Q4 2020 HeadHunter Group PLC Earnings Call
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Make an enchantment. Thank you for standing by and welcome to today's fourth quarter 2020 Financial results conference call at this time all participants violation on remote after the secret of operation will be the question and answer session, press the question during the session. We need to press star and one on your telephone keypad. This is constantly being recorded today on the 18th of March 2021. I would not allow us to kind of conference over to your first Speaker today safiyulin, please go ahead sir. Thank you. Hello everyone and welcome to chefs Club fourth quarter and full-year 2020 earnings call on the call today. We have Mikhail zhukov our chief executive officer Gregory, May save our Chief Financial Officer and middle of our chief strategy officer a press release containing the our fourth-quarter and full-year 2020 results was issued earlier today and according may be obtained through our website at investor. Now, I will briefly walk you through the birth.
Harbor statements today's discussion will contain forward-looking statements actual results May differ materially from the results predicted or implied by such statements and forward-looking statements made today. I speak only to our expectations as of today. We undertake no obligation to publicly update or revise the statements for a discussion of some of the risk factors that could cause actual results to differ with the respect or section in our annual report on form 20-f for the year ended September December 31st, 2019 and our final perspective in connection with our public offering that was filed with the US Securities and Exchange Commission on June 16th, 2020 during this call will be referring to some non-ifrs Financial measures. This non-ifrs financial measures am not prepared in accordance with IFRS. The reconciliation of the non-ifrs financial measures to the most directly comparable IFRS measures is provided in the earnings release we issued today and the name
Representations Each of which is available.
On our website at investor. H. Now, I'll turn the call over to Mikhail to make a quick opening remarks, please. Go ahead. Thank you Roman and a good afternoon. Everyone last year are celebrated its 20th anniversary and without a doubt the has not been a year like that before COVID-19 pandemic has changed everybody's lives adversely impacting some businesses and opening up new opportunities to the others our business emerged from the home group even stronger than ever being the powerful Network effect of our platform reinforced by timely marketing and monetization steps during recovery allowed us to further am sorry babes the market and significantly improve keep operating metrics in February 20-21 the number of CVS on the platform, which if fifty million milestone,
And I can see seat holding on a record level of above eight hundred thousand job postings. Despite all the challenges. We have not only defended our leading Market position but also accelerated our development in certain key strategic areas those acquisition of strong Regional job platforms are plotted. Are you and introduction of New Canaan importance into our product Suite now, we see life slowly getting back to normal which gives businesses more confidence and visibility. The competition wage labor is intensifying in Russia forcing employers to leverage the most effective channels of recruitment. All these factors alongside accelerated digitalization makes us to believe the 2021 will be a really exciting year for Headhunter now, I'll turn it to Dimitri how to walk you through the key highlights of the fourth quarter and the full year.
Income Nissan. Good afternoon everyone and thank you for joining us on this call. Let's do quick were you here on results and as usual have enough time for Q&A looking backwards 20 20 by no stretch of imagination couldn't can be called a year as it turned out to be one of the most difficult but equally important year in company history month. We once again demonstrated the resilience of our business and our ability to earn economic volatility in our favor and it's coming out of recession even stronger than ever our 2020 Revenue went up by 6.2% year-on-year with a full recovery to recover the revenue growth Levels by end of fourth quarter, despite overall challenging here. We progress significantly one government relations strategy switching to a new subject and model. So hopefully have a long-lasting effect on everything growth our brick-oven pricing depreciation initiatives became noticeable and made significant impact include for facilitating overall revenue recovery.
I'll throw this year we demonstrate.
The street Financial discipline and ability to manage our cost cost base environment our business performance. We detain the 40% plus profitability in all quarters and eventually even managed to increase in margin compared to 2019 on top of our dining rooms. We have get it out acquisition of strong online platform the most untapped market segments original blue colors and SMA down to twenty report a generated revenue of 780 million, which is right on top of the range provided in November.
