10-Q 1 zip-20220331.htm 10-Q zip-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-40406

ZIPRECRUITER, INC.
(Exact name of registrant as specified in its charter)
Delaware27-2976158
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
604 Arizona Avenue
Santa Monica, CA 90401
(877) 252-1062
(Address, including zip code, and telephone number, including area code, of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, $0.00001 par value per shareZIPNew York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒   No  ☐ 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer  Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes   ☐     No   
The registrant had 87,498,133 shares of Class A common stock outstanding and 30,361,349 shares of Class B common stock outstanding as of May 5, 2022.

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Page

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NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “potential,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “target,” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit, operating expenses including changes in research and development, sales and marketing, and general and administrative expenses (including any components of the foregoing), and our ability to achieve and/or maintain future profitability;
effects of the COVID-19 pandemic on our business, the employment market, and the economy generally;
our business plan and our ability to effectively manage our growth;
our ability to compete with well-established competitors and new entrants;
our ability to enhance our marketplace and introduce new and improved offerings;
our ability to increase the number of employers and job seekers in our marketplace;
our ability to strengthen our technology that underpins our marketplace;
our ability to attract and retain qualified employees and key personnel;
our ability to execute our strategy;
beliefs and objectives for future operations;
the effects of seasonal trends on our results of operations;
our ability to expand to new markets;
our ability to maintain, protect, and enhance our brand and intellectual property;
our ability to stay in compliance with laws and regulations that currently apply or become applicable to our business;
economic and industry trends, projected growth, or trend analysis; and
increased expenses associated with being a public company.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in the section titled “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any

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factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q or to conform these statements to actual results or revised expectations, except as required by law.
You should read this Quarterly Report on Form 10-Q with the understanding that our actual future results, performance, and events and circumstances may be materially different from what we expect.
As used herein, “ZipRecruiter,” “the Company,” “we,” “us,” “our,” and similar terms include ZipRecruiter, Inc. and its subsidiaries, unless the context indicates otherwise.
SUMMARY OF RISK FACTORS
Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” later in this Quarterly Report on Form 10-Q. These risks include, but are not limited to, the following:
We face intense competition and could lose market share to our competitors, which could adversely affect our business, operating results, and financial condition.
COVID-19 has caused significant uncertainty and disruption in our business operations. The ongoing effects of the COVID-19 pandemic continue to be unpredictable, and may have an adverse effect on our business, results of operations, and financial condition.
Our business is significantly affected by fluctuations in general economic conditions, which have been adversely affected by the COVID-19 pandemic. There is risk that any economic recovery may be short-lived and uneven, and may not result in increased demand for our services.
Our marketplace functions on software that is highly technical and complex and if it fails to perform properly, our reputation could be adversely affected, our market share could decline and we could be subject to liability claims.
Our future success depends in part on employers purchasing and renewing or upgrading subscriptions and performance-based services from us. Any decline in our user renewals or upgrades or performance-based services could harm our future operating results.
We have experienced growth in recent periods and expect to continue to invest in our growth for the foreseeable future. If we cannot manage our growth effectively, our business, operating results, and financial condition could be adversely affected.
Significant segments of the market for job advertisement services may have hiring needs and service preferences that are subject to greater volatility than the overall economy.
Our efforts and ability to sell to a broad mix of businesses could adversely affect our operating results in a given period.
Our business depends largely on our ability to attract and retain talented employees, including senior management and key personnel. If we lose the services of Ian Siegel, our Chief Executive

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Officer, or other members of our senior management team, we may not be able to execute on our business strategy.
If internet search engines’ methodologies or other channels that we use to direct traffic to our website are modified to our disadvantage, or our search result page rankings decline for other reasons, our user growth could decline.
Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business, which makes our future results difficult to predict.
Our success depends on our ability to maintain the value and reputation of the ZipRecruiter brand.
Our indebtedness could adversely affect our liquidity and financial condition.
Market volatility may affect the value of an investment in our Class A common stock and could subject us to litigation.
The dual class structure of our common stock concentrates voting control with those stockholders who held our capital stock prior to our listing, including our directors, executive officers, and 5% stockholders. This ownership will limit or preclude your ability to influence corporate matters, including the election of directors and the approval of any change of control transaction.

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Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
ZipRecruiter, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except par values)
(unaudited)
March 31,December 31,
20222021
Assets
Current assets
Cash$745,393 $254,621 
Accounts receivable, net of allowances of $3,482 and $3,325 at March 31, 2022 and December 31, 2021, respectively
51,680 41,657 
Prepaid expenses and other assets10,599 9,721 
Deferred commissions, current portion4,608 4,640 
Total current assets812,280 310,639 
Property and equipment, net9,050 8,702 
Operating lease right-of-use assets15,900 18,515 
Internal use software, net14,466 13,657 
Deferred commissions, net of current portion3,962 4,011 
Goodwill1,724 1,724 
Deferred tax assets, net43,388 38,029 
Other assets1,151 3,342 
Total assets$901,921 $398,619 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable$22,000 $24,862 
Accrued expenses72,371 86,213 
Accrued interest5,957  
Deferred revenue25,498 23,253 
Operating lease liabilities, current portion6,033 6,109 
Other current liabilities5,735 2,457 
Total current liabilities137,594 142,894 
Operating lease liabilities, net of current portion17,530 19,179 
Long-term borrowings540,862  
Other long-term liabilities2,318 1,578 
Total liabilities698,304 163,651 
Commitments and contingencies (Note 7)
Stockholders' equity
Preferred Stock, $0.00001 par value; 50,000 shares authorized as of March 31, 2022 and December 31, 2021; no shares issued and outstanding as of March 31, 2022 and December 31, 2021
  
Class A common stock, $0.00001 par value; 700,000 shares authorized as of March 31, 2022 and December 31, 2021; 87,380 and 87,843 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
1 1 
Class B common stock, $0.00001 par value; 700,000 shares authorized as of March 31, 2022 and December 31, 2021; 30,557 and 30,571 shares issued and 30,362 and 30,376 shares outstanding as of March 31, 2022 and December 31, 2021, respectively
  
Class B treasury stock, 195 shares outstanding as of March 31, 2022 and December 31, 2021
(644)(644)
Additional paid-in capital263,627 303,395 
Accumulated deficit(59,367)(67,784)
Total stockholders' equity203,617 234,968 
Total liabilities and stockholders' equity$901,921 $398,619 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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ZipRecruiter, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
March 31,
20222021
Revenue$227,260 $125,372 
Cost of revenue21,606 15,961 
Gross profit205,654 109,411 
Operating expenses
Sales and marketing137,590 63,476 
Research and development29,644 17,015 
General and administrative24,196 12,454 
Total operating expenses191,430 92,945 
Income from operations14,224 16,466 
Other income (expense)
Interest expense(6,285)(209)
Sublease income  292 
Other income (expense), net(25)94 
Total other income (expense), net(6,310)177 
Income before income taxes7,914 16,643 
Income tax expense (benefit)(503)3,245 
Net income8,417 13,398 
Less: Accretion of redeemable convertible preferred stock (997)
Less: Undistributed earnings attributable to participating securities (2,913)
Net income attributable to Class A and Class B common stockholders$8,417 $9,488 
Net income per share attributable to Class A and Class B common stockholders:
Basic$0.07 $0.12 
Diluted$0.07 $0.10 
Weighted average shares used in computing net income per share attributable to Class A and Class B common stockholders:
Basic118,806 78,834 
Diluted127,050 98,435 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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ZipRecruiter, Inc.
Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(in thousands)
(unaudited)

