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spk08: Thank you. Hello everyone and welcome to Headhunter Group fourth quarter and full year 2020 earnings call. On the call today we have Mikhail Zhukov, our chief executive officer, Gregory Moiseev, our chief financial officer, and Dmitry Sergiyenko, our chief strategy officer. A press release containing our fourth quarter and full year 2020 results was issued earlier today and a copy may be obtained through our website at investor.hh.ru. Now I will briefly walk you through the safe 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 speak only to our expectations as of today. We undertake no obligation to publicly update or revise these statements. For a discussion of some of the risk factors that could cause actual results to differ, please see the risk factor section in our annual report on Form 20F for the year ended December 31, 2019, and our final prospectus in connection with our public offering that was filed with the U.S. Securities and Exchange Commission on June 16, 2020. During this call, we'll be referring to some non-IFRS financial measures. These non-IFRS financial measures are 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 slide presentations, each of which is available on our website at investor.hh.ru. Now, I'll turn the call over to Mikhail to make a quick opening remark. Please go ahead. Thank you, Roman.
spk07: Good afternoon, everyone. Last year, HackHunter celebrated its 20th anniversary. And without a doubt, there 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 this backdrop even stronger than ever been. The powerful network effect of our platform, reinforced by timely marketing and monetization steps during recovery, allowed us to further consolidate the market and significantly improve key operating metrics. In February 2021, the number of CVs on the platform reached a 50 million milestone and vacancy seats holding on a record level of above 800,000 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 through the acquisition of strong regional job platform zarplata.ru and introduction of new consumption partners into our product suite. Now we see life is slowly getting back to normal, which gives businesses more confidence and visibility. The competition for 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 that 2021 will be a really exciting year for HeadHunter. Now I'll turn it to Dmitry to walk you through the key highlights of the fourth quarter and the full year. Thank you.
spk09: Thank you, Misha. Good afternoon, everyone, and thank you for joining us on this call. Let's do a quick overview of year-end results and, as usual, have enough time for Q&A. Looking backwards, 2020, by no stretch of imagination, can be called a dull year, as it turned out to be one of the most difficult but equally important years in company history. We once again demonstrated the resilience of our business and our ability to turn economic volatility in our favor. hence coming out of recession even stronger than ever. Our 2020 revenue went up by 6.3% year-on-year, with full recovery to pre-COVID revenue growth levels by end of fourth quarter. Despite overall challenging year, we progressed significantly along our monetization strategy, switching to a new subscription model, which will hopefully have a long-lasting effect on RPC growth. Our pre-COVID pricing differentiation initiatives became noticeable and made significant impact in Q4, facilitating overall revenue recovery. Throughout this year, we demonstrated safe financial discipline and ability to manage our cost base in line with our business performance. We retained 40% plus profitability in all quarters and eventually even managed to increase our annual EBITDA margin compared to 2019. On top of our guiding rules, we have carried out acquisition of strong online platform in the most untapped market segments, regional blue collars and SMA. In 2020, Zarplata generated revenue of $780 million, which is right on top of the range provided in November. Last year dynamics of our core operating metrics indicate the continuous product development and overall online recruitment market expansion in Russia, despite all the economic headwinds. During 2020, we added more than 6 million net new CVs, sustaining leadership in all Russian regions in terms of new candidate inflow and expanding the gap with competitors. More importantly, we maintain high share of active CVs, 70% of total visible CVs on our platform either applied or were updated over