Last year Dynamic operating metrics indicate the continuous product development and overall. I'm going to go to the market expansion Russia despite all the economic headwinds your life into adding more than six million net new series sustaining leadership in all Russian regions in terms of new info and expanding the Gap is competitors more importantly we maintain a high chair of activities 70% of total visible cities now platform either apply the war updated over the last two years. So this database database remains very patient. And as I move to a new X-Men ization, this becomes very crucial, especially strong Trends. We see in blue collar worker categories where we have demonstrated Circle 45% year and met with
As of hand twenty twenty 35% of all job Seekers TVs from this category just justify style consider what direction Blue Collar Market one employers side were observed quite a sieve on the platform was 25% up supported by strong new customer info and consumption growth of existing clients.
Contract blue color back and sister growing especially strong representing 43% of total vacancy feet. It's very important for us strategically strike right balance between demand and Supply system blue cord. And therefore it's very pleased very pleased research concurrent dynamic.
How do you send a man in terms of interview with the remain strong during twenty twenty four and almost? No, she's not the client growing 18% here on the end December.
Now getting a little bit more specific about your phone numbers and the first quarter our Revenue growth came back to pre pandemic levels growing 90% year-on-year importantly. We see our strength back in January and February despite the spawn of price increase from 1st January as we usually do to 1st April of this year.
In the fourth quarter was levels for the 7.4% affected slightly, but it isn't hiding and some discretionary bonus baito employees for the 4th.
Our topics in Q4 2012 was only for the million or 2% of Revenue as we finally completed our office reservation.
I'll keep brought up Dynamic is also encouraging and generally consistent with the trend we've seen in previous quarter being more sense of the business environment job posting demonstrated the strongest recovery Dynamics and fought order growing 30% Year-on-year growth came back on came on the back of in for new customers, mostly small and medium businesses as well as grows of bank account consumption aspect of 2020 price increase which became fully certified the year-end.
bundle subscription proved
Be less susceptible to short-term volatility due to predominance of long-term contracts in Q4 this for the category accelerated to 12% year-on-year.
Sebi database grows accelerated to 9% year-on-year. We saw lived an average duration by access and that actually contributes to visibility of a future revenues in this segment. We significantly in fact transition to a new paper contact model with the vast majority of key accounts already working and move to New scheme. We expect that immigration be substantially over this year and we expect them for even you search from 2:20 onwards you maintain a comfortable sharing subscription Revenue in our portfolio approximately 47% which helps us to extended periods of heightened volatility and what we experienced last year off.
Other well, yeah, the service grows the situation was affected by some of when events that were cancelled last year. What was the reason however branding and price to Performance Products have shown certain rules about 20% year-on-year and in the end our last category demonstrated Revenue growth exceeding group average the owner.
Joe leaned out the results by customer segment despite the fact that this year we saw higher than usual during lockdown affecting any segment especially hard. We have increased our page and biased by Circa 30,000 customers.
During you for loyal client categories demonstrated strong double-digit Revenue grows with estimated being mostly driven by customer base expansion while key accounts both pricing initiatives and consult with some deep packages our client acquisition plan executed in Q3 and Q4 facilitated new customer intake during the fourth quarter number of new customer relations request grew by 50% Year-on-year was the record high conversion screen customers. We see average revenue per customer growing across all client categories with very encouraging Winters Dynamic client from okay to get to Greece acquired during nineteen increase their spending in 2020 by More than 70% those kind of customers who start using Headhunter before nineteen demonstrate need to see if 20% Rule's average. So that meaning we have been advancing wrong government decisions strategies, even in such a terrible here now handing it to Gregory talk through our financial performance dead.
Yeah, thank everyone. Let me first give you some detail on the website as you see on slide 11 in the fourth quarter 2028. I work just at the Del Mar channel has decreased by a circuit two percentage points from 49.5 in the fourth quarter 2019 to 47.4 in the fourth quarter 2026 is already mentioned that was due to the elevator growth in our personal expenses and the fourth quarter 2020, which I will explain later at the same time for the birth year twenty-twenty. We are able to sustain profitability or just to keep the margin for the full year was 50.6% compared to Fifty Point five in the year 2019.
Let's dive into the hour.