Three Months Ended March 31, 2022
Redeemable Convertible Preferred StockCommon StockClass B Treasury StockAdditional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders'
Equity
Series ASeries BClass AClass B
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmount
Balance as of December 31, 2021 $  $ 87,843 $1 30,571 $ (195)$(644)$303,395 $(67,784)$234,968 
Conversion of Class B stock to Class A stock— — — 1,446 — (1,446)— — —  —  
Issuance of common stock upon exercise of options— — — — — 1,180 — — — 2,078 — 2,078 
Issuance of common stock upon the vesting and settlement of restricted stock units— — — 354 — 433 — — — — — — 
Stock-based compensation— — — — — — — — — 21,112 — 21,112 
Shares withheld related to net share settlement— — — (133)— (181)— — — (5,902)— (5,902)
Shares issued under employee stock purchase plan— — — 290 — — — — — 5,293 — 5,293 
Repurchase and retirement of common stock— — — (2,420)— — — — — (62,349)— (62,349)
Net income— — — — — — — — — — 8,417 8,417 
Balance as of March 31, 2022 $ $ 87,380 $1 30,557 $ (195)$(644)$263,627 $(59,367)$203,617 

Three Months Ended March 31, 2021
Redeemable Convertible Preferred StockCommon StockClass B Treasury StockAdditional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders' Deficit
Series ASeries BClass AClass B
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmount
Balance as of December 31, 20202,271 $87,118 6,031 $49,738  $ 78,283 $ (195)$(644)$21,732 $(71,384)$(50,296)
Issuance of common stock upon exercise of options— — — — — 1,965 — — — 3,660 — 3,660 
Stock-based compensation— — — — — — — — — 1,290 — 1,290 
Repurchase and retirement of common stock— — — — — (50)— — — (450)— (450)
Accretion of redeemable convertible preferred stock— 961 36 — — — — — — (997)— (997)
Net income— — — — — — — — — — 13,398 13,398 
Balance as of March 31, 20212,271 $88,079 6,031$49,774  $ 80,198 $ (195)$(644)$25,235 $(57,986)$(33,395)
The accompanying notes are an integral part of these condensed consolidated financial statements.
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ZipRecruiter, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended
March 31,
20222021
Cash flows from operating activities
Net income$8,417 $13,398 
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense20,494 1,226 
Depreciation and amortization2,485 2,302 
Provision for bad debts758 244 
Deferred income taxes(5,359)3,151 
Non-cash lease expense1,304 1,473 
Other1,619  
Change in operating assets and liabilities:
Accounts receivable(10,781)(5,149)
Prepaid expenses and other current assets(991)(1,087)
Deferred commissions, net81 122 
Other assets2,129 59 
Accounts payable(2,882)(2,191)
Accrued expenses and other liabilities(9,306)5,078 
Accrued interest5,957  
Deferred revenue 2,234 4,259 
Operating lease liabilities(1,726)(731)
Net cash provided by operating activities14,433 22,154 
Cash flows from investing activities
Purchases of property and equipment(986)(1,131)
Capitalized internal use software costs(2,530)(2,124)
Net cash used in investing activities(3,516)(3,255)
Cash flows from financing activities
Proceeds from issuance of senior unsecured notes550,000  
Payment of senior unsecured notes’ issuance fees(9,378) 
Payment for net settlement of taxes on restricted stock units(5,902) 
Repurchase of common stock(62,349)(450)
Proceeds from exercise of stock options2,191 2,077 
Proceeds from issuance of stock under employee stock purchase plan5,293  
Net cash provided by financing activities479,855 1,627 
Net increase in cash490,772 20,526 
Cash
Beginning of period254,621 114,539 
End of period$745,393 $135,065 
Supplemental disclosure of non-cash activities
Capitalized assets included in accounts payable and accrued expenses$1,019 $2,084 
Stock-based compensation capitalized for software618 64 
In-transit proceeds from exercise of stock options16 2,547 
Accretion of redeemable convertible preferred stock 997 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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ZipRecruiter, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1.Organization and Description of Business
ZipRecruiter, Inc. was incorporated in the state of Delaware on June 29, 2010. Hereinafter, ZipRecruiter, Inc. and its wholly owned subsidiaries ZipRecruiter Israel Ltd., ZipRecruiter UK Ltd., and ZipRecruiter Canada Ltd. are collectively referred to as “ZipRecruiter” or the “Company.” The Company is a two-sided marketplace that enables employers and job seekers to connect with one another online to fill job opportunities.
2.Basis of Presentation, Principles of Consolidation, and Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, certain information and disclosures normally included in consolidated financial statements presented in accordance with U.S. GAAP have been condensed or omitted.
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “2021 Form 10-K”). The condensed consolidated balance sheet as of December 31, 2021 has been derived from the Company’s audited consolidated financial statements. Certain reclassifications have been made to prior year presentation to conform to current year presentation.
In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements include all adjustments (consisting of normal recurring adjustments) necessary for the fair statement of the condensed consolidated financial statements.
There have been no changes in the Company’s accounting policies from those disclosed in the Company’s audited consolidated financial statements and the related notes included in the 2021 Form 10-K.
The operating results for the three months ended March 31, 2022 are not necessarily indicative of the results expected for the full year ending December 31, 2022 or any future period.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant estimates include revenue recognition, estimates relating to the measurement of operating lease right-of-use (“ROU”) assets and operating lease liabilities, determination of the fair value of stock-based awards, valuation of common stock in periods prior to becoming a public company, collectability of accounts receivable, impairment of long-lived assets, including goodwill, carrying value and useful lives of property and equipment and internal-use software, the amortization period for deferred commission costs, and income taxes. By their nature, estimates are subject to an inherent degree of uncertainty and actual results could differ from those estimates.
The impact of the Coronavirus pandemic (“COVID-19”) continues to evolve. As a result, many of the Company’s estimates and assumptions require increased judgment and carry a higher degree of variability and volatility.
10

ZipRecruiter, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
As of the date these condensed consolidated financial statements are issued, the Company is not aware of any specific event or circumstance that would require an update to the Company’s estimates or judgments, or change to the carrying value of the Company’s assets or liabilities. However, these estimates and judgments may change as new events occur and additional information is obtained, which may result in changes being recognized in the consolidated financial statements in future periods. Actual results could differ from those estimates and any such differences may have a material impact on the financial statements.
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Accounting standards describe a fair value hierarchy based on the following three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:
- Level 1 — Quoted prices in active markets for identical assets, liabilities, or funds.
- Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
- Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The carrying amounts of the Company’s financial instruments, including accounts receivable, accounts payable, and accrued expenses, approximate fair value because of their short-term maturities, except for the Company’s senior unsecured notes which are valued based on quoted prices for the notes in an inactive market. The value of the notes represents a Level 2 input in the fair value hierarchy.
Certain assets, including goodwill and operating leases, are also subject to measurement at fair value on a non-recurring basis using Level 3 or Level 2 inputs, but only when they are deemed to be impaired. As of March 31, 2022 and December 31, 2021, no material impairments were identified on those assets required to be measured at fair value on a non-recurring basis.
Segments and Geographic Information
The Company operates as a single operating segment. The Company’s Chief Operating Decision Maker, the CEO, regularly reviews financial information presented on a consolidated basis for purposes of assessing financial performance and allocating resources. During the three months ended March 31, 2022 and 2021, respectively, revenue from countries outside of the United States was not material. In addition, property and equipment and operating lease ROU assets outside of the United States were not material as of March 31, 2022 and December 31, 2021, respectively.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and accounts receivable. The Company maintains its cash accounts with large financial institutions and at times, the cash accounts may exceed Federal Deposit Insurance Corporation limits. The Company has not experienced any losses in such accounts.
One customer accounted for 15% and 16% of the Company's outstanding accounts receivable as of March 31, 2022 and December 31, 2021, respectively. The Company closely monitors the financial
11