the last two years. So this database remains very relevant, and as we move to new access monetization, this becomes very crucial. Especially strong trends we see in blue-collar worker categories, where we have demonstrated a circle of 45% year-on-year CV growth. As of the end of 2020, 35% of all job seekers received from this category. This justifies our considerable traction in the blue-collar market. On the employer's side, we observed quite similar dynamics. As of the end of 2020, the total number of job posting on the platform was 25% up, supported by strong new customer inflow and consumption growth of existing clients. Similar to candidate content, blue-collar vacancies are growing especially strong. representing 43% of total vacancy feed. It's very important for us to strategically strike a right balance between demand and supply side in blue color, and therefore we're very pleased with such concurrent dynamic. Higher extend demand in terms of interview invitation remains strong during 2020, quarter four, and almost no seasonal decline, growing 80% year-on-year in December. Now, giving a little bit more specific about Q4 numbers. In the fourth quarter, our revenue growth came back to pre-pandemic levels, growing 90% year-on-year. Importantly, we see our revenue trends trending in January and February, despite a postponement of price increase from 1st January, as we usually do, to 1st April this year. Our adjusted EBITDA margin in the fourth quarter was level 47.4%, affected slightly by today's Zoom hiring and some discretionary bonuses paid to our employees in Q4. Our capex in Q4 2020 was only $48 million, or 2% of revenue, as we finally completed our office renovation. Our key product dynamics is also encouraging and generally consistent with the trends we've seen in the previous quarter. Being more sensitive to business environment, job posting demonstrated the strongest recovery dynamics in the first quarter, growing 32% year-on-year. Growth came back on came on the back of inflow of new customers, mostly small and medium businesses, as well as growth of key account consumption and effect of 2020 price increase, which became fully effective at the year-end. Bundled subscriptions proved to be less susceptible to short-term volatility due to predominance of long-term contracts. In Q4, this product category accelerated to 12% year-on-year. CV database growth accelerated to 9% year-on-year, which saw uplift in average duration by access and that actually contributes to visibility of our future revenues in this segment. We significantly advanced transition to a new paper contact model with the vast majority of key accounts already working and moved to a new scheme. We expect that migration will be substantially over this year, and we expect very meaningful revenue effects from 2020 onwards. You maintain a comfortable share of subscription revenue in our portfolio, approximately 47%, which helps us to withstand the periods of heightened volatility like we experienced last year. Other value-added services growth deceleration was affected by some offline events that were canceled last year for this reason. However, branding and price of performance products have shown soaring growth above 20% year-on-year. And in the end, our last category demonstrated revenue growth exceeding group average year-on-year. Turning now to results by customer segment. Despite the fact that this year we saw higher than usual return rate during lockdown, affecting SME segment especially hard, we have increased our paying client base by circa 30,000 customers. During Q4, all client categories demonstrated strong double-digit revenue growth, with SMA being mostly driven by customer base expansion, while key accounts both pricing initiatives and consumption growth in big packages. Our client acquisition planning executed in Q3 and Q4 facilitated new customer intake. During the fourth quarter, a number of new customer registrations grew by 50% year-on-year with record high conversions paying customers. We see an average revenue per customer growing across all client categories with very encouraging vintage dynamics. Clients from all categories acquired during 2019 increased their spending in 2020 by more than 70%. Those kind of customers who started using Headhunter before 2019 demonstrated RPC 20% growth on average. So that meaning we have been advancing longer our monetization strategy even in such a turbulent year. Now I'm handing it to Gregory to talk through our financial performance.