Tien expense blankets in the 4th for the 20 20 mm. Our Personnel expenses increased by 33.6% to 808 million roubles. And that was three one by Three Dog factors trust in taxation of wages in the beginning of 20 22nd. We increased our hiring and hired approximately Thirty new people during the fourth quarter 2012 and most of this wiring slower in developing sales and marketing teams and the third Factor we decided to pay discretionary bonus. Personnel to compensate for a reduction off earlier in the year. It was part of our cost Reduction Program in response to COVID-19 as a result of countries in hiring and the discretionary bonus paid personal expenses is percentage of Revenue has increased resulting in the decrease of adjusted ebitda margin by two percentage points, which I've mentioned in the beginning.
Our marketing expenses in the fourth quarter 2020 increased by 16% to 318 million roubles marketing spend was thirteen percent of Revenue wage his flat compared to 13.3% in the fourth quarter of 2019 our other General and administrative expenses in the fourth quarter 2026 increased by 10.8% to 292 million roubles. This expands blanket has decreased as percentage of Revenue, but excluding certain non-operating items. I was blind as percentage of revenue for the full year twenty-twenty as we've said before or just a bit. Margin was 50.6% when compared to Fifty Dead wife in the 4 year 2019. Our personal expenses are just prepare is not operating items have increased as percentage of Revenue. Well, I'll mark it as plant and other changes.
Kelly Mysteries expenses also adjusted for number three items were flat this percentage of Revenue in the full year twenty-twenty. The change in personal experience was upset by the increase in wage is change game resulting in Flint adjusted ebitda margin for the full year the change and personal expense and the full year twenty-twenty s percentage of Revenue booster on the back of the same interests and hire an additional six people during the year resulting in increasing headcount to 832 people as of the year and
Moving on to other teams that caters our capex and twenty20 exclusion acquisition of passage of what was 261 million and it was down 131 million a year primarily due to a decline in office renovation costs as we finalize that project in in the summer 2020 as a result Capital expenses worth 3.1% of revenue for the full year twenty-twenty including our office renovation costs not working capital as of December 31st, 2020 decreased by 856 million to Circle. -3.8 billion roubles primarily due to an increase in contract liabilities or 480 million from customer prepayments wage increase other people's due to considerations table for the positions of water.
our income taxes
Plus $686.20 compared to $644 million in 2019 and the effective tax rate for the full year has decreased to pick up to 6.7% in 2020 from 29% in 2019 on the back of the degrees in the doctor was passes now turning to Iraq metrics in the full year twenty-twenty. We generated 3.2 billion rubles from operating activities compared to two point six billion generated 2019. Edge was primarily due to the increase in interest or decrease in interest paid on the back of the decreasing the curator centre-back of Russia and the increase in sales rep.
That's used in investing activities was 3.2 billion rubles in the year 2020 compared to $637 billion used in 2019. The key chains were here was 3.1 billion payment for the acquisition at what time?
We have generated 1.1 billion roubles from Financial activities in 2028 compared to 2.6 billion used in 2019. The major change driver was the issuance of a poor billion roubles bond in 2020.
Also last year, we have paid 1.9 billion dividend compared to one point 1 billion payment in 2019 our bank and all those repayments decreased from 1.3 billion and 2019 to circulate hundred million in 2020. Mostly on the back of the other one time loan repayment of 2019 and also due to the decreasing Paramount's as we amended our bank long-duration and repayment schedule in 2020.
Our debt increased in 2020 by Circa one point nine billion mostly due to 3.1 billion paid for the plot Exposition and 1.9 billion month payout which were upset by 3.2 billion. From operating activities. And as a result. Our leverage has increased from 0.8 times a bit. 1.2 off as of the end of 2020 and finally moving to our outlook for 2021, assuming no further escalation of old COVID-19 from Tama can based on our competitive position and so lit a year-to-year performance. We expect our revenue on the group level to increase in the rate from thirty seven am 42% in 2021 compared to 2020.
This concludes our presentation of the fourth quarter and the full year 2020 results and we are now opening the floor to your questions.
Thank you. Ladies and gentlemen will now begin the question-and-answer session. Is it reminded? If you wish to ask the question, please press one and one on your telephone keypad and wait for them to be announced.
