6-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO SECTION 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of June 2019

Commission File Number: 001-38882

 

 

HeadHunter Group PLC

(Exact Name of Registrant as Specified in Its Charter)

 

 

Dositheou 42,

Strovolos, 2028, Nicosia

Cyprus

+357-22-418200

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

On June 4, 2019, HeadHunter Group PLC will hold a conference call regarding its unaudited financial results for the first quarter ended March 31, 2019. A copy of the related press release is furnished as Exhibit 99.1 hereto.

 

 

 


Exhibit

No.

  

Description

99.1    Press Release of HeadHunter Group PLC, dated June 4, 2019


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    HeadHunter Group PLC
Date: June 4, 2019     By:  

/s/ Mikhail Zhukov

      Mikhail Zhukov
      Chief Executive Officer
EX-99.1

Exhibit 99.1

HeadHunter Group PLC Announces First Quarter 2019 Financial Results

NICOSIA, Cyprus, June 4, 2019 – HeadHunter Group PLC (Nasdaq: HHR) announced today its financial results for the quarter ended March 31, 2019. As used below, references to “we,” “our,” “us” or the “Company” or similar terms shall mean HeadHunter Group PLC.

First Quarter 2019 Financial and Operational Highlights

 

(in millions of RUB(1) and USD(2))

   Three months
ended
March 31,
2019
    Three months
ended
March 31,
2018
    Change(3)     Three months
ended
March 31,
2019
 
   RUB     RUB    

 

    USD(4)  

Revenue

     1,678       1,274       31.8     25.9  

Russia Segment Revenue

     1,556       1,189       30.8     24.0  

Net Income (Loss)

     239       (14     n/m       3.7  

Net Income Margin, %

     14.2     —         n/m    

Adjusted EBITDA

     774       440       75.7     12.0  

Adjusted EBITDA Margin, %

     46.1     34.6     11.5 ppts    

Adjusted Net Income

     373       131       184.7     5.8  

Adjusted Net Income Margin, %

     22.2     10.3     11.9 ppts    

 

  (1)

“RUB” or “P” denote Russian Ruble.

  (2)

“USD” or “$” denote U.S. Dollar.

  (3)

Percentage movements throughout the document may differ due to rounding.

  (4)

Dollar translations 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 March 31, 2019 (RUB 64.7347 to USD 1).

 

   

Revenue up 31.8% primarily due to the increase in revenue in our Russia segment. Russia segment revenue up 30.8% mainly driven by the increase in the number of paying customers in Small and Medium Accounts and the increase in average revenue per customer (“ARPC”) in Key Accounts in Moscow and St. Petersburg.

 

   

Net Income up to P239 million from P(14) million net loss driven by the increase in revenue and timing of our marketing expenses, offset by the increase in income tax due to the increase in taxable profit.

 

   

Adjusted EBITDA up 75.7% and Adjusted EBITDA Margin up to 46.1% from 34.6% primarily due to the increase in revenue and timing of our marketing expenses.

 

   

Adjusted Net Income up 184.7% and Adjusted Net Income Margin up to 22.2% from 10.3% driven by the increase in revenue and timing of our marketing expenses, offset by the increase in income tax due to the increase in taxable profit.

 

(in millions of RUB and USD)

   As of March 31,
2019
     As of December 31,
2018
     Change     As of March 31,
2019
 
   RUB      RUB     

 

    USD  

Net Working Capital

     (2,672      (2,623      1.9     (41.3

Net Debt

     3,587        3,577        0.3     55.4  

Net Debt to Adjusted EBITDA(1) Ratio

     1.1x        1.3x       

 

  (1)

For the purposes of calculation of this ratio as of March 31, 2019, Adjusted EBITDA is calculated on the last twelve months basis.

 

1


   

Net Working Capital as of March 31, 2019 remained flat compared to December 31, 2018, as the increase in contract liabilities over the first quarter of 2019 due to an increase in sales was offset by a decrease in contract liabilities from the utilization of prepayments for annual subscriptions received from our customers in the fourth quarter of 2018.

 

   

Net Debt remained flat as net cash generated from operating activities of P375 million was offset by the acquisition of a 25.01% ownership interest in LLC “Skillaz” for P232 million and capital expenditures.