spk05: Thank you, Dima. Hello, everyone. Let me first give you some detail on the cost side. As you see on slide 11 in the fourth quarter 2020, Our adjusted EBITDA margin has decreased by circa two percentage points from 49.5 in the fourth quarter 2019 to 47.4 in the fourth quarter of 2020. As Dima already probably mentioned, that was due to the elevated growth in our personnel expenses in the fourth quarter 2020, which I will explain later. At the same time, for the full year 2020, we are able to sustain profitability. Our adjusted EBITDA margin for the full year was 50.6% compared to 50.5% in the year 2019. Let's dive into our key expense buckets in the fourth quarter of 2020. Our personnel expenses increased by 33.6% to 808 million rubles, and that was driven by three key factors. First, indexation of wages in the beginning of 2020. Second, we unfreezed our hiring and hired approximately 30 new people during the fourth quarter of 2020, and most of these hirings were in development, sales, and marketing teams. And the third factor, we decided to pay a discretionary bonus to our personnel to compensate for a reduction of bonuses earlier in the year, which was part of our cost reduction program in response to COVID-19. As a result of unfreeze and hiring and the discretionary bonus paid, personnel expenses as 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 rubles. Marketing spend was 13% of revenue, which was flat compared to 13.3% in the fourth quarter of 2019. Our other general and administrative expenses in the fourth quarter 2020 increased by 10.8% to 292 million rubles. This expense bucket has decreased as percentage of revenue, but excluding certain non-operating items, it was flat as percentage of revenue. For the full year 2020, as we've said before, our adjusted EBITDA margin was 50.6%, flat compared to 50.5% in the full year 2019. Our personnel expenses adjusted for various non-operating items have increased as percentage of revenue, while our marketing spend and other general and administrative expenses, also adjusted for non-operating items, were flat as percentage of revenue in the full year 2020. The change in personnel expense was offset by the increase in foreign exchange gain, resulting in flat adjusted EBITDA margin for the full year. The change in personnel expense in the full year 2020 as percentage of revenue was mostly on the back of indexation of wages and hiring additional 60 people during the year, resulting in increasing headcount to 832 people as of the year end. Moving on to other key indicators, our CAPEX in 2020 excluding acquisition of assets from South Plata was $261 million. And it was down 131 million year-on-year, primarily due to a decline in office renovation costs as we finalized our project in the summer 2020. As a result, capital expenses were 3.1% of revenue for the full year 2020, including our office renovation costs. Networking capital as of December 31st, 2020 decreased by 855 million to circa minus 3.8 billion rubles. primarily due to an increase in contract liabilities of $418 million from customer prepayments and an increase in other payables due to consideration payable for the acquisitions of Plata. Our income tax expense was $686 million in 2020 compared to $644 million in 2019, and the effective tax rate for the full year has decreased to 26.7%. in 2020 from 29% in 2019 on the lack of the decrease in non-deductible expenses. Now turning to cash generation metrics. In the full year 2020, we generated 3.2 billion rubles from operating activities compared to 2.6 billion generated in 2019. This growth was primarily due to the increase in interest, sorry, decrease in interest paid on the back of the decrease in the key rate of Central Bank of Russia and the increase in sales. Net cash used in investing activities was 3.2 billion rubles in the year 2020 compared to 637 million used in 2019. The key change driver here was a 3.1 billion payment for the acquisition of Satlata. We have generated 1.1 billion rubles from financing activities in 2020 compared to 2.6 billion used in 2019. The major change driver here was the issuance of a 4 billion rubles bond in 2020. Also last year we have paid 1.9 billion rubles dividend compared to 1.1 billion payment in 2019. Our bank and other loans repayments decreased from 1.3 billion in 2019 to circa 800 million in 2020, mostly on the back of the other one-time loan repayment in 2019 and also due to the decrease in payouts as we amended our bank loan duration and repayment schedule in 2020. Our net debt increased in 2020 by circa 1.9 billion mostly due to 3.1 billion paid for the plot acquisition and 1.9 billion dividend payout, which were offset by 3.2 billion generated from operating activities. And as a result, our leverage has increased from 0.8 times EBITDA to 1.2 times EBITDA as of the end of 2020. And finally, moving to our outlook for 2021, Assuming no further escalation of the COVID-19 pandemic and based on our competitive position and solid year-to-year performance, we expect our revenue on the group level to increase in the range from 37% to 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.
spk10: Thank you, ladies and gentlemen. We will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star and 1 on your telephone keypad and wait for your name to be announced. The first question comes through the line of Slava Dexter from Goldman Sachs. Please ask your question.
