Good afternoon. My name is Josh, and I will be your conference operator today. At this time, I would like to welcome everyone to the ZipRecruiter, Inc. Third Quarter 2021 Earnings Call. I would like to hand the call over to Tim Yarbrough, Chief Business Officer. Please go ahead.

Thank you, operator, and good afternoon. Thank you for joining us in our earnings conference call, during which we will discuss ZipRecruiter's performance for the quarter ended September 30, 2021, and guidance for the fourth quarter and full year for 2021. Joining me on the call today are Ian Siegel, Co-Founder and CEO; and David Travers, CFO. Before we begin, please be aware that forward-looking statements made today are subject to risks and uncertainties relating to future events and/or the future financial performance of ZipRecruiter. Actual results could differ materially from those anticipated in these forward-looking statements. A discussion of some of the risk factors that could cause actual results to differ materially from any forward-looking statements can be found in ZipRecruiter's public registration statement on Form S-1 filed with the U.S. Securities and Exchange Commission on April 30, 2021, and in our quarterly report on Form 10-Q for the 3 and 9 months ended September 30, 2021. Both of these are available on our investor website and the SEC's website. The forward-looking statements in this conference call are based on the current expectations as of today, and ZipRecruiter assumes no obligation to update or revise them, whether as a result of new developments or otherwise. In addition, during today's call, we will discuss non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from GAAP results. Reconciliations of the non-GAAP metrics to the nearest GAAP metric are included in ZipRecruiter shareholder letter and in our Form 10-Q. And now I will turn the call over to Ian.

Thank you, Tim, and good afternoon to everyone joining us today. At $212.7 million in revenue, the third quarter was another record for ZipRecruiter. We're happy to deliver both top line and bottom line results above the guidance provided in our last call. In a few minutes, Dave will walk you through these numbers and our increased expectations for the rest of the year. We find ourselves in a unique economic environment. In the Great Recession of 2008, for example, the labor force contracted by around 1 million workers and retail sales fell by about $40 billion. It took over 3 years for retail sales to recover. The COVID pandemic has been a different type of recession. More than a year-end, the labor force is still smaller by 3 million workers yet retail sales are now $90 billion higher than they were before the crisis, having recovered after only 4 months. As a result, employer demand for workers is immense. There are about 50% more job openings now than there were before the pandemic. However, millions of job seekers still have not come back to work. Further, we've seen record high numbers of workers who voluntarily quitting their jobs each month, finding new workers is critical for businesses to fill orders on time, expand production and grow. Businesses know that success depends on their ability to win the war for talent. ZipRecruiter is laser-focused on using smart software to help these employers of all sizes find great match candidates for their growing list of roles. We believe we are uniquely positioned for long-term success during these extraordinary times and beyond. Over the course of the quarter, we made significant progress against the 3 pillars of our marketplace strategy, increasing the number of employers, increasing the number of job seekers and…

Thank you, Ian, and good afternoon, everyone. Building on the momentum of Q2, our third quarter revenue of $212.7 million represented another record quarter, significantly exceeding our guidance. This represents 107% growth year-over-year and 16% growth over the second quarter of '21, following up on a record-shattering 48% sequential growth in quarterly paid employers in the second quarter, quarterly paid employers were flat in Q3. Revenue per paid employer increased by 16% sequentially during the quarter, reflecting our ability to expand our relationships with paid employers as they participate in our marketplace over time. GAAP net income was $22.1 million in the third quarter of 2021 compared to net income of $23.1 million in the prior year. Adjusted EBITDA was $42.5 million, with a 20% margin compared to $26.7 million in adjusted EBITDA or a 26% margin in the prior year. The increase in revenue was offset by employee-driven expenses as well as an increase in our sales and marketing activities. We believe year-over-year trends are more instructive than sequential comparisons since Q2 '21 included $31.9 million nonrecurring direct listing costs as well as $41.7 million in stock-based compensation expense for a large number of historical RSUs that vested in the quarter, all timed with our direct listing. After closing out another record quarter, we're pleased to increase our guidance for the fourth quarter and the full year of 2021. We expect $206 million of revenue in Q4 of 2021 at the midpoint, which translates to 80% year-over-year growth. Our Q4 '21 guidance translates to a midpoint of $727 million for the full year, up from the $658 million shared last quarter. This increased 2021 revenue guidance equates to 74% growth over 2020 at the midpoint. While the hiring environment remained strong throughout the third quarter, our fourth quarter guidance…

[Operator Instructions]. Your first question comes from Ralph Schackart with William Blair.