 

   

Net Debt to Adjusted EBITDA Ratio declined from 1.3x to 1.1x due to an increase in Adjusted EBITDA.

“We are pleased with the operational and financial results that the Company has achieved in the first quarter of 2019,” said Mikhail Zhukov, CEO of HeadHunter Group PLC.

“HeadHunter Group’s strategy is to drive growth in Russian regions, as well as in Small and Medium Accounts. To support these priorities, the Company has recently carried out significant organizational capability upgrades. We are happy to see strong customer base expansion in both areas, while at the same time, increasing ARPC across all customer segments.

We continue making significant investments into our brand and into driving new users to our platform, which now holds over 38 million CVs. We are also introducing new solutions, allowing our clients to source candidates outside of our main platform, which gives our clients access to even more relevant candidates and makes recruiting through HeadHunter even more efficient.

The Company is delivering on its ambitious technology road map, with a particular focus on mobile platforms. In the first quarter of 2019, over 77% of our traffic came via mobile devices, and more than half of our traffic came from visitors who only used our mobile platform.

We are happy to kick off our life as a public company with this strong set of quarterly results, and we are excited to explore the opportunity ahead of us to the benefit of our shareholders.”

Operating Segments

For 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.

Seasonality

Revenue

We generally do not experience substantial seasonal fluctuations in demand for our services and our revenue remains relatively stable throughout each quarter. However, as our customers are predominately businesses and use our services mostly on business days, 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 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 the 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 2017 and 2018 was 21.1% and 20.9%, respectively, of total Russia segment revenue for the year.

 

2


The number of business days in a quarter may also be affected by calendar layout in a specific year; also, 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 the year would remain the same. This affects our revenue in a particular quarter, and year-on-year revenue growth rate for that quarter, if the allocation of business days in the comparable period was different. In addition, when a calendar layout in a specific year provides for several consecutive holidays, or 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 2017 to 2019. In 2019, the total number of working days is the same as in 2018, but there is 1 business day more, 2 business days less and 1 business day more in the first quarter, second quarter and third quarter, respectively, and the same number of business days in the fourth quarter:

 

     Number of business
days
     As % of total business days
per year
 
     2019      2018      2017      2019     2018     2017  

First quarter

     57        56        57        23.1     22.7     23.1

Second quarter

     59        61        61        23.9     24.7     24.7

Third quarter

     66        65        65        26.7     26.3     26.3

Fourth quarter

     65        65        64        26.3     26.3     25.9

Total Year

     247        247        247        100.0     100.0     100.0

Therefore, in the first quarter of 2019, we saw a positive impact from the additional business days in the quarter as compared to the first quarter of 2018. However, an opposite effect is expected in the second quarter of 2019 as compared to the second quarter of 2018.

Operating costs and expenses (exclusive of depreciation and amortization)

Most of our expenses are not linked directly to our revenue. Our operating costs and expenses (exclusive of depreciation and amortization) consist primarily of personnel and marketing expenses. Personnel and marketing expenses cumulatively accounted for 77.4% and 78.9% of our total operating costs and expenses (exclusive of depreciation and amortization) for the years ended December 31, 2018 and December 31, 2017, respectively.

Marketing expenses are more volatile in terms of allocation to quarters, which is affected by the decisions we make about 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. Costs and expenses, such as share-based compensations or foreign exchange gains or losses, can be significantly concentrated in a particular quarter.

The first quarter segment external expenses in our Russia segment in 2017 and 2018 were 23.0% and 25.5%, respectively, of the total Russia segment external expenses for the year.

Net income and Adjusted EBITDA

Even though our revenue remains relatively stable throughout each quarter, the seasonal revenue fluctuations 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 percentage of revenue are usually higher in first quarter due to lower revenue. For example, our Adjusted EBITDA Margin was 36.4% for the first quarter of 2018, compared to 46.7% for the full year 2018. Our profitability is also affected by our decisions on timing of expenses, as described above.

 

3


Contract liabilities

Our contract liabilities are 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 and prepay 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 and our contract liabilities usually increase substantially higher during the fourth quarter. For example, our contract liabilities as of March 31, June 30, September 30 and December 31, 2018 were P1,607 million, P1,548 million, P1,553 million and P2,073 million, respectively.

