Ziprecruiter, Inc 10-Q for FY2022 Q1
Ziprecruiter, Inc. (ZIP)
10-Q
2022-05-13
For: 2022-03-31
View Original
Added on
April 12, 2026
About this 10-Q
Ziprecruiter, Inc filed this 10-Q on May 13, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).
Headline figures
Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $227.26M
- up 81.3% from $125.37M a year earlier
- Net income
- $8.42M
- down 37.2% from net income of $13.4M a year earlier
- Diluted EPS
- $0.07
- down 30.0% from $0.10 a year earlier
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
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |||||||||||||
(
(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 class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
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 filer | ☐ | 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, | ||||||||||
| 2022 | 2021 | ||||||||||
| Assets | |||||||||||
| Current assets | |||||||||||
| Cash | $ | $ | |||||||||
Accounts receivable, net of allowances of $ | |||||||||||
| Prepaid expenses and other assets | |||||||||||
| Deferred commissions, current portion | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Internal use software, net | |||||||||||
| Deferred commissions, net of current portion | |||||||||||
| Goodwill | |||||||||||
| Deferred tax assets, net | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and Stockholders' Equity | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses | |||||||||||
| Accrued interest | |||||||||||
| Deferred revenue | |||||||||||
| Operating lease liabilities, current portion | |||||||||||
| Other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Operating lease liabilities, net of current portion | |||||||||||
| Long-term borrowings | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 7) | |||||||||||
| Stockholders' equity | |||||||||||
Preferred Stock, $ | |||||||||||
Class A common stock, $ | |||||||||||
Class B common stock, $ | |||||||||||
Class B treasury stock, | ( | ( | |||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total stockholders' equity | |||||||||||
| Total liabilities and stockholders' equity | $ | $ | |||||||||
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, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| Revenue | $ | $ | |||||||||||||||||||||
| Cost of revenue | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Income from operations | |||||||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||
| Interest expense | ( | ( | |||||||||||||||||||||
| Sublease income | |||||||||||||||||||||||
| Other income (expense), net | ( | ||||||||||||||||||||||
| Total other income (expense), net | ( | ||||||||||||||||||||||
| Income before income taxes | |||||||||||||||||||||||
| Income tax expense (benefit) | ( | ||||||||||||||||||||||
| Net income | |||||||||||||||||||||||
| Less: Accretion of redeemable convertible preferred stock | ( | ||||||||||||||||||||||
| Less: Undistributed earnings attributable to participating securities | ( | ||||||||||||||||||||||
| Net income attributable to Class A and Class B common stockholders | $ | $ | |||||||||||||||||||||
| Net income per share attributable to Class A and Class B common stockholders: | |||||||||||||||||||||||
| Basic | $ | $ | |||||||||||||||||||||
| Diluted | $ | $ | |||||||||||||||||||||
| Weighted average shares used in computing net income per share attributable to Class A and Class B common stockholders: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
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 Stock | Common Stock | Class B Treasury Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series A | Series B | Class A | Class B | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Class B stock to Class A stock | — | — | — | — | — | ( | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of options | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon the vesting and settlement of restricted stock units | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares withheld related to net share settlement | — | — | — | — | ( | — | ( | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued under employee stock purchase plan | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase and retirement of common stock | — | — | — | — | ( | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended March 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Redeemable Convertible Preferred Stock | Common Stock | Class B Treasury Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' Deficit | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series A | Series B | Class A | Class B | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2020 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of options | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase and retirement of common stock | — | — | — | — | — | — | ( | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accretion of redeemable convertible preferred stock | — | — | — | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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, | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Stock-based compensation expense | |||||||||||
| Depreciation and amortization | |||||||||||
| Provision for bad debts | |||||||||||
| Deferred income taxes | ( | ||||||||||
| Non-cash lease expense | |||||||||||
| Other | |||||||||||
| Change in operating assets and liabilities: | |||||||||||
| Accounts receivable | ( | ( | |||||||||
| Prepaid expenses and other current assets | ( | ( | |||||||||
| Deferred commissions, net | |||||||||||
| Other assets | |||||||||||
| Accounts payable | ( | ( | |||||||||
| Accrued expenses and other liabilities | ( | ||||||||||
| Accrued interest | |||||||||||
| Deferred revenue | |||||||||||
| Operating lease liabilities | ( | ( | |||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities | |||||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Capitalized internal use software costs | ( | ( | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities | |||||||||||
| Proceeds from issuance of senior unsecured notes | |||||||||||
| Payment of senior unsecured notes’ issuance fees | ( | ||||||||||
| Payment for net settlement of taxes on restricted stock units | ( | ||||||||||
| Repurchase of common stock | ( | ( | |||||||||
| Proceeds from exercise of stock options | |||||||||||
| Proceeds from issuance of stock under employee stock purchase plan | |||||||||||
| Net cash provided by financing activities | |||||||||||
| Net increase in cash | |||||||||||
| Cash | |||||||||||
| Beginning of period | |||||||||||
| End of period | $ | $ | |||||||||
| Supplemental disclosure of non-cash activities | |||||||||||
| Capitalized assets included in accounts payable and accrued expenses | $ | $ | |||||||||
| Stock-based compensation capitalized for software | |||||||||||
| In-transit proceeds from exercise of stock options | |||||||||||
| Accretion of redeemable convertible preferred stock | |||||||||||
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
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.
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.
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ZipRecruiter, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
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
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
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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
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.
The following table presents the Company’s basic net income per share (in thousands, except per share amounts):
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| Net income per share, basic: | |||||||||||||||||||||||
| Net income | $ | $ | |||||||||||||||||||||
| Less: Accretion of redeemable convertible preferred stock | ( | ||||||||||||||||||||||
| Less: Undistributed earnings attributable to participating securities | ( | ||||||||||||||||||||||
| Net income attributable to Class A and Class B common stockholders | $ | $ | |||||||||||||||||||||
| Weighted average shares of Class A and Class B common stock outstanding | |||||||||||||||||||||||
| Net income per share attributable to Class A and Class B common stockholders, basic | $ | $ | |||||||||||||||||||||
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, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| Net income per share, diluted: | |||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income attributable to Class A and Class B common stockholders | $ | $ | |||||||||||||||||||||
| Add: | |||||||||||||||||||||||
| Reallocation of net income attributable to participating securities | |||||||||||||||||||||||
| Interest on convertible notes with related parties, net of tax | — | ||||||||||||||||||||||
| Net income attributable to Class A and Class B common stockholders, diluted | $ | $ | |||||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted average shares of Class A and Class B common stock outstanding, basic | |||||||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||
| Options to purchase common stock | |||||||||||||||||||||||
| Convertible notes with related parties | |||||||||||||||||||||||
| Restricted stock units | |||||||||||||||||||||||
| Weighted average shares of Class A and Class B common stock outstanding, diluted | |||||||||||||||||||||||
| Net income per share attributable to Class A and Class B common stockholders, diluted | $ | $ | |||||||||||||||||||||
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, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| Options to purchase common stock | |||||||||||||||||||||||
| Restricted stock units | |||||||||||||||||||||||
| Unvested early exercise common stock | |||||||||||||||||||||||
| Employee stock purchase plan | |||||||||||||||||||||||
| Total shares excluded from diluted net income per share | |||||||||||||||||||||||
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, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| Subscription | $ | $ | |||||||||||||||||||||
| Performance-based | |||||||||||||||||||||||
| Total revenue | $ | $ | |||||||||||||||||||||
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
Performance Obligations
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, | ||||||||||
| 2022 | 2021 | ||||||||||
| Accrued marketing | $ | $ | |||||||||
| Accrued partner expenses | |||||||||||
| Accrued compensation and benefits | |||||||||||
| Accrued commissions | |||||||||||
| Accrued non-income taxes | |||||||||||
| Accrued refunds and customer liabilities | |||||||||||
| Other accrued expenses | |||||||||||
| Total accrued expenses | $ | $ | |||||||||
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:
| Year | Percentage | ||||
| 2025 | % | ||||
| 2026 | % | ||||
| 2027 and thereafter | % | ||||
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 no t 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”).
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, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| Cost of revenue | $ | $ | |||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Total stock-based compensation | $ | $ | |||||||||||||||||||||
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 Outstanding | Weighted Average Exercise Price Per Share | ||||||||||
Outstanding at December 31, 2021 | $ | ||||||||||
| Granted | |||||||||||
| Exercised | ( | ||||||||||
| Forfeited/Canceled | ( | ||||||||||
Outstanding at March 31, 2022 | $ | ||||||||||
Exercisable at March 31, 2022 | $ | ||||||||||
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 Shares | Weighted Average Grant Date Fair Value Per Share | ||||||||||
Unvested at December 31, 2021 | $ | ||||||||||
| Granted | |||||||||||
| Vested | ( | ||||||||||
| Forfeited/Canceled | ( | ||||||||||
Unvested at March 31, 2022 | $ | ||||||||||
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)
12.Subsequent Events
23
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, 2021 | December 31, 2021 | March 31, 2022 | |||||||||||||||||||||||||
| Quarterly Paid Employers | 114,705 | 169,191 | 169,535 | 147,081 | 150,233 | ||||||||||||||||||||||||
| Revenue per Paid Employer | $ | 1,093 | $ | 1,081 | $ | 1,254 | $ | 1,497 | $ | 1,513 | |||||||||||||||||||
24
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Adjusted EBITDA | $ | 37,203 | $ | 19,994 | |||||||||||||||||||
| Adjusted EBITDA margin | 16 | % | 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, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
GAAP net income (1) | $ | 8,417 | $ | 13,398 | |||||||||||||||||||
| Stock-based compensation | 20,494 | 1,226 | |||||||||||||||||||||
| Depreciation and amortization | 2,485 | 2,302 | |||||||||||||||||||||
| Total other (income) expense, net | 6,310 | (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, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Revenue | $ | 227,260 | $ | 125,372 | |||||||||||||||||||
| Net income | 8,417 | 13,398 | |||||||||||||||||||||
| GAAP net income margin | 4 | % | 11 | % | |||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Revenue | $ | 227,260 | $ | 125,372 | |||||||||||||||||||
| Adjusted EBITDA | 37,203 | 19,994 | |||||||||||||||||||||
| Adjusted EBITDA margin | 16 | % | 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
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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, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
Revenue(1) | $ | 227,260 | $ | 125,372 | |||||||||||||||||||
Cost of revenue(2) | 21,606 | 15,961 | |||||||||||||||||||||
| Gross profit | 205,654 | 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 expenses | 191,430 | 92,945 | |||||||||||||||||||||
| Income from operations | 14,224 | 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 taxes | 7,914 | 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, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Subscription revenue | $ | 174,823 | $ | 100,504 | |||||||||||||||||||
| Performance-based revenue | 52,437 | 24,868 | |||||||||||||||||||||
| Total revenue | $ | 227,260 | $ | 125,372 | |||||||||||||||||||
(2)Includes stock-based compensation expense as follows:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cost of revenue | $ | 216 | $ | 16 | |||||||||||||||||||
| Sales and marketing | 2,628 | 99 | |||||||||||||||||||||
| Research and development | 8,670 | 825 | |||||||||||||||||||||
| General and administrative | 8,980 | 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, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | $ 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, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Cost of revenue | $ | 21,606 | $ | 15,961 | $ | 5,645 | 35 | % | |||||||||||||||||||||||||||||||||||||||
| Gross margin | 90 | % | 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, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Sales and marketing | $ | 137,590 | $ | 63,476 | $ | 74,114 | 117 | % | |||||||||||||||||||||||||||||||||||||||
| Percentage of revenue | 61 | % | 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, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Research and development | $ | 29,644 | $ | 17,015 | $ | 12,629 | 74 | % | |||||||||||||||||||||||||||||||||||||||
| Percentage of revenue | 13 | % | 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, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative | $ | 24,196 | $ | 12,454 | $ | 11,742 | 94 | % | |||||||||||||||||||||||||||||||||||||||
| Percentage of revenue | 11 | % | 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 | 2021 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Other income (expense), net | $ | (6,310) | $ | 177 | $ | (6,487) | * | ||||||||||||||||||||||||||||||||||||||||
The increase in other income (expense) for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 is primarily due to the $5.8 million interest expense related to our senior unsecured notes in the aggregate principal amount of $550.0 million that commenced in January 2022.
______________
*Percentage not meaningful.
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Income Tax Expense (Benefit)
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Income tax expense (benefit) | $ | (503) | $ | 3,245 | $ | (3,748) | (116) | % | |||||||||||||||||||||||||||||||||||||||
| Effective tax rate | (6) | % | 19 | % | |||||||||||||||||||||||||||||||||||||||||||
Income tax expense decreased $3.7 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The decrease in income tax expense is primarily due to additional tax benefits related to the exercise of non-qualified stock options and the vesting of RSUs, as well as the impact of stock-based compensation to pretax income, both of which were not material when the Company was not publicly traded during the three months ended March 31, 2021. For the three months ended March 31, 2022 and 2021, our effective tax rate of (6)% and 19%, respectively, differed from the U.S. federal statutory rate of 21% primarily due to excess tax benefits relating to the exercise of non-qualified stock options and settlement of RSUs, partially offset by permanent items such as our officer compensation limitations.
Liquidity and Capital Resources
As of March 31, 2022, we had cash totaling $745.4 million, and $244.1 million available in unused borrowing capacity under our current revolving credit facility. We have financed our operations and capital expenditures primarily through cash generated from operations, sales of shares of common and preferred stock and from our senior unsecured notes, bank loans, and convertible notes. As of March 31, 2022, we had no amounts outstanding under our revolving credit facility.
We believe our existing cash, cash flow from operations, and amounts available for borrowing under our bank loan agreement will be sufficient to meet our working capital requirements for at least the next twelve months. To the extent existing cash, cash from operations, and amounts available for borrowing are insufficient to fund future activities, we may need to raise additional funds. In the future, we may attempt to raise additional capital through the sale of equity securities or through equity-linked or debt financing arrangements. If we raise additional funds by issuing equity or equity-linked securities, the ownership of our existing stockholders will be diluted. If we raise additional financing by the incurrence of additional indebtedness, we may be subject to increased fixed payment obligations and could also be subject to additional restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business. Any future indebtedness we incur may result in terms that could be unfavorable to equity investors. There can be no assurances that we will be able to raise additional capital. The inability to raise capital could adversely affect our ability to achieve our business objectives.
Credit Facility
In April 2021, we entered into a Credit Agreement with a syndicate of banks, or the Credit Agreement. The Credit Agreement provides for a $250.0 million revolving credit facility, or the new credit facility, and has a maturity date of April 30, 2026. The amount available under the new credit facility is reduced by letters of credit outstanding, which totaled $5.9 million as of March 31, 2022. The letters of credit outstanding relate to various leased office spaces.
The new credit facility bears interest at a rate based upon our Net Leverage Ratio. Our 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 month of earnings, adjusted for items such as non-cash expenses and other nonrecurring transactions.
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We are also obligated to pay other customary fees for a credit facility of this size and type, 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%, based upon our Net Leverage Ratio.
The new credit facility is collateralized by security interests in substantially all of our assets. The new credit facility includes customary events of default that include, among other things, non-payment of principal, 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 us, and a change of control. The occurrence of an event of default could result in the acceleration of the obligations under the Credit Agreement.
The Credit 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, applicable to us. The negative covenants include restrictions that, among other things, restrict our and our subsidiaries’ 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, we entered into an amendment to the Credit Agreement with a syndicate of banks and the lenders named therein, 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, we entered into a second amendment to the Credit Agreement, or 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 our total indebtedness from $100.0 million to $550.0 million for purposes of calculating our total Net Leverage Ratio under the Credit Agreement.
We have no amounts outstanding under the new credit facility and are in compliance with our debt covenants as of March 31, 2022.
Issuance of Senior Unsecured Notes
On January 12, 2022, we issued an aggregate principal amount of $550.0 million senior unsecured notes due 2030 in a private placement. The senior unsecured notes were issued pursuant to an indenture dated as of January 12, 2022, or the Indenture. Pursuant to the Indenture, the senior unsecured notes will mature on January 15, 2030 and bear interest at a rate of 5% per year. Interest on the senior unsecured notes is payable semi-annually in arrears on January 15 and July 15 of each year, beginning on July 15, 2022.
The Indenture contains certain customary negative covenants, including, but not limited to, limitations on the incurrence of debt, limitations on liens, limitations on consolidations or mergers, and limitations on asset sales. The Indenture also contains customary events of default.
At any time prior to January 15, 2030, we have the option, at our sole discretion, to redeem all or a portion of our senior unsecured notes subject to the payment of certain premiums, make-whole provisions, and accrued and unpaid interest. Upon the occurrence of a change of control triggering event, we must offer to repurchase the senior unsecured notes at a repurchase price equal to 101% of the aggregate principal amount to be repurchased, and any accrued and unpaid interest.
For more information on the senior unsecured notes, please see Note 6 “Debt” to our condensed consolidated financial statements included in this report.
Share Repurchase Program
In February 2022, our board of directors authorized us to repurchase up to $100.0 million of our outstanding common stock, with no fixed expiration. In March 2022, we repurchased approximately 0.6
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million shares of our Class A common stock through open market purchases at an aggregate cost of $12.3 million. Thereafter, we entered into an accelerated share repurchase agreement, or ASR, with Goldman Sachs to repurchase an aggregate of $50.0 million in shares of our Class A common stock. Approximately $37.7 million in shares of our Class A common stock remains available for future repurchases under our $100.0 million share repurchase program after completion of the ASR. For more information, see Note 9 “Share Repurchase Program” to our condensed consolidated financial statements included in this report.
