$ZIP long - Employees are wanted everywhere - longterm trade

15 mar 2022

Note:

- NYSE:ZIP
- Hot sector --> Employees are wanted everywhere
- Labor Demand in US is high
- TAM is good
- SMA10 and SMA20 coming together
- Fundamentals are good
- EPS are ok
- ZIP has "rule of 40" according to SaaS business


Disclaimer and Info:

- No guarantee for the correctness of information or calculations
- No advice or investment advice
- ZipRecruiter (ZIP) said on 05. Jan'22 it is planning a private offering of $500 million in senior notes due 2030
- ZipRecruiter (ZIP) Announces $100 Million Share Repurchase Program on 02. March'22

Paid Employees:

FY2020Q1: 98,500
FY2020Q2: 76,900
FY2020Q3: 89,800
FY2020Q4: 89,600
FY2021Q1: 114,700
FY2021Q2: 169,191
FY2021Q3: 169,500
FY2021Q4: 147,081

Revenue per Employee (in USD):

FY2020Q1: 1,150
FY2020Q2: 1,140
FY2020Q3: 1,146
FY2020Q4: 1,276
FY2021Q1: 1,093
FY2021Q2: 1,081
FY2021Q3: 1,255
FY2021Q4: 1,497

EPS:

FY2021Q1: 0.10
FY2021Q2: (0.55)
FY2021Q3: 0.19
FY2021Q4: 0.16

Marketing Ratio (Sales&Marketing divided by Revenue):

FY2020Q1: 70%
FY2020Q2: 32%
FY2020Q3: 41%
FY2020Q4: 37%
FY2021Q1: 51%
FY2021Q2: 62%
FY2021Q3: 53%
FY2021Q4: 55%

Rule of "40":

The "Rule of 40" ( aka . "Rule of Forty") is one of the simplest and most important SaaS and software metrics. This KPI was developed by the US-based software venture capital fund Bessemer Venture Partners.
It tries to relate the growth and profitability of a company. The revenue growth and the free cash flow margin (also (non-GAAP) operating margin or adjusted EBITDA margin) are added as a measure of profitability. If the sum of the two values results in a value greater than 40 , empirical data are used to assume that this is a very healthy company. The rule of 40 is particularly meaningful for software or subscription companies with high gross margins.

The background to the relationship is that a company that is growing rapidly but is still losing money can be just as attractive or even more attractive than a company that is profitable but only grows more slowly.
In addition, companies can often actively decide whether they want to give up profitability in order to grow even faster or save marketing costs and instead accept slow growth but deliver more EBIT .

At the same time, a situation in which a company is neither profitable nor grows significantly faster than 20% can quickly become a bad trade. Often these companies do not achieve sufficient economies of scale and operating leverage to be profitable and sustainable in the long term.
Therefore, the following applies quite casually: Either grow quickly or make a profit! If both of these don't work, the company often find itself in a dead end.


FY2021Q1: 28
FY2021Q2: 117
FY2021Q3: 131
FY2021Q4: 117

Backtesting:

Please ignore the backtesting results in this idea here.