Executive Summary / Key Takeaways

• ZipRecruiter operates a two-sided online employment marketplace, leveraging AI and technology to reduce hiring friction and connect job seekers with opportunities, positioning itself for long-term market share gains.
• Despite a challenging labor market downturn characterized by declining hires and a low quit rate, the company's Q1 2025 results showed sequential stabilization in revenue and paid employers, indicating a potential shift towards more typical seasonal patterns.
• Strategic investments in technology like Zip Intro, the next-generation resume database, and expanded ATS integrations are enhancing the marketplace experience and driving job seeker traffic growth, which management believes is a leading indicator for future employer revenue.
• The company maintains a flexible operating model and a strong balance sheet, enabling disciplined investment in strategic initiatives while remaining prepared to adjust spending based on evolving macroeconomic conditions.
• Management is cautiously optimistic about achieving year-over-year revenue growth by Q4 2025, projecting mid-single-digit Adjusted EBITDA margins for the full year in that scenario, reflecting continued investment focus.

ZipRecruiter: Investing Through the Downturn for Future Gains

ZipRecruiter, Inc., established in 2010, operates as a dynamic two-sided marketplace connecting employers and job seekers online. At its core, the company's mission is to actively connect individuals to their next great opportunity, primarily generating revenue through fees paid by employers for job postings and access to its suite of hiring tools. From its inception, ZipRecruiter has been driven by a commitment to leveraging technology to streamline the recruitment process, aiming to eliminate friction and accelerate the time to hire for businesses of all sizes.

The online employment marketplace is characterized by intense competition, featuring well-established players like LinkedIn (part of Microsoft (MSFT)), Indeed (owned by Recruit Holdings (6098)), and newer entrants, including those leveraging advanced AI technologies. ZipRecruiter positions itself within this landscape by focusing on ease of use, speed, and intelligent matching, particularly catering to small-to-medium businesses (SMBs) while also expanding its reach into the enterprise segment. While larger competitors like LinkedIn boast vast professional networks and deep integrations, and Indeed offers extensive job databases and global reach, ZipRecruiter differentiates through its AI-powered matching technology and a suite of tools designed for rapid connections.

Central to ZipRecruiter's differentiation is its proprietary technology, including its AI-powered career advisor, Phil, and sophisticated matching algorithms. This technology is designed to curate relevant job opportunities for job seekers and identify suitable candidates for employers, aiming to improve the efficiency and effectiveness of the hiring process. The company highlights tangible benefits from its technological advancements: employers using Zip Apply, its frictionless application process, receive 3x more applications and get their first five candidates 4x faster. The Zip Intro feature, designed for quick video connections, has shown significant promise, with employers receiving over 3x more quality applications per job and scheduled sessions growing 16% quarter-over-quarter in Q1 2025. Job seekers have also responded positively, with over 90% indicating they are likely to use Zip Intro again. Improvements to the job seeker email notifications algorithm led to a 100% increase in clicks and a 120% increase in applications from those emails. The revamped search experience increased job seeker engagement with job postings by over 30%. The company continues to invest in R&D, focusing on enhancing the post-matching experience and leveraging AI across the platform to induce engagement between employers and job seekers.

The company's strategic initiatives extend beyond core platform enhancements. The acquisition of Breakroom in July 2024, a UK-based employer review platform, aims to provide job seekers with authentic insights into workplace culture, particularly for frontline roles, with a US rollout underway. Expanding applicant tracking system (ATS) integrations, including achieving Workday (WDAY) Certified Integration status in Q1 2025, is crucial for seamless adoption by larger enterprise clients. These integrations facilitate direct application passing and enable the use of features like Zip Apply within enterprise systems. Furthermore, the company is refining its enterprise campaign optimization, with an improved bidding model resulting in a 7% month-over-month increase in applications delivered to enterprise customers in the first month of its Q1 2025 launch.

ZipRecruiter's performance over the past year has been significantly impacted by a protracted labor market downturn. Seasonally adjusted hires have declined year-over-year for 28 consecutive months as of the Q4 2024 report, and the quit rate remains near its lowest level since 2015, excluding the onset of the COVID-19 pandemic. This environment has reduced overall demand for hiring services, particularly affecting SMBs, which comprise a significant portion of ZipRecruiter's paid employer base.