Forecasted Cash Tax Liability
Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and development expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures over five years. While it is possible that Congress may defer, modify, or repeal this provision, potentially with retroactive effect, we have no assurance that this provision will be deferred, modified, or repealed. Furthermore, in anticipation of the new provision taking effect, we have analyzed the provision and worked with our advisors to evaluate its application to our business. If this provision is not deferred, modified, or repealed with retroactive effect to January 1, 2022, it would decrease our expected cash from operations in 2022. The actual impact on 2022 cash from operations will depend on if and when this provision is deferred, modified, or repealed by Congress, including if retroactively, and the amount of research and development expenses paid or incurred in 2022 among other factors.
Cash Flows
The following table summarizes our cash flows for the periods presented (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Net cash provided by operating activities | $ | 14,433 | $ | 22,154 | |||||||
| Net cash used in investing activities | (3,516) | (3,255) | |||||||||
| Net cash provided by financing activities | 479,855 | 1,627 | |||||||||
| Net increase in cash | $ | 490,772 | $ | 20,526 | |||||||
Operating Activities
The primary source of operating cash inflows is cash collected from our customers for our services. Our primary uses of cash from operating activities are for personnel related expenditures, marketing costs and third-party costs incurred to support our marketplace.
For the three months ended March 31, 2022, cash provided by operating activities was $14.4 million resulting from our net income of $8.4 million, adjusted by non-cash charges of $21.3 million and a net decrease of $15.3 million in our operating assets and liabilities. The non-cash charges primarily resulted from $20.5 million for stock-based compensation expense, $2.5 million pertaining to amortization of intangible assets and depreciation, and $1.3 million pertaining to non-cash lease expense, partially offset by $5.4 million related to the change in our deferred tax assets driven by our current year capitalization of research costs from a tax perspective and the tax related impact of stock-based compensation. The decrease of $15.3 million related to changes in our operating assets and liabilities, which was primarily driven by a $12.2 million decrease in our accrued expenses and other liabilities and accounts payable and a $10.8 million increase in accounts receivable associated with an increase in revenue due to the number of Quarterly Paid Employers compared to the prior-year period, partially offset by a $6.0 million increase in accrued interest associated with our senior unsecured notes.
For the three months ended March 31, 2021, cash provided by operating activities was $22.2 million resulting from our net income of $13.4 million, adjusted by non-cash charges of $8.4 million and a net increase of $0.4 million in our operating assets and liabilities. The non-cash charges primarily resulted
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from $3.2 million related to the change of our deferred tax assets, $2.3 million pertaining to depreciation and amortization of intangible assets, capitalized software development costs and property and equipment, $1.5 million pertaining to non-cash lease expense and $1.2 million for stock-based compensation expense.
Investing Activities
For the three months ended March 31, 2022, cash used in investing activities was $3.5 million resulting from an increase in capitalized software development costs of $2.5 million and an increase in capital expenditures of $1.0 million primarily related to purchases of computer supplies and equipment.
For the three months ended March 31, 2021, cash used in investing activities was $3.3 million resulting from an increase in capitalized software development costs of $2.1 million and an increase in capital expenditures of $1.1 million to leasehold improvements for one of our operating leases.
Financing Activities
For the three months ended March 31, 2022, cash provided by financing activities was $479.9 million which consisted of $550.0 million of proceeds from the issuance of our senior unsecured notes, $5.3 million of proceeds from the issuance of stock under the employee stock purchase plan, and $2.2 million of proceeds from the exercise of stock options, partially offset by $62.3 million for the repurchase of common stock, $9.4 million for the payment of the issuance costs related to the issuance of our senior unsecured notes, and $5.9 million for the net settlement of taxes on RSUs.
For the three months ended March 31, 2021, cash provided by financing activities was $1.6 million, which primarily consisted of $2.1 million of proceeds from the exercise of stock options, partially offset by $0.5 million for the repurchase of common stock.
Obligations and Other Commitments
See our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, or the 2021 Form 10-K, for our future minimum commitments related to certain software service agreements. Through March 31, 2022, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions, including, but not limited to, those related to revenue recognition, stock-based compensation, and income taxes. We base our estimates on historical experience and on various other estimates and assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates and assumptions.
Our significant accounting policies are discussed in Note 2 “Basis of Presentation, Principles of Consolidation, and Summary of Significant Accounting Policies” to our condensed consolidated financial statements included in this report. There have been no changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates discussed in the 2021 Form 10-K.
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JOBS Act Accounting Election
We meet the definition of an emerging growth company under the Jumpstart Our Business Startups Act of 2012, or JOBS Act, which permits us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use this extended transition period until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period. As a result, our consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements applicable to public companies.
Recent Accounting Pronouncements
See Note 2 “Basis of Presentation, Principles of Consolidation, and Summary of Significant Accounting Policies” to our condensed consolidated financial statements included in this report for more information.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We have operations both within the United States and internationally, and we are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate and foreign currency exchange rates.
Interest Rate Risk
We are subject to interest rate risk in connection with our Current Revolving Line which bears a floating interest rate. We have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our condensed consolidated financial statements.
We are also subject to interest rate risk in connection with the senior unsecured notes. As the interest rate on these senior unsecured notes is subject to a fixed percentage, we do not have significant financial statement risk associated with changes in interest rates pertaining to our senior unsecured notes.
Foreign Currency Risk
We are exposed to fluctuations in foreign exchange risk related primarily to expenses denominated in currencies other than the U.S. Dollar, principally the Canadian Dollar, British Pound, and Israeli New Shekel. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. We have experienced, and will continue to experience, fluctuations in our net income (loss) as a result of transaction gains and losses related to the remeasurement of our asset and liability balances that are denominated in currencies other than the U.S. Dollar. A hypothetical 10% change in foreign currency exchange rates applicable to our business would not have had a material impact on our condensed consolidated financial statements.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and our principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of March 31, 2022. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and
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procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of March 31, 2022, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II - Other Information
Item 1. Legal Proceedings
Refer to the disclosure under the heading “Legal Matters” in Note 7 “Commitments and Contingencies” to our condensed consolidated financial statements included in this report for legal proceedings. From time to time, we may be involved in various legal proceedings arising from the normal course of our business activities.
Item 1A. Risk Factors
Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Quarterly Report on Form 10-Q, before making a decision to invest in our Class A common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of or that we deem immaterial may also become important factors that adversely affect our business. If any of the following risks occur, our business, financial condition, operating results, and future prospects could be materially and adversely affected. In that event, the price of our Class A common stock could decline, and you could lose part or all of your investment.
Risk Related to Our Business
Operational Risks
We face intense competition and could lose market share to our competitors, which could adversely affect our business, operating results, and financial condition.
We face intense competition from many well-established online job sites such as CareerBuilder, Craigslist, Glassdoor, Indeed, LinkedIn and Monster and may face additional competition from newer entrants such as Google or Facebook. Many of our existing and potential competitors are considerably larger or more established than we are and have larger workforces and more substantial marketing and financial resources. Price competition for job marketplaces such as ours is likely to remain high, which could limit our ability to maintain or increase our market share, subscriber base, revenue and/or profitability.
Many of our larger competitors have long-standing relationships or access to employers, including our Paid Employers, as well as those whom we may wish to pursue. Some employers may be hesitant to use a new platform and prefer to upgrade products offered by these incumbent platforms for reasons that include price, quality, sophistication, familiarity, and global presence. These platforms could offer competing products on a standalone basis at a low price or bundled as part of a larger product sale.
Many of our competitors are able to devote greater resources to the development, promotion, sale, and support of their products and services. Furthermore, our current or potential competitors may be acquired by third parties with greater available resources and the ability to initiate or withstand substantial price competition. Our competitors may also establish cooperative relationships among themselves or with third parties to enhance their product offerings or resources. If our competitors’ products, platforms, services or technologies maintain or achieve greater market acceptance than ours, if they are successful in bringing their products or services to market earlier than ours, or if their products, platforms or services are more technologically capable than ours, then our revenue could be adversely affected. Also, some of our competitors may offer their products and services at a lower price. If we cannot optimize pricing, our operating results may be negatively affected. Pricing pressures and increased competition could result in reduced sales, reduced margins, losses or a failure to maintain or improve our competitive market position, any of which could adversely affect our business.
The number of employers distributing their job posting service purchases among a broader group of competitors may increase which may make it more difficult to retain or maintain our current share of business with existing Paid Employers. We also face the risk that employers may decide to provide
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similar services internally or reduce or redirect their efforts to recruit job seekers through online job advertisements. As a result, there can be no assurance that we will not encounter increased competition in the future.
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.
COVID-19 has caused significant uncertainty. Public health problems resulting from COVID-19 and precautionary measures instituted by governments and businesses to mitigate its spread, including travel restrictions and quarantines, could continue to contribute to a general economic slowdown, adversely impact our employers and job seekers and other business partners, and disrupt our operations.
As a result of the COVID-19 pandemic, in March 2020, we transitioned our entire staff to a remote working environment, which impacts productivity and our business operations. We have had to expend, and expect to continue to expend, resources to respond to the COVID-19 pandemic, including to develop and implement internal policies and procedures and track changes in laws. The remote working environment may also create increased vulnerability to cybersecurity incidents, including breaches of information systems security, which could damage our reputation and commercial relationships. Changes in our operations in response to COVID-19 or employee illnesses resulting from COVID-19 may also result in inefficiencies or delays, and additional costs related to business continuity initiatives, that cannot be fully mitigated through succession and business continuity planning, employees working remotely or using teleconferencing technologies. Any prolonged diversion of resources may have an adverse effect on our operations. Over time, such remote operations may decrease the cohesiveness of our teams and our ability to maintain our culture, both of which are critical to our success. Additionally, a remote working environment may impede our ability to undertake new business projects, foster a creative environment, and hire and retain team members. Such effects may adversely affect the productivity of our team members and overall operations, which could have a material adverse effect on our business, results of operations, financial condition, and future prospects.
The impact of the ongoing COVID-19 pandemic is severe and widespread, and continues to evolve. The extent to which the COVID-19 pandemic will continue to impact our business will depend on future developments, which are highly uncertain and cannot be predicted at this time, including:
•the duration and spread of the pandemic, including any additional resurgences and/or variants;
•the distribution, utilization and efficacy of COVID-19 vaccines;
•governmental, business, and individuals’ actions taken in response to the pandemic, including business closures and any shelter-in-place guidelines;
•the impact of the pandemic on national and global economic activity, unemployment levels, and capital and financial markets, including the possibility of a national or global recession;
•the impact of the pandemic on the financial circumstances and employment needs of our employers and job seekers, including vaccine mandates and supply chain constraints;
•other business disruptions that affect our workforce; and
•actions taken to contain the pandemic or treat its impact.
To the extent the COVID-19 pandemic or a similar public health threat has an impact on our business, results of operations, and financial condition, it is likely also to have the effect of heightening many of the other risks described in this “Risk Factors” section.
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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 business depends on the overall demand for labor and on the economic health of current and prospective employers and job seekers that use our marketplace. Demand for recruiting and hiring services is significantly affected by the general level of economic activity and employment in the United States and the other countries in which we operate. Any significant weakening of the economy in the United States or the global economy, increased unemployment, reduced credit availability, reduced business confidence and activity, decreased government spending, economic uncertainty, financial turmoil affecting the banking system or financial markets, trade wars and higher tariffs, changes in interest rates, inflation in the cost of goods and services including labor, and other adverse economic or market conditions may adversely impact our business and operating results. Significant swings in economic activity historically have had a disproportionately negative impact on hiring activity and related efforts to find candidates. In addition, as a result of the adverse impact of the COVID-19 pandemic on economic activity, many employers initially significantly decreased the number of candidates they are hiring, implemented hiring freezes or were forced to cease operations entirely, each of which resulted in a decrease in the number of job seekers and Paid Employers in our marketplace. We may also experience more pricing pressure during periods of economic downturn.
The COVID-19 pandemic has caused significant volatility in financial markets and has caused what may be an extended global recession. There is a risk that as overall global conditions improve, we could continue to experience declines in all, or in portions, of our business. Economic recoveries are difficult to predict, and may be short-lived, slow, or uneven, with some regions, or countries within a region, continuing to experience declines or weakness in economic activity while others improve. Differing economic conditions and patterns of economic growth or contraction in the geographical regions in which we operate may affect demand for our marketplace. As global economic conditions improve, we may not experience uniform, or any, increases in demand for our marketplace within the markets where our business is concentrated.
Economic uncertainty may cause some of our current or potential employers to curtail spending in our marketplace and may ultimately result in cost challenges to our operations. These adverse conditions could result in reductions in revenue, increased operating expenses, longer sales cycles, slower adoption of new technologies, and increased competition. We cannot predict the timing, strength, or duration of any economic slowdown or any subsequent recovery generally. There is also risk that when overall global economic conditions are positive, our business could be negatively impacted by decreased demand for job postings and our services. If general economic conditions significantly deviate from present levels, our business, financial condition, and operating results could be adversely affected.
Substantially all of our revenue is generated by our business operations in the United States. Prior to the COVID-19 pandemic, the United States had largely experienced positive economic and employment trends since our founding in 2010 and therefore we do not have a significant operating history in periods of weak economic environments and cannot predict how our business will perform in such periods. Any significant economic downturn in the United States or other countries in which we operate could have a material adverse effect on our business, financial condition and results of operations.
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 marketplace functions on software that is highly technical and complex and may now or in the future contain undetected errors, bugs, or vulnerabilities. Some errors in our software code may be discovered only after the code has been deployed. Any errors, bugs, or vulnerabilities discovered in our code after deployment, inability to identify the cause or causes of performance problems within an acceptable period of time, or difficulty maintaining and improving the performance of our marketplace
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could result in damage to our reputation or brand, loss of employers and job seekers, loss of revenue, or liability for damages, any of which could adversely affect our business and results of operations.
As the usage of our marketplace grows, we will need an increasing amount of technical infrastructure, including network capacity and computing power, to continue to operate our marketplace. If we cannot continue to effectively scale and grow our technical infrastructure to accommodate these increased demands, it may adversely affect our user experience. We also rely on third-party software and infrastructure, including the infrastructure of the internet, to provide our marketplace. Any failure of or disruption to this software and infrastructure, whether intentional or malicious in nature or due to our activities or those of our vendors, could also make our marketplace unavailable to our users. If our marketplace is unavailable to our subscribers or job seekers for any period of time, our business could be adversely affected.
Our marketplace is constantly changing with new updates, which may contain undetected errors when first introduced or released. Any errors, defects, disruptions in service, or other performance or stability problems with our marketplace, or the insufficiency of our efforts to adequately prevent or timely remedy errors or defects, could result in negative publicity, loss of or delay in market acceptance of our marketplace, loss of competitive position, our inability to timely and accurately maintain our financial records, inaccurate or delayed invoicing of Paid Employers, delay of payment to us, claims by users for losses sustained by them, corrective action taken by gatekeepers of components integral to our marketplace, or investigation and corrective action taken by a regulatory agency. In such an event, we may be required, or may choose, for user relations or other reasons, to expend additional resources to help resolve the issue. Accordingly, any errors, defects, or disruptions in our marketplace could adversely impact our brand and reputation, revenue, and operating results.
Because of the large amount of data that our Paid Employers collect and manage by means of our services, it is possible that failures or errors in our systems could result in data loss or corruption, or cause the information that we or our Paid Employers collect to be incomplete or contain inaccuracies that our Paid Employers regard as significant. Furthermore, the availability or performance of our marketplace could be adversely affected by a number of factors, including users’ inability to access the internet or to send or receive email messages, the failure of our network or software systems, security breaches or variability in user traffic for our services. We may be required to issue credits or refunds for prepaid amounts related to unused services or otherwise be liable to our users for damages they may incur resulting from certain of these events. In addition to potential liability, if we experience interruptions in the availability of our marketplace, our reputation could be adversely affected and we could lose employers and job seekers.
Our errors and omissions insurance may be inadequate or may not be available in the future on acceptable terms, or at all. In addition, our policy may not cover all claims made against us and defending a suit, regardless of its merit, could be costly and divert management’s attention.
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.
Many of our Paid Employers pay for access to our marketplace on a per-job-per-day basis, rather than entering into new longer term paid time-based job posting plans, renewing their paid time-based job posting plans when such contract terms expire, or purchasing performance-based services from us. Employers who enter into paid plans have no obligation to renew their plans after the expiration of their contract period, which typically range from one day to twelve months. In addition, employers may renew for lower subscription amounts or for shorter contract lengths. Historically, some of our Paid Employers have elected not to renew their agreements with us and as we expand into new products and markets, we have a limited ability to reliably predict future renewal rates. Our future renewal rates for both existing and potential new products may be lower, possibly significantly lower, than historical trends.
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Our future success also depends in part on our ability to sell upsell services to employers who use our marketplace. If employers do not purchase upsell services from us, our revenue may decline and our operating results may be harmed.
Our Paid Employer subscription renewals, performance-based services, and upsells may decline or fluctuate as a result of a number of factors, including user usage, user satisfaction with our services and user support, our prices, the prices of competing services, mergers and acquisitions affecting our user base, the effects of global economic conditions, or reductions in our Paid Employers’ spending levels generally.
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.
We have experienced growth in a relatively short period of time. For example, our total revenue for the year ended December 31, 2021 was $741.1 million, representing an increase of 77% over the $418.1 million in total revenue we recorded for the year ended December 31, 2020. Over time, we expect to expand our operations and personnel significantly. Sustaining our growth will place significant demands on our management as well as on our administrative, operational, and financial resources. To manage our growth, we must continue to improve our operational, financial, and management information systems; expand, motivate, and effectively manage and train our workforce; and effectively collaborate with our third-party partners. If we cannot manage our growth successfully, our business, operating results, financial condition, and ability to successfully advertise our marketplace and serve our employers and job seekers could be adversely affected.
Our historical growth should not be considered indicative of our future performance. We have encountered in the past, and will encounter in the future, risks, challenges, and uncertainties frequently experienced by growing companies in rapidly changing industries. If our assumptions regarding these risks, challenges, and uncertainties, which we use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our financial condition and operating results could differ materially from our expectations, our growth rates may slow, and our business would be adversely impacted.