Net cash generated from operating activities

Our net cash generated from operating activities is affected by seasonal fluctuations of 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 capital

Our net working capital is primarily affected by changes in our contract liabilities as discussed above. As our contract liabilities are usually higher in the fourth quarter, our net working capital is usually the lowest in the fourth quarter. For example, our net working capital of March 31, June 30, September 30 and December 31, 2018 was P(2,044) million, P(2,048) million, P(2,036) million and P(2,623) million, respectively.

First Quarter 2019 Results

Our revenue was P1,678 million for the three months ended March 31, 2019 compared to P1,274 million for the three months ended March 31, 2018. Revenue for the three months ended March 31, 2019 increased by P405 million, or 31.8%, compared to the three months ended March 31, 2018, primarily due to the increase in revenue in our Russia segment. Revenue in our Russia segment was P1,556 million for the three months ended March 31, 2019 compared to P1,189 million for the three months ended March 31, 2018. Revenue in our Russia segment increased by P367 million, or 30.8%. This was primarily due to the growth in the number of paying Small and Medium Accounts by 73.8% in the other regions of Russia and by 15.9% in Moscow and St. Petersburg and the increase in ARPC in Key Accounts in Moscow and St. Petersburg by 17.2%, driven by price increases and an increase in the usage of our services by this type of customer.

The following table breaks down revenue by product.

 

     For the three months ended
March 31,
 
(in thousands of RUB)    2019      2018      Change  

Bundled Subscriptions

     503,885        421,398        19.6

CV Database Access

     385,647        302,784        27.4

Job Postings

     641,871        435,085        47.5

Other value-added services

     147,034        114,409        28.5
  

 

 

    

 

 

    

 

 

 

Total revenue

     1,678,437        1,273,676        31.8
  

 

 

    

 

 

    

 

 

 

 

4


The following table sets forth the revenue broken down by type of customer and region.

 

     For the three months ended
March 31,
 
(in thousands of RUB)    2019      2018      Change  

Key Accounts in Russia

        

Moscow and St. Petersburg

     437,363        364,083        20.1

Other regions of Russia

     133,739        107,761        24.1
  

 

 

    

 

 

    

 

 

 

Subtotal

     571,102        471,844        21.0
  

 

 

    

 

 

    

 

 

 

Small and Medium Accounts in Russia

        

Moscow and St. Petersburg

     567,219        455,813        24.4

Other regions of Russia

     336,770        194,155        73.5
  

 

 

    

 

 

    

 

 

 

Subtotal

     903,989        649,968        39.1
  

 

 

    

 

 

    

 

 

 

Foreign customers of Russia segment

     14,108        10,670        32.2

Other customers in Russia

     66,316        56,464        17.4
  

 

 

    

 

 

    

 

 

 

Total for “Russia” operating segment

     1,555,515        1,188,946        30.8

Other segments

     122,922        84,730        45.1
  

 

 

    

 

 

    

 

 

 

Total revenue

     1,678,437        1,273,676        31.8
  

 

 

    

 

 

    

 

 

 

 

5


The following table sets forth the number of paying customers and ARPC, which we calculate by dividing revenue by the number of paying customers for the period, for the periods indicated:

 

     For the three months ended
March 31,
 
     2019      2018      Change  

Number of paying customers

        

Russia segment

        

Key Accounts

        

Moscow and St. Petersburg

     4,694        4,581        2.5

Other regions of Russia

     4,444        3,580        24.1
  

 

 

    

 

 

    

 

 

 

Key Accounts, total

     9,138        8,161        12.0

Small and Medium Accounts

        

Moscow and St. Petersburg

     58,999        50,904        15.9

Other regions of Russia

     69,120        39,775        73.8
  

 

 

    

 

 

    

 

 

 

Small and Medium Accounts, total

     128,119        90,679        41.3

Foreign customers of Russia segment

     1,622        856        89.5
  

 

 

    

 

 

    

 

 

 

Total for “Russia” operating segment

     138,879        99,696        39.3

Other segments, total

     10,918        7,365        48.2
  

 

