What happened
ZipRecruiter (ZIP -1.24%) shareholders were seeing red on Wednesday. Shares of the online employment marketplace were down 11% by 3 p.m. ET compared to a flat S&P 500. The slump contributed to a volatile year so far for investors. ZipRecruiter has been up by as much as 40% in 2023 but is now down 5% on the year. The S&P 500 is up 17% in contrast.
Wednesday's slump was sparked by an earnings report that showed mounting stress on its business.
So what
ZipRecruiter said before the market opened that sales in the second-quarter selling period (through late June) were down 29% to $170 million. This drop occurred mainly due to a sharp shift in the industry that has reduced demand for job postings. "The number of job openings and employers' willingness to pay for those job openings has declined significantly from the peaks of prior years," CEO Ian Siegel said in a press release.
The good news is the company succeeded at protecting profits despite the demand slump. ZipRecruiter remained in positive earnings territory in Q2, and non-GAAP earnings were $43 million, or 25% of sales. Both of these figures were improvements compared to the prior quarter when sales fell 19%.
Now what
The accelerating nature of those sales declines suggests that it might be some time before ZipRecruiter's demand trends stabilize. This rebound likely won't happen until companies become more active in their hiring moves, which is dependent on wider macroeconomic trends.
In the meantime, ZipRecruiter executives are planning to continue making improvements to their platform while maintaining the company's strong balance sheet. That strategy should allow the company to win a large portion of the job-advertising business once the next cyclical upturn begins. Yet the unclear timing of that shift, plus the prospect of further sharp sales declines ahead, pressured the stock on Wednesday.