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.
The employers in the United States’ private sector are diverse across a number of business characteristics, including company size, geography, and industry, among other factors. Hiring activity may vary significantly among businesses with different characteristics and accordingly, any concentration we may have among businesses with certain characteristics may subject us to high volatility in our financial results. Smaller businesses, for example, typically have less persistent hiring needs and may experience greater volatility in their need for job advertisement services and preferences among providers of such services. Along with a relatively shorter sales cycle, smaller businesses may be more likely to change platforms based on short-term differences in perceived price, value, service level, or other factors. Difficulty in acquiring and/or retaining these employers may adversely affect our operating results.
Our efforts and ability to sell to a broad mix of businesses could adversely affect our operating results in a given period.
Our ability to increase revenue and maintain profitability depends, in part, on widespread acceptance and utilization of our marketplace by businesses of all sizes and types. Because our customers reflect a wide variety of businesses, we face a variety of challenges, including but not limited to, pricing pressure, cost variances and marketing strategies that vary based on the business type and size, varying lengths of sales cycles, and less predictability in completing some of our sales. For example, some of our larger prospective customers may need us to provide greater levels of education regarding the use and benefits of our marketplace and services, because the prospective customer’s decision to use our marketplace
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and services may be a company-wide decision. We are in the nascent stages of developing the analytical tools that will allow us to determine how prospective customers can be most effectively directed within, and addressed by, our sales organizations. As a result, we may not always approach new opportunities in the most cost-effective manner or with the most appropriate resources. Developing and successfully implementing these tools will be important as we seek to efficiently capitalize on new and expanding market opportunities. In addition, because we are a relatively new company with a limited operating history when compared to some of our existing competitors, our target employers and job seekers may prefer to use offerings from more established competitors that are more tailored to their specific requirements.
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 Officer, or other members of our senior management team, we may not be able to execute on our business strategy.
Our future success depends in large part on the continued services of our senior management and other key personnel and our ability to retain and motivate them. In particular, we are dependent on the services of Ian Siegel, our Chief Executive Officer, and our technology, marketplace, future vision, and strategic direction could be compromised if he were to take another position, become ill or incapacitated, or otherwise become unable to serve as our Chief Executive Officer. We rely on our leadership team in the areas of marketing, sales, finance, support, product development, human resources, and technology. Our senior management and other key personnel are all employed on an at-will basis, which means that they could terminate their employment with us at any time, for any reason, and without notice. If we lose the services of senior management or other key personnel, or if we cannot attract, train, and retain the highly-skilled personnel we need, our business, operating results, and financial condition could be adversely affected.
Our future success also depends on our continuing ability to attract, train, and retain highly skilled personnel, including software engineers and sales personnel. We face intense competition for qualified personnel from numerous software and other technology companies. This competition for highly skilled personnel is especially intense in the regions where we have significant operations, and we may incur significant costs to attract and retain them. We have, from time to time, experienced, and we expect to continue to experience, difficulty in hiring and retaining highly skilled employees with appropriate qualifications. We may incur significant costs to attract and retain highly skilled personnel, and we may lose new employees to our competitors or other technology companies before we realize the benefit of our investment in recruiting and training them. In addition, as a result of the current tight labor market, we may experience increased difficulty in hiring and retaining, or increased costs in attracting and retaining, highly skilled personnel, or we may lose new employees to our competitors or other technology companies at a greater rate. To the extent we move into new geographies, we would need to attract and recruit skilled personnel in those areas. Moreover, uncertainty arising from economy-wide shifts toward remote work could negatively impact our ability to recruit or retain talent, particularly in light of our workforce historically being concentrated largely in the Los Angeles and Phoenix metropolitan areas. In addition, job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity or equity awards declines, it may adversely affect our ability to retain highly skilled employees. If we cannot attract and retain suitably qualified individuals who are capable of meeting our growing technical, operational, and managerial requirements, on a timely basis or at all, our business may be adversely affected.
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.
We depend in part on various internet search engines, such as Google, as well as other channels to direct a significant amount of traffic to our website. Our ability to maintain the number of visitors directed to our website is not entirely within our control. For example, our competitors’ search engine optimization
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and other efforts such as paid search may result in their websites receiving a higher search result page ranking than ours; internet search engines or other channels that we utilize to direct traffic to our website could revise their methodologies in a manner that adversely impacts traffic to our website, or we may make changes to our website that adversely impact our search engine optimization rankings and traffic. As a result, links to our website may not be prominent enough to drive sufficient traffic to our website, and we may not be able to influence the results.
Search engines and other channels that we use to drive employers and job seekers to our website periodically change their algorithms, policies, and technologies, sometimes in ways that cause traffic to our website to decline. These changes can also result in an interruption in their ability to access our website or a drop in our search ranking, or have other adverse impacts that negatively affect our ability to maintain and grow the number of employers and job seekers that visit our website. We may also be forced to significantly increase marketing expenditures in the event that market prices for online advertising and paid listings escalate or our organic ranking decreases. Any of these changes could have an adverse impact on our business, user acquisition, and operating results.
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 quarterly results of operations, including the levels of our revenue, gross margin, and profitability, may vary significantly in the future and period to period comparisons of our operating results may not be meaningful. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. We also have a limited operating history and make pricing and other changes from time to time, all of which make it difficult to forecast our future results. As a result, you should not rely upon our past quarterly operating results as indicators of future performance.
Factors that may cause fluctuations in our quarterly financial results include, without limitation, those listed below:
•our ability to attract new employers and job seekers;
•Paid Employer renewal rates;
•Paid Employers purchasing upsell services;
•the addition or loss of large Paid Employers, including through acquisitions or consolidations;
•the timing of recognition of revenue;
•the amount and timing of operating expenses related to the maintenance and expansion of our business, operations and infrastructure;
•network outages or security breaches;
•general economic, industry and market conditions;
•changes in our pricing policies or those of our competitors;
•seasonal variations in sales of our products, which have historically been most pronounced in the fourth quarter of our fiscal year;
•the timing and success of new product or service introductions by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors or strategic partners; and
•the timing of expenses related to the development or acquisition of technologies or businesses and potential future charges for impairment of goodwill from acquired companies.
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Our success depends on our ability to maintain the value and reputation of the ZipRecruiter brand.
We believe that our brand is important to attracting and retaining both employers and job seekers. Maintaining, protecting, and enhancing our brand depends largely on the success of our marketing efforts, our ability to provide a compelling job marketplace, including services, features, content, and support related to our marketplace, and our ability to successfully secure, maintain, and defend our rights to use the “ZipRecruiter” mark, our logo, and other trademarks important to our brand. We believe that the importance of our brand will increase as competition further intensifies and brand promotion activities may require substantial expenditures. Our brand could be harmed if we cannot achieve these objectives or if our public image were to be tarnished by negative publicity. Unfavorable publicity about us could diminish confidence in our marketplace and services. Such negative publicity also could have an adverse effect on the volume, engagement and loyalty of our employers and job seekers and could have an adverse effect on our business.
If we are not able to provide successful enhancements, and new products, services, and features, our business could be adversely affected.
The market for job-posting marketplaces is characterized by frequent product and service introductions and enhancements, changing user demands, and rapid technological change. The introduction of products and services embodying new technologies can quickly make existing products and services obsolete and unmarketable. The success of our business will depend, in part, on our ability to adapt and respond effectively and timely to these changes. We invest substantial resources in researching and developing new products and services and enhancing our marketplace by incorporating additional features, improving functionality, and adding other improvements to meet our employers’ and job seekers’ evolving demands in our highly competitive industry. If we cannot provide enhancements and new features or services that achieve market acceptance or that keep pace with rapid technological developments and the competitive landscape, our business could be adversely affected. The success of any enhancements or improvements to, or new features of, our marketplace or any new products and services depends on several factors, including timely completion, competitive pricing, adequate quality testing, integration with new and existing technologies in our marketplace and third-party partners’ technologies, overall market acceptance, and resulting user activity that is consistent with the intent of such products or services. We cannot be sure that we will succeed, either timely or cost effectively, in developing, marketing, and delivering enhancements or new features, products and services to our marketplace that respond to continued changes in the market for job placement services, nor can we be sure that any enhancements or new features to our existing or any new products and services will achieve market acceptance or produce the intended effect. In addition, if new technologies emerge that allow our competitors to deliver similar services at lower prices, more efficiently, more conveniently, or more securely, such technologies could adversely impact our ability to compete.
Additionally, because our marketplace operates on a variety of third-party systems and platforms, we will need to continuously modify and enhance our offerings to keep pace with changes in internet-related hardware, operating systems, cloud computing infrastructure, and other software, communication, browser and open source technologies. We may not be successful in either developing these modifications and enhancements or in bringing them to market timely. Furthermore, uncertainties about the timing and nature of new network platforms or technologies, or modifications to existing platforms or technologies, could increase our research and development expenses. Parts of the technology stack supporting our marketplace may also become difficult to maintain and service as there become fewer software engineers who are skilled with respect to the programming languages used to build such pieces of software. Any failure of our marketplace to operate effectively with future network systems and technologies could reduce the demand for our marketplace, result in user dissatisfaction and adversely affect our business.
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Issues with the use of artificial intelligence (including machine learning) in our marketplace may result in reputational harm or liability.
Artificial intelligence, or AI, is enabled by or integrated into some of our marketplace and is a significant element of our business. As with many developing technologies, AI presents risks and challenges that could affect its further development, adoption, and use, and therefore our business. AI algorithms may be flawed. Datasets may be insufficient, of poor quality, or contain biased information. Inappropriate or controversial data practices by data scientists, engineers, and end-users of our systems or elsewhere could impair the acceptance of AI solutions and could result in burdensome new regulations that may limit our ability to use existing or new AI technologies. If the recommendations, forecasts, or analyses that AI applications assist in producing are deficient or inaccurate, we could be subjected to competitive harm, potential legal liability, and brand or reputational harm. Some AI scenarios present ethical issues. If we enable or offer AI solutions that are controversial because of their purported or real impact on human rights, privacy, employment, or other social issues, we may experience brand or reputational harm. In addition, it is possible that certain governments may seek to regulate, limit, or block the use of AI in our products and services or otherwise impose other restrictions that may affect or impair the usability or efficiency of any or all of our products and services for an extended period of time or indefinitely.
The forecasts of growth of online recruitment may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, we cannot assure you that our business will grow at a similar rate, if at all.
Growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that may not ultimately be accurate and are not under our control. The forecasts relating to the expected growth of the online recruitment market may prove to be inaccurate. Even if the market experiences the growth we forecast, we may not grow our business at a similar rate, or at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts of market growth included in this Quarterly Report on Form 10-Q should not be taken as indicative of our future growth.
The growth of our marketplace depends in part on the success of our strategic relationships with our Job Distribution Partners and Job Acquisition Partners.
To grow our business and the number of job seekers and employers in our marketplace, we anticipate that we will continue to depend, in part, on relationships with Job Distribution Partners and Job Acquisition Partners. Job Distribution Partners are third-party sites who have a relationship with us and advertise jobs from our marketplace, and includes job boards, newspaper classifieds, search engines, social networks, talent communities and resume services, while Job Acquisition Partners are third-party sites and ATSs who have a relationship with us and from whom we receive jobs for our marketplace. Our competitors may be effective in providing incentives to these job boards and other similar third parties to favor their products or services or to prevent or reduce engagement with our marketplace. In addition, acquisitions of the Job Distribution Partners and Job Acquisition Partners that we partner with by our competitors could reduce the number of our current and potential employers and job seekers as well as the number of job postings accessible by our marketplace. We cannot guarantee that the Job Distribution Partners and Job Acquisition Partners with which we have strategic relationships will continue to offer the services for which we rely on them, devote the resources necessary to expand our reach, or support an increased number of employers and job seekers and associated use cases. Further, some of our Job Distribution Partners and Job Acquisition Partners offer, or could offer, competing products and services or also work with our competitors. They may also choose to develop alternative products and services in addition to, or in lieu of, our marketplace, either on their own or in collaboration with others, including our competitors.
While these relationships have not generated substantial revenue in recent periods and are not expected to generate substantial revenue in the future, they are strategically important in ensuring an appropriate balance of and interaction between jobs and job seekers in our marketplace. If we are unsuccessful in establishing or maintaining our relationships with our Job Distribution Partners and Job Acquisition Partners, or if such Job Distribution Partners or Job Acquisition Partners choose to end their
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relationships with us, our ability to compete with our competitors and grow our marketplace could be impaired and our operating results may be negatively impacted.
Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity, and teamwork fostered by our culture, and our business may be harmed.
We believe that our corporate culture has been a key contributor to our success. If we do not continue to develop our corporate culture as we grow and evolve, it could harm our ability to foster the innovation, creativity, and teamwork we believe that we need to support our growth. Additionally, a remote working environment may impede our ability to foster a creative environment and adversely affect the productivity of our team members. As our organization grows and we are required to implement more complex organizational structures, we may find it increasingly difficult to maintain the beneficial aspects of our corporate culture, which could negatively impact our future success.
Technological advances may significantly disrupt the labor market and weaken demand for human capital at a rapid rate.
Our success is directly dependent on our employers’ demands for talent. As technology continues to evolve, more tasks currently performed by people may be replaced by automation, robotics, machine learning, AI and other technological advances outside of our control. This trend poses a risk to the job posting and distribution industry as a whole, particularly in lower-skill job categories that may be more susceptible to such replacement.
Our business is seasonal.
Our business is seasonal, reflecting typical behavior in hiring markets, where hiring activity tends to decelerate in the fourth quarter. Such seasonality also causes our revenue to vary from quarter to quarter depending on the variability in the overall job market. This seasonality can make forecasting more difficult and may adversely affect our ability to predict financial results accurately.
We track certain performance metrics with internal tools and do not independently verify such metrics. Certain of our performance metrics are subject to inherent challenges in measurement, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.
We track certain performance metrics, including Quarterly Paid Employers and Revenue per Paid Employer, which are not independently verified by any third party. Our internal tools have a number of limitations and our methodologies for tracking these metrics may change over time, which could result in unexpected changes to our metrics, including the metrics we report. If the internal tools we use to track these metrics undercount or overcount performance or contain algorithmic or other technical errors, the data we report may not be accurate. In addition, limitations or errors with respect to how we measure data (or the data that we measure) may affect our understanding of certain details of our business, which could affect our longer-term strategies. If our performance metrics are not accurate representations of our business, user base, or traffic levels; if we discover material inaccuracies in our metrics; or if the metrics we rely on to track our performance do not provide an accurate measurement of our business, our reputation may be harmed, we may be subject to legal or regulatory actions, and our operating and financial results could be adversely affected.
We derive substantially all of our revenue from job advertisements.
We derive substantially all of our revenue from sales of products and services related to the distribution of job advertisements to job seekers across the internet. As such, any factor adversely affecting the sale of these products and services, including market acceptance, product competition, performance and reliability, reputation, price competition, intellectual property claims, legal or regulatory restrictions, and economic and market conditions, could harm our business and operating results.
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Failure to effectively expand our sales and marketing capabilities could harm our ability to increase our user base and achieve broader market acceptance of our services.
Our ability to increase our Paid Employer base and achieve broader market acceptance of our marketplace will depend significantly on our ability to continue to expand our sales and marketing operations. We plan to continue to expand our sales force and to dedicate significant and increasing resources to sales and marketing programs. We are expanding our sales and marketing capabilities to target additional potential Paid Employers, including some larger organizations, but there is no guarantee that we will be successful attracting and maintaining these businesses as users, and even if we are successful, these efforts may divert our resources away from and negatively impact our ability to attract and maintain our current Paid Employer base. All of these efforts will require us to invest significant financial and other resources. If we cannot find efficient ways to deploy our marketing spend or to hire, develop, and retain talented sales personnel in numbers required to maintain and support our growth, if our new sales personnel cannot achieve desired productivity levels in a reasonable period of time, or if our sales and marketing programs are not effective, our ability to increase our Paid Employer base and achieve broader market acceptance of our services could be harmed.
Paid Employers may demand more configuration and integration services, or customized features and functions that we do not offer, which could adversely affect our business and operating results.
Our current and future Paid Employers may demand more configuration and integration services, which would increase our upfront investment in sales and deployment efforts, with no guarantee that these Paid Employers will increase their use of our services. As a result of these factors, we may need to devote a significant amount of sales support and professional services resources to individual Paid Employers, which may increase the cost and time required to complete sales. If prospective Paid Employers require customized features or functions that we do not offer, and that would be difficult for them to deploy themselves, then the market for our marketplace will be more limited and our business could suffer. As a result, we may need to devote resources to continue to develop features and technology which may impact our operating results.
Any failure to offer high-quality technical support services may adversely affect our relationships with our Paid Employers and our financial results.
Once our products and services are deployed, our Paid Employers depend on our technical support organization to assist Paid Employers with service support and optimization, and resolve technical issues. We may be unable to respond quickly enough to accommodate short-term increases in demand for support services. We also may be unable to modify the format of our support services to compete with changes in support services provided by our competitors. Increased demand for these services, without corresponding revenue, could increase costs and adversely affect our operating results. In addition, our sales process is highly dependent on our services and business reputation and on positive recommendations from our existing Paid Employers. Any failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality support, could adversely affect our reputation, our ability to sell our services to existing and prospective Paid Employers, and our business, operating results and financial position.
We have a history of net losses, anticipate increasing our operating expenses in the future, and may not sustain profitability.