ZipRecruiter, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
condition of the foregoing customer, which has been in good credit standing. No other customer individually accounted for 10% or more of the Company's outstanding accounts receivable as of March 31, 2022 and December 31, 2021, respectively. As such, the Company does not consider the concentration of its accounts receivable to be a material risk. For the three months ended March 31, 2022 and 2021, there were no customers that individually represented 10% or more of revenue.
The Company uses third parties to collect its credit card receivables and believes risk related to its credit card processors is minimal.
Recent Accounting Pronouncements
Accounting Pronouncements Not Yet Adopted
As an emerging growth company (“EGC”), the Company is allowed by the Jumpstart Our Business Startups Act to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use the adoption dates applicable to private companies. As a result, the Company’s financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective date for new or revised accounting standards that are applicable to public companies.
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the existing model for measuring the allowance for credit losses for financial assets measured at amortized cost (including accounts receivable) to a model that is based on the expected losses rather than incurred losses. Under the new credit loss model, lifetime expected credit losses on such financial assets are measured and recognized at each reporting date based on historical, current, and forecasted information. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, and in April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. These ASUs provide supplemental guidance and clarification to ASU 2016-13 and must be adopted concurrently with the adoption of ASU 2016-13, cumulatively referred to as “Topic 326.” As an EGC, this guidance is effective for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effects of the adoption of this update on its condensed consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which enhances and simplifies various aspects of income tax accounting guidance. As an EGC, this guidance is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted, including adoption in an interim period. An entity that elects to early adopt ASU 2019-12 in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. The Company is currently evaluating the effects of the adoption of this update on its condensed consolidated financial statements.
Recently Adopted Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which reduces the number of accounting models for convertible debt instruments and convertible preferred stock, and which removes certain conditions that should be considered in the derivative scope exception evaluation under Subtopic 815-40. The Company early adopted ASU 2020-06 on January 1, 2022 and applied the changes using the modified retrospective approach. The adoption did not have a material impact on the Company’s condensed consolidated financial statements.
12

ZipRecruiter, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
3.Net Income Per Share
Basic and diluted net income per share are computed using the two-class method as required when there are participating securities and multiple classes of common stock. Basic net income per share is computed using the weighted-average number of shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of shares and the effect of potentially dilutive securities outstanding during the period.
Prior to May 14, 2021, when the Company’s Series A preferred stock and Series B preferred stock converted into shares of Class B common stock, the Company’s redeemable convertible preferred stock were participating securities as the holders of the redeemable convertible preferred stock were entitled to participate in dividends with common stock. In periods of net income, net income after deducting the accretion of redeemable convertible preferred stock was attributed to common stockholders and participating securities based on their participation rights. Net losses after deducting the accretion of redeemable convertible preferred stock are not allocated to the participating securities as the participating securities do not have a contractual obligation to share in any losses.
In April 2021, the Company filed its amended and restated certificate of incorporation, which resulted in the creation of Class A common stock and Class B common stock. As the liquidation and dividend rights are identical for Class A and Class B common stock (see Note 8), the undistributed earnings under the two-class method are allocated on a proportional basis and the resulting net income per share attributable to common stockholders is, therefore, the same for both Class A and Class B common stock on an individual or combined basis.
The following table presents the Company’s basic net income per share (in thousands, except per share amounts):
Three Months Ended
March 31,
20222021
Net income per share, basic:
Net income $8,417 $13,398 
Less: Accretion of redeemable convertible preferred stock (997)
Less: Undistributed earnings attributable to participating securities (2,913)
Net income attributable to Class A and Class B common stockholders$8,417 $9,488 
Weighted average shares of Class A and Class B common stock outstanding118,806 78,834 
Net income per share attributable to Class A and Class B common stockholders, basic$0.07 $0.12 
The Company computes diluted net income per share under the two-class method where income is reallocated between common stock, potential common stock and participating securities. Potential common stock includes stock options and restricted stock units (“RSUs”) computed using the treasury stock method and the conversion of the convertible notes and accrued interest using the if converted method.
13

ZipRecruiter, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The following table presents the Company’s diluted net income per share (in thousands, except per share amounts):
Three Months Ended
March 31,
20222021
Net income per share, diluted:
Numerator:
Net income attributable to Class A and Class B common stockholders$8,417 $9,488 
Add:
Reallocation of net income attributable to participating securities 466 
Interest on convertible notes with related parties, net of tax— 129 
Net income attributable to Class A and Class B common stockholders, diluted$8,417 $10,083 
Denominator:
Weighted average shares of Class A and Class B common stock outstanding, basic118,806 78,834 
Effect of dilutive securities:
Options to purchase common stock7,960 15,774 
Convertible notes with related parties 3,827 
Restricted stock units284  
Weighted average shares of Class A and Class B common stock outstanding, diluted127,050 98,435 
Net income per share attributable to Class A and Class B common stockholders, diluted$0.07 $0.10 

14

ZipRecruiter, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The following table presents the weighted average number of potentially dilutive common stock equivalents excluded from the computation of diluted net income per share because their inclusion would have been anti-dilutive (in thousands):
Three Months Ended
March 31,
20222021
Options to purchase common stock62 10 
Restricted stock units4,859 5,559 
Unvested early exercise common stock 2 
Employee stock purchase plan224  
Total shares excluded from diluted net income per share5,145 5,571 
In April 2021, the Company granted an RSU award (the “CEO Performance Award”), which included service, market, and performance based vesting conditions. The CEO Performance Award is excluded from the above table because none of the market conditions had been met as of March 31, 2022.
4.Revenue Information
The Company disaggregates revenue into two streams: subscription revenue and performance-based revenue. The following table presents the Company’s revenue streams (in thousands):
Three Months Ended
March 31,
20222021
Subscription$174,823 $100,504 
Performance-based52,437 24,868 
Total revenue$227,260 $125,372 
The Company recognized $21.9 million and $12.5 million of revenue during the three months ended March 31, 2022 and 2021, respectively, that was included in the deferred revenue balances as of December 31, 2021 and 2020, respectively.
As of March 31, 2022 and December 31, 2021, the Company had no contract assets.
Performance Obligations
No revenue was recognized during the three months ended March 31, 2022 and 2021 from performance obligations satisfied in previous periods.
As of March 31, 2022, revenue for unsatisfied performance obligations expected to be recognized in the future is $2.0 million, which will be recognized in the current year. The remaining performance obligations primarily relate to subscription services such as time-based job posting plans, upsell services, and resume database plans. Remaining performance obligations include amounts that will be invoiced in future periods, and exclude (i) contracts with an original expected term of one year or less and (ii) contracts for which the Company only recognizes revenue at the amount to which it has the right to invoice for services performed.
15