 

    

 

 

    

 

 

 

Total number of paying customers

     149,797        107,061        39.9
  

 

 

    

 

 

    

 

 

 

ARPC (in RUB)

        

Russia segment

        

Key Accounts

        

Moscow and St. Petersburg

     93,175        79,477        17.2

Other regions of Russia

     30,094        30,101        0.0

Key Accounts, total

     62,497        57,817        8.1

Small and Medium Accounts

        

Moscow and St. Petersburg

     9,614        8,954        7.4

Other regions of Russia

     4,872        4,881        (0.2 )% 

Small and Medium Accounts, total

     7,056        7,168        (1.6 )% 

Other segments, total

     11,259        11,504        (2.1 )% 

 

   

Our customer base has continued to expand as penetration of online recruitment in Russian regions outside of Moscow and St. Petersburg and Small and Medium Accounts continues to grow.

 

   

In Key Accounts in Moscow and St. Petersburg, we increased ARPC by 17.2% in the first quarter of 2019, driven by the increase in prices (e.g., 10% on average for subscriptions and 18% for a single “Standard” type job posting), the increase in usage of job postings by this category of customers and reducing discounts. ARPC in other customer segments was affected by price increases discussed above and the increased usage of services per customer, offset by the accelerated intake of new customers who, as evidenced by historical statistics, initially have a lower ARPC. For example, in Other regions of Russia, in Key Accounts and Small and Medium Accounts, ARPC remained flat; however, the ARPC of customers acquired before January 1, 2018 in these customer segments has increased by 12% and 18%, respectively.

 

6


Operating Costs and Expenses (exclusive of depreciation and amortization)

Operating costs and expenses (exclusive of depreciation and amortization) were P934 million for the three months ended March 31, 2019 compared to P894 million for the three months ended March 31, 2018. Operating costs and expenses (exclusive of depreciation and amortization) increased by P39 million, or 4.4%, compared to the three months ended March 31, 2018.

 

(in thousands of RUB)    For the three months ended March 31,  
   2019      2018      Change  

Personnel expenses

     480,161        425,138        12.9

Marketing expenses

     257,745        286,150        (9.9 )% 

Other general and administrative expenses:

        

Subcontractors and other expenses related to provision of services

     44,875        44,888        0.0

Office rent and maintenance

     44,335        53,742        (17.5 )% 

Professional services

     80,851        62,187        30.0

Hosting and other website maintenance

     8,712        6,638        31.2

Other operating expenses

     16,861        15,579        8.2
  

 

 

    

 

 

    

 

 

 

Operating costs and expenses (exclusive of depreciation and amortization)

     933,540        894,322        4.4
  

 

 

    

 

 

    

 

 

 

Our operating expenses were flat or decreased as percentage of revenue for the three months ended March 31, 2019 compared to the three months ended March 31, 2018:

 

     For the three months ended
March 31,
 
     2019     2018     Change  

Personnel expenses

     28.6     33.4     (4.8 )% 

Marketing expenses

     15.4     22.5     (7.1 )% 

Other general and administrative expenses:

      

Subcontractors and other expenses related to provision of services

     2.7     3.5     (0.8 )% 

Office rent and maintenance

     2.6     4.2     (1.6 )% 

Professional services

     4.8     4.9     (0.1 )% 

Hosting and other website maintenance

     0.5     0.5     (0.0 )% 

Other operating expenses

     1.0     1.2     (0.2 )% 
  

 

 

   

 

 

   

 

 

 

Operating costs and expenses (exclusive of depreciation and amortization)

     55.6     70.2     (14.6 )% 
  

 

 

   

 

 

   

 

 

 

Personnel expenses

Personnel expenses increased by P55 million, or 12.9%, for the three months ended March 31, 2019 compared to the three months ended March 31, 2018. The main factors that contributed to the increase in personnel expenses are: (i) hiring 107 people during the second, third and fourth quarters of 2018 and the first quarter of 2019 primarily in our development, sales and production teams in our Russia segment; and (ii) the indexation of wages in the first quarter of 2019. These changes were partially offset by the decrease of employee expenses under our management incentive agreement.