We have a history of incurring net losses. While we earned net income of $3.6 million and $86.0 million for the years ended December 31, 2021 and 2020, respectively, for the year ended December 31, 2019, we incurred a net loss of $6.3 million. As of December 31, 2021, we had an accumulated deficit of $67.8 million. We expect to incur additional expenses in connection with legal, accounting, and other administrative expenses related to operating as a public company in addition to ongoing stock-based compensation expense related to the vesting of our RSUs. Additionally, we expect to make significant
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future expenditures related to the development and expansion of our business, including investing in our technology to improve our marketplace and investing in sales and marketing channels to enhance our brand promotion efforts. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently to offset these higher expenses. If our revenue declines or fails to grow at a rate faster than increases in our operating expenses, we will not be able to maintain profitability in future periods. As a result, we may generate losses. We cannot ensure that we will continue to achieve profitability in the future or that we can sustain profitability.
We rely on Amazon Web Services, or AWS, to host our marketplace, and any disruption of service from AWS or material change to our arrangement with AWS could adversely affect our business.
We currently host our marketplace and support most of our operations using AWS, a provider of cloud infrastructure services. We do not control the operations of AWS’s facilities. AWS’s facilities are vulnerable to damage or interruption from earthquakes, hurricanes, floods, fires, cyber security attacks, terrorist attacks, power losses, telecommunications failures, and similar events or could be subject to break-ins, computer viruses, sabotage, intentional acts of vandalism, and other misconduct. The occurrence of any of these events, a decision to close the facilities or cease or limit providing services to us without adequate notice, or other unanticipated problems could result in interruptions to our marketplace, which may be lengthy. Our marketplace’s continuing and uninterrupted performance is critical to our success and employers and job seekers may become dissatisfied by service interruption. Sustained or repeated system failures could reduce the attractiveness of our marketplace to employers and job seekers, cause employers and job seekers to decrease their use of or stop using our marketplace, and adversely affect our business. Moreover, negative publicity from disruptions could damage our reputation.
AWS does not have an obligation to renew its agreements with us on commercially reasonable terms, or at all. If we cannot renew our agreement or are unable to renew on commercially reasonable terms, we may experience costs or downtime in connection with the transfer to, or the addition of, new cloud infrastructure or other data center. If these providers charge high costs for or increase the cost of their services, we will experience higher costs to operate our business and may have to increase the fees to use our marketplace and our operating results may be adversely impacted.
Upon expiration or termination of our agreement with AWS, we may not be able to replace the services provided to us in a timely manner or on terms and conditions, including service levels and cost, that are favorable to us, and a transition from one vendor to another vendor could subject us to operational delays and inefficiencies until the transition is complete. Switching our operations from AWS to another cloud or other data center provider would also be technically difficult, expensive, and time consuming.
Many people are using mobile devices to access the internet. If we cannot optimize our websites for mobile access or offer a compelling mobile app, we may not remain competitive and could lose employers and job seekers.
Many employers and job seekers access our marketplace through our mobile website and mobile app. We must ensure that the experience for our mobile offerings is optimized to ensure a positive experience. It requires us to develop and enhance our offerings to be specifically designed for mobile devices, such as social media job postings. If we cannot optimize our websites and apps cost effectively and improve the monetization capabilities of our mobile services, we may not remain competitive, which may negatively affect our business and results of operations.
Additionally, there is no guarantee that employers and job seekers will use our mobile apps rather than competing marketplaces. We are dependent on the interoperability of our mobile apps with popular third-party mobile operating systems such as Apple's iOS and Google's Android, and their placement in popular app stores like the Apple App Store and Google Play Store, and any changes in such systems that degrade our apps’ functionality or give preferential treatment or app store placement to competitive
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apps could adversely affect the access and usage of our apps on mobile devices. If it is more difficult for employers and job seekers to access and use our apps on their mobile devices, our growth and engagement levels could be harmed.
Legal and Regulatory Risks
If we or our third-party partners experience a security breach, such as a hacking or phishing attack, or other data privacy or security incident, our marketplace may be perceived as not being secure, our reputation may be harmed, demand for our marketplace may be reduced, our operations may be disrupted, we may incur significant legal costs or liabilities, and our business could be adversely affected.
Our business involves the storage, processing, and transmission of proprietary, confidential, and personal information as well as the use of third-party partners and vendors who also store, process, and transmit such user information. We also maintain certain other proprietary and confidential information relating to our business and personal information of our personnel. We have previously experienced multiple data security incidents involving the unauthorized access to personal information of job seekers utilizing our services (including their resumes) as well as affecting our business clients’ accounts, some of which have required us to notify affected individuals and/or regulators. Although upon detection of these security incidents we immediately investigate them and have taken steps to reinforce our security practices and enhance our security monitoring and controls, there are no assurances that other data security incidents will not occur in the future. These incidents and any future data security breach, such as a hacking or phishing attack, or other data privacy or security incident, whether intentionally or unintentionally caused by us or by third parties, that we experience could result in unauthorized access to, misuse of, or unauthorized acquisition of our, our personnel’s, or our users’ data; the loss, corruption, or alteration of this data; interruptions in our operations; or damage to our computers or systems or those of our users. Any of these could expose us to claims, litigation, fines, other potential liability, and reputational harm.
An increasing number of online services have also disclosed security breaches, some of which involved sophisticated and highly targeted attacks, and as our profile and name recognition increase, we may be targeted more frequently. Additionally, malware, viruses, social engineering (including business email compromise), and general hacking in our industry have become more prevalent and more complex. Further, due to the current COVID-19 pandemic, there is an increased risk that we may experience cybersecurity related incidents as a result of our employees, service providers, and third parties working remotely on less secure systems. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not foreseeable or recognized until launched against a target, we and our third-party partners and vendors may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of our or our third-party partners’ or vendors’ security or privacy or other data privacy or security incident occurs, public perception of the effectiveness of our security measures and brand could be harmed, and we could lose users and business.
Data security breaches and other data privacy and security incidents may also result from non-technical means, for example, through human error. Any such security compromise could result in a violation of applicable data privacy, security, breach notification and other laws, regulatory or other governmental investigations, enforcement actions, litigation, and legal and financial exposure, including potential contractual liability. We may need to expend significant resources to protect against, and to address issues created by, security breaches and other privacy and security incidents. These liabilities may exceed the amounts covered by our insurance or our insurance coverage may not extend to or be adequate for liabilities actually incurred, or our insurance may not continue to be available to us on economically reasonable terms, or at all. Any such compromise could also result in damage to our reputation and a loss of confidence in our security measures. Our systems, and the systems of our vendors and third-party partners, may also be vulnerable to computer viruses and other malicious software, physical or electronic break-ins, or weakness resulting from intentional or unintentional service
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provider actions, and similar disruptions that could make all or portions of our website or applications unavailable for periods of time. Any of these effects could adversely impact our business.
We face payment and fraud risks that could adversely impact our business.
Requirements in our marketplace relating to user authentication and fraud detection are complex. If our user authentication and fraud detection measures are not effective, our marketplace may be perceived as not being secure, our reputation may be harmed, and our business may be adversely impacted. In addition, bad actors use increasingly sophisticated methods to engage in illegal activities involving personal information, such as unauthorized or fraudulent use of another’s identity, payment information, or other information; misrepresentation of the user’s identity or skills, including using accounts that they have purchased, sold, or leased; and acquisition or use of credit or debit card details and bank account information. This conduct in our marketplace could result in any of the following, each of which could adversely impact our business:
•bad actors may use our marketplace, including our payment processing and disbursement methods, to engage in unlawful or fraudulent conduct, such as identity theft, money laundering, terrorist financing, fraudulent sale of services, bribery, breaches of security, leakage of data, piracy or misuse of software and other copyrighted or trademarked content, and other misconduct;
•we may be held liable for the unauthorized use of an account holder’s credit card or bank account number and required by card issuers or banks to return the funds at issue and pay a chargeback or return fee, and if our chargeback or return rate becomes excessive, credit card networks may also require us to pay fines or other fees and the California Department of Business Oversight may require us to hold cash reserves;
•we may be subject to additional risk and liability exposure, including for negligence, fraud, or other claims, if employees or third-party service providers fraudulently misappropriate our banking or other information or user information;
•employers and job seekers that are subjected or exposed to the unlawful or improper conduct of other employers and job seekers or other third parties, or law enforcement or administrative agencies, may seek to hold us responsible for the conduct of employers and job seekers, lose confidence in our marketplace, decrease or cease use of our marketplace, seek to obtain damages and costs, or impose fines and penalties;
•we may be subject to additional risk if employers in our marketplace cannot pay hired job seekers for services rendered, as such job seekers may seek to hold us responsible for the employers’ conduct and may lose confidence in our marketplace, decrease or cease use of our marketplace, or seek to obtain damages and costs; and
•we may suffer reputational damage as a result of the occurrence of any of the above.
Despite measures we have taken to detect, prevent, and mitigate these risks, we do not have control over the employers and job seekers in our marketplace and cannot ensure that any of our measures will stop or minimize the use of our marketplace for, or to further, illegal or improper purposes. We may receive complaints from employers, job seekers and other third parties concerning misuse of our marketplace and wrongful conduct of other employers and job seekers. We may also bring claims against employers and job seekers and other third parties for their misuse of our marketplace in the future. Even if these claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the attention and resources of our management and adversely affect our business and operating results.
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Changes in laws or regulations relating to data privacy or the protection, collection, storage, processing, transfer, or use of personal data, or any actual or perceived failure by us to comply with such laws and regulations or our privacy policies, could adversely affect our business.
We receive, collect, store, process, transfer, and use personal information and other user data. There are numerous federal, state, local, and international laws and regulations regarding data privacy, data protection, information security, and the collection, storing, sharing, use, processing, transfer, disclosure, and protection of personal information and other content. The scope of these laws and regulations is changing, subject to differing interpretations, and may be inconsistent among countries, or conflict with other laws and regulations.
We are also subject to the terms of our privacy policies and obligations to third parties related to privacy, data protection, and information security. The regulatory framework for privacy and data protection worldwide is uncertain and complex, and these or other actual or alleged obligations may be interpreted and applied in ways we do not anticipate or that are inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Further, any significant change to applicable laws, regulations, or industry practices regarding the collection, use, retention, security, or disclosure of the data of our employers and job seekers, employees, contractors, or others, or their interpretation, or any changes regarding the manner in which the express or implied consent of employers and job seekers for the collection, use, retention, or disclosure of such data must be obtained, could increase our costs and require us to modify our services and features, which may be material or not cost-effective, and may limit our storage and processing of user data or develop new services and features.
We also expect that there will continue to be new laws, regulations, and industry standards concerning privacy, data protection, and information security proposed and enacted in various jurisdictions. For example, in 2018, European legislators adopted the General Data Protection Regulation, or the GDPR, which imposes more stringent European Union, or EU, data protection requirements, and provides for significant penalties for noncompliance. The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR. Compliance with the GDPR has been and will continue to be a rigorous and time-intensive process that may increase our cost of doing business or require us to change our business practices, and may subject us to governmental investigations or enforcement actions, fines and penalties, claims, litigation, and reputational harm in connection with any European activities. Further, the United Kingdom, or the UK, has enacted the UK GDPR, which, together with the amended UK Data Protection Act 2018, or DPA, retains the GDPR in UK national law. Fines for certain breaches of the GDPR and the UK data protection regime are significant (e.g., fines for certain breaches of the GDPR or the UK GDPR are up to the greater of 20 million Euros (or 17.5 million GBP under the UK GDPR) or 4% of total global annual turnover). Additionally, the California Consumer Privacy Act, or the CCPA, which afforded new data privacy rights for consumers and new operational requirements for companies, came into force in 2020, and also provides for fines for noncompliance. In November 2020, California voters passed the California Privacy Rights and Enforcement Act of 2020, or CPRA, which further expands the CCPA with additional data privacy compliance requirements and rights of California consumers effective January 1, 2023, and establishes a regulatory agency dedicated to enforcing those requirements. In addition, Virginia and Colorado each have enacted a new privacy law, which take effect January 1, 2023 and July 1, 2023, respectively, and U.S. states have continued to introduce new legislation in 2022. The costs of compliance with, and other burdens imposed by, the GDPR, the UK GDPR, the DPA, the CCPA, and others may limit the use and adoption of our products and services and could have an adverse impact on our business. As a result, we may need to modify the way we treat, process, or store such information.
Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to employers and job seekers, employees, contractors, or other third parties, or any other legal obligations or regulatory requirements relating to privacy, data protection, or information security may result in governmental and regulatory investigations or enforcement and/or assessment notices (for a compulsory audit), orders to cease or change our processing of our data, litigation, claims (including
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representative actions and other class action type litigation, where individuals have suffered harm), or public statements against us by consumer advocacy groups or others and could result in significant liability, cause our employers and job seekers to lose trust in us, and otherwise have an adverse effect on our reputation and business. Furthermore, the costs of compliance with such laws, regulations and policies may limit the adoption and use of, and reduce the overall demand for, our marketplace.
Failure to comply with anti-corruption and anti-money laundering laws, including the Foreign Corrupt Practices Act, or FCPA, and similar laws associated with our activities outside of the United States, could subject us to penalties and other adverse consequences.
We have voluntarily implemented policies and procedures designed to allow us to comply with U.S. economic sanctions laws and prevent our marketplace from being used to facilitate business in countries or with persons or entities included on designated lists promulgated by the U.S. Department of the Treasury’s Office of Foreign Assets Control, or OFAC, and equivalent foreign authorities. We may be subject to fines or other penalties in one or more jurisdictions levied by federal, state or local regulators, in the event that we engage in any conduct, intentionally or not, that facilitates money laundering, terrorist financing, or other illicit activity, or that violates sanctions or otherwise constitutes sanctionable activity.
Regulators continue to increase their scrutiny of compliance with these obligations, which may require us to further revise or expand our compliance program, including the procedures that we use to verify the identity of our users and to monitor our marketplace for potential illegal activity. In addition, any policies and procedures that we implement to comply with OFAC regulations may not be effective, including in preventing users from using our services within the OFAC-sanctioned countries of North Korea, Syria, Cuba, and Iran, and the Crimea region of Ukraine, or additional countries or regions that may be included from time-to-time. Given the technical limitations in developing controls to prevent, among other things, the ability of users to publish in our marketplace false or deliberately misleading information or to develop sanctions-evasion methods, it is possible that we may inadvertently and without our knowledge provide services to individuals or entities that have been designated by OFAC or are located in a country subject to an embargo by the United States that may not be in compliance with the economic sanctions regulations administered by OFAC.
Consequences for failing to comply with applicable rules and regulations could include fines, criminal and civil lawsuits, forfeiture of significant assets, or other enforcement actions. We could also be required to make changes to our business practices or compliance programs as a result of regulatory scrutiny. In addition, any perceived or actual breach of compliance by us, our employers and job seekers, or payment partners with respect to applicable laws, rules, and regulations could have a significant impact on our reputation and could cause us to lose existing employers and job seekers, prevent us from obtaining new employers and job seekers, cause other payment partners to terminate or not renew their agreements with us, require us to expend significant funds to remedy problems caused by violations and to avert further violations, and expose us to legal risk and potential liability, all of which may adversely affect our business, operating results, and financial condition and may cause the price of our common stock to decline.
We are also subject to the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, and the UK Bribery Act 2010, and may be subject to other anti-bribery, anti-money laundering, and sanctions laws in countries in which we conduct activities or have employers and job seekers. The FCPA prohibits providing, offering, promising, or authorizing, directly or indirectly, anything of value to government officials, political parties, or political candidates for the purposes of obtaining or retaining business or securing any improper business advantage. The provisions of the Bribery Act extend beyond bribery of government officials and create offenses in relation to commercial bribery including private sector recipients. The provisions of the Bribery Act also create offenses for accepting bribes in addition to bribing another person. We face significant risks if we cannot comply with the FCPA, the Bribery Act and other applicable anti-corruption laws. We have implemented an anti-corruption compliance policy, but we cannot ensure that all of our employees, employers and job seekers, and agents, as well as those contractors to which we outsource certain of our business operations, will not
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take actions in violation of our policies or agreements and applicable law, for which we may be ultimately held responsible.
Any violation of the FCPA, the Bribery Act, other applicable anti-corruption laws, and other laws could result in investigations and actions by federal or state attorneys general or foreign regulators, loss of export privileges, severe criminal or civil fines and penalties or other sanctions, forfeiture of significant assets, debarment from government contracts, whistleblower complaints, and adverse media coverage, which could have an adverse effect on our reputation, business, operating results, and prospects. In addition, responding to any enforcement action or internal investigation related to alleged misconduct may result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees.
We are subject to a wide variety of foreign and domestic laws. As we look to expand our international footprint over time and as new domestic laws are implemented, we may become obligated to comply with additional laws and regulations of the countries or markets in which we operate or have employers and job seekers.
We and our employers and job seekers are subject to a wide variety of foreign and domestic laws. Laws, regulations, and standards governing issues that may affect us, such as employment, payments, whistleblowing and worker confidentiality obligations, intellectual property, consumer protection, taxation, privacy, data security, benefits, unionizing and collective action, arbitration agreements and class action waiver provisions, unfair competition, terms of service, website accessibility, background checks, and escheatment are often complex and subject to varying interpretations, and, as a result, their application in practice may change or develop over time through judicial decisions or as new guidance or interpretations are provided by regulatory and governing bodies. Many of these laws do not contemplate or address the unique issues of the internet, mobile, and related technologies. Other laws and regulations in response to internet, mobile, and related technologies may also be adopted, implemented, or interpreted to apply to us and other online services marketplaces or our users. Likewise, these laws affect our users, and their application, or uncertainty around their application, may affect demand for our marketplace.
New approaches to policymaking and legislation may also produce unintended harms for our business, which may impact our ability to operate our business in the manner in which we are accustomed. Any of these regulations could negatively impact our users, including perceptions regarding their use of our marketplace, or have a material adverse effect on the demand for job postings in our marketplace or on how we operate our marketplace.
