HeadHunter Group PLC Announces Fourth Quarter and Full-Year 2020 Financial Results

MOSCOW, March 18, 2021 (GLOBE NEWSWIRE) — HeadHunter Group PLC (Nasdaq: HHR, MOEX: HHRU) announced today its financial results for the fourth quarter and the full year ended December 31, 2020. As used below, references to “we,” “our,” “us” or the “Company” or similar terms shall mean HeadHunter Group PLC.
Fourth Quarter 2020 Financial and Operational Highlights^{(1)   “RUB” or “₽” denote Russian Ruble throughout this release.
(2)   “USD” or “$” denote U.S. Dollar throughout this release.
(3)   Percentage movements and certain other figures in this release may not recalculate exactly due to rounding. This is because percentages and/or figures contained herein are calculated based on actual numbers and not the rounded numbers presented.
(4)   Dollar translations throughout this release are included solely for the convenience of the reader and were calculated at the exchange rate quoted by the Central Bank of Russia as of December 31, 2020 (RUB 73.8757 to USD 1).
(5)   Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Net Income Margin are non-IFRS measures. See “Use of Non-IFRS Financial Measures” elsewhere in this release for a description of these measures and a reconciliation to the nearest IFRS measure.}Revenue is up 18.5% due to the increase in revenue across all customer segments in Russia reflecting a return to growth following a slowdown caused by COVID-19.Net income is up 30.9% to ₽650 million.Adjusted EBITDA is up 13.4% to ₽1,160 million; Adjusted EBITDA Margin is down to 47.4% from 49.5%, or by 2.2 ppts., mostly due to a discretionary bonus payment to our personnel in the fourth quarter 2020.Adjusted Net Income is up 19.5% to ₽852 million.^{(1)   Net Working Capital, Net Debt, and Net Debt to Adjusted EBITDA Ratio are non-IFRS financial measures. See “Use of Non-IFRS Financial Measures” elsewhere in this release for a description of these measures and a reconciliation to the nearest IFRS measure.}Net Working Capital as of December 31, 2020 decreased by ₽855 million, or 28.5%, primarily due to (i) an increase in contract liabilities of ₽418 million from customer prepayments, and (ii) an increase in trade and other payables (current portion) due to ₽234 million consideration payable for the acquisition of Zarplata.ru;Net Debt increased by ₽1,869 million, or 61.5%, primarily due to ₽3,100 million paid for the acquisition of Zarplata.ru and ₽1,885 million dividend payment, offset by ₽3,215 million cash generated from operating activities (see “Cash Flows”);As a result of the increase in Net Debt, Net Debt to Adjusted EBITDA Ratio increased from 0.8x to 1.2x.
Full-Year 2020 Financial and Operational Highlights^{(1)   Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Net Income Margin are non-IFRS measures. See “Use of Non-IFRS Financial Measures” elsewhere in this release for a description of these measures and a reconciliation to the nearest IFRS measure.}Revenue is up 6.3% due to the increase in revenue across all customer segments in Russia, except Small and Medium Accounts in Moscow, which were affected most by the COVID-19 pandemic and related government measures to curb its spread.Our Russia Segment is up 7.1%, and the year-on-year growth/(decline) in revenues in this segment versus the same quarters in 2019 was 18.2%, (19.1)%, 9.1%, and 20.1% in the first, second, third, and fourth quarter of 2020, respectively, reflecting significant impact of the
COVID-19 pandemic in the second quarter 2020, followed by a gradual return to growth during the third and fourth quarters.Net Income is up 19.3% to ₽1,886 million.Adjusted EBITDA is up 6.5%; Adjusted EBITDA Margin is 50.6%, flat compared to 50.5% in the year 2019, as the increase in personnel expenses (excluding equity-settled share-based compensations and other items) as a percentage of revenue was offset by the foreign exchange gain.Adjusted Net Income is up 13.4% to ₽2,733 million.CEO quote“Even though 2020 was unprecedentedly turbulent year, it has also brought about a radical behavioral transformation into the entire economy, which, in our view, will have a long-lasting positive effect on digital recruitment market,” said Mikhail Zhukov, Chief Executive Officer of HeadHunter Group PLC. “Having recovered from the pandemic hit, in Q4 we managed to put the business back on growth track across all major products and segments, capitalizing on our leading market positions and solid industry fundamentals.“Despite being fairly busy dealing with COVID-19 repercussions throughout the year, we still delivered on key pillars of our growth strategy: sustained overall customer base expansion, significantly enhanced monetization switching to new subscription model and further consolidated regional market by acquisition of Zarplata.ru.