ZipRecruiter, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
5.Accrued Expenses
Accrued expenses consist of the following (in thousands):
March 31,December 31,
20222021
Accrued marketing$28,745 $22,493 
Accrued partner expenses11,122 8,457 
Accrued compensation and benefits11,180 26,621 
Accrued commissions6,122 5,790 
Accrued non-income taxes4,570 11,250 
Accrued refunds and customer liabilities3,797 3,646 
Other accrued expenses6,835 7,956 
Total accrued expenses$72,371 $86,213 
6.Debt
Credit Facility
In April 2021, the Company terminated its Second Amended and Restated Loan and Security Agreement dated September 2, 2020 and entered into a new $250.0 million credit facility agreement with a syndicate of banks. The new credit facility has a maturity date of April 30, 2026 and bears interest at a rate based upon the Company’s Net Leverage Ratio. The Company’s Net Leverage Ratio is defined as total debt less total cash and permitted investments outstanding at period end, with a maximum total cash and permitted investments adjustment of $550.0 million, divided by the trailing twelve months of earnings, adjusted for items such as non-cash expenses and other nonrecurring transactions. The Company is also obligated to pay other customary fees including a commitment fee on a quarterly basis based on amounts committed but unused under the new credit facility at a rate between 0.25% to 0.35%, depending on the Company’s Net Leverage Ratio.
The new credit facility is collateralized by security interests in substantially all of the Company’s assets and includes customary events of default such as non-payment of principal, non-payment of interest or fees, inaccuracy of representations and warranties, violation of certain covenants, cross default to certain other indebtedness, bankruptcy and insolvency events, material judgments against the Company, and a change of control. The occurrence of an event of default could result in the acceleration of the obligations under the new credit facility.
The new credit facility agreement contains customary representations, warranties, affirmative covenants, such as financial statement reporting requirements, negative covenants, and financial covenants, such as maintenance of certain net leverage ratio requirements. The negative covenants include restrictions that, among other things, restrict the Company’s ability to incur liens and indebtedness, make certain investments, declare dividends, dispose of, transfer or sell assets, make stock repurchases and consummate certain other matters, all subject to certain exceptions.
On November 19, 2021, the Company entered into an amendment to the new credit agreement with a syndicate of banks and the lenders named therein (the “Credit Agreement”), to amend certain other provisions under the Credit Agreement relating to how letters of credit denominated in currencies other than U.S. Dollars are valued under the Credit Agreement. 
On January 10, 2022, the Company entered into a Second Amendment to the Credit Agreement (the “Second Amendment”) with a syndicate of banks and the lenders named therein. The Second Amendment increased the maximum amount of liquidity (including cash and permitted investments) that may be netted against the Company’s total indebtedness from $100.0 million to $550.0 million for
16

ZipRecruiter, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
purposes of calculating the Company’s total Net Leverage Ratio under the Credit Agreement. The Company was in compliance with the financial covenants as of March 31, 2022.
The Company had no amounts outstanding under the Credit Agreement as of March 31, 2022. The amount available under the credit facility as of March 31, 2022 was $244.1 million, which is the credit limit less letters of credit outstanding of $5.9 million.
Issuance of Senior Unsecured Notes
On January 12, 2022, the Company issued an aggregate principal amount of $550.0 million senior unsecured notes due 2030 (the “Notes”) in a private placement. The Notes and the guarantees are senior unsecured obligations of ZipRecruiter, Inc.
The Notes were issued pursuant to an indenture dated as of January 12, 2022 (the “Indenture”) between the Company and the trustee. Pursuant to the Indenture, the Notes will mature on January 15, 2030 and bear interest at a rate of 5% per year. Interest on the Notes is payable semi-annually in arrears on January 15 and July 15 of each year, beginning on July 15, 2022. Unpaid amounts are included within accrued interest in the Company’s condensed consolidated balance sheets.
The Indenture contains certain customary negative covenants, including but not limited to, limitations on the incurrence of debt, liens, consolidations or mergers, and asset sales. The Indenture also contains customary events of default.
At its sole discretion, the Company has the option to redeem all or a part of the Notes as follows:
(i) At any time prior to January 15, 2025, the Company may redeem all or part of the Notes, at its option, at a redemption price equal to 100% of the principal amount plus a make-whole premium as defined in the Indenture, and any accrued and unpaid interest, if any; and
(ii) At any time on or after January 15, 2025, the Company may redeem all or any portion of the Notes, at the redemption prices equal to the percentage of principal amount set forth below, plus accrued and unpaid interest, if any, if redeemed during the twelve-month period beginning on January 15 of the year indicated below:
YearPercentage
2025102.50 %
2026101.25 %
2027 and thereafter100.00 %
Prior to January 15, 2025, the Company has the option to redeem up to 40% of the aggregate principal amount of the Notes from net cash proceeds from certain equity offerings at a redemption price equal to 105% of the principal amount of the Notes to be redeemed plus any accrued and unpaid interest.
Upon the occurrence of a change of control triggering event (as defined in the Indenture), the Company must offer to repurchase the Notes at a repurchase price equal to 101% of the aggregate principal amount of the Notes to be repurchased, and any accrued and unpaid interest.
The Company includes its Notes, net of debt issuance costs, within long-term borrowings in its condensed consolidated balance sheets.
The Company accounts for the debt issuance costs incurred related to the Notes using the effective interest method, under which the debt issuance costs are amortized as interest expense until the
17

ZipRecruiter, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
applicable maturity date. As of March 31, 2022, the Company had a carrying amount of approximately $9.1 million of debt issuance costs related to the Notes.
For the three months ended March 31, 2022, the Company recognized $6.1 million in interest expense related to the senior unsecured notes with an effective interest rate of 5.26%. Such interest expense includes $0.2 million related to the amortization of debt issuance costs.
The aggregate fair value of the Company’s senior unsecured notes as of March 31, 2022 was estimated to be approximately $536.9 million, and is valued based on quoted prices for the notes in an inactive market, which represents a Level 2 input in the fair value hierarchy.
7.Commitments and Contingencies
Legal Matters
The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. If the Company determines that it is probable that a loss has been incurred and the amount is reasonably estimable, the Company will record a liability. However, if the Company determines that a contingent loss is reasonably possible and the loss or range of loss can be estimated, the Company will disclose the possible loss in the condensed consolidated financial statements. Legal costs relating to loss contingencies are expensed as incurred.
In April 2019, the Company was named as a defendant in a putative class action lawsuit filed by a former employee in the Los Angeles Superior Court alleging that the Company violated the Fair Credit Reporting Act as well as owed certain compensation to employees. In January 2020, the former employee filed a related representative action in the Los Angeles Superior Court under the Private Attorney General Act alleging similar claims regarding compensation owed to employees. In January 2021, the Company filed a motion for summary judgment or, in the alternative, summary adjudication, which was granted in part and denied in part. At the date these condensed consolidated financial statements were issued, the parties had agreed to settle the lawsuit for an immaterial amount and accordingly, the Company recorded a liability within accrued expenses as of March 31, 2022.
Indemnification
In the ordinary course of business, the Company may provide indemnification of varying scopes and terms to customers, investors, directors and officers with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements, services to be provided by the Company, or from certain claims made by third parties. These indemnification provisions may survive termination of the underlying agreement and the maximum potential amount of future payments the Company could be required to make under these indemnification provisions may not be subject to maximum loss clauses. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is indeterminable. The Company has never paid a material claim, nor has the Company been sued in connection with these indemnification arrangements. As of March 31, 2022, the Company has not accrued a liability for these indemnification arrangements because the likelihood of incurring a payment obligation, if any, in connection with these indemnification arrangements is neither probable nor reasonably estimable.
Non-income Taxes
The Company collects and remits sales and use, value added and other taxes (“non-income taxes”) relating to the sale of the Company’s services in various jurisdictions. The Company accrues non-income taxes that may result from examinations by, or any anticipated negotiated agreements with, these tax authorities when a loss is probable and reasonably estimable. If the Company determines that a loss is reasonably possible and the loss or range of loss can be estimated, then the reasonably possible loss is disclosed. Due to the inherent complexity and uncertainty of these matters and judicial process in certain jurisdictions, the final outcome may be materially different from the Company’s expectations.