As we look to expand our international footprint over time, we may become obligated to comply with additional laws and regulations of the countries or markets in which we operate or have customers or job seekers. We may be harmed if we are found to be subject to new or existing laws and regulations or if those laws are interpreted and applied to us in a manner that harms our business or is inconsistent with the application of U.S. laws, including with respect to those subjects mentioned above. In addition, contractual provisions that are designed to protect and mitigate against risks, including terms of service, arbitration and class action waiver provisions, disclaimers of warranties, limitations of liabilities, releases of claims, and indemnification provisions, could be deemed unenforceable as to the application of these laws and regulations by a court, arbitrator, or other decision-making body. If we cannot comply with these laws and regulations or manage the complexity of global operations and support an international user base successfully or cost effectively, or if these laws and regulations are deemed to apply to our users or cause a decline in demand for our marketplace, our business, operating results, and financial condition could be adversely affected.
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We plan to expand our international operations which could subject us to additional costs and risks, and our continued expansion internationally may not be successful.
We plan to expand our operations internationally in the future. Outside of the United States, we currently have operations in the United Kingdom, Israel, and Canada. There are significant costs and risks inherent in conducting business in international markets, including:
•establishing and maintaining effective controls at foreign locations and the associated costs;
•adapting our marketplace to non-U.S. employers’ and job seekers’ preferences and customs;
•increased competition from local providers;
•longer sales or collection cycles in some countries;
•compliance with foreign laws and regulations, including data privacy frameworks like the GDPR;
•adapting to doing business in other languages or cultures;
•compliance with local tax regimes, including potential double taxation of our international earnings, and potentially adverse tax consequences due to U.S. and foreign tax laws as they relate to our international operations;
•compliance with anti-bribery laws, such as the FCPA and the Bribery Act;
•currency exchange rate fluctuations and related effects on our operating results;
•economic and political instability in some countries;
•the uncertainty of obtaining and protecting intellectual property rights in some countries and practical difficulties of enforcing rights abroad; and
•other costs of doing business internationally.
These factors and other factors could harm our international operations and, consequently, materially impact our business, operating results, and financial condition.
Further, we may incur significant operating expenses as a result of our international expansion, and it may not be successful. We have limited experience with regulatory environments and market practices internationally, and we may not be able to penetrate or successfully operate in new markets. We also have more limited brand recognition in certain parts of the world, leading to delayed acceptance of our marketplace by international employers and job seekers. If we cannot continue to expand internationally and manage the complexity of our global operations successfully, our financial condition and operating results could be adversely affected.
Privacy concerns and laws or other domestic or foreign regulations may reduce the effectiveness of our marketplace, disrupt our communication processes, and adversely affect our business.
In order to use our marketplace, employers, job seekers, and, to a lesser extent, other third parties including advertisers, partners, and our own employees, entrust us to collect, use, and store their personal information. Our ability to leverage this information and to effectively and efficiently provide our services, including by communicating electronically and otherwise with employers and job seekers of our marketplace, is critical to our business. By way of example, our services may include the sending and receiving of emails, SMS/text messages, in-platform messages, and push notifications on mobile devices. Certain federal, state and foreign government bodies and agencies have adopted, and others are considering adopting, or may adopt in the future, laws and regulations regarding the collection, use, transfer, storage and disclosure of personal information obtained from consumers, customers, employees, and other individuals, and the conditions under which businesses may communicate with
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such individuals and other third parties. The costs of compliance with, and other burdens imposed by, such laws and regulations that are applicable to the businesses of our employers and job seekers may limit the use of our marketplace and reduce overall demand, or lead to significant fines, penalties or liabilities for any noncompliance with such privacy laws. Moreover, third-party gatekeepers and service providers and their interpretation and application of privacy and data protection laws, rules, regulations, and best practices, may limit, disrupt, or require alteration of our operations, service offerings, and ability to communicate with and among employers and job seekers, and may adversely affect our business.
From time to time, we may be subject to legal proceedings, regulatory disputes, and governmental investigations that could cause us to incur significant expenses, divert our management’s attention, and materially harm our business, financial condition, and operating results.
From time to time, we may be subject to claims, lawsuits (including class actions), government investigations, arbitrations and other proceedings involving competition and antitrust, intellectual property, privacy, consumer protection, securities, tax, labor and employment, commercial disputes, and other matters that could adversely affect our business operations and financial condition. The outcome of any legal proceeding, regardless of its merits, is inherently uncertain. Regardless of the merits, pending or future legal proceedings could result in a diversion of management’s attention and resources and reputational harm, and we may be required to incur significant expenses defending against these claims or pursuing claims against third parties to protect our rights. If we do not prevail in litigation, we could incur substantial liabilities. We may also determine in certain instances that a settlement may be a more cost-effective and efficient resolution for a dispute.
Where we can make a reasonable estimate of the liability relating to pending litigation and determine that it is probable, we record a related liability. As additional information becomes available, we assess the potential liability and revise estimates as appropriate. However, because of uncertainties relating to litigation, the amount of our estimates could be wrong as determining reserves for pending legal proceedings is a complex, fact-intensive process that is subject to judgment calls. The results of legal and regulatory proceedings cannot be predicted with certainty, and determining reserves for pending litigation and other legal and regulatory matters requires significant judgment. There can be no assurance that our expectations will prove correct, and even if these matters are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, could harm our business. Any adverse determination related to legal proceedings or a settlement agreement could require us to change our technology or our business practices in costly ways, prevent us from offering certain products or services, require us to pay monetary damages, fines, or penalties, or require us to enter into royalty or licensing arrangements, and could adversely affect our operating results and cash flows, harm our reputation, or otherwise negatively impact our business.
Our failure or inability to protect our intellectual property rights, or claims by others that we are infringing upon or unlawfully using their intellectual property, could diminish the value of our brand and weaken our competitive position, and adversely affect our business, financial condition, operating results, and prospects.
Our success depends in large part on our proprietary technology and other intellectual property rights, or IPR. We currently rely on a combination of copyright, trademark, trade secret, and unfair competition laws, as well as confidentiality agreements and procedures and licensing arrangements, to establish and protect our IPR. We currently do not own any patents. We have devoted substantial resources to the development of our proprietary technologies and related processes. To protect our proprietary technologies and processes, we rely in part on trade secret laws and confidentiality agreements with our employees, licensees, independent contractors, commercial partners, and other advisors. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. We cannot be certain that the steps taken by us to protect our IPR will be adequate to prevent infringement of such rights by others. Additionally, the process of obtaining protection for trademarks and other IPR is expensive and time-consuming, and we may not be able to apply for all necessary or desirable trademark
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and other IPR applications at a reasonable cost or in a timely manner. Additionally, the process of obtaining patent or trademark protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications or apply for all necessary or desirable trademark applications at a reasonable cost or in a timely manner. Moreover, intellectual property protection may be unavailable or limited in some foreign countries where laws or law enforcement practices may not protect our IPR as fully as in the United States, and it may be more difficult for us to successfully challenge the unauthorized use of our IPR by other parties in these countries. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our IPR, and our failure or inability to obtain or maintain IPR protection or otherwise protect our IPR could adversely affect our business.
We may in the future be subject to patent infringement and trademark claims and lawsuits in various jurisdictions, and we cannot be certain that our products or activities do not violate the patents, trademarks, or other IPR of third-party claimants. Companies in the technology industry and other patent, copyright, and trademark holders seeking to profit from royalties in connection with grants of licenses own large numbers of patents, copyrights, trademarks, domain names, and trade secrets and frequently commence litigation based on allegations of infringement, misappropriation, or other violations of intellectual property or other rights. As we face increasing competition and gain an increasingly high profile, the likelihood of IPR claims against us has grown and will likely continue to grow.
Further, from time to time, we may receive letters from third parties alleging that we are infringing upon their IPR or inviting us to license their IPR. Successful infringement claims against us could result in significant monetary liability, prevent us from selling some of our products and services, or require us to change our branding. In addition, resolution of claims may require us to redesign our products, license rights from third parties at a significant expense, or cease using those rights altogether. We may in the future bring claims against third parties for infringing our IPR. Costs of supporting such litigation and disputes may be considerable, and there can be no assurances that a favorable outcome will be obtained. Patent infringement, trademark infringement, trade secret misappropriation, and other intellectual property claims and proceedings brought against us or brought by us, whether successful or not, could require significant attention of our management and resources and have in the past and could further result in substantial costs, harm to our brand, and have an adverse effect on our business.
Adverse tax laws or regulations could be enacted or existing laws could be applied to us or our employers and job seekers, which could increase the costs of our services and adversely impact our business.
The application of federal, state, local and international tax laws to services provided electronically is evolving. New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time (possibly with retroactive effect), and could be applied solely or disproportionately to services provided over the internet. These enactments could adversely affect our sales activity due to the inherent cost increase the taxes would represent and ultimately result in a negative impact on our operating results and cash flows.
In addition, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us (possibly with retroactive effect), which could require us or our employers and job seekers to pay additional tax amounts, as well as require us or our employers and job seekers to pay fines or penalties and interest for past amounts. If we are unsuccessful in collecting such taxes from our employers and job seekers, we could be held liable for such costs, thereby adversely impacting our operating results and cash flows.
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Other Risks Related to Our Business
Our business is subject to the risk of earthquakes, fire, power outages, floods, public health crises, including the current COVID-19 pandemic, and other catastrophic events, and to interruption by man-made problems such as terrorism.
Our business is vulnerable to damage or interruption from earthquakes, fires, floods, power losses, telecommunications failures, terrorist attacks, acts of war, human errors, break-ins, public health crises, including the COVID-19 pandemic, and similar events. Additionally, the third-party systems and operations, such as the data centers and online services we use in our company operations, are subject to similar risks. Our insurance policies may not cover losses from these events or may provide insufficient compensation that does not cover our total losses. For example, the COVID-19 pandemic has resulted in a widespread global health crisis and adversely affected global economies and financial markets, and similar public health threats could do so in the future. Such events have impacted, and could in the future impact, demand for products sold in our marketplace, which in turn could adversely affect our revenue and results of operations. In addition, acts of terrorism, which may be targeted at metropolitan areas that have higher population density than rural areas, could also cause disruptions in our business or the economy as a whole. A significant portion of our technology team is located in Israel, which is located in a region of the world that historically has experienced elevated levels of geopolitical instability. Our corporate offices and our primary data center facilities are located in California, a state that frequently experiences earthquakes and wildfires. We may not have sufficient protection or recovery plans. As we rely heavily on our data center facilities, computer and communications systems, and the internet to conduct our business and provide high-quality user service, these disruptions could negatively impact our ability to run our business.
Our indebtedness could adversely affect our liquidity and financial condition.
We had $550.0 million of indebtedness (excluding intercompany indebtedness) and $244.1 million available under our revolving credit facility as of March 31, 2022. Our indebtedness could have important consequences, including:
•making it more difficult for us to satisfy our debt obligations;
•limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;
•requiring a portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;
•increasing our vulnerability to adverse changes in general economic, industry and competitive conditions; and
•increasing our cost of borrowing.
In addition, the credit agreement that governs our revolving credit facility and the indenture governing the $550.0 million aggregate principal amount of our senior unsecured notes that we issued in January 2022 contain restrictive covenants that limit our ability to engage in activities that may be in our long-term best interest. Our failure to comply with those covenants could result in an event of default under the credit agreement that governs our revolving credit facility or the indenture governing the senior unsecured notes which, if not cured or waived, could result in the acceleration of substantially all of our indebtedness.
We may not be able to generate sufficient cash to service all of our indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
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Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and results of operations, which in turn are subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness. Our ability to restructure or refinance our debt will depend on, among other things, the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of existing or future debt instruments may restrict us from adopting some of these alternatives. In addition, any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness. In the absence of such cash flows and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations.
Further, the credit agreement governing our revolving credit facility contains, and any future credit facility or other debt instrument may contain, provisions that will restrict our ability to dispose of assets and use the proceeds from any such disposition. We may not be able to consummate those dispositions or to obtain the proceeds that we could realize from them and these proceeds may not be adequate to meet any debt service obligations then due. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations.
If we cannot make the scheduled payments on our debt, we will be in default and, as a result, the lenders under our revolving credit facility and the holders of the senior unsecured notes could declare all outstanding principal and interest to be due and payable, the lenders under our revolving credit facility could terminate their commitments to loan money and foreclose against the assets securing the borrowings under such credit facility, and we could be forced into bankruptcy or liquidation, which could result in an adverse impact to your investment in our company.
Covenants in our debt agreements may restrict our operations, and if we do not effectively manage our business to comply with these covenants, our financial condition could be adversely impacted.
We entered into a Credit Agreement with the lenders named therein, and JPMorgan Chase Bank, N.A., as administrative agent, in April 2021, which provides for a $250.0 million secured revolving line of credit. We also entered into an indenture in January 2022, which governs the senior unsecured notes. The revolving credit facility and the indenture that governs the senior unsecured notes contain various restrictive covenants, including, among other things, net leverage ratio requirements, and restrictions on our ability to dispose of assets, make acquisitions or investments, incur debt or liens, make distributions to our stockholders, or enter into certain types of related party transactions. These restrictions may restrict our current and future operations, particularly our ability to respond to certain changes in our business or industry, or take future actions. Pursuant to the credit agreement, we granted the lenders thereto a security interest in substantially all of our assets. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” for additional information.
Our ability to meet these restrictive covenants can be impacted by events beyond our control and we may be unable to do so. Our credit agreement and the indenture governing the senior unsecured notes provides that our breach or failure to satisfy certain covenants constitutes an event of default. Upon the occurrence of an event of default, the lender could elect to declare all amounts outstanding under its debt agreements to be immediately due and payable, and holders of the senior unsecured notes could declare all outstanding principal and interest to be due and payable. In addition, the lender would have the right to proceed against the assets we provided as collateral pursuant to the credit agreement. If the debt under our credit agreement or the senior unsecured notes were to be accelerated, we may not have sufficient
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cash on hand or be able to sell sufficient collateral to repay such debts, which would have an immediate adverse effect on our business, liquidity, and financial condition.
We may engage in merger and acquisition activities, which could require significant management attention, disrupt our business, dilute stockholder value, consume resources that are necessary to sustain our business, and adversely affect our operating results.
As part of our business strategy, we may make investments in other companies, products, or technologies. At any given time, we may be engaged in discussions or negotiations with respect to one or more of these types of transactions. Any acquisition, investment, or business relationship may result in unforeseen or additional operating difficulties, risks, and expenditures. We may not be able to find suitable acquisition candidates and we may not be able to complete acquisitions on favorable terms, if at all. If we do complete acquisitions in the future, we may not ultimately strengthen our competitive position or achieve our goals, and any acquisitions we complete could be viewed negatively by employers and job seekers. In addition, if we cannot successfully integrate such acquisitions, or the assets, technologies or personnel associated with such acquisitions, into our company, the anticipated benefits of any acquisition, investment, or business relationship may not be realized. Additionally, we may be exposed to unknown or additional risks and liabilities.
We may in the future seek to acquire or invest in additional businesses, products, technologies, or other assets. We also may enter into relationships with other businesses to expand our marketplace or our ability to provide our marketplace in foreign jurisdictions, which could involve preferred or exclusive licenses, additional channels of distribution, discount pricing, or investments in other companies. Negotiating these transactions can be time consuming, difficult, and expensive, and our ability to close these transactions may often be subject to approvals that are beyond our control. Consequently, these transactions, even if undertaken and announced, may not close. Acquisitions may disrupt our ongoing operations, divert management from their primary responsibilities, dilute our corporate culture, subject us to additional liabilities, increase our expenses, and adversely impact our business, financial condition, operating results, and cash flows. We may not successfully evaluate or use the acquired technology and accurately forecast the financial impact of an acquisition transaction, including accounting charges. We may have to pay cash, incur debt, or issue equity securities to pay for any such acquisition, each of which could affect our financial condition, result in dilution to our stockholders or increase our fixed obligations.
We may require additional capital to support business growth and objectives, and this capital might not be available to us on reasonable terms, if at all, and may result in stockholder dilution.
We expect that our existing cash and cash equivalents will be sufficient to meet our anticipated cash needs for the foreseeable future. However, we intend to continue to make investments to support our business growth and may require additional capital to fund our business and to respond to competitive challenges, including the need to promote and enhance our marketplace, develop new products and services, enhance our operating infrastructure, and potentially to acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. There can be no assurance that such additional funding will be available on terms attractive to us, or at all. Our inability to obtain additional funding when needed could have an adverse effect on our business, financial condition, and operating results. If additional funds are raised through the issuance of equity or convertible debt securities, holders of our Class A common stock could suffer significant dilution, and any new shares we issue could have rights, preferences, and privileges superior to those of our Class A common stock. Additionally, a substantial number of shares of our common stock are available for future sale pursuant to stock options, RSUs, or issuance pursuant to our equity incentive plans and employee stock purchase plan. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.
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The requirements of being a public company, including maintaining adequate internal control over our financial and management systems, may strain our resources, divert management’s attention, and affect our ability to attract and retain executive management and qualified board members.
We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, the rules subsequently implemented by the SEC, the rules and regulations of the listing standards of the New York Stock Exchange and other applicable securities rules and regulations. Compliance with these rules and regulations has increased our legal and financial compliance costs and strains our financial and management systems, internal controls, and employees.
The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and operating results. Moreover, the Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures, and internal control over financial reporting. We will be required to make a formal assessment and provide an annual management report on the effectiveness of our internal control over financial reporting beginning with our annual report for the fiscal year ending December 31, 2022. We have not identified any material weaknesses in our internal control over financial reporting during 2019, 2020, and 2021. However, to maintain and, if required, improve our disclosure controls and procedures, and internal control over financial reporting to meet the standards of the Sarbanes-Oxley Act, additional and potentially significant resources and management oversight may be required.
Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our business or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we may eventually be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on our stock price.
The new rules and regulations applicable to public companies, and stockholder litigation brought against recently public companies, have made it more expensive for us to obtain and maintain director and officer liability insurance, and we may be required to incur substantially higher costs to obtain and maintain the same or similar coverage.