The first question comes from the line of David extra from Goldman Sachs. Please ask your question. Yes. Thank you very much for the presentation a couple of questions firstly. How do you think about the margins how they perform in 2021 on a like-for-like basis excluding the Acquisitions. Basically, do you think that revenues will outgrow the key cost components being the personal expenses and the marketing expenses. So any color would be appreciated here and also secondly, how would you assess your market share Trent across the blue color segment in particular and I'm on the competitors. Who do you think of the most active and potential relative share Gainer among the competition? Thank you.
I think slowly disqualify you your question was on the margins for 20 21, right? So we take the guidelines and margins. Yes. Yeah. I yeah, we we debated this internally and I think it's just at least at this point of time. We decided not to provide any official guidance on on margins at all. Right, So the prevailing environment is still relatively uncertain it's quite obviously quite encouraging how things developing, uh, year-to-date overall and but the same time we we understand it. Yeah, we're not out of the woods yet in the column is still experiencing a certain segments of the economy still struggle. So we provide quite a wide range for a revenue next year, and we were quite comfortable with that for margins. We just reserve and maybe we'll come back in the market later once we can adjust phone number.
Girls and recovery of the economy but just From longer-term perspective. I think we always guided towards I do gradual Market expansion, right? It not not often happens year after year because it will also some extent a function of competitive situation and some upside is could be at a certain cost upfront. Um, but generally we expect the dog should continue growing as a vast majority of expenses are not tied to revenue expansion.
And on the market share gain, it's always a bit speculative. Right because our competitors don't report and one of them actually report Revenue numbers above the last year. We let me try to speculate a little bit cuz it feels quite safe to say that we're market share Ur significant increase right the first of all inorganically week or the the substantial player market share was estimated be around 6% or 7% of the market. And so that that's the creative and they predominantly operate and in segments of glucose and and regions and among smaller businesses. So I think that also affected more or less wage fortunately our share in in blue Colour.
as to the
You can just kind of organic market share Evolution. We also believe that we are gaining market share and there are clearly two players who are signal outperforming the others right? It's us and our data and we look at their Dynamics, uh, actually almost the entire business of the Vita. It's targeted at Blue cores. So we're fixing not splitting out any any disturbance teams or vacances while our business is kind of split into blue and white and if a half hour blue Dynamic that is clearly out sleeping white covers, right? And uh, even if you look for example at the job posting the ad Revenue Dynamics in Q4, it was 42% up and I can tell you that if you were going to split out and look at only blue color vacancies then dead.
That growth rate would be almost twice as high and I believe it's it's relatively comparable to what theater is experiencing was a few months quite a dynamic range. So generally the other players are we we don't see that they that they growing anyhow, close to this before seems like we're gaining
Okay. Thank you very much.
Thank you. The next question comes from line of even came from xtellus Capital. Please ask you a question.
Yes, good afternoon. Two questions for myself, please first can you just maybe comment on the room and growth that you were seeing January February which will be more sort of em.
Pretty manipulation kind of growth because the price increase comes later this year than last year and then my second question on the marketing specifically if you can talk about what to expect in terms of marketing to sales in Twenty-One given that the marketing budgets of your home, so I remain fairly high, but also your Revenue grows a lot. So any comment on that would be appreciated. Thank you.
Meg Ryan is here. Just a few words on the year-to-date performance. We we started all this year with exceptionally strong performance across visually all market segments and then products was we practiced acceleration compared to December quite significant while December was the best months in 2020. And now we also see that effectively Thursday February is better than January and March is stronger than than February. So we kind of not notice monster months growth acceleration walk across all segments. I wouldn't provide specific on numbers, but I think from our guidance you may kind of read. Yep.
we expect what kind of
Number we expect for the whole year and we this point of time for if you pretty comfortable within this range. Um, we we see that the main kind of growth drivers for this whole performance is just uh accelerated ugh conceived to online from small medium businesses and their consumption of our job posting products and also am constantly improving kind of consumption of key accounts driven predominantly women position and also also, uh, it's kind of side effects from our introduction of our database Administration was last year cuz we see key accounts started consuming more vacancies that they did before the introduction just data trying to save on contacts off. So we believe that this both factors. They're quite robust. We don't expect them to significantly roll back over the year and and as your home
Said we effectively not increased prices here and we will plan to do so from April 1st, almost four products prices with the crow by down 10% almost around 10% some products a bit more but not less.