“Looking forward, we expect that further recovery of the Russian economy will reinforce our leadership and accelerate execution on our long-term strategy.”Impact of the COVID-19 Pandemic on Our Operations and Financial PositionIn March 2020, the World Health Organization declared the spread of COVID-19 virus a global pandemic.Measures taken by the Russian government to curb spread of the disease, such as a lock-down in Moscow and a nation-wide “period of non-working days,” led to a decrease in the number of job postings and the number of new CV database subscriptions in the second quarter of 2020. As a response to the decrease in revenue, we implemented temporary cost-cutting initiatives, including putting all non-essential hiring, capital expenditure and other expenses on hold. Following easing of restrictions in May 2020, we saw a gradual recovery of our key performance indicators (“KPIs”) in the third quarter of 2020. Although there was a spike in the number of new cases in the fourth quarter of 2020 that was comparable to that of the second quarter of 2020, less severe restrictions were in place in Russia, and we did not experience similar decrease in our KPIs in the fourth quarter 2020.We have not seen a specific impact of COVID-19 on our financial position as of December 31, 2020. Recent developments in the first quarter of 2021, as of the date of this release, also do not indicate a specific impact of COVID-19 on our financial position.Our liquidity analysis, based on our recent performance and current estimates, shows that we have adequate resources to finance our operations for the foreseeable future.Our financial position, results and liquidity may be affected in the future by any further adverse developments related to COVID-19.Operating SegmentsFor management purposes, we are organized into operating segments based on the geography of our operations. Our operating segments include “Russia,” “Belarus,” “Kazakhstan” and other countries. As each segment, other than Russia, individually comprises less than 10% of our revenue, for reporting purposes we combine all segments other than Russia into the “Other segments” category.On December 25, 2020, we completed the acquisition of 100% of the issued charter capital in LLC “Zarplata.ru”, a job classified platform with a strong footprint in certain Russian regions, such as Siberia and the Ural. As of December 31, 2020, operations of Zarplata.ru met the criteria of a reportable operating segment. However, as the financial results of Zarplata.ru for the period from the acquisition date to December 31, 2020 were non-material, they are not included in the statement of income and comprehensive income for the year ended December 31, 2020.CustomersWe sell our services predominantly to businesses that are looking for job seekers to fill vacancies inside their organizations. We refer to such businesses as “customers.” In Russia, we divide our customers into (i) Key Accounts and (ii) Small and Medium Accounts, based on their annual revenue and employee headcount. We define “Key Accounts” as customers who, according to the Spark-Interfax database, have an annual revenue of ₽2 billion or more or a headcount of 250 or more employees and have not marked themselves as recruiting agencies on their page on our website. We define “Small and Medium Accounts” as customers who, according to the Spark-Interfax database, have both an annual revenue of less than ₽2 billion and a headcount of less than 250 employees and have not marked themselves as recruiting agencies on their page on our website. Our website allows several legal entities and/or natural persons to be registered, each with a unique identification number, under a single account page (e.g., a group of companies). Each legal entity registered under a single account is defined as a separate customer and is included in the number of paying customers metric. Natural persons registered under a single account are assumed to be employees of the legal entities of that account and, thus, are not considered separate customers and so are not included in the number of paying customers metric. However, in a specific reporting period, if only natural persons used our services under such account, they are collectively included in the number of paying customers as one customer.SeasonalityRevenueWe generally do not experience seasonal fluctuations in demand for our services and, prior to COVID-19, our revenue remained relatively stable throughout each quarter. However, our customers are predominately businesses and, therefore, use our services mostly on business days. As a result, our quarterly revenue is affected by the number of business days in a quarter, with the exception of our services that represent “stand-ready” performance obligations, such as subscriptions to access our curriculum vitae (“CV”) database, which are satisfied over the period of subscription, including weekends and holidays.Public holidays in Russia predominantly fall during the first quarter of each year, which results in lower business activity in that quarter. Accordingly, our first quarter revenue is typically slightly lower than in the other quarters. For example, our first quarter revenue in our Russia segment in 2019 was 21.6%.The number of business days in a quarter may also be affected by calendar layout in a specific year. In addition, the Government of Russia decides on an annual basis how public holidays that occur on weekends will be reallocated to business days throughout the year as a requirement of the Labor Code of Russia. As a result, the number of business days in a quarter may be different in each year (while the total number of business days in a year usually remains the same). Therefore, the comparability of our quarterly results, including with respect to our revenue growth rate, may be affected by this variance. In addition, when a calendar layout in a specific year provides for several consecutive holidays or a small number of business days between holidays or holidays adjacent to weekends, HR managers of our customers may take short vacations, further contributing to the decrease in business activities in these periods.The following table illustrates the number of business days by quarter for the years 2018 to 2020. In 2020 there was one business day more in the second quarter and in the total year and the same number of business days in the first, third and fourth quarters, meaning that the calendar layout in 2020 