Our management team has limited experience managing a public company.
Most members of our management team have limited experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws pertaining to public companies. We are subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These obligations and constituents require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, financial condition, and operating results.
Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.
Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board (FASB), the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results and could affect the reporting of transactions completed before the announcement of a change.
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If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our operating results could be adversely affected.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and stockholders’ equity/deficit, and the amount of revenue and expenses that are not readily apparent from other sources. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in the price of our Class A common stock.
Fluctuations in currency exchange rates could harm our operating results and financial condition.
Transactions generated in countries other than the United States as well as those incurred by our international subsidiaries are often denominated in the currencies of the local countries. As a result, our consolidated U.S. dollar financial statements are subject to fluctuations due to changes in exchange rates as the financial results of our international subsidiaries are translated from local currencies into U.S. dollars. Our financial results are also subject to changes in exchange rates that impact the settlement of transactions in non-local currencies. To date, we have not engaged in currency hedging activities to limit the risk of exchange fluctuations and, as a result, our financial condition and operating results could be adversely affected by such fluctuations.
Risks Related to the Ownership of Our Class A Common Stock
Market volatility may affect the value of an investment in our Class A common stock and could subject us to litigation.
Technology stocks have historically experienced high levels of volatility. The price of our Class A common stock also could be subject to wide fluctuations in response to the risk factors described in this Quarterly Report on Form 10-Q and others beyond our control, including:
•the number of shares of our Class A common stock and Class B common stock publicly owned and available for trading;
•actual or anticipated fluctuations in our financial condition, operating results and other operating and non-GAAP metrics;
•our actual or anticipated operating performance and the operating performance of our competitors;
•changes in the projected operational and financial results we provide to the public or our failure to meet those projections;
•any major change in our board of directors, management, or key personnel;
•the economy as a whole and market conditions in our industry;
•rumors and market speculation involving us or other companies in our industry;
•announcements by us or our competitors of significant innovations, new products, services, features, integrations or capabilities, acquisitions, strategic investments, partnerships, joint ventures, or capital commitments;
•lawsuits threatened or filed against us;
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•other events or factors, including those resulting from the COVID-19 pandemic, war, incidents of terrorism, or responses to these events; and
•sales or expected sales of our Class A common stock by us, and our officers, directors, and principal stockholders.
Furthermore, the stock market has recently experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies and financial services and technology companies in particular. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political, and market conditions such as recessions, interest rate changes, or international currency fluctuations, may negatively impact the market price of our Class A common stock. These fluctuations may be even more pronounced in the trading market for our Class A common stock following the recent listing of our Class A common stock on the New York Stock Exchange as a result of the supply and demand forces described above. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could harm our business.
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.
Our Class B common stock has twenty votes per share and our Class A common stock has one vote per share. As of March 31, 2022, the holders of our outstanding Class B common stock beneficially owned approximately 25.8% of our outstanding common stock as a class and held approximately 87.4% of the voting power of our outstanding common stock as a class. Because of the twenty-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively control a substantial majority of the combined voting power of our common stock and therefore are able to control all matters submitted to our stockholders for approval until the earliest of (1) the first business day falling on or after 180 days after the date on which Ian Siegel beneficially owns less than 4,000,000 shares of Class B common stock, (2) the date which is (a) 90 days after the date of death or disability of Mr. Siegel or (b) such later date, not to exceed a total period of 180 days after the date of death or disability of Mr. Siegel, as may be approved prior to the date that is 90 days after the date of death or disability of Mr. Siegel by a majority of our independent directors then in office, and (3) the first business day falling on or after the date on which Mr. Siegel elects to convert all then-outstanding shares of Class B common stock into shares of Class A common stock. This concentrated control limits or precludes your ability to influence corporate matters for the foreseeable future, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval. In addition, this may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that you may feel are in your best interest as one of our stockholders.
Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions, such as certain permitted transfers, including certain transfers to family members, trusts solely for the benefit of the stockholder or their family members, affiliates under common control with the stockholder, and partnerships, corporations, and other entities exclusively owned by the stockholder or their family members, in each case as fully described in our amended and restated certificate of incorporation. The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term.
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The dual class structure of our common stock may adversely affect the trading market for our Class A common stock.
Certain stock index providers, such as S&P Dow Jones, exclude companies with multiple classes of shares of common stock from being added to certain stock indices, including the S&P 500. In addition, several stockholder advisory firms and large institutional investors oppose the use of multiple class structures. As a result, the dual class structure of our common stock may prevent the inclusion of our Class A common stock in such indices, may cause stockholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure, and may result in large institutional investors not purchasing shares of our Class A common stock. Any exclusion from stock indices could result in a less active trading market for our Class A common stock. Any actions or publications by stockholder advisory firms or institutional investors critical of our corporate governance practices or capital structure could also adversely affect the value of our Class A common stock.
Our share repurchase program could affect the price of our Class A common stock and increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading price of our Class A common stock.
In February 2022, our board of directors authorized the repurchase of up to $100.0 million of our common stock through open market or privately negotiated transactions, block purchases, or pursuant to one or more Rule 10b5-1 plans, in compliance with applicable securities laws and other legal requirements. 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, we entered into the ASR to repurchase an aggregate of $50.0 million in shares of our Class A common stock. Approximately $37.7 million in shares of our Class A common stock remains available for future repurchases under our $100.0 million share repurchase program after completion of the ASR.
Repurchases pursuant to our share repurchase program could affect the price of our Class A common stock and increase its volatility. The existence of our share repurchase program could also cause the price of our Class A common stock to be higher than it would be in the absence of such a program and could reduce the market liquidity for our Class A common stock. Additionally, repurchases under our share repurchase program will diminish our cash reserves, which could impact our ability to further develop our business and service our indebtedness. There can be no assurance that any repurchases will enhance stockholder value because the market price of our Class A common stock may decline below the levels at which we repurchased such shares. Any failure to repurchase shares after we have announced our intention to do so may negatively impact our reputation and investor confidence in us and may negatively impact our Class A common stock price. Although our share repurchase program is intended to enhance long-term stockholder value, short-term price fluctuations could reduce the program’s effectiveness.
If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business or our future prospects, the price of our Class A common stock and trading volume could decline.
The trading market for our Class A common stock depends in part on the research and reports that securities or industry analysts publish about us or our business, our market, and our competitors. We do not have control over these securities analysts. If one or more of the analysts who cover us downgrade our Class A common stock or publish inaccurate or unfavorable research about our business, our Class A common stock price would likely decline. If one or more of these analysts cease coverage of us or cannot publish reports on us regularly, demand for our Class A common stock could decrease, which might cause our Class A common stock price and trading volume to decline.
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We are an “emerging growth company” and intend to take advantage of the reduced disclosure requirements applicable to emerging growth companies which may make our Class A common stock less attractive to investors.
We are an “emerging growth company” as defined in the JOBS Act. We will remain an emerging growth company until the earliest of (1) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or more; (2) the last day of the fiscal year following the fifth anniversary of the date of the effectiveness of the registration statement; (3) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; and (4) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC. For so long as we remain an emerging growth company, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not “emerging growth companies,” including:
•not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;
•reduced disclosure obligations regarding executive compensation; and
•exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
We have taken advantage of the available exemptions described above. We cannot predict if investors will find our Class A common stock less attractive if we rely on these exemptions. If some investors find our Class A common stock less attractive as a result of these decisions, there may be a less active trading market for our Class A common stock and the price of our Class A common stock may be more volatile.
We do not intend to pay dividends for the foreseeable future.
We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends in the foreseeable future. Additionally, our ability to pay dividends on our common stock is limited by the restrictions under the terms of our credit agreement. We anticipate that for the foreseeable future we will retain all of our future earnings for use in the development of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
Provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may limit attempts by our stockholders to replace or remove our current management.
Provisions in our amended and restated certificate of incorporation and restated bylaws may have the effect of delaying or preventing a merger, acquisition, or other change of control of our company that the stockholders may consider favorable. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, our amended and restated certificate of incorporation and restated bylaws include provisions that:
•provide that our board of directors will be classified into three classes of directors with staggered three-year terms;
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•permit the board of directors to establish the number of directors and fill any vacancies and newly created directorships;
•require super-majority voting to amend some provisions in our amended and restated certificate of incorporation and restated bylaws, including provisions relating to the classified board, the size of the board, removal of directors, special meetings, actions by written consent, and designation of our preferred stock;
•authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan;
•provide that only the chairman of our board of directors, our chief executive officer, our lead independent director, or a majority of our board of directors will be authorized to call a special meeting of stockholders;
•eliminate the ability of our stockholders to call special meetings of stockholders;
•prohibit cumulative voting;
•provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders;
•provide for a dual class common stock structure in which holders of our Class B common stock may have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets;
•prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;
•provide that the board of directors is expressly authorized to make, alter, or repeal our bylaws; and
•establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
Moreover, Section 203 of the Delaware General Corporate Law, or DGCL, may discourage, delay, or prevent a change in control of our company. Section 203 imposes certain restrictions on mergers, business combinations, and other transactions between us and holders of 15% or more of our common stock. See the section titled “Description of Class A Common Stock” in Exhibit 4.6 to the 2021 Form 10-K for additional information. In addition, under the indenture governing the senior unsecured notes, if certain “change of control” events occur, each holder of the notes may require us to repurchase all of such holder’s notes at a purchase price equal to 101% of the principal amount of such notes. Additionally, our revolving credit facility provides for an event of default upon the occurrence of certain specified “change of control” events.
Our amended and restated certificate of incorporation and our restated bylaws contain exclusive forum provisions for certain claims, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our amended and restated certificate of incorporation, to the fullest extent permitted by law, provides that the Court of Chancery of the State of Delaware will be the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the DGCL, our amended and restated certificate of incorporation, or our restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine.
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Moreover, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder and our restated bylaws provide that the U.S. federal district courts will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, or a Federal Forum Provision. Our decision to adopt a Federal Forum Provision followed a decision by the Supreme Court of the State of Delaware holding that such provisions are facially valid under Delaware law. While there can be no assurance that federal or state courts will follow the holding of the Delaware Supreme Court or determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal Forum Provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder and neither the exclusive forum provision nor the Federal Forum Provision applies to suits brought to enforce any duty or liability created by the Exchange Act. Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal court. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder.
Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities will be deemed to have notice of and consented to our exclusive forum provisions, including the Federal Forum Provision. These provisions may limit our stockholders’ ability to bring a claim in a judicial forum they find favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation or restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results, and financial condition.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Share repurchase activity during the three months ended March 31, 2022 was as follows (in thousands, except per share amounts):
| Period | Total Number of Shares Purchased (#) | Average Price Paid Per Share ($) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (#) | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1) ($) | |||||||||||||||||||
| January 1, 2022 to January 31, 2022 | — | $ | — | $ | — | ||||||||||||||||||
| February 1, 2022 to February 28, 2022 | — | — | — | ||||||||||||||||||||
| March 1, 2022 to March 31, 2022 | |||||||||||||||||||||||
| Open market repurchases | 607 | $ | 20.36 | 607 | |||||||||||||||||||
ASR (2) | 1,813 | (2) | 1,813 | ||||||||||||||||||||
| Total | 2,420 | $ | 37,652 | ||||||||||||||||||||
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____________
(1)As of March 31, 2022, the board of directors authorized us to purchase up to $100.0 million of our common stock under the share repurchase program announced on March 2, 2022, of which $62.3 million had been utilized. The remaining $37.7 million in the table represents the amount available to repurchase shares under the share repurchase program as of March 31, 2022. We 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. For more information, see Note 9 “Share Repurchase Program” to our condensed consolidated financial statements included in this report.
(2)In March 2022, we entered into an ASR with Goldman Sachs. Under the terms of the agreement, we made an initial payment of $50.0 million and received an initial delivery of 1.8 million shares of our Class A common stock which represented $40.0 million (or 80%) of the ASR. The final number of shares repurchased was 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 settlement of the ASR occurred during the second quarter of 2022. The ASR transaction was effectuated pursuant to our previously announced $100.0 million share repurchase program.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
Incorporated by Reference | Filed or Furnished Herewith | ||||||||||||||||||||||
Exhibit Number | Description | Form | File No. | Exhibit | Filing Date | ||||||||||||||||||
| 3.1 | 8-K | 001-40406 | 3.1 | 5/17/2021 | |||||||||||||||||||
| 3.2 | 8-K | 001-40406 | 3.2 | 5/17/2021 | |||||||||||||||||||
| 4.1 | S-1 | 333-255488 | 4.1 | 4/23/2021 | |||||||||||||||||||
| 4.2 | S-8 | 333-256155 | 4.6 | 5/14/2021 | |||||||||||||||||||
| 4.3 | S-1 | 333-255488 | 4.2 | 4/23/2021 | |||||||||||||||||||
| 4.4 | 8-K | 001-40406 | 4.1 | 1/12/2022 | |||||||||||||||||||
| 4.5 | 8-K | 001-40406 | 4.1 | 1/12/2022 | |||||||||||||||||||
| 10.1 | 8-K | 001-40406 | 10.1 | 1/12/2022 | |||||||||||||||||||
| 10.2 | X | ||||||||||||||||||||||
| 31.1 | X | ||||||||||||||||||||||
| 31.2 | X | ||||||||||||||||||||||
| 32.1 | X | ||||||||||||||||||||||
| 32.2 | X | ||||||||||||||||||||||
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| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document. | X | |||||||||||||||||||||
| 101.SCH | XBRL Taxonomy Extension Schema Document | X | |||||||||||||||||||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | X | |||||||||||||||||||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | X | |||||||||||||||||||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | X | |||||||||||||||||||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | X | |||||||||||||||||||||
| 104 | The cover page from this Quarterly Report on Form 10-Q, formatted in Inline XBRL. | X | |||||||||||||||||||||
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Signatures
Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Santa Monica, California, on May 13, 2022.
| ZIPRECRUITER, INC. | |||||
By: | /s/ Ian Siegel | ||||
Ian Siegel | |||||
| Chief Executive Officer | |||||
By: | /s/ Timothy Yarbrough | ||||
Timothy Yarbrough | |||||
| Chief Financial Officer | |||||
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Exhibit 10.2
SUBLEASE
by and between
ZIPRECRUITER, INC.,
a Delaware corporation as Sublandlord,
and
LINCOLN AVENUE CAPITAL MANAGEMENT, LLC
a Delaware limited liability company as Subtenant,
at
401 Wilshire Blvd., Suite 1100, Santa Monica, California 90401
SUBLEASE
THIS SUBLEASE ("Sublease") is made as of this 2nd day of March, 2022, by and between ZIPRECRUITER, INC., a Delaware corporation (“Sublandlord”) and LINCOLN AVENUE CAPITAL MANAGEMENT, LLC, a Delaware limited liability company (“Subtenant”) with regard to the following facts:
R E C I T A L S
A.Sublandlord is the tenant under that certain Office Lease dated May 16, 2014 (the “Original Lease”), as amended by that certain First Amendment to Office Lease dated May 23, 2017 (the “First Amendment”), that certain Second Amendment to Office Lease dated May 3, 2018 (the “Second Amendment”), and that certain Third Amendment to Office Lease dated January 7, 2019 (the “Third Amendment”), each with DOUGLAS EMMETT 1995, LLC, a Delaware limited liability company (“Landlord”), whereby Sublandlord leased Suite 1100 on the eleventh (11th) floor of the property (the “Premises”) located at 401 Wilshire Blvd., Santa Monica, California 90401 (the “Building”). A plan of the Premises is attached hereto as Exhibit A. As used herein, the term “Lease” shall collectively refer to and mean the Original Lease, First Amendment, Second Amendment and Third Amendment.
B.Sublandlord now desires to sublease to Subtenant, and Subtenant now desires to sublease from Sublandlord, the entire Premises consisting of approximately 17,900 rentable square feet of space as depicted in the Lease plus patio and terrace space, upon the terms, covenants and conditions set forth in this Sublease.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.Capitalized Terms. All capitalized terms when used herein shall have the same meaning as is given such terms in the Lease, unless expressly superseded by the terms of this Sublease.
2.Sublease. Sublandlord hereby subleases to Subtenant and Subtenant hereby subleases from Sublandlord, the Premises on an “as-is,” “where-is” basis, subject to the terms, covenants and conditions set forth in this Sublease. Except as expressly set forth herein, no representations or warranties of any kind have been made to Subtenant concerning the condition of the Premises, nor have any promises to alter or improve the Premises been made by Sublandlord or any party on behalf of Sublandlord, except the Sublandlord shall deliver the Premises in a broom-clean condition and free of all debris on the Commencement Date. Therefore, Subtenant hereby agrees that the term “as is” means that it will sublease the Premises, without warranty or representation, either oral or written, or expressed or implied, as to the physical condition of the Premises and/or the compliance of same with building, fire, health and zoning codes and other applicable laws, ordinances and regulations; provided, however, that the foregoing shall not limit Landlord or Sublandlord’s repair and maintenance responsibilities under this Sublease and the Lease.