 

7


Marketing expenses

Marketing expenses decreased by P28 million, or 9.9%, for the three months ended March 31, 2019 compared to the three months ended March 31, 2018. The decrease in marketing expenses was primarily due to the decrease in TV marketing expenses as the result of a lower share of the total annual marketing budget allocated to the first quarter this year.

Other general and administrative expenses

Our office rent and maintenance expenses decreased by 17.5% to P44 million for the three months ended March 31, 2019 compared to the three months ended March 31, 2018. At January 1, 2019, we initially adopted IFRS 16, the new accounting standard that introduced a single, on-balance sheet accounting model for lessees. As a result, we, as a lessee, have recognized right-of-use assets representing our rights to use the underlying assets and lease liabilities representing our obligation to make lease payments. We have applied IFRS 16 using the modified retrospective approach. Accordingly, the comparative information presented for 2018 has not been restated and is presented, as previously reported, under IAS 17 and related interpretations. We recognized P18,455 thousand of depreciation charges and P8,777 thousand of interest costs from leases in the first quarter of 2019.

Our professional services increased by 30.0% to P81 million for the three months ended March 31, 2019 as a result of increased IPO-related expenses.

Net foreign exchange loss

Net foreign exchange loss was P23 million for the three months ended March 31, 2019, an increase of P22 million, compared to a P1 million loss for the three months ended March 31, 2018. The net foreign exchange loss for the three months ended March 31, 2019 reflects the appreciation of the Russian ruble to U.S. Dollar during the first quarter of 2019, as we decided in 2018 to convert substantial Russian Ruble-denominated cash amount into U.S. Dollar in light of a dividend we were considering to pay at that time, which was not paid.

Depreciation and amortization

Depreciation and amortization were P165 million for the three months ended March 31, 2019 compared to P144 million for the three months ended March 31, 2018. Depreciation and amortization increased by P21 million, or 14.6%, primarily due to a depreciation charge of P18 million related to right-of-use assets recognized as of January 1, 2019 under the new standard IFRS 16 “Leases.” (See “Other general and administrative expenses”).

Finance income and costs

Finance income was P26 million for the three months ended March 31, 2019 compared to P19 million for the three months ended March 31, 2018. Finance income increased by P7 million, or 34.6%, due to an increase in available cash balances that were deposited.

Finance costs were P168 million for the three months ended March 31, 2019, and they remained flat compared to P166 million for the three months ended March 31, 2018.

 

8


Income tax expense

Income tax expense was P177 million for the three months ended March 31, 2019 compared to P102 million for the three months ended March 31, 2018. The increase of P75 million was primarily due to the increase of profit before income tax from P88 million in the three months ended March 31, 2018 to P416 million in the three months ended March 31, 2019.

The decrease in the effective tax rate from 115.4% for the three months ended March 31, 2018 to 42.5% for the three months ended March 31, 2019 was caused mainly by the decrease in the proportion of non-deductible expenses and an unrecognized deferred tax asset relative to the profit before income tax. The increase of the effective tax rate from 33.0% for the year ended December 31, 2018 to 42.5% for the three months ended March 31, 2019 was primarily due to a tax expense associated with our tax restructuring.

Net income (loss)

Net income was P239 million for the three months ended March 31, 2019 compared to P(14) million net loss for the three months ended March 31, 2018. Net income increased by P252 million compared with the three months ended March 31, 2018, primarily due to the reasons described above.

Adjusted EBITDA

Adjusted EBITDA was P774 million for the three months ended March 31, 2019 compared to P440 million for the three months ended March 31, 2018, and it increased by P333 million primarily due to the increase in revenue, offset by the increase in operating expenses (exclusive of depreciation and amortization) and the net foreign exchange loss.

Adjusted Net Income

Adjusted Net Income was P373 million for the three months ended March 31, 2019 compared to P131 million for the three months ended March 31, 2018. Adjusted Net Income increased by P242 million compared with the three months ended March 31, 2018, primarily due to the reasons described above.