That's on the first question. I want a second is you know when we were not big fans of guiding on marketing strategy, right, especially at the beginning of the year because we see that your mentioned the competitors investing they keep investing in in this business and uh because they also see the the the the more the economy is recovering and the market is growing and so we do and this point of time it's it's within our expectations and budgets wage which they retain some flexibility here for all the year depending on our top-line performance to increase or decrease Market expand generally a lot of other expenses. Our discretion is affected wage reflection of our first the competitive environment the second our expectations on the kind of return on investment, right cuz we increased the marketing in the second half last
Theodore actually defying or regardless of competition just because we we saw that that's a great potential for us boost Revenue growth. So we'll see how Market develops this year and maybe also just found the same strategy for us. The priority would be just driving Revenue growth first of all, but we don't expect the margin for your 50,000.
Right. Thank you very much.
Thank you. See you next question comes from line of Dmitry from wouldn't Company. Please ask your question?
All right. Thank you very much. So the first question is on your strategy. When do you see when do you expect prices for small and medium Enterprises to increase the wage to start expect to start seeing some manipulation opportunity in with being those accounts and the second question is on uh other segments. Uh, when do you when would you expect to start see monetization of your users? And when do you expect to start entering new segments? Thank you.
I think it would be easy. Well, actually we in SMA we have already been seeing constantly enhancing when he's Asian and grew up an average check right at the time when you see uh, kind of all pacing customer base grow from this segment with the average wage might go down. But if you going to split up and look at the Historical vintages almost in all windows, you see Healthy Growth around 20% plus even in small medium, although it's not our main target formalization is not going to become more main target for next two to three years cuz we see much higher potential monetizing busy with bigger consumption just because at this point they disproportionately can use more cheaper use our services and they can we can definitely pay more for the Dead.
To provide part for small counts. We I think we just started a few years ago a little bit more aggressive monetization and we didn't notice any children. So I would say that they also contribute to overall RPC Dynamics.
In terms of new market segments. Well, we have strategy right where we say that it's one of the Dead Sea major growth dealers with our business expansion of a portfolio and we already invested in uh, EGR automation products where we see significant potential. We believe that Denmark is just scratching the surface and the growth and the segment of each other automation who reads sink and we should definitely take a significant role in in the in this opportunity. We look at other areas, uh specifically now we're we're attentively a temporary Market because it's driven by some legislation changes and it's probably one of the most dynamic Market wage.
In the end we differently also want to be present as this as a significant player in the space, but I think we constantly monitoring. We're just trying to find the right way whether we do it took over acquire right platform to start with and in in the short-term. I think it's automation is the area where we've actually made steps and we see several benefits package.
Thank you very much.
Thank you see a participant. If you wish to ask a question, please press star and one on your telephone keypad.
The next question comes from UVS. Please. Ask your question. Hello everyone. I have a quick question on your life with overage. And do you expect it to go down this year on the current one point?
Gregory
I think it would kind of the point on whether we are acquiring any new debt off or make convenient emanate projects. So it's kind of hard to say definitely provided that we are not I would say that choice would go slightly down as we as we make this regular business for that and also has the increase in wage in 2021.
Okay. Thank you.
Thank you. The next question comes of Miriam from Morgan Stanley. Please ask a question.
Media, I'm your line is open.
Hi, sorry, I was I had thanks for the call. Just two questions for me firstly just when your personnel costs. I mean, I know you're not giving any specific Martin guidance, but any color you can share their thoughts on how you're thinking about hiring for this year, and and if there there there needs to be another big step up from Q4 level and then just on the plotter. If you could just give a bit more color on our business. I know you mentioned the strong current trading if there anything specifically to call out for the platter, or have they seen the same Trends as for the the broader business, and then also just to confirm that you're going to be putting up prices in April on the platter as well with in line with the rest of the group. Thanks.
Yeah, this is Gregory. I think on personal expense is is already management. We are kind of am not actually making like guidance on explains blankets because to some extent it is a kind of moving points during the year wage, depending on what we see in terms of Revenue development competition situation, etc. Etc. Probably dead. I wouldn't say that there's a kind of specific plan in place to significantly increase headcount am in the company, right? I would also say that the major Investments and Personnel would probably lie down.