spk01: Yes, thank you very much for the presentation. A couple of questions. Firstly, how do you think about the margins? How do you 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 personnel expenses and the marketing expenses so any color would be appreciated here and also secondly how would you assess your market share trends across the blue color segment in particular and among the competitors who do you think are the most active and the potential relative share gainer among the competition thank you
spk09: Thanks a lot, Dima. Just to clarify, your question was on the margins for 2021, right? We debated this internally and I think at this point of time decided not to provide any official guidance on margins at all, because the prevailing environment is still relatively uncertain. It's quite encouraging how things are developing year-to-date overall, but at the same time we understand that we are not out of woods yet, and the economy is still experiencing certain segments of the economy are still So we provide quite a wide range for revenue next year, and we're quite comfortable with that. For margins, we just preserve, and maybe we'll come back to the market later once we digest further growth and recovery of the economy. But just from a longer-term perspective, I think we're always guided towards gradual market expansion, right? It not always happens year after year and because it also is to some extent a function of competitive situation and some upside that could be at a certain cost upfront. But generally we expect that margins should continue growing as the vast majority of our 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 none of them actually report revenue numbers. But for last year, we may try to speculate a little bit because it feels quite safe to say that our market share significantly increased. First of all, inorganically, we acquired a substantial player. Market share was estimated to be around 7% of the market. So that's a creative And they predominantly operate in a segment of blue collars and regions and among smaller businesses. So I think that also affected more or less proportionally our share in blue collar. As to the just kind of organic market share evolution, we also believe that We are gaining market share and there are clearly two players who are significantly outperforming the others. It's us and Aditya. and we look at their dynamics, because effectively almost the entire business of Avita is targeted at blue colors, right? So we're actually not splitting out any revenue streams or vacancies, while our business is kind of split into blue and white. And if you look at our blue dynamic, that is clearly outstripping white colors, right? And Even if you look, for example, at the job posting dynamic, revenue dynamic in Q4, it was 32% up. And I can tell you that if you're going to split out and look at only blue-collar vacancies, then that growth rate would be almost twice as high. And I believe it's relatively comparable to what Avita is experiencing for the last few months, quite a dynamic growth. So generally, the other players, we don't see that they're growing anyhow close to this before it seems like we are gaining.
spk01: Okay, thank you very much.
spk10: Thank you. The next question comes from Ivan Kim from Extellus Capital. Please ask your question.
spk04: Yes, good afternoon. Two questions from my side, please. Firstly, can you just maybe comment on the revenue growth that you are seeing in January or February, which will be more sort of pre-minitization 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 21, given that the marketing budgets of your rivals remain fairly high, but also your revenue grows a lot. So any comments on that would be appreciated. Thank you.
spk09: Just a few words on the year-to-date performance. We started all this year with exceptionally strong performance across all market segments and products. We noticed acceleration compared to December. quite significant, while December was the best month in 2020. And now we also see that, effectively, February is better than January, and March is stronger than February. So we notice month-over-month growth acceleration across all segments. I wouldn't provide specific numbers, but I think from our guidance you may kind of read what kind of numbers we expect for the whole year. And we, at this point of time, feel pretty comfortable within this range. We see that the main growth drivers for this outperformance is just accelerated shift to online from small and medium businesses and their consumption of our job posting products and also constantly improving consumption of key accounts driven predominantly by monetization. And also, it's a kind of side effect from our introduction of our CV database monetization model last year, because we see key accounts started consuming more vacancies than they did before the introduction. They're trying to save on contacts somehow. So we believe that these both factors are quite robust. We don't expect them to significantly roll back over the year. And as you rightfully said, we effectively not uh increased prices yet and uh we plan to do so from april the first almost four products prices uh would grow by 10 almost around 10 some products a bit more but not less um That's on the first question. On the second, as you know, we were not big fans of kind of guiding on marketing strategy, right, especially at the beginning of the year because we see that you mentioned competitors investing. They keep investing in this business because they also see that the economy is recovering and the market is growing, and so we do. At this point of time, it's within our expectations and budgets. We retain some flexibility throughout the year depending on our top-line performance to increase or decrease market expense. Generally, a lot of our expenses are discretionary, so it will be just a reflection of First, the competitive environment. Second, our expectations on kind of return on investment, right? Because we increased the marketing in the second half last year, actually defying or regardless of competition, just because we saw that that's a great potential for us to boost revenue growth. So we'll see how market develops this year. Maybe we'll also just follow the same strategy. For us, the priority would be just driving revenue growth, first of all. But we don't expect the margin to fall below 50%. All right.