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Sublandlord hereby expressly disclaims any and all warranties or representations made to Subtenant, whether the same were made by any partner, officer, director or employee of Sublandlord or any other agent of same, such as a broker, except to the extent that such representations and warranties are made in this Sublease. Notwithstanding anything to the contrary set forth herein, Sublandlord hereby represents and warrants to Subtenant that: (i) the Lease is in full force and effect as of the date hereof; and (ii) to Sublandlord’s actual knowledge, there exists no default under the Lease on the part of Landlord or Sublandlord. At the expiration or earlier termination of this Sublease, Subtenant shall surrender the Premises to Sublandlord broom clean, trash free and in the condition received, reasonable wear and tear and casualty excepted, with all of Subtenant’s trade fixtures and equipment, furniture, furnishings and other moveable items installed or placed within the Premises by Subtenant removed and shall immediately repair all damage to the Premises caused by such removal; provided, however that Sublandlord acknowledges and agrees that Subtenant may expand Subtenant’s existing lease in the Building (“Subtenant Existing Lease”) to include the Premises and extend the term of such Subtenant Existing Lease (as expanded to include the Premises) following the Expiration Date, in which case Subtenant shall not be required to surrender the Premises to Sublandlord, or remove any trade fixtures or furniture therefrom, upon the Expiration Date but shall remain in the Premises thereafter pursuant to the Subtenant Existing Lease. Any trade fixtures or furniture, including but not limited to the Furniture (defined below), shall be removed at Subtenant’s sole cost and expense, subject to the immediately preceding sentence; provided that in the event such Subtenant Existing Lease is not modified to include the Premises or Subtenant is not otherwise permitted to possession of the Premises (other than pursuant to this Sublease), then any trade fixtures or furniture, including but not limited to the Furniture, remaining after termination or expiration may be deemed abandoned property by Sublandlord and may be disposed of as Sublandlord deems appropriate at Subtenant's expense. For purposes hereof, the “rentable square feet” of the Premises set forth in Recital B above are hereby agreed to by Sublandlord and Subtenant and shall not be subject to revision.
1.Term. The term (“Term”) of this Sublease shall (a) commence upon the later of: (i) the date of receipt by Sublandlord of the fully executed “Consent,” as that term is defined in Section 10 below (the “Commencement Date”), (ii) the date Sublandlord delivers Subtenant exclusive physical possession of the Premises in broom clean condition with all furniture, fixtures, and equipment removed except for the Furniture, or (iii) May 1, 2022 and (b) shall expire as of 11:59
p.m. on October 31, 2023 (the “Expiration Date”). Notwithstanding anything herein or in the Lease to the contrary, Subtenant shall have no rights to extend the term of this Sublease, subject to Section 2 above. At the request of either party, promptly following the Commencement Date, the parties shall enter into a written agreement fixing the exact date on which the Commencement Date occurred in the form attached hereto as Exhibit B. Following the date of this Sublease, Subtenant shall have the right to access the Premises upon reasonable advance notice to Sublandlord, and on the condition that Landlord has delivered its executed Consent to this Sublease, Subtenant shall have the right to prepare for its occupancy of the Premises and improvements thereto.
2.Rent.
a.Basic Rent. Effective as of the Commencement Date (“Rent Commencement Date”), Subtenant shall pay to Sublandlord, or its designee, fixed rent for the Premises in equal
2
monthly payments of Fifty Thousand One Hundred Twenty and 00/100 Dollars ($50,120.00) (“Basic Rent”), in advance, on or before the first business day of each month during the Term of this Sublease. Notwithstanding anything to the contrary contained herein, Basic Rent shall increase by three percent (3.0%) on each anniversary of the Rent Commencement Date. Subtenant shall pay to Sublandlord Fifty Thousand One Hundred Twenty and 00/100 Dollars ($50,120.00) upon execution of this Sublease by Subtenant as Basic Rent for the first month of the Term following the Rent Commencement Date. Basic Rent and all other sums under this Sublease shall be payable by Subtenant without notice, demand, reduction or set-off, except as expressly set forth in the Lease as incorporated herein or this Sublease, in lawful money of the United States of America to Sublandlord or its agent at the address set forth in this Sublease, or to such other person or such other places as Sublandlord may from time to time designate in writing. Until further notice, all payments should be made payable to ZipRecruiter, Inc. and sent to 604 Arizona Avenue, Santa Monica, California 90401, Attention: Accounts Payable. If the Term begins or ends on a day other than the first or last day of a month, the Basic Rent for the partial month following the Rent Commencement Date or any other partial month shall be prorated on the basis of the number of days of such month.
b.Sublandlord Expenses and Taxes. As used herein “Sublandlord Expenses and Taxes” mean all payments owed by Sublandlord as tenant under the Lease for Operating Expenses with regard to the Premises. Notwithstanding anything to the contrary contained in this Sublease, in addition to the Basic Rent and any Subtenant Surcharges (as defined in this Sublease) payable to Sublandlord (without duplication of any charge), Subtenant shall pay to Sublandlord, as additional rent, the Sublandlord Expenses and Taxes attributable to the Premises, as such are determined pursuant to the Lease, which are in excess of the Sublandlord Expenses and Taxes attributable to the Premises, during the 2022 calendar year (the “Base Year”); provided, however, no Sublandlord Expenses and Taxes shall be owed during the first twelve (12) full calendar months following the Commencement Date. Such additional rent shall be payable the date when Sublandlord Expenses and Taxes are payable by Sublandlord to Landlord, whichever is later, taking into account the existence of Subtenant’s 2022 Base Year and subject to the immediately preceding sentence. Because the Lease provides for the payment by Sublandlord of Sublandlord Expenses and Taxes on the basis of an estimate thereof, as and when adjustments between estimated and actual Sublandlord Expenses and Taxes are made under the Lease, the obligations of Sublandlord and Subtenant hereunder shall be adjusted in a like manner taking into account the existence of the Base Year; and if any such adjustment shall occur after the expiration or earlier termination of the Term, then the obligations of Sublandlord and Subtenant under this Section 4(b) shall survive such expiration or termination.
c.Subtenant Surcharges. During the Term, Subtenant shall pay to Sublandlord, as additional rent, the amount payable by Sublandlord to Landlord for Subtenant Surcharges (as defined below). The term “Subtenant Surcharges” shall mean (i) any and all amounts other than Basic Rent and the Sublandlord Expenses and Taxes which become due and payable by Subtenant to Sublandlord as expressly set forth in Section 4(b) of this Sublease, and (ii) any and all amounts which become due and payable by Sublandlord to Landlord under the Lease (and actually paid by Sublandlord to Landlord) as additional charges which would not have become due and payable but for the acts and/or failures to act of Subtenant under this Sublease, including, but not limited to, any additional charges under the Lease payable by Sublandlord on account of (1) Subtenant’s
3
use of water, electricity, elevator, heating, ventilation or air conditioning or any other building services in excess of those provided at no additional charge pursuant to the Lease, (2) late charges and/or default interest as set forth in the Lease to the extent caused by Subtenant’s failure to make such payments within the time period required under this Sublease, or (3) parking charges or fees for Subtenant’s parking under Section 18 below. Subtenant shall pay the Subtenant Surcharges set forth above within twenty-five (25) days (unless a shorter period is provided in the Lease) after the presentation of written statements and reasonably supporting documentation therefor by Landlord (if such Subtenant Surcharges are due to Landlord) or Sublandlord to Subtenant in accordance with the terms of the Lease.
d.Security Deposit. Upon Subtenant’s execution and delivery of this Sublease, Subtenant shall deposit with Sublandlord a security deposit (the “Security Deposit”) in the amount of One Hundred Three Thousand Two Hundred Forty-Seven and 20/100 Dollars ($103,247.20) as security for the faithful performance by Subtenant of all of the terms, covenants and conditions under this Sublease to be kept and performed by Subtenant, including without limitation, Subtenant’s restoration obligations specifically set forth herein. If Subtenant defaults with respect to any provisions of this Sublease beyond the applicable notice and cure period including, but not limited to, the provisions relating to the payment of rent, Sublandlord may, but shall not be required to, use, apply or retain all or any part of the Security Deposit for the payment of any rent or any other sum in default, or for the payment of any amount that Sublandlord may spend or become obligated to spend by reason of Subtenant’s default, or to compensate Sublandlord for any other loss or damage that Sublandlord may suffer by reason of Subtenant’s default. If any portion of the Security Deposit is so used or applied, Subtenant shall, within five (5) days after written demand therefor, deposit cash with Sublandlord in an amount sufficient to restore the Security Deposit to its original amount, and Subtenant’s failure to do so shall be a default under this Sublease. So long as Subtenant is not in breach or default of its obligations under this Sublease and the Security Deposit remains unused and unapplied to the extent permitted under this Sublease, one-half of the Security Deposit (i.e., Fifty-One Thousand Six Hundred Twenty-Three and 60/100 Dollars ($51,623.60)) shall be credited to Basic Rent due and payable on September 1, 2023, and the other half of the Security Deposit (i.e., Fifty-One Thousand Six Hundred Twenty-Three and 60/100 Dollars ($51,623.60)) shall be credited to Basic Rent due and payable on October 1, 2023. Any unapplied (to the extent permitted under this Sublease) or uncredited balance of the Security Deposit shall be returned to Subtenant, or, at Sublandlord’s option, to the last assignee of Subtenant’s interest hereunder, within thirty (30) days following the expiration of the Term or earlier termination of this Sublease and Subtenant’s surrender of the Premises to Sublandlord in the condition required hereby. Subtenant shall not be entitled to any interest on the Security Deposit. Subtenant hereby waives the provisions of Section 1950.7 of the California Civil Code, and all provisions of law, now or hereafter in force, which limit the recovery a Sublandlord may claim from a Security Deposit, it being agreed that Sublandlord may claim from a security deposit only those sums reasonably necessary to remedy defaults in the payment of rent, to repair damage caused by Subtenant, to clean the Premises or to compensate Sublandlord from any loss or damage, foreseeable or unforeseeable, caused by the act or omission of Subtenant or any officer, employee, agent or invitee of Subtenant.
5.Use. Subtenant may use the Premises for all permitted uses which are allowed under the Lease and shall not be used or permitted to be used for any other purpose without the prior written consent
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of Sublandlord and Landlord, which consent may be withheld in Sublandlord’s or Landlord’s sole discretion, as the case may be. All provisions of the Lease regarding use of the Premises (including, without limitation, Section 6.1 of the Lease) shall apply to the Subtenant. Subtenant shall have the right to access and use of the Premises, all common areas located within the Building, and the parking facilities serving the Building, twenty-four (24) hours per day, seven (7) days per week, to the same extent as Sublandlord’s rights thereto as the tenant under the Lease.
6.Lease. As applied to this Sublease, the words “Landlord” and “Tenant” as used in the Lease shall be deemed to refer to Sublandlord and Subtenant hereunder, respectively. This Sublease shall be subject in all respects to the terms of, and the rights of Landlord under the Lease. Sublandlord represents that a true and correct redacted copy of the Lease is attached hereto as Exhibit C (the “Redacted Lease”). Subtenant confirms that it has read the Redacted Lease and is familiar with the terms and provisions thereof that were not redacted. Except as otherwise expressly provided herein, the covenants, agreements, terms, provisions and conditions of the Redacted Lease insofar as they relate to the Premises, insofar as they are visible on such Exhibit C (i.e., unredacted), and insofar as they are not inconsistent with the terms of this Sublease are made a part of and incorporated into this Sublease as if recited herein in full, and the rights and obligations of Landlord and the Tenant under the Lease shall be deemed the rights and obligations of Sublandlord and Subtenant respectively hereunder and shall be binding upon and inure to the benefit of Sublandlord and Subtenant respectively except that the time limits contained in the Lease for the giving of notices, making of demands, or performing of any act, condition or covenant on the part of Subtenant as tenant under the Lease or for the exercise by Sublandlord as landlord under the Lease of any right, remedy or option, are changed for the purposes of incorporation herein by shortening the same in each instance by two (2) business days so that in each instance Subtenant shall have two (2) business days less time to observe or perform under this Sublease than Sublandlord has as tenant under the Lease. As between the parties hereto only, in the event of a conflict between the terms of the Lease and the terms of this Sublease, the terms of this Sublease shall control only to the extent they are inconsistent with the terms of the Lease and their respective counterpart provisions in the Lease shall be excluded only to such extent. For purposes of the provisions of the Lease incorporated into this Sublease, except as limited herein or where the context otherwise requires, the word “Tenant,” as used in the Lease, shall mean “Subtenant,” the word “Landlord” shall mean “Sublandlord,” the word “Premises” shall mean “Premises,” and the word “Lease” shall mean “Sublease.”
7.Excluded Provisions. The following provisions of the Lease shall not apply to this Sublease:
(i) Term, Commencement Date, Expiration Date, Fixed Monthly Rent, Fixed Monthly Rent Increase, Date of First Increase, Frequency of Increase, Security Deposit, Tenant’s Share, Base Year for Operating Expenses, Tenant’s Address for Notice (Before and After the Commencement Date), Brokers of the Basic Lease Information Table; Sections 1.1.1, 1.4, 2.1, 3.1, 3.2, 3.3, 3.7, 4.2, 7.1, and 20.5, Article 22, Exhibits A, B and B-1 of the Original Lease; (ii) Recital C, Sections 2, 3, 4, 5, 6, 7, 8, 9, 9.1, 10, 12 and 15 (first sentence only) and Exhibit A of the First Amendment;
(iii)Recital A (with respect to the reference to Suite 350 only), Sections 2 (other than the first sentence), 3, 4, 5, 6 (first, third and fourth sentences), 8, 10 (including 10.1, 10.2, 10.3, and 10.4), 11 (including 11.1, 11.2, 11.3, 11.411.5 and 11.6), 12 (including 12.1, 12.2, 12.3, 12.4 and 12.5), 13, 14, 15, 17, 18 and 21 and Exhibits A (including Schedule 1) and B of the Second Amendment,
(iv)Sections 3, 5, 7 and 9 of Third Amendment.
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8.Landlord’s Performance Under Lease. Subtenant recognizes that Sublandlord is not in a position to render any of the services or to perform any of the repair or maintenance obligations required to be performed by Landlord by the terms of the Lease. Therefore, Subtenant agrees that performance by Sublandlord of those obligations hereunder that are dependent on Landlord’s performance under the Lease are conditional upon due performance by Landlord of its corresponding obligations under the Lease and Sublandlord shall not be liable to Subtenant for any default of Landlord under the Lease and Subtenant shall not have any claim against Sublandlord by reason of Landlord’s failure or refusal to comply with any of the provisions of the Lease, unless such failure or refusal is a result of Sublandlord’s act or failure to act as required under this Sublease or the Lease, and Subtenant shall pay Basic Rent and additional rent and all other charges provided for herein as required hereunder without any abatement, deduction or set-off whatsoever, except as expressly provided for herein; provided, however, that (i) Sublandlord shall use commercially reasonable efforts, at Subtenant's sole cost and expense, to cause Landlord to perform its obligations under the Lease, (ii) if Sublandlord shall receive an abatement of Basic Rent or additional rent with respect to the Premises pursuant to the Lease, Subtenant shall receive a corresponding abatement of Basic Rent or additional rent hereunder, it being understood that Sublandlord shall use commercially reasonable efforts, at Subtenant's sole cost and expense, to obtain any such abatement that it may be entitled to under the Lease. This Sublease shall be subject to the covenants, agreements, terms and provisions of the Lease, except as modified herein. Subtenant shall not take any action or do or perform any act or fail to perform any act which would result in the failure, default, or breach of any of the covenants, agreements, terms, provisions or conditions of the Lease on the part of the Tenant thereunder. Whenever the consent of Landlord shall be required by, or Landlord shall fail to perform its obligations under, the Lease, Sublandlord agrees to promptly upon Subtenant’s request from time to time, use commercially reasonable efforts to obtain such consent (as more specifically provided in Section 9 below) and/or prompt performance on behalf of Subtenant. So long as Subtenant is not in default under this Sublease beyond all applicable notice and cure periods, Sublandlord covenants as follows: (a) not to amend or voluntarily terminate the Lease (except in the event of damage or destruction or condemnation and in accordance with Sublandlord’s rights under the Lease), or take any action (which is not Subtenant’s obligation hereunder) which would cause the Lease to be terminated or forfeited by reason of any right of termination or forfeiture reserved or vested in Landlord under the Lease; (b) not to modify the Lease so as to adversely affect Subtenant’s rights or increase its obligations hereunder; and (c) to take all commercially reasonable actions necessary to preserve the Lease. Sublandlord shall indemnify, defend, protect and hold Subtenant harmless from all claims, costs and liabilities, including reasonable attorneys’ fees and costs, arising out of or in connection with the breach by Sublandlord of any of the covenants set forth in the immediately preceding three (3) sentences. If Sublandlord fails, after using commercially reasonable efforts, to cause Landlord under the Lease to observe and/or perform its obligations under the Lease, upon prior written notice to Sublandlord, Sublandlord shall non-exclusively assign to Subtenant Sublandlord’s right under the Lease to enforce such provisions of the Lease and Sublandlord, upon Subtenant’s reasonable request and at Subtenant’s sole cost and expense, shall reasonably cooperate with Subtenant in this regard, and if such assignment is not permitted by applicable laws or otherwise, Sublandlord shall take such other commercially reasonable action as is requested by Subtenant on Subtenant’s behalf, at Subtenant’s sole cost and expense. Subtenant shall defend, protect, indemnify and hold Sublandlord harmless from all claims, costs and liabilities, including reasonable attorneys’ fees and costs, to the extent arising out of or in connection with any such actions by Subtenant, unless
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such actions are required as a result of Sublandlord’s breach of any of its covenants set form in items (a)-(c) above. Subtenant agrees that except as otherwise expressly provided herein, Sublandlord shall not be required to dispute any determinations or other assertions or claims of Landlord regarding the rights or obligations of Sublandlord under the Lease for which Subtenant is or may be responsible under this Sublease or by which Subtenant may be bound. Sublandlord shall promptly forward to Subtenant true and correct copies of all notices, requests, demands and communications received by Sublandlord from Landlord affecting Subtenant or the Premises. Without limiting the generality of the foregoing, Sublandlord agrees to promptly provide Subtenant with a copy of any notice alleging any default under the Lease.