First, just on monetization. It was exceptionally strong in the third quarter, even though you're onboarding record levels of paid employers. And I think historically, when you've onboarded new employers that come in at sort of lower tiers, it's taken a while to sort of increase that revenue per paid employer. So I guess my first question is, how are you able to sort of achieve these high levels of revenue paid per employer when you're having these record levels of employers added?

Sure. Thanks, Ralph. Good question. So yes, you're exactly right about that historical pattern. And I would say a couple of things allowed us to have the exceptionally strong average revenue. One is, obviously, in the current environment, employer willingness to pay has proven to be robust. And secondly, that the cohorts that were also very large in the first couple of quarters of the year are going through those oversized cohorts are also going through the natural process getting comfortable with paying us more as they get to know us better and realizing the value from ZipRecruiter. And so we got great strength from those cohorts who are performing exceptionally well.

Yes. I just -- I'd add to that. So we have older or I should say, the last 2 quarters' worth of cohorts maturing as is the normal pattern. But also on our site, it works -- it's very much like an auction-based marketplace where you can pay more to get more, and there's a variety of upsells that employers can opt into. And in this intensely competitive environment, certainly, there was a lot of self-selection and willingness to pay amongst employers who are willing to spend up because they were getting results and they wanted more results.

Okay. That makes sense. And then maybe a follow-up to that is, I think, Dave, you talked about it on the call and later called out as well about a return to more sort of, I guess, more normalized macroeconomic trends. Is that something you're seeing in the quarter? Or is that just maybe conservatism anticipating an eventual sort of return to that type of environment?

Yes. Very good question. So we did -- although we did experience more robust results than we expected last quarter. We do see signs of that even at the end of last quarter that we still believe we're on this glide path back to normal. So that is not just speculation. But the shape of that has been uneven as the overperformance in the quarter versus our expectations indicates. And so we certainly feel the -- we're still in this period of uncertainty where we've never been in these waters before, so to speak. And so we're certainly slightly on the margin more cautious about how we approach that. But we do -- certainly, it's not just speculation. We do see signs we're headed back toward a more normalized environment. And embedded in our guidance is the assumption that next year, we will be back in some sort of new normal that looks more like the pre-COVID period.

Your next question comes from Doug Anmuth with JPMorgan.

This is Dae Lee on for Doug. First one, going back to your quarterly paid employers remaining at an all-time high levels. I'm curious if this is something that you're expecting early in 3Q? And if you can provide more color on what are some key drivers of that metric staying at this level? And how we should think about that going forward? And related to that, you mentioned in your letter about 30% increase in sales and marketing headcount over the last two quarters. Could you just talk about which parts of your sales and marketing organization received this investment then any color on the types of returns that you're expecting from them?

Well, we have developed over time a sophisticated and tunable sales and marketing operation that we can adjust based on what we're experiencing in the market and the strength of the return on our investment led us to continue increasing that investment. And that's part of the reason why we overperformed on quarterly paid employers. It's also, I believe, persistent optimization and the strategies we use to bring employers in. And let's not forget that it wasn't just new customers coming in that created that number, it was also the reactivation of previous customers who were satisfied with the results they got the first time, and we're coming back to us again. So we saw health effectively across the platform in every class and category of both new customer and returning customer on the platform.

Yes. So to add on that, the quarterly paid employers, you're exactly right. We were very pleased the results again how much they've grown the quarter before to stay flat this quarter. To your question about going forward, obviously, we don't provide guidance on quarterly paid employers. However, looking back for historical analogs, we did not experience normal seasonality in Q4 of 2020. But in prior years, including 2019 and 2018 and others before then, we did experience Q4 seasonality, where especially in the latter half of the quarter, there's a contraction, somewhere in the high single-digit percentage quarter-over-quarter contraction in quarterly paid employers overall in Q4 versus Q3. And we do expect that we will see more normal seasonality given historical patterns this quarter. And if we're correct, despite our uncertainty around the macroeconomic environment that we're also on a glide path back to normal, we could even see that be slightly higher than normal because of seasonality plus the glide path back to normal. So slightly higher than high single-digit quarter-over-quarter percentage contraction of quarterly paid employers. On the other side of the ledger, what happens then is that contraction in quarterly paid employers if that were to happen and has happened in previous Q4's that the contraction comes from a lack of brand new paid employers, which to our previous comments are the ones that pay us the least. So on a weighted average basis, sort of mathematically and mechanically, the average revenue per paid employer will come up. And we feel that, that is: a, a trend that is coming up over time very consistently as we've discussed many times before, but that will bump it up a little bit even more to largely offset the impact of the contraction in quarterly paid employers, if that's what happens, like it's happened in other Q4s.