spk04: Thank you very much.
spk10: Thank you. The next question comes from the line of Dmitry Vlasov from Wooden Company. Please ask your question.
spk06: Hi. Thank you very much. So the first question is on your strategy. When do you expect prices for small and medium enterprises to increase? When do you actually expect to start seeing some monetization opportunity within those accounts? And the second question is on other segments. When do you expect to start seeing monetization of your users? And when do you expect to start entering new segments? Thank you.
spk09: Thank you, Dmitry. Well, actually, in SMA, we have already been seeing constantly enhancing monetization and growth and average check. At the time when you see kind of outpacing customer-based growth in this segment, Obviously, the average RPC may go down, but if you kind of split up and look at the historical vintages, almost in all vintages, you see healthy growth around 20% plus, even in small and medium, although it's not our... main target for monetization is not only going to become our main target for next two to three years because we see a much higher potential monetizing bigger clients with bigger consumption just because at this point they disproportionately can use more and cheaper use our services and they can definitely pay more for the value they provide. But for small accounts, I think we already started a few years ago, a little bit more aggressive monetization, and we didn't notice any chores. So I would say that they also contribute to overall RPC dynamics. In terms of new market segments, well, We have strategy where we say that it's one of the three major growth pillars of our business expansion of portfolio. And we already invested in HR automation products where we see significant potential. We believe that that market is just scratching the surface and the growth in the segment of HR automation will be long lasting and we should definitely take a significant role. In this opportunity, we look at other areas. Specifically, now we look very attentively at the temporary market because it's driven by some legislation changes and it's probably one of the most dynamic market and we definitely also want to be present as a significant player in the space but I think we're constantly monitoring we're just trying to find the right way whether we do it internally or acquire right platform to start with and in the shorter term I think HR automation is the area where we've actually made steps and we see really benefits
spk06: Thank you very much.
spk10: Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star and 1 on your telephone keypad. The next question comes from from UBS. Please ask your question.
spk03: Hello, everyone. I have a quick question on your leverage. Do you expect it to go down this year on the current 1.2?
spk05: Hi, Julia. This is Gregory. I think it would kind of depend on whether we are acquiring any new debt or making any M&A projects. So it's kind of hard to say definitely. Provided that we are not, I would say that the leverage would go slightly down as we make these regular payments for that, and also as the EBITDA is increasing in 2021. Okay, thank you. Thank you.
spk10: The next question comes from the line of Miriam Adisa from Morgan Stanley. Please ask your question. Miriam, your line is open.
spk02: Hi, sorry, I was on mute. Thanks for the call. Just two questions from me. Firstly, just on your personnel costs, I mean, I know you're not giving any specific margin guidance, but any color you can share there on how you're thinking about hiring. for this year and if there needs to be another big step up from Q4 level. And then just on Zapata, if you could just give a bit more color on the business. I know you mentioned the strong current trading. Is there anything specifically to call out for Zapata or have they seen the same trends as for the broader business? And then also just to confirm that you're also going to be putting up prices in April on Zapata as well in line with the rest of the group. Thanks.
spk05: Yeah, Miriam, this is Gregory. I think on personnel expenses, as Tim already mentioned, we are kind of not actually making the guidance on expense buckets because to some extent it is a kind of moving parts during the year depending on what we see in terms of revenue development competition situation, et cetera, et cetera. Probably, I wouldn't say that there's a kind of specific plan in place to significantly increase headcount or salaries in the company, right? I would also say that the major investments in personnel would probably lie in our, uh, development, uh, team for, for the 2021. Um, yeah, that, that probably, that probably is just Roger.