Our development team for it for the 2021. Yeah, that that probably that page is just Rodger.
Yep, I'll take the second and third. Hi Marion on their plot what we see now that they they also recovered off and leave your phone in your quota update stronger, then they perform the reinforced quarter. Um a little bit logging I will say group average Dynamic package and let's Pro kind of reflective or of their Market position. I think it's a good example small player that preventing in today's environment wage compared to a much bigger company like Headhunter first thing a second as our competitors the plot used to do and utilize that tax benefit non-viable and they were setting non-viable licenses that became vegetable this year. So that that made also certain authors
Cuz some some clients their plot who can actually deduct that from their taxable income. Right? And so that that limits to a certain extent we need reservations here, but the same problems faced by all of our competitors, I think besides the Vita cuz it's just us and Them who who never saw the license and um, but generally we do see that in February they uh, they already kind of joining to to growth and uh, now they're more or less operating within the the budget that we agreed in terms of prices. They have slightly different cycle. We're uh, trying to align it now and that that's the kind of first priority in terms of our integration, uh, process and roadmap was we see a lot of potential cross-sell and uh, the plot product was our group and also why scientists and authors
Product in terms of pricing. I think that that would be clearly our high priority for the second quarter and some results just would be hopefully absorbable in the second half this year, but they also plan to grow prices and even more aggressively than what we budgeted wage to live for $400.
That's really helpful. Thank you.
Thank you, dear participants. Once again. If you wish to ask a question, please press start and one on your telephone keypad.
The next question comes from line of Maria from BCS. Please ask you a question.
Yes, good afternoon. Thank you for the opportunity. I have question about automation the automation segment. Could you please update us what happened in 2022 use a big Feast War like reading a Transit skillaz and does use a base of talent. I just I'm just wondering whether you saw any strategic benefits like for instance with blue color Choice lies in companies like using more the service or something like that, or it's more like the services were brushed by the market environment and probably what you're if if if you could voice it. What are your plans for 20 21 22 21 for for instance the line Techs in terms of my decision. Thank you.
I'm thinking my last we all service is we very pleased with skillaz performance last year. I wouldn't say that the environment and circumstances held down a lot to be honest, cuz the second quarter was the almost lost in terms of getting there were severely under budget and the honesty obviously companies they try to put all expensive programs on hold off was the lack of visibility in the second quarter. So that affected effectively they're kind of quiet bass relation, although the need for clients to automate and then go off-road interaction increase they they just didn't receive approval for for Budget expansion. So the second quarter was very challenging, but they effectively they managed to recall.
So the second quarter in the second and third and fourth especially and they managed to double their revenue base the manage to double the client base and it's actually almost touching their original budget targets, uh for for this year. We'll have we'll consider acquisition and consolidation of control and skills. We're off the option exercise, uh-uh later this spring. Um, and of course we have actually diamonds you'll end of June but so far we're very pleased and also we identify a lot of senior just between our sourcing products and their processing products or not. Always Standalone Revenue performance those about boosting, uh, kind of and and kind of gross sell our services to clients home.
As to the land 6 same the same problem, but just kind of small-scale cuz the line techs is Gator dog. It's a midsize segment, which was under the biggest, uh pressure due to pain demek at the same time in the first year organizational Antics managed to gain, uh around $400 paying clients, which is pretty good result. Um, we never consider the line six pack the kind of significant Revenue stream to be honest and just many decisions launch was more to just crystallized, uh, client base. It's more stick. So in this mid-segment, it's more about data flowing for approval funnel and we from that perspective. We we see the Matrix is very strategic, but we we don't think birth.
You you trying to become notes or female? Well, well skillaz. Hopefully we'll we'll done and generally we we sold that off the need an Automation and some restrictions on all kind of offline interactions happened during the pandemic just gave giveaways and quaint interest and that should happen to sell sell these two products this year.
But it's been helpful. Thank you.
Thank you be up at this point. Once again. If you wish to ask questions, please press star and one on the telephone key pad.
DSU cuz there are no further questions at this time, please continue.
Thank you everybody for joining the call then. Take care, bye-bye, bye-bye. Thanks, buddy.
That that's conclusive a conference for today. Thank you for participating. You may all disconnect. Have a nice day.
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