9.Consents. All references in this Sublease to the consent or approval of Landlord and/or Sublandlord shall be deemed to mean the written consent or approval of Landlord and/or Sublandlord, as the case may be, and no consent or approval of Landlord and/or Sublandlord, as the case may be, shall be effective for any purpose unless such consent or approval is set forth in a written instrument executed by Landlord and/or Sublandlord, as the case may be, which consent of Sublandlord shall not be unreasonably withheld. In all provisions requiring the approval or consent of Sublandlord (whether pursuant to the express terms of this Sublease or the terms of the Lease incorporated herein), Subtenant shall be required to obtain the approval or consent of Landlord and then to obtain like approval or consent of Sublandlord; provided, however, that: (a) application for Sublandlord’s approval or consent may be submitted by Subtenant prior to receipt of Landlord’s approval or consent; (b) Sublandlord shall respond to such application for approval or consent within a reasonable time after receipt thereof but not later than the time period for which Landlord is required to provide its approval, and in any event Sublandlord shall not unreasonably withheld, conditioned, or delay its approval; and (c) Sublandlord may condition its approval or consent upon the subsequent receipt of Landlord’s unconditional approval or consent to such application. If Sublandlord is required or has determined to give its consent or approval, Sublandlord shall cooperate reasonably with Subtenant in endeavoring to obtain Landlord’s consent or approval upon and subject to the following terms and conditions: (i) Subtenant shall reimburse Sublandlord for any actual and documented out-of-pocket costs incurred by Sublandlord in connection with seeking such consent or approval; (i) Sublandlord shall not be required to make any payments to Landlord (unless Subtenant agrees to make such payments) or to enter into any material agreements or to materially modify the Lease or this Sublease in order to obtain any such consent or approval; and (iii) if Subtenant agrees or is otherwise obligated to make any payments to Sublandlord or Landlord in connection with such request for such consent or approval, Subtenant shall have made arrangements for such payments which are reasonably satisfactory to Sublandlord. If Subtenant asks Sublandlord in writing to request Landlord to give Landlord’s consent or approval in any situation where such consent or approval is required hereunder or under the Lease, if such request contains the form and substance of the request prepared for Sublandlord’s signature and is reasonably acceptable to Sublandlord, Sublandlord shall promptly request such consent or approval from Landlord. Nothing contained in this Section 9 shall be deemed to require Sublandlord to give any consent or approval because Landlord has given such consent or approval. Whenever either party to this Sublease agrees not to unreasonably withhold its consent, such consent shall also not be unreasonably delayed or conditioned.
10.Consents of Landlord. This Sublease shall not be effective until Landlord has signed and
delivered to Sublandlord and Subtenant its written consent to this Sublease (the “Consent”).
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Promptly following execution and delivery hereof, Sublandlord will submit this Sublease to Landlord for its consent. Subtenant agrees to cooperate in good faith with Sublandlord and shall comply with any reasonable request made by Sublandlord and/or Landlord in connection with the procurement of the Consent. Sublandlord shall be solely responsible for any costs and/or fees required to be paid by Sublandlord under the Lease to obtain Landlord’s Consent. The Consent shall in no event materially limit Subtenant’s rights hereunder or materially increase Subtenant’s obligations hereunder unless agreed to in writing by Subtenant. The provisions of this Section 10 shall survive the expiration or earlier termination of this Sublease.
11.Effect of Sublease and Landlord’s Consent. Notwithstanding this Sublease and any consent of Landlord to this Sublease:
a.Such consent to this Sublease will not release Sublandlord from its obligations or alter the primary liability of Sublandlord to pay the rent and perform and comply with all of the obligations of Sublandlord to be performed under the Lease. Except as set forth in the Consent, Landlord has not consented or agreed to any modifications of the Lease;
b.The acceptance of rent or any other sums by Landlord from Subtenant and/or anyone else liable under the Lease shall not be deemed a waiver by Landlord of any provisions of the Lease;
c.Landlord’s consent to this Sublease shall not constitute a consent to any subsequent subletting or assignment;
d.In the event of any default of Sublandlord under the Lease, Landlord may proceed directly against Sublandlord or anyone else liable under the Lease without first exhausting Landlord’s remedies against any other person or entity liable thereon to Landlord; and
e.No amendments, changes or modifications shall be made to this Sublease without the prior written consent of Landlord.
12.Alterations; Surrender. Subject to compliance with the terms of the Lease including, without limitation, Section 12.12 of the Lease, Subtenant shall not make alterations, additions or improvements to the Premises (collectively referred to as “Alterations”) without first obtaining the written consent, in each instance, of (i) Landlord when and as required under the Lease; and (ii) Sublandlord, which consent shall be granted in Sublandlord’s reasonable discretion; provided that Sublandlord’s consent shall not be required only if and to the extent such Landlord’s consent or the Consent expressly provides, or Subtenant confirms in writing, that Sublandlord is not responsible for the removal of Subtenant’s Alterations and repair of all damage caused by such removal, which removal and repairs shall be made by Subtenant at Subtenant’s sole cost and expense. Subject to Section 2, at the expiration or earlier termination of this Sublease, Subtenant shall surrender the Premises to Sublandlord in the condition received, reasonable wear and tear and casualty excepted and all Alterations installed by Subtenant in the Premises (excluding only trade fixtures and equipment, furniture, furnishings and other moveable items) shall remain and be
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the property of Sublandlord, except for any Alterations that Landlord requires Sublandlord to remove in accordance with the terms of the Lease and repair all damage caused by such removal, which removal and repairs shall be made by Subtenant at Subtenant’s sole cost and expense.
13.Notices. Any and all notices, approvals or demands required or permitted under this Sublease shall be in writing, shall be served either personally, by United States certified mail, postage prepaid, return receipt requested or by reputable overnight carrier and, shall be deemed to have been given or made on the day on which it was received and shall be addressed to the parties at the addresses set forth below. Any party may, from time to time, by like notice, give notice of any change of address, and in such event, the address of such party shall be deemed to have been changed accordingly. The address for each party is:
If to Sublandlord: ZipRecruiter, Inc.
604 Arizona Avenue
Santa Monica, California 90401 Attention: Business Affairs
If to Subtenant: Lincoln Avenue Capital Management, LLC
401 Wilshire Boulevard, Suite 1070 Santa Monica, California 90401 Attention: Jeremy Bronfman
With a copy to:
Elkins Kalt Weintraub Reuben Gartside LLP 10345 Olympic Blvd.
Los Angeles, CA 90064 Attn: Scott M. Kalt, Esq.
and to:
Stone-Miller
11620 Wilshire Blvd. Suite 520 Los Angeles, CA 90025
Attn: Craig Miller
14.Broker. Sublandlord and Subtenant represent and warrant to each other and to Landlord that each has had no dealings with any real estate broker or agent in connection with the negotiation of this Sublease, except for Cresa (on behalf of Sublandlord) and Stone Miller (on behalf of Subtenant) (individually and collectively, “Broker”), whose commission shall be payable solely by Sublandlord pursuant to a separate written agreement and that neither Sublandlord nor Subtenant knows of any real estate broker or agent (other than the Broker) who is or might be entitled to a commission in connection with this Sublease. Sublandlord and Subtenant each hereby agree to indemnify, defend and hold harmless the other and Landlord from and against any losses, causes of action, liabilities, damages, claims, demands, costs and expenses (including reasonable
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attorneys’ fees and costs) incurred, or to be incurred, by reason of any breach of the foregoing warranty by either party hereto with respect to any such dealings with any and all real estate broker(s) or agent(s) (other than the Broker, which Subtenant shall not be required to indemnify for).
15.Insurance, Proceeds and Awards. Subtenant shall comply with all of the insurance requirements and obligations of Sublandlord as tenant under the Lease respecting the Premises. Notwithstanding anything to the contrary contained herein, whether required by the Lease or not, Subtenant shall name Landlord, and Sublandlord as additional insureds, as their interests may appear, on all policies of insurance required to be carried by Subtenant hereunder or thereunder. Notwithstanding anything contained in the Lease to the contrary, as between Sublandlord and Subtenant only, all insurance proceeds (other than those proceeds paid out on insurance obtained by Subtenant) or condemnation awards received by Sublandlord under the Lease shall be deemed to be the property of Sublandlord.
16.Indemnity. Subtenant hereby agrees to indemnify, protect, defend and hold Sublandlord harmless from and against any and all claims, losses and damages including, without limitation, reasonable attorneys’ fees and disbursements: (a) which may at any time be asserted against Sublandlord by (i) Landlord for failure of Subtenant to perform any of the covenants, agreements, terms, provisions or conditions contained in the Lease which by reason of the provisions of this Sublease Subtenant is obligated to perform, or (ii) any person by reason of Subtenant’s use and /or occupancy of the Premises; and (b) resulting from any failure by Subtenant to comply with the terms of this Sublease or the Lease, except to the extent any of the foregoing is caused by the negligence or willful misconduct of Sublandlord. The provisions of this Section 16 shall survive the expiration or earlier termination of this Sublease. Notwithstanding anything to the contrary herein or in the Lease, Sublandlord’s partners, members, officers, directors, shareholders, employees and agents shall not be liable to Subtenant under any circumstance. Nothing in this Sublease shall impose any obligations on Subtenant or Sublandlord to be responsible or liable for, and each hereby releases the other from all liability for, consequential damages other than those consequential damages incurred by Sublandlord in connection with a holdover of the Premises by Subtenant after the expiration or earlier termination of this Sublease (as set forth in Section 17 below). Notwithstanding the foregoing, for purposes of this Sublease, consequential damages shall not be deemed to include property damage or personal injury damages.
Sublandlord hereby agrees to indemnify, protect, defend and hold Subtenant harmless from and against any and all claims, losses and damages including, without limitation, reasonable attorneys’ fees and disbursements which may at any time be asserted against Subtenant by Landlord for failure of Sublandlord to perform any of the covenants, agreements, terms, provisions or conditions contained in the Sublease. Notwithstanding anything to the contrary herein or in the Lease, Subtenant’s partners, members, officers, directors, shareholders, employees and agents shall not be liable to Sublandlord under any circumstance.
17.Intentionally Omitted.
18.Parking. Subject to Subtenant’s compliance with the terms and conditions set forth in the Lease, commencing with the date Sublandlord delivers possession of the Premises to Subtenant, Subtenant shall have the obligation to purchase twenty (20) unreserved parking permits on a
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“must-take” basis and the right, but not the obligation, to purchase an additional thirty-two (32) permits for unreserved parking spaces throughout the Term, all at the prevailing monthly rates in the Building’s parking facility, which are subject to market increases.
19.Furniture.
a.Lease. Effective upon the Commencement Date, Sublandlord agrees to sell to Subtenant, and Subtenant agrees to purchase from Sublandlord, the items of furniture set forth in Exhibit D attached hereto (hereinafter individually and collectively referred to herein as the “Furniture”) for the Premises, in their then current locations, at no additional cost (without limiting the Basic Rent and additional rent payable under this Sublease). Upon the Commencement Date, Subtenant shall have full right, title and interest in the Furniture.
b.Delivery. The Furniture shall be delivered as of the Commencement Date in its then current locations within the Premises. Except as set forth in the immediately preceding sentence, Sublandlord makes no warranty, express or implied, as to any matter whatsoever including, without limitation, the design or condition of the Furniture, its merchantability or its fitness or capacity or durability for any particular purpose or the quality of material or workmanship of the Furniture except that it has good and marketable title to the Furniture, that it is not encumbered by any liens or subject to any right to acquire the same. Sublandlord shall have no liability to Subtenant for any claim, loss or damage caused or alleged to be caused directly, indirectly, incidentally or consequentially by the Furniture, by any inadequacy thereof or deficiency or defect therein, by any incident whatsoever in connection therewith, arising in strict liability, negligence or otherwise, or in any way related to or arising out of this lease of the Furniture.
c.Loss of Furniture. Subtenant shall bear the entire risk of Furniture being lost, destroyed, damaged or otherwise rendered permanently unfit or unavailable for use from any cause whatsoever after its delivery to Subtenant.
d.Removal of Furniture. Upon the Commencement Date, Subtenant shall purchase from Sublandlord, and Sublandlord shall sell to Subtenant, all of the Furniture in the Premises for One Dollars ($1.00) and the parties shall execute a commercially reasonable bill of sale to evidence such purchase. Subtenant shall have the sole responsibility for removing the Furniture from the Premises to the extent required by the Lease, subject to Section 2.
20.Severability. If any term or provision of this Sublease or the application thereof to any person or circumstances shall, to any extent, be invalid and unenforceable, the remainder of this Sublease or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term or provision of this Sublease shall be valid and be enforced to the fullest extent permitted by law.
21.Entire Agreement; Waiver. This Sublease contains the entire agreement between the parties hereto and shall be binding upon and inure to the benefit of their respective heirs, representatives, successors and permitted assigns. Any agreement hereinafter made shall be ineffective to change, modify, waive, release, discharge, terminate or effect an abandonment hereof, in whole or in part, unless such agreement is in writing and signed by the parties hereto.
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22.Further Assurances. The parties hereto agree that each of them, upon the request of the other party, shall execute and deliver, in recordable form if necessary, such further documents, instruments or agreements and shall take such further action that may be reasonably necessary to effectuate the purposes of this Sublease.
23.Attorneys’ Fees. In the event of the bringing of any action or suit by any part or parties hereto against another party or parties hereunder alleging a breach of any of the covenants, conditions, agreements or provisions of this Sublease, the prevailing party or parties shall recover all reasonable out-of-pocket costs and expenses of suit including, without limitation, reasonable attorneys’ fees, consultant’s fees and fees of expert witnesses.
24.Defined Terms. All capitalized, defined terms used in this Sublease shall have the same meanings and effect given to them in the Lease unless otherwise defined herein.
25.Choice of Law. This Sublease shall be governed by and construed in accordance with the laws of the State of California without regard to choice of law principles.
26.Power and Authority. Each of the persons executing this Sublease on behalf of Subtenant and Sublandlord respectively warrant and represent to the other that they have full power and authority to execute this Sublease and bind their respective parties hereto.
27.Counterparts. This Sublease may be executed in one or more counterparts, each of which shall be deemed original, and all of which together shall constitute one and the same instrument. This Sublease may be executed electronically (e.g. through e-signature applications such as DocuSign) and electronic signatures shall be considered binding upon the parties. Executed copies of this Sublease may also be delivered in “.pdf” format via email and, upon receipt of both parties’ signatures by such means, shall be deemed originals binding upon the parties.
28.CASp.
a.Pursuant to Section 1938 of the California Civil Code, Sublandlord hereby advises Subtenant that the Premises, as delivered to Subtenant, have not undergone an inspection by a Certified Access Specialist ("CASp"). Sublandlord makes no representations or warranties with respect to the Premises complying with any applicable federal, state and local standards, codes, rules and regulations governing physical access for persons with disabilities at places of public accommodation, including, but not limited to, the Americans with Disabilities Act of 1990, California’s Unruh Civil Rights Act, California Building Standards Code, or California Health and Safety Code.
b.The following disclosure is made pursuant to §1938 of the California Civil Code: A Certified Access Specialist (CASp) can inspect the subject premises and determine whether the subject premises comply with all of the applicable construction-related accessibility standards under state law. Although state law does not require a CASp inspection of the subject premises, the commercial property owner or lessor may not prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or tenant. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection,
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and the cost of making any repairs necessary to correct violations of construction-related accessibility standards within the premises.
c.Notwithstanding the foregoing, if Subtenant elects to cause a CASp inspection, then the same will be performed at Subtenant's sole cost and expense, and the cost of making any repairs necessary to correct violations of construction related accessibility standards within the Premises will be at Subtenant’s cost and expense to the extent it is Sublandlord’s responsibility under the Lease.
[Signatures on following page]
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IN WITNESS WHEREOF, the parties hereto have executed this Sublease to be effective as of the day and year first above written.
“SUBTENANT”:
LINCOLN AVENUE CAPITAL MANAGEMENT, LLC,
a Delaware limited liability company
By: /s/ Jeremy Bronfman
Name: Jeremy Bronfman
Its: President
“SUBLANDLORD”:
ZIPRECRUITER, INC.,
a Delaware corporation
By: /s/ Kasra shafiee
Name: Kasra shafiee
Its: corporate counsel
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EXHIBIT A PLAN OF PREMISES
| Exhibit A 1 | ||
EXHIBIT B
SUBLEASE DATE CONFIRMATION NOTICE
| Exhibit B 1 | ||
EXHIBIT C REDACTED LEASE
[attached]
Exhibit C 1 | ||
EXHIBIT D FURNITURE INVENTORY
Exhibit D 1 | ||
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Ian Siegel, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of ZipRecruiter, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: | May 13, 2022 | /s/ Ian Siegel | ||||||||||||||||||||||||||||||||||||||||||
Ian Siegel | ||||||||||||||||||||||||||||||||||||||||||||
Chief Executive Officer (Principal Executive Officer) | ||||||||||||||||||||||||||||||||||||||||||||
Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Timothy Yarbrough, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of ZipRecruiter, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: | May 13, 2022 | /s/ Timothy Yarbrough | ||||||||||||||||||||||||||||||||||||||||||
Timothy Yarbrough | ||||||||||||||||||||||||||||||||||||||||||||
Chief Financial Officer (Principal Financial Officer) | ||||||||||||||||||||||||||||||||||||||||||||
Exhibit 32.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of ZipRecruiter, Inc., a Delaware corporation (the “Company”), for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Ian Siegel, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: | May 13, 2022 | /s/ Ian Siegel | ||||||||||||||||||||||||||||||||||||||||||
Ian Siegel | ||||||||||||||||||||||||||||||||||||||||||||
Chief Executive Officer (Principal Executive Officer) | ||||||||||||||||||||||||||||||||||||||||||||
Exhibit 32.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of ZipRecruiter, Inc., a Delaware corporation (the “Company”), for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Timothy Yarbrough, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(1)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: | May 13, 2022 | /s/ Timothy Yarbrough | ||||||||||||||||||||||||||||||||||||||||||
Timothy Yarbrough | ||||||||||||||||||||||||||||||||||||||||||||
Chief Financial Officer (Principal Financial Officer) | ||||||||||||||||||||||||||||||||||||||||||||