[Operator Instructions]. And your next question comes from Trevor Young with Barclays.

Just back to the sales headcount ramp. How long does it typically take those hires to be like full productivity? Is it like 6 to 9 months? Or are they already kind of hitting their stride now? Just trying to understand like the implications of the hiring now versus 4Q and 1Q growth? And then also any update on backfilling the COO role?

Yes. I'll take the second one first. We were very pleased to announce a couple of weeks ago that Qasim Saifee, who was our Chief Marketing Officer, has been elevated to Chief Operating Officer. You can read a little bit more about Qasim in our shareholder letter this and we look forward to you getting to meet with him and hear from him, but he's been with us for quite some time and is really a spectacular leader on our team and has been. Back to your sales ramp question, it really depends a little bit between the type of salesperson. So it's a handful of months for SMB-oriented inside salespeople, broadly speaking. And it's a handful of quarters for enterprise salespeople. We're growing and have been growing both teams and are very pleased with the high bar we've been using to grow those teams even though we've been growing quickly. Obviously, it's very helpful when you're growing your team to have a secret weapon, which is we eat our own dog food, we use ZipRecruiter and it's working. And so we expect will continue to see a high return on investment from that headcount, and we're constantly looking for opportunities to continue to invest there.

Your last question comes from Aaron Kessler with Raymond James.

A couple of questions. Maybe if you can just discuss a little bit maybe your competitive market share, kind of how you think you're doing this year relative to some of the key players that you see? Second, just the -- maybe the impact of the unemployment insurance running off kind of at the end of August kind of what impact is that having on kind of company's ability to hire right now as well?

Yes. Well, let's take the market share question first. I mean, as evidenced by the results we posted in Q3, I think we feel really good about how we're performing relative to the competition right now. And I would just like to reiterate something that we said during the original roadshow back when we first went public, which is, if you look at the total recruiting category, it's over $200 billion. And if you take the 3 largest players in it who represent the bulk of what happens online, what you find is that online is still a diminutive percentage of that total $200 billion. So we don't really look at our competition as the other online players as much as we look at the opportunity of moving and taking a larger share of sort of the off-line recruiting world and getting paid for the tools that we deliver to those who provide those services in the offline world. And then going to the second question, which was the impact of unemployment benefits running out. There was also the mortgage forgiveness programs. There was the -- waiting for the vaccination to be widely available and distributed for schools to reopen. We've watched every 1 of these developments closely and monitor to see whether or not they lead to an uptick in job seeker activity. And I think what we're starting to accept is that there has been a fundamental change in what the job seekers are looking for from work, and that's evidenced not just by the reluctance of the unemployed to resume searching for work but also the great resection where people who were currently employed who now feel safe are now leaving their jobs at record levels. You're seeing an employer reaction to that, that is predictable with a record increase in wages, a record number of jobs that offer benefits, flexible schedules and/or even remote work. So it seems like the job market is still in a state of flux as it reacts in response to what happened during COVID. And it's yet to settle down and play itself out. So as of yet, job seekers remain searching in a very different pattern and looking for very different types of work than they were in a pre-COVID period.

Your next question comes from Mark Mahaney with Evercore ISI.

I just want to follow up on that last question. I want to stay macro. I am overstating the case, but it does seem like it's an employee's job seekers market, hopefully, higher wages, more benefits. For your business model, like is there a goldilocks marketing environment? You've been running this business for multiple years now in a couple of different market environments. Is there 1 market environment that's better for yours when it's a job seekers or if it's an employer's market or somewhere in the middle? Just comment about that macro environment that you painted, is that on the margin neutral, positive, negative for ZipRecruiter?

When the business started more than 10 years ago, unemployment was close to 10%, and today, unemployment is closer to 4%. And in both of those different realities, the business did 1 thing, which is grow. And I think a big part of the reason why that happens is because we're so focused on improving the process really from both sides of the marketplace's perspective, both for employers and for job seekers that it doesn't matter what the market conditions are. What is truly always going to be a ubiquitous need is employers finding talent and job seekers finding work. And as long as our product keeps getting better and the time to hire keeps coming down, we just have a lot of confidence that by building the best solution in the market, we're going to be okay.

There are no further questions. This does conclude today's conference call. Thank you for your participation, and you may now disconnect.