18

ZipRecruiter, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
8.Common Stock and Redeemable Convertible Preferred Stock
Common stock
The Company is authorized to issue a total of 1.45 billion shares consisting of 700 million shares of Class A common stock, 700 million shares of Class B common stock, and 50 million shares of preferred stock all with a par value per share of $0.00001.
The Class A common stock is entitled to one vote per share and the Class B common stock is entitled to twenty votes per share. The Class A and Class B common stock have the same dividend and liquidation rights. The Class B common stock converts to Class A common stock at any time at the option of the holder. Additionally, each share of Class B common stock will convert automatically into one share of Class A common stock upon any transfer, except for certain transfers described in the amended and restated certificate of incorporation.
Redeemable Convertible Preferred Stock
In April 2021, the Company amended and restated its certificate of incorporation such that the redeemable convertible preferred stock would automatically convert into shares of common stock upon the effectiveness of the Company’s registration statement related to the direct listing of its Class A common stock on the New York Stock Exchange (the “Direct Listing”).
On May 14, 2021, the holders of the Series A preferred stock and Series B preferred stock converted all outstanding shares of preferred stock into 24.2 million shares of Class B common stock.


9.Share Repurchase Program
In February 2022, the Company’s board of directors authorized the Company to repurchase up to $100.0 million of its outstanding common stock. The Company may repurchase shares of common stock through open market or privately negotiated transactions, block purchases, or pursuant to one or more Rule 10b5-1 plans. The share repurchase program has no expiration date and will continue until otherwise suspended, terminated, or modified at any time for any reason by the board of directors.
The share repurchase program does not obligate the Company to repurchase shares of common stock. There is no minimum or maximum number of shares to be repurchased under the program. The timing and actual number of shares repurchased will depend on a variety of factors including price, market conditions, corporate and regulatory requirements, and other investment opportunities.
In March 2022, the Company repurchased approximately 0.6 million shares of its Class A common stock through open market purchases at an aggregate cost of $12.3 million. Thereafter, the Company entered into an accelerated share repurchase agreement (“ASR”) with Goldman Sachs & Co. LLC (“Goldman Sachs”) to repurchase an aggregate of $50.0 million in shares of the Company’s Class A common stock.
The Company made an initial payment of $50.0 million to Goldman Sachs and received an initial delivery of 1.8 million shares of its Class A common stock which represented $40.0 million (or 80%) of the ASR. The final number of shares to be repurchased will be based on the volume-weighted average price of the Company’s Class A common stock during the term of the ASR, less fees paid to the bank. The final
19

ZipRecruiter, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
settlement of the ASR occurred during the second quarter of 2022. The ASR transaction is effectuated pursuant to the Company’s previously announced $100.0 million share repurchase program.
Approximately $37.7 million in shares of the Company’s Class A common stock remains available for future repurchases under the Company’s $100.0 million share repurchase program after completion of the ASR.
All shares repurchased under the share repurchase program were immediately retired. Repurchased shares reduced the Company’s outstanding shares and its weighted average number of common shares outstanding for purposes of calculating basic and diluted earnings per share.
10.Stock-Based Compensation
Total stock-based compensation expense is recorded in the Condensed Consolidated Statements of Operations as follows (in thousands):
Three Months Ended
March 31,
20222021
Cost of revenue$216 $16 
Sales and marketing2,628 99 
Research and development8,670 825 
General and administrative8,980 286 
Total stock-based compensation$20,494 $1,226 
Equity Incentive Plans
Prior to adoption of the 2021 Equity Incentive Plan (the “2021 Plan”), the Company granted awards under the 2012 Equity Incentive Plan (the “2012 Plan”) or 2014 Equity Incentive Plan (the “2014 Plan”, and together with the 2012 Plan, the “Prior Plans”). All awards currently are granted from the 2021 Plan. However, the Prior Plans continue to govern the terms and conditions of the outstanding awards previously granted under the 2012 Plan and 2014 Plan.
Under the amended and restated certificate of incorporation, all outstanding options to purchase common stock became options to purchase an equivalent number of shares of Class B common stock and all RSUs became RSUs for an equivalent number of shares of Class B common stock under the Prior Plans.
In April 2021, the Company adopted the 2021 Plan, which became effective on May 14, 2021 in connection with the Direct Listing. The 2021 Plan permits the grant of incentive stock options to employees and the grant of non-qualified stock options, restricted stock, restricted stock awards, RSUs, stock appreciation rights, performance units, performance shares and stock bonus awards to the Company’s employees, directors, and consultants. Under the 2021 Plan, as of March 31, 2022, 12.4 million shares were reserved for issuance of Class A common stock. The number of shares initially reserved for issuance pursuant to awards under the 2021 Plan will be increased by (i) (a) any reserved shares not issued or subject to outstanding awards granted under the Prior Plans that cease to be subject to such awards by forfeiture or otherwise after the effective date, (b) shares issued under the Prior Plans before or after the effective date pursuant to the exercise of stock options that are, after the effective date, forfeited, (c) shares issued under the Prior Plans that are repurchased by the Company at the original purchase price or are otherwise forfeited, and (d) shares that are subject to stock options or other awards under the Prior Plans that are used to pay the exercise price of a stock option or withheld to satisfy the tax withholding obligations related to any award and (ii) an annual increase on January 1st of each year beginning in 2022 through 2031, by the lesser of (a) 5% of the number of shares of all classes of the
20

ZipRecruiter, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Company’s common stock issued and outstanding on December 31 immediately prior to the date of increase or (b) such number of shares determined by the board of directors.
During the three months ended March 31, 2022, 2.1 million RSUs and no stock options were issued under the 2021 Plan.
2021 Employee Stock Purchase Plan
In August 2021, the Company launched the 2021 Employee Stock Purchase Plan (the “ESPP”). The ESPP provides for concurrent six-month offering and purchase periods beginning February 15 and August 15 of each year. On January 1 of each of year, 2022 through 2031, the aggregate number of shares of Class A common stock reserved for issuance under the ESPP shall be increased automatically by the number of shares equal to 1% of the total number of outstanding shares of Class A common stock and shares of preferred stock of the Company (on an as converted to common stock basis) on the immediately preceding December 31; provided that the board of directors or compensation committee may in its sole discretion reduce the amount of the increase in any particular year. As of March 31, 2022, 2.2 million shares were reserved for issuance of Class A common stock.
The ESPP allows eligible employees the option to purchase shares of the Company's Class A common stock at a 15% discount through payroll deductions of their eligible compensation, subject to certain plan limitations. On each purchase date, eligible employees can purchase the Company’s Class A common stock at a price per share equal to 85% of the lesser of the fair market value of the Company’s Class A common stock on (i) the offering date or (ii) the purchase date. The purchase date is the last day of any concurrent offering and purchase period. During the three months ended March 31, 2022, 0.3 million shares of Class A common stock were purchased under the ESPP for an aggregate amount of $5.3 million.
In the three months ended March 31, 2022, total stock-based compensation expense of $0.8 million was recognized related to the ESPP. As of March 31, 2022, there was $0.8 million of unrecognized stock-based compensation expense that is expected to be recognized over the remaining term of the offering period ending August 14, 2022. As of March 31, 2022, the Company recorded a liability of $1.1 million related to the accumulated payroll deductions, which are refundable to employees who withdraw from the ESPP. This amount is included within accrued expenses in the accompanying Condensed Consolidated Balance Sheets.
Stock Options
A summary of the Company’s stock option activity under the Prior Plans and the 2021 Plan (collectively, the “Plans”) for the three months ended March 31, 2022 is as follows (in thousands, except weighted average information):
Number of Options OutstandingWeighted Average Exercise Price Per Share
Outstanding at December 31, 2021
9,841 $2.27 
Granted  
Exercised(1,180)1.79 
Forfeited/Canceled(14)2.96 
Outstanding at March 31, 2022
8,647 $2.33 
Exercisable at March 31, 2022
7,921 $2.23 
As of March 31, 2022, total remaining stock-based compensation expense for unvested stock options is $5.8 million, which is expected to be recognized over a weighted average period of 1.3 years.
21

