecurity, privacy, regulatory or litigation events.