In Q1 2025, ZipRecruiter reported revenue of $110.1 million, a 10% decrease compared to $122.2 million in Q1 2024. This decline reflects the lower number of Quarterly Paid Employers, which stood at 63,466 in Q1 2025, down 11% from 71,572 in Q1 2024. Revenue per Paid Employer increased slightly year-over-year to $1,734 in Q1 2025 from $1,708 in Q1 2024, driven by a mix shift towards performance-based revenue. Sequentially, however, Q1 2025 revenue declined only 1% from Q4 2024, and Quarterly Paid Employers increased by 10% sequentially, representing the strongest Q4 to Q1 growth since 2021. This sequential trend suggests a potential return towards more typical seasonal hiring patterns compared to the steeper sequential declines seen in Q1 of 2023 and 2024.

The company reported a net loss of $12.8 million in Q1 2025, compared to a net loss of $6.5 million in Q1 2024. Adjusted EBITDA was $5.9 million in Q1 2025, resulting in a 5% margin, down from $20.8 million and a 17% margin in Q1 2024. The decrease in profitability metrics year-over-year was primarily driven by the decline in revenue, while the sequential decrease from Q4 2024 Adjusted EBITDA ($14.4 million, 13% margin) was attributed to higher marketing and personnel expenses as the company leaned into observed positive trends early in the year. Cost of revenue decreased in Q1 2025, primarily due to lower hosting, partner revenue share, and credit card processing fees, contributing to a stable gross margin of 89%. Sales and marketing expenses increased year-over-year due to higher advertising spend, reflecting the strategic decision to invest in brand and user acquisition.

ZipRecruiter maintains a robust balance sheet, with $468.2 million in cash, cash equivalents, and marketable securities as of March 31, 2025. The company also has $286.6 million available under its credit facility, with no outstanding borrowings. This strong liquidity position provides financial flexibility to navigate the uncertain macroeconomic environment and continue funding strategic investments. The company also actively manages its capital structure, repurchasing 4.6 million shares for $27.4 million in Q1 2025, with $95.7 million remaining under its share repurchase program.

Looking ahead, ZipRecruiter's Q2 2025 guidance projects revenue of $111 million at the midpoint, representing a 1% sequential increase and a 10% year-over-year decline. Adjusted EBITDA guidance for Q2 2025 is $7 million at the midpoint, or a 6% margin. Management's outlook is based on the assumption of a continuation of the paid employer trends observed year-to-date, which show stabilization but not yet acceleration in hiring activity. Despite the ongoing macroeconomic uncertainty, the company remains cautiously optimistic. Management believes achieving year-over-year revenue growth by Q4 2025 is a likely scenario if current trends suggesting a potential recovery in employer sentiment continue. In this scenario, the company expects full-year 2025 Adjusted EBITDA margins to be in the mid-single digits, reflecting the continued investment in long-term strategic initiatives. The flexible operating model allows the company to rapidly adjust investment levels based on data, increasing spend if hiring demand recovers or pulling back if conditions deteriorate further, which would result in higher margins.

Key risks for ZipRecruiter include the significant impact of general economic conditions and the duration of the labor market downturn. Intense competition, including from larger players leveraging AI, poses a constant challenge to market share and pricing. Risks associated with the development and deployment of AI technologies, including potential inaccuracies or biases, are also pertinent. Evolving data privacy and regulatory landscapes globally, including new AI regulations, could increase compliance costs and limit operations. Operational risks such as security breaches, dependence on third-party infrastructure like AWS (part of Amazon (AMZN)), and geopolitical factors (particularly concerning its technology team in Israel) could disrupt business. The company's indebtedness also presents financial constraints and risks related to covenant compliance.

Conclusion

ZipRecruiter is navigating a challenging period marked by a prolonged labor market downturn, which has pressured revenue and paid employer growth. However, the company's recent performance shows signs of sequential stabilization, suggesting a potential return to more typical seasonal patterns. ZipRecruiter's strategic focus on enhancing its two-sided marketplace through continuous technological innovation, including AI-powered matching, new features like Zip Intro and the next-generation resume database, and expanded ATS integrations, is driving job seeker traffic growth and improving the hiring experience. Management views this job seeker momentum as a critical leading indicator for future employer revenue gains when the labor market inevitably recovers. Supported by a flexible operating model and a strong balance sheet, ZipRecruiter is positioned to continue investing in these strategic initiatives, aiming to capture market share and emerge stronger from the downturn. While macroeconomic uncertainty and competitive pressures remain significant risks, the company's disciplined approach and focus on long-term value creation through product and technology differentiation underpin its investment thesis heading into a potential recovery phase.