is substantially the same as in 2019, allowing for good comparability of our quarterly results:On March 25, 2020, in response to the COVID-19 pandemic, the period from March 30, 2020 to May 11, 2020 was announced a ‘period of non-working days’ in Russia. As a result, two and 22 working days formally became non-working in the first and second quarter of 2020, respectively. However, at least some level of business activity was retained during this period, as remote work was encouraged and some sectors such as banking were functioning with limited capacity.Operating costs and expenses (exclusive of depreciation and amortization)Our operating costs and expenses (exclusive of depreciation and amortization) consist primarily of personnel and marketing expenses. Personnel and marketing expenses, in total, accounted for 78.6% and 76.3% of our total operating costs and expenses (exclusive of depreciation and amortization) for the years ended December 31, 2020 and December 31, 2019, respectively. Most of our marketing and personnel expenses are fixed and not directly tied to our revenue.Marketing expenses are more volatile in terms of allocation to quarters and are affected by our decisions on how we realize our strategy in a particular year, which can differ from year to year. Therefore, total marketing expenses as a percentage of revenue for a particular quarter may not be fully representative of the whole year. Personnel expenses are relatively stable over the year. However, they are also affected by other dynamics, such as our hiring decisions. Some costs and expenses, such as share-based compensation or foreign exchange gains or losses, can be significantly concentrated in a particular quarter.As an example, the fourth quarter segment external expenses in our Russia segment in 2019 were 27.1%, of total Russia segment external expenses for the year.Net income and Adjusted EBITDAEven though our revenue remains relatively stable throughout each quarter, seasonal revenue fluctuations, as described above, affect our net income. As a result of revenue seasonality, our profitability in the first quarter is usually lower than in other quarters and for the full year, because our expenses as a percentage of revenue are usually higher in the first quarter due to lower revenue. For example, our Adjusted EBITDA margin was 46.1% for the first quarter of 2019, compared to 50.5% for the full year 2019.Our profitability is also affected by our decisions on timing of expenses, as described above.Contract liabilitiesOur contract liabilities are mostly affected by the annual subscriptions’ renewal cycle in our Key Accounts customer segment. A substantial number of our Key Accounts renew their subscriptions in the first quarter but prepay us in the fourth quarter of a previous year, as per our normal payment terms. As a result, we receive substantial prepayments from our customers in the fourth quarter which causes a consequential increase in our contract liabilities at the end of that quarter. For example, our contract liabilities as of March 31, June 30, September 30, and December 31, 2020 were ₽2,584 million, ₽2,355 million, ₽2,323 million, and ₽2,785 million, respectively.Net cash generated from operating activitiesOur net cash generated from operating activities is affected by seasonal fluctuations in business activity as explained in “Revenue” and by substantial prepayments from our customers (see “Contract liabilities”), as well as by our decisions in regard to timing of expenses (see “Operating expenses (exclusive of depreciation and amortization)”), and to a lesser extent by payment terms provided to us by our largest suppliers, such as TV advertising agencies and others.Net Working CapitalOur Net Working Capital is primarily affected by changes in our contract liabilities as discussed above. As our contract liabilities have usually been highest in the fourth quarter, our Net Working Capital has usually been lowest in the fourth quarter. For example, our Net Working Capital of March 31, June 30, September 30, and December 31, 2020 was ₽ (3,130) million, ₽ (2,865) million, ₽ (3,111) million, and ₽(3,849) million, respectively.Fourth Quarter 2020 ResultsOur revenue was ₽2,450 million for the three months ended December 31, 2020 compared to ₽2,066 million for the three months ended December 31, 2019. Revenue for the three months ended December 31, 2020 increased by ₽383 million, or 18.5%, compared to the three months ended December 31, 2019, primarily due to an increase in our Russia segment.In our Russia segment, Key Accounts revenue increased by 21.8% in the three months ended December 31, 2020. This was mainly on the back of the increase in average revenue per customer (“ARPC”) by 18.2% in Moscow and St. Petersburg, explained by the list price increase in the beginning of 2020 and a reduction in discounts, whilst the average number of units per customer remained relatively flat. We also increased the number of customers in our Key Accounts segment by 7.7% in the three months ended December 31, 2020, mostly in Other regions of Russia.Small and Medium Accounts revenue increased by 20.2% in the three months ended December 31, 2020, due to an increase in the number of paying customers on the back of recovery of business activity after COVID 19. ARPC in this segment remained relatively flat, as the increase in average price per unit from list price increase was offset by the decrease in the average number of units per customer.Our revenue in Other segments remained relatively flat on the back of political unrest in Belarus.The following table breaks down revenue by product for the periods indicated: