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Edited Transcript of HHR.OQ earnings conference call or presentation 16-Sep-19 12:00pm GMT

Q2 2019 HeadHunter Group PLC Earnings Call

Sep 24, 2019 (Thomson StreetEvents) -- Edited Transcript of HeadHunter Group PLC earnings conference call or presentation Monday, September 16, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Dmitry Sergienkov

HeadHunter Group PLC - Chief Strategy Officer of Headhunter LLC

* Grigorii Moiseev

HeadHunter Group PLC - CFO

* Mikhail Zhukov

HeadHunter Group PLC - CEO & Director

* Roman Safiyulin

HeadHunter Group PLC - Head of IR

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Conference Call Participants

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* Ivan Kim

Xtellus Capital Partners, Inc., Research Division - Equities Analyst

* Maria Sukhanova

BCS Financial Group, Research Division - Research Analyst

* Miriam Anuoluwapo Adisa

Morgan Stanley, Research Division - Equity Analyst

* Svetlana Sukhanova

Sberbank CIB Investment Research - Senior Analyst

* Vyacheslav Degtyarev

Goldman Sachs Group Inc., Research Division - Equity Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to today's second quarter 2019 financial results conference call. (Operator Instructions) I must advise you that this conference is being recorded today, Monday, the 16th of September 2019.

And I would now like to hand the conference over to your first speaker today, Roman Safiyulin. Please go ahead, sir.

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Roman Safiyulin, HeadHunter Group PLC - Head of IR [2]

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Hello, everyone, and welcome to HeadHunter Group's Second Quarter and First Half 2019 Earnings Call. On the call today, we have Mikhail Zhukov, our Chief Executive Officer; Grigorii Moiseev, our Chief Financial Officer; and Dmitry Sergienkov, our Chief Strategy Officer. A press release and supplementary slides containing our second quarter and first half 2019 results was issued earlier today, and a copy may be obtained through our website at investor.hh.ru.

Now I will quickly 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 be -- could cause actual results to differ, please see the Risk Factors section in our final prospectus in connection with our initial public offering and filed with the U.S. Securities and Exchange Commission on 9th of May 2019.

During this call, we will 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 into the more directly comparable IFRS measures is provided in the earning release we issued today and the slide presentation, 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.

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Mikhail Zhukov, HeadHunter Group PLC - CEO & Director [3]

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Thank you, Roman. Hello to everyone. Thank you for joining our Second Quarter 2019 Earnings Call. We are pleased to announce another strong set of operational and financial results in the second quarter of 2019 despite the ongoing economic slowdown in Russia. In such environment, we have sustained growth of our client base, showed considerable revenue expansion and boosted profitability, which makes us confident in our ability to execute on the long-term growth strategy. Our recent brand awareness strategy demonstrated very satisfying results. We are now the #1 online recruitment platform not only for white, but also for blue-collar candidates and the gap between us and the nearest competitor continued to widen.

On the back of investment in brand and the product development, we achieved 2 important milestones in this quarter: 40 million CVs in the HeadHunter database and 20 million mobile application downloads. In this context, we're very excited to reiterate our growth and profitability guidance and will strive to live up to market expectation in future.

Now let me turn it to Dmitry to walk you through the key highlights of the second quarter.

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Dmitry Sergienkov, HeadHunter Group PLC - Chief Strategy Officer of Headhunter LLC [4]

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Good afternoon, and thanks for joining us on the call. Overall, as Mikhail mentioned, we continued delivering strong financial and operational performance in the second quarter 2019. Our revenue grew by approximately 26% year-on-year, primarily driven by continued Small and Medium Accounts expansion and monetization enhancement of Key Accounts in Moscow and St. Petersburg. This has led to a 28% revenue growth in the first half 2019.

As noted last time, revenue growth in the second quarter was lower than in the first quarter 2019, due in part to calendar effect. The second quarter of 2019 contained fewer working days and also we saw somewhat lower than usual customer activity in the working days between May holidays, which might be related to the convenient adjacencies of the weekends and overall propensity for the workforce to take additional days off. So obviously, we believe this affected our revenue recognition in May.

Our adjusted EBITDA reached RUB 989 million in the second quarter 2019, representing a 52% margin compared to 48% in the second quarter 2018. This substantial margin expansion was mainly driven by the operating leverage effect on the back of our revenue expansion. As a result, our adjusted EBITDA in the first half 2019 was RUB 1.76 billion, representing a 49% margin compared to 42% in the first half 2018. Capitalizing on our asset-light business model, we continued to drive high cash flow conversions in Q2. And as a result, our CapEx as a percentage of revenue was less than 6%.

Turning the page, we're also continuing to deliver on the key pillars of our long-term growth strategy in Q2. We continued penetrating untapped market segments with high potential such as small and medium businesses in regions of Russia.

Our total estimated customer base increased by 38% year-on-year, and our total customer base in Russia regions increased by 62%, of which Key Accounts in Russia region increased by 20% year-on-year and small and medium businesses in Russia region increased by 65%.

Following an effective price increase since the beginning of the year and increase in usage of our services, Key Accounts ARPC in Moscow and St. Petersburg increased by 17% year-on-year, accelerating from 2018, 2017 full year dynamics. Also, small and medium business ARPC in Moscow, St. Petersburg grew by 2%.

As Mikhail already said, recently we conducted an annual brand awareness survey and would like to share some results with you on Page 5. We always say being on top of mind for candidate job search makes a big difference in our double-sided business model. It's the main source of free high-quality traffic, and which defines platform efficiency in the end. It also drives inbound flows of new customers, predominantly in small and medium category. So we are very pleased with the survey results received this year. Our total top of mind brand awareness increased by 10% from 45% to 55%, making the gap with the closest competitor close to 3x.

It shouldn't surprise that in white-collar space, we are leading the growth by a big margin, that continued expanding this year. What we are most excited about is the result in blue-collar segment, which is an emerging and arguably the most competitive area. And for the first time in our history, we've become the most recognized brand in Russia in this segment as well, where our top of mind brand awareness grew by 9% to 42%. This speaks of our ability to transform the HeadHunter business towards our strategic goal of being truly universal platform for all types of candidates and employers.

Turning to Page 6. In terms of product portfolio, our key product dynamics in general are consistent with what we saw in Q1. We maintain a comfortable share of subscription revenue in our portfolio, approximately 52%. Job postings, by far the highest growing category, driven by first and foremost, our expansion into small and medium accounts as well as by additional monetization of Key Accounts.

As I mentioned before, subscription prices do not always link to the actual consumption, especially when it comes to large clients. Whereas in job posting area, this relationship is stronger and more direct, making it easier for our sales force to upsell existing clients. You can see it from the nice listing fee dynamics in Q2. It will require [some time] monetization changes before we have potential to enjoy the same effect from subscription product upsell and that's definitely our midterm objective.

And now I have Grigorii talk to you about financial performance.

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Grigorii Moiseev, HeadHunter Group PLC - CFO [5]

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Yes, thank you, Dmitry, and hello, everyone. As we mentioned earlier, our consolidated revenue increased by circa 26% year-on-year in the second quarter, reaching approximately RUB 1.9 billion, and 28% year-on-year in the first half of the year, reaching approximately to RUB 3.6 billion.

If we flip to Slide #7, you can see that we have managed to sustain high revenue growth rates both in our Key Accounts and the Small and Medium Accounts segments. Specifically, our Key Account revenue increased by 17% in the second quarter and 19% in the first half of 2019 year-on-year. The growth in the segment in the second quarter was mainly attributable to a 17% increase in average revenue per customer in Moscow and St. Petersburg. This was driven by increase in prices and reducing discount and actually as well by the increase in usage of job postings, meaning the number of postings per customer in this category.

Now our Small and Medium Accounts revenue increased by 31% in the second quarter and 34% in the first half of the year, again, primarily as probably last quarter and actual 2018, primarily due to the growth in the number of these paying Small and Medium Accounts, and specifically by 65% in the second quarter in other regions of Russia.

If we flip a page, in terms of geographic breakdown, we are also -- we're making a very good progress expanding in Russian regions and our customer base in central cities continues to grow as well.

Revenue from regional customers increased by 46% in the second quarter and by 51% in the first half of the year, meaning that the pace of increase of revenue in this regional customers is actually the same as it was in 2018. This increase was mostly driven by the growth in number of regional Small and Medium Accounts and we consider these dynamics to be a good reflection of our strategic focus to further penetrate into the regional customer segment, specifically in Small and Medium Accounts.

Revenue in Moscow and St. Petersburg increased by 17% in the second quarter and 19% in the first half of the year. And as Dmitry mentioned already, that was mostly driven by an increase in monetization of Key Accounts in Moscow and St. Petersburg.

We'll skip the next slide #9, as it was covered before. Moving onto #10, let me give you some more detail on our expenses and margins. Here on this slide, I will comment on the first half of the year numbers, which are at the bottom of the slide, because I think they are more meaningful as spikes and dives of actual particular quarters are balanced out. But you can do your own calculations, of course, for the Q2 as we -- from the data we provide in our press release. So in the first half of 2019, our total operating expenses has increased from circa RUB 1.7 billion to RUB 2 billion or by 21% and they decreased as a percentage of revenue from 61.4% to 57.7% by circa 4 percentage points. Now excluding items that are adjustable on the EBITDA levels, such as share-based compensation and IPO-related expenses, total OpEx in the first half of the year has decreased as a percentage of revenue by 7 percentage point to 51% contributing to the EBITDA expansion.

If we start from the personnel expenses, they have increased by RUB 219 million as you can see from the chart at the bottom or by 26% in the first half of the year, and they reflect, as a percentage of revenue at approximately 30%. Actually excluding the share-based compensation, personnel expenses increased by 22%. And they went down as a percentage of revenue by circa 1.4 percentage points to 28%. The key drivers of growth in personnel expenses, excluding share-based compensation were 92% new people we have hired over the last 12 months, primarily in our development and production teams in Russia and also the indexation of wages effective from the first quarter of 2019.

Now moving onto marketing expense. As you can see, they remained roughly flat in ruble terms, both in second -- in first half of the year and in Q2. And in the first half of the year, they declined as a percentage of revenue by 4% point to 13.4%, which is a bit optical as marketing was very high as a percentage of revenue in the first half of 2018, but we still expect marketing to go down as a percentage of revenue for the full year, not that significant, but probably by 1 percentage point compared to 2018. And other costs are mostly represented by professional services, subcontractor costs, office rent and maintenance expenses as well as professional services. You can see that professional services really surged this quarter by RUB 145 million, more than 100% on the back of increased IPO-related expenses. And excluding the IPO-related expenses, other costs were flat in ruble terms and declined as a percentage of revenue by circa 3 percentage points. And approximately half of that decrease is attributable to implementation of the new standard of accounting for leases, IFRS 16 and the other half is the operating leverage from the back of increasing revenue.

So in conclusion, you can see that all our key expense buckets, excluding the adjustable items have declined as a percentage of revenue in this quarter contributing to the expansion of margin. If we flip a page, you can see that our adjusted EBITDA has reached RUB 989 million for the second quarter of 2019 and RUB 1.7 billion in the first half of the year. Adjusted EBITDA margin was 52% in the Q2 and as compared to 48% in the Q2 of 2018.

In the first half of the year, adjusted EBITDA margin was 49% as compared to 42% in the first half of 2018.

Now moving onto CapEx. Our CapEx in the second quarter of 2019 was RUB 107 million, an increase of RUB 16 million year-on-year. That was primarily due to RUB 37 million of office renovation costs, as we are planning to redesign our office in Moscow in 2019 and have allocated a budget of circa RUB 220 million to RUB 250 million for this purpose in this year.

It's worth mentioning that CapEx adjusted for this investment in office renovation in the second quarter is lower than CapEx in the second quarter of 2018. Net working capital as of June 30, 2019, remained flat as compared to the end of year 2018 as -- because the increase in trade payables related to IPO expenses was offset by the increase of advances we have waived for the services we will receive in the second half of the year.

Income tax expense was RUB 175 million in the second quarter 2019 compared to RUB 89 million in the second quarter 2018. And the key growth driver here was the release of the deferred tax liability last year, which did not occur this year. The effective tax rate in the second quarter of 2018 was 38.8%, that was affected by the IPO expenses, which are mostly nondeductible on the operational level. If we exclude these expenses, effective tax rate would have been 29.5% for the second quarter as compared to 33% in 2018.

Turning to cash generation metrics on the next slide. In the first half of 2019, we generated circa RUB 1 billion from operating activities compared to RUB 618 million in 2018 and the growth was primarily driven by the increase in sales. Net cash used in investing activities was RUB 361 million in the first half of 2019 and the key strength here was the prepayment for the acquisition of 25% ownership interest in Skillaz, the Russian HR IT company.

Net cash used in financing activities was RUB 666 million in the first half of 2019 and the change between the periods was primarily due to operating loan repayment of RUB 270 million to the associate of noncontrolling shareholder.

Our net debt have decreased from circa RUB 3.5 billion to RUB 3.2 billion and our leverage has declined from 1.3x EBITDA to less than 1, mostly due to adjusted EBITDA expansion.

And finally turning to our guidance, we feel very confident to reiterate the outlook for 2019 for revenue growth in the range of 27% to 30% and adjusted EBITDA margin in the range from 48% to 50%.

That concludes our presentation on our side, and we are open for your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And your first question comes from the line of Slava Degtyarev of Goldman Sachs.

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Vyacheslav Degtyarev, Goldman Sachs Group Inc., Research Division - Equity Analyst [2]

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Two questions. So firstly, to the extent possible, can you comment on the pricing strategy for the next year? Do you aim to move to the consumption-based pricing? And maybe there is any early feedback from your Key Accounts with regard to that strategy if you aim to pursue that? And secondly, can you comment on the seasonality of the cost allocation between Q3 and Q4, particularly marking personnel expenses, should we see higher margins in Q3 or in Q4 of this year?

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Dmitry Sergienkov, HeadHunter Group PLC - Chief Strategy Officer of Headhunter LLC [3]

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Thanks, Slava. I'll take the first one on monetization. I would say our biggest theme in monetization is, as you know, aligning value to price and -- or linking to the actual consumption to price. And as you rightly said, we target first of all our big clients, and we believe that they consume our services at the very low price there as a value unit. And for that, we have developed a number of initiatives that we are planning to explore in the coming years. We can't adopt too many changes on client at a time, otherwise, we risk to push their budgeting process into trouble. So must be careful. And in Q3, we sort of usually start talking to our clients about the next year prices and the process usually are very iterative. So based on client feedbacks, we can -- we normally modify our plans. Therefore I don't think we can disclose at this point of time any detailed pricing and tariff updates. I can only tell you that you should not probably expect an extreme jumps in prices driven by certain initiatives to kick off. As we -- generally, we aim for gradual and sustainable monetization strategy. So even crucial changes, like you mentioned, CV database access limits would be implemented in a very smooth and sort of smart way that allows us to sustain high customer growth and contain churn. So on -- in particular, on CV database access, we will move towards linking consumption of candidate information to price. As you can imagine, for some of our clients, this would result in substantial paycheck growth, and therefore, it would require some transition period. Next year, we are planning to start running certain experiments with new monetization model for CV database access. But as I said, sort of full-blown integration would require some time and very neat execution just to make it smooth.

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Grigorii Moiseev, HeadHunter Group PLC - CFO [4]

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Yes, Slava, this is Grigorii. On the cost side, for marketing, we expect more expenses in the second half of the year as a percentage of revenue than in the first half of the year. So you should expect probably around 14% of marketing as a percentage of revenue for the full year results. And in the personnel, it's actually vice versa. We expect that in the second half of the year, personnel costs will be lower as a percentage of revenue than in the first half because of several one-offs we had in Q2. Speaking of the full year results, I guess you can look at maybe 1% or 1.5% decline -- I mean percentage points decline as a percentage of revenue for the full year for the personnel expenses.

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Vyacheslav Degtyarev, Goldman Sachs Group Inc., Research Division - Equity Analyst [5]

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That's clear. But maybe you can somehow comment with regard to the cost allocation between Q3 and Q4 in particular, specifically, as we don't have the comparison for 2018, maybe there is any seasonality in marketing or personnel expenses, particularly between Q3 and Q4?

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Dmitry Sergienkov, HeadHunter Group PLC - Chief Strategy Officer of Headhunter LLC [6]

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Slava, as you know, our cost based out -- specifically our marketing expenses are very discretionary, right, especially when it comes to digital marketing, therefore it may change. It's not sort of cast in stone. We generally have this year a smooth allocation of our marketing expenses throughout the year. For example, last year, we had a significantly high allocation in the first quarter, while this year, it's smoother. But the exact allocation between Q3, Q4 would also depend on the competitive environment. So I don't think we can actually comment very precisely now.

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Operator [7]

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And your next question comes from the line of Miriam Adisa of Morgan Stanley.

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Miriam Anuoluwapo Adisa, Morgan Stanley, Research Division - Equity Analyst [8]

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Two questions from me. Firstly, could you just comment on the current macro environment and what you're seeing in terms of current trading, and any impact the environment could be having on your customer acquisition or if it's changing behavior of certain customers as well? And then also, if you could just comment on what you're currently expecting in terms of macro environment going into the second half in terms of what this implies in your guidance?

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Dmitry Sergienkov, HeadHunter Group PLC - Chief Strategy Officer of Headhunter LLC [9]

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Yes. Thanks, Miriam. I'll take your questions. As you see, we just posted, in our view, a very strong first half results on the backdrop of a slowing economy. So we're generally satisfied with these dynamics and to some extent, it just shows that the business -- our business has a lot of secure growth drivers that are not directly linked to the economic cycle. And also our leadership and our business model based on subscriptions actually helps to smooth out any volatility. Hence, that slowing economy doesn't help us either, we think, but from the economy both on a Key Accounts and a small and medium business revenues, we are actually operating in an environment where -- so the vast majority of our clients either not expanding their headcount at all, right, so mostly we're helping them to replace their existing headcount. Or they're going through very heightened scrutiny, very harsh budgeting process when approving HR budgets, especially expansion budget, right. So from the one hand, it create high necessity and efficient online solutions that we deliver versus traditional word of mouth or some other less-efficient offline channels. On the other hand, it limits our upsell opportunity for add-on products, right, i.e., ARPC developments. So on balance, we believe that in the upward moving economic cycle we'd grow even faster than we demonstrate, but at the same time, we haven't experienced significant impacts on our business. So we're seeing that we're still growing at a very decent rate. So and we do not expect the further economic development to somehow affect our guidance or our expectation for the remaining part of the year.

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Operator [10]

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And your next question comes from the line of Maria Sukhanova of BCS.

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Maria Sukhanova, BCS Financial Group, Research Division - Research Analyst [11]

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Congrats on the results. I have 2 questions. First on the number of your Key Accounts in Moscow and St. Petersburg, could you please comment why there is a small decline? Is it related to -- like is it a trend or it's just like technical thing? And second, if you could comment on what's happened in this antitrust investigation, at stage we are now?

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Dmitry Sergienkov, HeadHunter Group PLC - Chief Strategy Officer of Headhunter LLC [12]

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Thanks, Maria. What you see in Q2 in terms of Key Accounts dynamics in Moscow, St. Petersburg, I would rather call it the optical decrease, which is less than 1% and that is caused by a number of technical factors, including classification of companies between Key Accounts and SMBs when they changing (inaudible) for example, [less site], et cetera. So we -- you don't see it in the 6 months numbers, for instance, and we would expect that this impact should fade away on annual numbers. Speaking of general direction in Key Accounts in Moscow, we deem this to be close to the saturation point and gradually all the growth we see from Moscow in Key Accounts coming from monetization improvement, 70% in Q2. And on the antitrust, a few days ago, that's probably the only update, a few days ago, FAS announced that they dropped the case against Superjob and Rabota, stating absence of violation. Nevertheless, they noted that the case against HeadHunter still continues. So we haven't seen official decrees or can't speculate on the ground of the decision, but anyways, we consider this as a positive sign rather than negative for us.

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Operator [13]

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And your next question comes from the line of Ivan Kim of Xtellus.

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Ivan Kim, Xtellus Capital Partners, Inc., Research Division - Equities Analyst [14]

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Three questions from my side, please. Firstly, on the top of mind brand awareness, which is very strong. You launched the marketing campaign at the same time in September on which I just wanted to understand a bit better, why you need to invest again more even though you are so much ahead of your competition now there? That's the first question.

The second question is on the revenue market share in 2018. Can you share some information on that with us, please?

And then lastly, on the competition in general, so what do you see as going on in the competitive field with, I don't know, the latest development with Sberbank acquiring Rabota with new owner of Workey, what Yandex Talent do? Any color on what do you see at the moment as the biggest competitive threat would be very helpful.

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Dmitry Sergienkov, HeadHunter Group PLC - Chief Strategy Officer of Headhunter LLC [15]

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Thanks, Ivan. Maybe I will deal with the second one. It's the easiest one and simplest one. We do not know numbers of revenue for our competitors. Unfortunately, none of them really report, disclose, therefore I can't comment on the revenue market share. So in terms of we are very satisfied with the operating statistics that you see, operational KPIs, like sharing job postings and CVs, et cetera, right. So this could be used as a proxy, but I wouldn't probably speculate on the revenue side here.

Then in terms of top of mind brand awareness, we are actually analyzing our marketing spend across all Russia and we're assessing the cost of acquisition of new candidates very rigorously and regularly, and we see that actually, the cost of acquisition is not growing that fast. So we see very good returns on marketing campaigns, both offline and in digital. And we saw in other markets when the top of mind brand awareness was even higher and the gap with the second player was even bigger. And this is what we aim for because we believe that this really drives the key competitive advantage of our business, [chip] traffic and also this results in a very low acquisitional cost for new clients, SMBs. And as you saw from our result, this is the biggest growth driver at the moment. Therefore as we actually drive our brand awareness across Russia, we would just enjoy lower and lower and a cheaper acquisition of new clients. Therefore, we don't really see that -- well, first of all, if you compare that last year, we decreased slightly marketing spend as a percentage of revenue, but we don't think that we should actually decrease it significantly at this point of time.

And then on the competition, I would say that there hasn't been any significant changes to the competitive environment since I last spoke. As I said, we're pleased with our own dynamics, operating financial and hard to compare directly with the peers. So with regard to certain competitors you mentioned, we notice some high activity from Workey, InMail and in Android store, but at the same time we're confidently holding leadership in number of downloads by a big margin and also, we defended our top posted position in store ranking. So we saw competitors more active especially in Q3 on TV and digital media, for example. It doesn't surprise us because we're obviously entering a new business season and many companies allocate higher budget to Q3.

So I would say that on balance, there's nothing that would force us to reconsider our additional tactics and budget for the year. So everything within expectations.

And on Sberbank-Rabota, again, I don't think they disclosed any incremental meaningful information. As far as we understand, they tried to upgrade their significantly aged platform and that's their main focus at the moment. And we didn't witness any significant changes or improvements in their operating metrics or any high scale marketing activity as of yet for -- nothing they should have -- no major update here as well.

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Operator [16]

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And your next question comes from the line of Sveta Sukhanova of Sberbank.

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Svetlana Sukhanova, Sberbank CIB Investment Research - Senior Analyst [17]

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Congratulations on strong results. My question would be on effective tax rate. As far as I recall, you were guiding for about 27.5% effective tax rate for the full 2019. It was higher than 40% in Q1 and slightly below 40% in Q2. So is that kind of guidance, 27.5% is still on track? And my first question here. And second, would you please elaborate about the reasons for high ETR in the second quarter? And how your Russian tax residency has affected your ETR in the second quarter?

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Grigorii Moiseev, HeadHunter Group PLC - CFO [18]

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Yes. Well, Svetlana, thanks. As I said, I think before we have substantial IP-related costs in Q2, which are nondeductible just because they sort of -- it's not possible to relate them to the operating profits of HeadHunter, right. So if we exclude these IPO-related expenses which are obviously one-off, the effective tax rate is 29.5% and that is actually lower than 33% in 2018. So we frankly are on track in this guidance we gave on the last call. And we expect to achieve 27%, 28% in -- for the full year results, excluding the one-off IPO-related expenses.

And also on the Russian tax residency, it's actually not increasing the effective tax rate, but on the contrary, because the applicable tax rate for dividend payments in our group is now 0%, that actually decreases the effective tax rate. So it's already accounted for in our guidance. If not for this change, it would be, well, probably 15% higher as this is the applicable rate for the dividend distributions from Russia to Cyprus Holding Company.

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Svetlana Sukhanova, Sberbank CIB Investment Research - Senior Analyst [19]

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Of course, it's very clear for me that Russian residency decreases effective tax rate. My question was more if it had any kind of effect on you in the second quarter, Grigorii?

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Grigorii Moiseev, HeadHunter Group PLC - CFO [20]

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I see. Well, not in terms of any, I don't know, particular amounts we would include in our P&L in income tax. But as we do not include this 15% tax rate on dividends anymore, and in the Q2 as well, of course, it had the impact on the Q2 numbers.

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Operator [21]

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There are no further questions at this time.

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Mikhail Zhukov, HeadHunter Group PLC - CEO & Director [22]

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Thanks, everyone.

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Operator [23]

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Ladies and gentlemen, that does conclude your conference for today. Thank you for participating, and you may now disconnect.