spk09: Yeah. I'll, I'll take the second and third. Um, hi, Marianne on, on their plot. Um, What we see now is that they also recovered and they performed quarter-to-date stronger than they performed in the fourth quarter. A little bit lagging, I would say, group average dynamic and that's kind of reflective of their market position. I think it's a good example of a very small player operating in today's environment compared to a much bigger company like Headhunter. First thing, and second, as our competitors, Zarplata used to utilize that tax benefit, effectively non-vitable, they were selling non-vitable licenses that became vitable this year. So that made also certain effect, because some clients of Zarplata who can actually deduct that from their taxable income. And so that limits, to a certain extent, monetization this year. But the same problem is faced by all our competitors, I think, besides Avita. Because it's just us and them who actually never sold the license. But generally, we see that in February, they're already kind of returning to growth. And now they're more or less operating within the budget that we agreed. In terms of prices, they have a slightly different cycle. We're trying to align it now. And that's a kind of first priority in terms of our integration process and roadmap, because we see a lot of potential cross-sell and Zapata product across our group. and also why some stand our products in terms of pricing. I think that that will be clearly our high priority for the second quarter and some results and synergies would be hopefully observable in the second half this year. But they also plan to grow prices and even more aggressively than what we budgeted originally for Headhunter.
spk02: That's really helpful. Thank you.
spk10: Thank you, dear participants. Once again, if you wish to ask a question, please press star and 1 on your telephone keypad. The next question comes from the line of Maria Sukhanova from BCS. Please ask your question.
spk11: Yes, good afternoon. Thank you for the opportunity. I have a question about automation, HR automation segment. Could you please update us what happened in 2020 to user base or revenue trends at Skillus and with user base of Talantics? I'm just wondering whether you saw any strategic benefits, like for instance, with blue-collar specializing companies using more of the services, something like that, or it's more like the services were pressured by the macro environment? And probably, if you could voice it, what are your plans for 2021 for, for instance, Atlantic in terms of monetization? Thank you.
spk09: Thank you, Maria. I'll start with SkiBus. We were very pleased with SkiBus' performance last year. I wouldn't say that the environment and circumstances helped them a lot, to be honest, because the second quarter was almost lost in terms of revenue. They were severely under budget. and obviously companies try to put all expensive programs on hold with the lack of visibility in the second quarter. So that affected their client-based penetration. Although the need for clients to automate and go on remote interaction increased, they just didn't receive approval for budget expansion. The second quarter was very challenging, but they effectively managed to recoup that second quarter and the third and fourth especially. And they managed to double their revenue base. They managed to double their client base. and it's actually almost reaching the original budget targets. For this year, we will consider acquisition of a consolidation of control and skillets via option exercise later this spring, because we have time until the end of June. But so far we are very pleased and also we identify a lot of synergies between our sourcing products and their processing products. Not always standalone revenue performance is also about boosting and cross-sell our services to clients. As to Talantics, it's probably the same problem, but just on a smaller scale, because Talantics is catered to its meat size segment, which was under the biggest pressure due to the pandemic. At the same time, in the first year of monetization, Talantics managed to gain around 400 paying clients, which is a pretty good result. We never considered Talantics as a significant revenue stream, to be honest. And monetization launch was more to just crystallize client base. It's more of the stickiness. So in this mid-segment, it's more about data flowing through the funnel. And from that perspective, we see Talantics as very strategic. But we don't think that Talantics will become noticeable now. P&L will skill us, hopefully will, over time. Generally, we saw that the need in automation and some restrictions on our kind of offline interactions happened during pandemic just gave a raise in client interest, and that should help us sell these two products this year.
spk11: That is very helpful. Thank you.
spk10: Thank you. Dear participants, once again, if you wish to ask a question, please press star and one on your telephone keypad. There are no further questions at this time. Please continue.
spk08: Thank you, everybody, for joining the call. And take care. Bye-bye. Bye-bye.
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