ZipRecruiter, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Restricted Stock Units
The Company has granted RSUs to certain employees and directors of the Company. The granted RSUs vest upon the satisfaction of both a time-based service condition and a liquidity event requirement. The time-based service condition for these awards is generally satisfied over four years. On April 19, 2021, the Company’s board of directors waived the liquidity event performance condition for the RSUs then outstanding so those that had satisfied the service condition would vest upon the earlier of the first day of trading of the Company’s common stock on the New York Stock Exchange, or March 15, 2022.
On April 19, 2021, the Company also granted the CEO Performance Award, which provides for a grant of 1.4 million RSUs. The CEO Performance Award vests upon achieving stock price targets as well as satisfying certain minimum service requirements. During the three months ended March 31, 2022, the Company recorded stock-based compensation expense of $1.5 million related to the CEO Performance Award.
For all RSUs, excluding the CEO Performance Award, the Company recorded stock-based compensation expense of $17.7 million during the three months ended March 31, 2022. During the three months ended March 31, 2021 and prior to the Direct Listing, the Company concluded that the liquidity event performance condition described above for the RSUs was not probable of being satisfied. As a result, the Company did not recognize any compensation cost during the three months ended March 31, 2021 for any RSUs granted.
A summary of the Company’s RSU activity for the three months ended March 31, 2022 is as follows (in thousands, except weighted average information):
Number of SharesWeighted Average Grant Date Fair Value Per Share
Unvested at December 31, 2021
7,532 $24.20 
Granted2,069 20.56 
Vested(787)18.08 
Forfeited/Canceled(196)20.79 
Unvested at March 31, 2022
8,618 $20.38 
As of March 31, 2022, total unrecognized stock-based compensation expense for RSUs associated with the CEO Performance Award was $17.8 million, which is expected to be recognized over a weighted average period of 3.2 years. For the remaining RSUs, total unrecognized stock-based compensation expense for unvested RSUs as of March 31, 2022 was $170.4 million, which is expected to be recognized over a weighted average period of 1.7 years.
11.Income Taxes
The Company computes its provision (benefit) for income taxes by applying the estimated annual effective tax rate to pretax income or loss and adjusts the provision for discrete tax items recorded in the period.
The Company recorded an income tax benefit of $0.5 million and income tax expense of $3.2 million for the three months ended March 31, 2022 and 2021, respectively.
The effective tax rate for the three months ended March 31, 2022 and 2021 was (6)% and 19%, respectively.
22

ZipRecruiter, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The effective tax rate for the three months ended March 31, 2022 differed from the U.S. federal statutory tax rate of 21% primarily due to excess tax benefits relating to the exercise of non-qualified stock options and settlement of RSUs and from the tax benefits from research and development tax credits, partially offset by non-deductible expenses including certain stock-based compensation expenses and limitations on the amount of deductible officer compensation. The effective tax rate for the three months ended March 31, 2021 differed from the U.S. federal statutory tax rate of 21% primarily due to excess tax benefits relating to the exercise of non-qualified stock options and from the tax benefits from research and development tax credits, partially offset by non-deductible expenses including certain stock-based compensation expenses.
During the three months ended March 31, 2022, the Company continued to record reserves for the current year uncertain tax positions recognized within the effective tax rate. The Company does not expect its unrecognized tax benefits to change significantly over the next twelve months.
12.Subsequent Events
In May 2022, subsequent to period end, the purchase period for the ASR ended and an additional 0.4 million shares were delivered to the Company. In total, 2.2 million shares were purchased by the Company under the ASR at a volume weighted-average price of $23.09 per share net of fees.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and the related notes included in Item 1 “Financial Statements” in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should read the sections titled “Risk Factors” and “Note Regarding Forward-Looking Statements” for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
OVERVIEW
Our Mission is to actively connect people to their next great opportunity.
ZipRecruiter is a two-sided marketplace for work. We generate substantially all of our revenue from fees paid by employers to post jobs and access other features in our marketplace. We offer our employers flat rate pricing on terms typically ranging from a day to a year, or performance-based pricing, such as cost-per-click, to align with each employer’s hiring needs.
ZipRecruiter is free to use for job seekers. Job seekers come to ZipRecruiter in search of their next opportunity. After establishing a profile, job seekers are able to apply to jobs with a single click. Our automated recruiter curates jobs and proactively sends alerts for new opportunities where they are a Great Match, which is a designation assigned by ZipRecruiter’s technology to indicate a high potential fit between a job seeker and a job. As our matching technology learns more about job seekers’ preferences and attributes, our technology offers increasingly higher quality matches.
We plan to continue to invest aggressively in our marketplace to drive growth for the foreseeable future. We have made significant investments in our business to expand our employer and job seeker footprints, increase their engagement, and enhance our datasets and machine learning.
For the three months ended March 31, 2022, our revenue was $227.3 million and we generated a net income of $8.4 million and Adjusted EBITDA of $37.2 million. For the three months ended March 31, 2021, our revenue was $125.4 million, and we generated a net income of $13.4 million and Adjusted EBITDA of $20.0 million. Adjusted EBITDA is a financial measure not presented in accordance with GAAP. For a definition of Adjusted EBITDA, an explanation of our management’s use of this measure and a reconciliation of net income to Adjusted EBITDA, see the section titled “Key Operating Metrics and Non-GAAP Financial Measures.”
KEY OPERATING METRICS AND NON-GAAP FINANCIAL MEASURES
In addition to the measures presented in our consolidated financial statements, we use the following key operating metrics and non-GAAP financial measures to identify trends affecting our business, formulate business plans, and make strategic decisions:
March 31,
2021
June 30,
2021
September 30, 2021December 31, 2021March 31, 2022
Quarterly Paid Employers114,705 169,191 169,535 147,081 150,233 
Revenue per Paid Employer$1,093 $1,081 $1,254 $1,497 $1,513 

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Three Months Ended
March 31,
20222021
(in thousands, except percentages)
Adjusted EBITDA$37,203 $19,994 
Adjusted EBITDA margin16 %16 %
Quarterly Paid Employers
We quantify the revenue-generating customer base as the number of Paid Employers in our marketplace. The Quarterly Paid Employer metric includes all actively recruiting employers (or entities acting on behalf of employers) on a paying subscription plan or performance marketing campaign for at least one day in a given calendar quarter. Paid Employers excludes employers from our third-party sites or other indirect channels, employers who are not actively recruiting, and employers on free-trials. This group of employers excluded from our Paid Employer count does not contribute a significant amount of revenue.
In the quarter ended March 31, 2022, Quarterly Paid Employers increased when compared to the quarter ended December 31, 2021. The elevated levels of hiring activity we saw throughout the year ended December 31, 2021 continued, driven by the strong demand from U.S. employers entering and returning to our marketplace, and a robust and recovering economy. The longstanding investments in building our brand among employers and in-period sales and marketing efforts contributed to a growing number of Paid Employers participating in our marketplace during the first quarter of 2022.
Revenue per Paid Employer
We evaluate Revenue per Paid Employer as a key indicator of our efforts to increase value provided to employers in our marketplace. We define Revenue per Paid Employer as total company revenue in a given period divided by Quarterly Paid Employers in the same period.
In the quarter ended March 31, 2022, Revenue per Paid Employer increased slightly when compared to the quarter ended December 31, 2021. Employers’ willingness to pay continued to grow in the current quarter as demand for talent remained high. Our products and services continue to improve, offering more value for employers of all sizes. We expect the longstanding upward trend of growing Revenue per Paid Employer to continue.
Adjusted EBITDA and Adjusted EBITDA Margin
We define Adjusted EBITDA as our net income before total other (income) expense, net, income tax expense (benefit) and depreciation and amortization, adjusted to eliminate stock-based compensation expense. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA for a period by revenue for the same period.
We believe Adjusted EBITDA and Adjusted EBITDA margin are helpful to investors, analysts and other interested parties because they can assist in providing a more consistent and comparable overview of our operations across our historical financial periods. In addition, these measures are frequently used by analysts, investors and other interested parties to evaluate and assess performance. Adjusted EBITDA is not intended to be a substitute for any U.S. GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry.
Our Adjusted EBITDA and Adjusted EBITDA margin fluctuate from quarter to quarter depending on a variety of factors including, but not limited to, our investments in research and development, sales and marketing, headcount and our ability to generate revenue.
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The following table presents a reconciliation of net income to Adjusted EBITDA for each of the periods indicated:
Three Months Ended
March 31,
20222021
(in thousands)
GAAP net income (1)
$8,417 $13,398 
Stock-based compensation20,494 1,226 
Depreciation and amortization2,485 2,302 
Total other (income) expense, net6,310 (177)
Income tax expense (benefit)(503)3,245 
Adjusted EBITDA$37,203 $19,994 
____________
(1)GAAP net income includes one-time general and administrative expenses related to accounting and legal expenses and other filing costs in connection with our Direct Listing totaling $0 and $2.1 million in the three months ended March 31, 2022 and 2021, respectively.

The following tables present GAAP net income margin and Adjusted EBITDA margin for each of the periods indicated:
Three Months Ended
March 31,
20222021
(in thousands, except percentages)
Revenue$227,260 $125,372 
Net income8,417 13,398 
GAAP net income margin%11 %
Three Months Ended
March 31,
20222021
(in thousands, except percentages)
Revenue$227,260 $125,372 
Adjusted EBITDA37,203 19,994 
Adjusted EBITDA margin16 %16 %
Impact of COVID-19
COVID-19 has had, and continues to have, a significant impact on the U.S. economy and hiring. The economic recovery during the year ended 2021 has driven a significant and broadly distributed increase in demand for labor. In the quarter ended March 31, 2022, we delivered $227.3 million in revenue, a 81% increase compared to the quarter ended March 31, 2021, reflecting strong execution across product, marketing and operations, and the continuation of an economic recovery. We saw employers in our marketplace increase by 31% in the quarter ended March 31, 2022 versus the quarter ended March 31, 2021 as macroeconomic conditions improved and we increased our sales and marketing investments to aid in bringing on more Paid Employers.

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Components of Our Results of Operations
Revenue
We generate revenue primarily from fees paid by employers to post and distribute jobs in our marketplace, as well as multiple sites managed by Job Distribution Partners, which are third-party sites who have a relationship with us and advertise from our marketplace, and includes job boards, newspaper classifieds, search engines, social networks, talent communities and resume services.
Our subscription revenue consists of time-based job posting plans, upsells which complement or expand visibility and prominence to job posting plans, and resume database plans.
We offer job posting plans with terms typically ranging from a day to a year on a flat rate subscription basis to access our marketplace, where customers may create and manage job postings and review incoming candidate applications. We recognize revenue ratably over the subscription period beginning on the date the subscription service is made available to the customer. Our nonrefundable subscriptions are typically subject to renewal at the end of the subscription term.
Our upsell services complement or expand visibility to job posting plans and are typically sold on a subscription basis. Upsell services revenue is recognized ratably over the term of the agreement beginning on the date the upsell services are made available to the customer. Additionally, upsell services include job posting enhancements which are applied to individual job postings to provide customers with a temporary boost in the prominence of their job postings. Revenue from job posting enhancements is recognized as the customer uses the enhancements on its job postings.
Resume database plans allow our customers to search and view resumes and revenue is recognized ratably over the subscription period.
Performance-based revenue is recognized when a candidate clicks on or applies to a job distributed by ZipRecruiter on behalf of a customer. For performance-based revenue, our customers pay an amount per click or per job application usually capped at a contractual maximum per job recruitment campaign.
For a description of our revenue accounting policies, see the section titled “Critical Accounting Policies and Estimates” below.
Cost of Revenue and Gross Profit
Cost of Revenue
Cost of revenue consists of third-party hosting, credit card processing fees, personnel related costs (including salaries, bonuses, benefits, and stock-based compensation) for customer support employees, partner revenue share amounts, job distribution costs from performance-based revenue, and amortization of capitalized software costs associated with our marketplace technology to provide services for our customers. In addition, we allocate a portion of overhead costs, such as rent, IT costs, supplies, and depreciation and amortization, to cost of revenue based on headcount.
We expect cost of revenue to increase in absolute dollars in future periods due to payment processing fees, third-party hosting fees, personnel related costs to support additional transaction volume, and amortization expense associated with our capitalized internal-use software and development cost. Our cost of revenue may fluctuate in absolute dollars from period to period based on the amount and timing of all of these items.
Gross Profit and Gross Margin
Our gross profit and gross margin may fluctuate from period to period. Such fluctuations may be influenced by our revenue, timing and amount of investments to expand hosting capacity, our continued
27


investments in our support teams, and the amortization expense associated with our capitalized internal-use software and development cost.
Costs and Operating Expenses
Sales and Marketing
Sales and marketing expense consists of personnel related costs (including salaries, sales commissions, bonuses, benefits, and stock-based compensation) for our sales and marketing employees, marketing activities, and related allocated overhead costs. Marketing activities include advertising, online lead generation, customer and industry events, and candidate acquisition. We allocate a portion of overhead costs, such as rent, IT costs, supplies, and depreciation and amortization, to sales and marketing expense based on headcount.
We expect that sales and marketing expenses will increase on an absolute dollar basis and may vary from period to period as a percentage of revenue for the foreseeable future as we plan to continue to invest in sales and marketing to attract both employers and job seekers to our marketplace and to increase our brand awareness. We expect that these expenses will continue to be our largest operating expense category for the foreseeable future as we continue to expand on our sales and marketing efforts.
Research and Development
Research and development expense consists of personnel related costs (including salaries, bonuses, benefits, and stock-based compensation) for our research and development employees, amortization of capitalized software costs associated with the development of the databases supporting our marketplace, and the cost of certain third-party service providers. We allocate a portion of overhead costs, such as rent, IT costs, supplies, and depreciation and amortization, to research and development expenses based on headcount. Research and development costs, other than software development costs qualifying for capitalization, are expensed as incurred.
We believe continued investments in research and development are important to attain our strategic objectives, and expect research and development expense to increase in absolute dollars. This expense may vary as a percentage of total revenue for the foreseeable future as we continue to invest in research and development activities related to ongoing improvements to, and maintenance of, our marketplace, expansion of our services, as well as other research and development programs, including the hiring of engineering, product development, and design employees to support these efforts.
General and Administrative
General and administrative expense consists of personnel related costs (including salaries, bonuses, benefits, and stock-based compensation) for employees in our executive, finance, human resource and administrative departments, and fees for third-party professional services, including consulting, legal and accounting services. General and administrative expense also consists of non-recurring costs as part of our transition to a publicly traded company and includes fees paid to our financial advisors in connection with our Direct Listing. In addition, we allocate a portion of overhead costs, such as rent, IT costs, supplies, and depreciation and amortization, to general and administrative expense based on headcount.
We expect to continue to invest in corporate infrastructure and incur additional expenses associated with transitioning to and operating as a public company, including expenses related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, and higher expenses for investor relations costs, professional services, and director and officer insurance.
Interest Expense
Interest expense consists of interest costs associated with our outstanding borrowings, undrawn fees associated with our credit facility, and amortization of issuance costs for our credit facility and senior unsecured notes.
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Sublease Income
Sublease income consists of income earned from a noncancellable sublease agreement for one of our office facilities. The agreement terminated in March 2021.
Other Income (Expense), Net
Other income (expense) consists primarily of gains and losses from foreign currency exchange transactions. We have foreign currency exposure primarily related to personnel related expenses that are denominated in currencies other than the U.S. Dollar, principally the Canadian Dollar, British Pound and the Israeli New Shekel.
Income Tax Expense (Benefit)
We are subject to federal and state income taxes in the United States, as well as several international jurisdictions. The effective tax rate for the three months ended March 31, 2022 differed from the U.S. federal statutory tax rate of 21% primarily due to excess tax benefits relating to the exercise of non-qualified stock options and settlement of RSUs and from the tax benefits from research and development tax credits, partially offset by non-deductible expenses including certain stock-based compensation expenses and limitations on the amount of deductible officer compensation. The effective tax rate for the three months ended March 31, 2021 differed from the U.S. federal statutory tax rate of 21% primarily due to excess tax benefits relating to the exercise of non-qualified stock options and from the tax benefits from research and development tax credits, partially offset by non-deductible expenses including certain stock-based compensation expenses.
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Results of Operations
The following table sets forth our consolidated results of operations for each of the periods presented:
Three Months Ended
March 31,
20222021
(in thousands)
Revenue(1)
$227,260 $125,372 
Cost of revenue(2)
21,606 15,961 
Gross profit205,654 109,411 
Operating expenses
Sales and marketing(2)
137,590 63,476 
Research and development(2)
29,644 17,015 
General and administrative(2)(3)
24,196 12,454 
Total operating expenses191,430 92,945 
Income from operations14,224 16,466 
Other income (expense)
Interest expense(6,285)(209)
Sublease income — 292 
Other income (expense), net(25)94 
Total other income (expense), net(6,310)177 
Income before income taxes7,914 16,643 
Income tax expense (benefit)(503)3,245 
Net income$8,417 $13,398 
____________
(1)Revenue was comprised as follows:
Three Months Ended
March 31,
20222021
(in thousands)
Subscription revenue$174,823 $100,504 
Performance-based revenue52,437 24,868 
Total revenue $227,260 $125,372 
(2)Includes stock-based compensation expense as follows:
Three Months Ended
March 31,
20222021
(in thousands)
Cost of revenue$216 $16 
Sales and marketing2,628 99 
Research and development8,670 825 
General and administrative8,980 286 
Total stock-based compensation$20,494 $1,226 
(3)Includes one-time charges related to accounting and legal expenses and other filing costs in connection with our Direct Listing totaling $0 and $2.1 million in the three months ended March 31, 2022 and 2021, respectively.

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Comparison of the Three Months Ended March 31, 2022 and 2021
Revenue
Three Months Ended March 31,
20222021$ Change% Change
(in thousands, except percentages)
Total revenue$227,260 $125,372 $101,888 81 %
Revenue increased $101.9 million, or 81%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. Subscription revenue increased by $74.3 million, or 74%, for the same periods, which was primarily due to the number of Quarterly Paid Employers in our marketplace as we ramped up our marketing spend and the macroeconomic environment continued to improve from the economic downturn caused by the COVID-19 pandemic. Performance-based revenue increased $27.6 million, or 111%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase in performance-based revenue was primarily due to the onboarding of new customers who run sophisticated recruitment marketing campaigns in addition to increased budgets as employers' hiring needs ramped up as the economy continued to recover.
Cost of Revenue and Gross Margin
Three Months Ended March 31,
20222021$ Change% Change
(in thousands, except percentages)
Cost of revenue$21,606 $15,961 $5,645 35 %
Gross margin90 %87 %
Cost of revenue increased $5.6 million, or 35%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021, primarily due to an increase of $2.2 million in credit card processing fees. Total gross margin improved from 87% to 90% in the three months ended March 31, 2021 and March 31, 2022, respectively, and reflects our continued commitment to operational efficiencies and maintaining costs proportionate to revenue growth.
Sales and Marketing
Three Months Ended March 31,
20222021$ Change% Change
(in thousands, except percentages)
Sales and marketing$137,590 $63,476 $74,114 117 %
Percentage of revenue61 %51 %

Sales and marketing expenses grew $74.1 million, or 117%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase was primarily attributable to an additional $60.6 million in marketing and advertising versus the prior-year period reflecting our efforts in ramping up advertising to both job seekers and employers to grow both sides of the marketplace. Personnel related costs for our sales and marketing employees increased by $9.7 million, largely due to an increase in headcount. Lastly, stock-based compensation costs increased $2.5 million, primarily attributable to the ongoing stock-based compensation expense related to the vesting of RSU awards that was not applicable in the prior-year period.
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Research and Development
Three Months Ended March 31,
20222021$ Change% Change
(in thousands, except percentages)
Research and development$29,644 $17,015 $12,629 74 %
Percentage of revenue13 %14 %

Research and development expenses increased $12.6 million, or 74%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase was primarily due to the ongoing stock-based compensation expense of $7.9 million primarily related to the vesting of RSU awards that was not applicable in the prior-year period. Personnel related costs for our research and development employees increased by $4.3 million, primarily attributable to an increase in headcount.
General and Administrative
Three Months Ended March 31,
20222021$ Change% Change
(in thousands, except percentages)
General and administrative$24,196 $12,454 $11,742 94 %
Percentage of revenue11 %10 %

General and administrative expenses increased $11.7 million, or 94%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase was primarily due to the ongoing stock-based compensation expense of $8.7 million related to the vesting of RSU awards that was not applicable in the prior-year period. Personnel related expenses for our general and administrative employees increased by $2.8 million due to an increase in headcount.
Other Income (Expense), Net
Three Months Ended March 31,
2022