Cash Flows

Net cash generated from operating activities

For the three months ended March 31, 2019, net cash generated from operating activities was P375 million compared to P175 million for the three months ended March 31, 2018. The change between the periods of P200 million was primarily driven by an increase in sales, which resulted in an increase in net income (adjusted for non-cash items and items not affecting cash flow from operating activities) and an increase in trade payables (primarily due to increase in payables to employees and suppliers). These changes were partially offset by an increase in income taxes paid due to an increased tax base and a decrease in the movement of contract liabilities in the three months ended March 31, 2019 as compared to three months ended March 31, 2018.

Net cash used in investing activities

For the three months ended March 31, 2019, net cash used in investing activities was P290 million compared to P52 million for the three months ended March 31, 2018. The change between the periods of P238 million was primarily due to the acquisition of a 25.01% ownership interest in LLC “Skillaz.”

 

9


Net cash used in financing activities

For the three months ended March 31, 2019, net cash used in financing activities was P574 million compared to P229 million for the three months ended March 31, 2018. The change between these periods was primarily due to a loan repayment of P270 million to the associate of a non-controlling shareholder and an increase in the bank loan repayments from P200 million in the three months ended March 31, 2018 to P245 million in the three months ended March 31, 2019 in accordance with the repayment schedule.

Capital Expenditures

Our additions to property and equipment and intangible assets in the three months ended March 31, 2019 were P85 million, an increase of P16 million compared to P69 million for the three months ended March 31, 2018, primarily due to P34 million in office renovation costs in three months ended March 31, 2019, as we are planning to redesign our offices in Moscow and Yaroslavl in 2019 and have allocated a budget of P220 to P250 million for this purpose in this year, partially offset by P41 million acquisition of Job.ru CV database from Pronto Media Holding LLC in the three months ended March 31, 2018.

Financial Outlook

The following forward-looking statement reflects our expectations as of June 4, 2019:

Based on our recent performance, we currently expect our revenue to grow in the range of 27% to 30% year-over-year and our Adjusted EBITDA Margin to be between 48% and 50% for the year 2019.

This outlook reflects our current view based on the trends that we see at this time and may change in light of market and economic developments in the business sectors and jurisdictions in which we operate.

Dividend

Our Board of Directors has approved dividend of $0.36 per share, representing approximately 75% of our Adjusted Net Income for the year ended December 31, 2018. The dividend record date is June 14, 2019, and we intend to pay the dividend on or before July 19, 2019.

We are in the process of changing the strategic and day-to-day place of management of HeadHunter Group PLC from Cyprus to Russia, which will result in obtaining a Russian tax residency status. As a Russian tax resident, we will be subject to the Russian Tax Code requirements and withhold a tax on dividends at a generally applicable rate of 15%.

A holder of our ADSs may apply for a lower tax rate under a double taxation treaty (“DTT”) in effect, signed between a country of a shareholder and the Russian Federation. In order to apply for a lower tax rate, a shareholder will need to provide us with certain documents confirming ownership of our ADSs, its’ tax residence and other documents. We aim to advise you further in regard to dividend taxation procedures ahead of the payment date. Provisions of a DTT may include limitations on application of DTT benefits, which you shall clarify with your tax advisor.

Conference Call Information

We will host a conference call and webcast to discuss our results at 8:00 a.m. U.S. Eastern Time (3:00 p.m. Moscow time, 1:00 p.m. London time) the same day.

First Quarter 2019 Financial Results Conference Call

Tuesday, June 4th, 2019

8:00 a.m. U.S. Eastern Time (3:00 p.m. Moscow time, 1:00 p.m. London time)

To participate in the conference call, please use the following details:

 

  Standard International:

   +44 (0) 2071 928000

  UK (local):

   +44 (0) 844 571 8892

  UK (toll free):

   0800 376 7922

  USA (local):

   +1631 510 7495

  USA (toll free):

   1866 966 1396

  Russian Federation (local):

   +7 495 249 9849

  Russian Federation (toll free):

   810 800 235 75011

  Conference ID:

   6777247

 

10


Webcast:

https://edge.media-server.com/m6/p/hdiq5op3

About HeadHunter Group PLC

HeadHunter is the leading online recruitment platform in Russia and CIS focused on providing comprehensive talent acquisition services, such as access to extensive CV database, job postings (jobs classifieds platform) and a portfolio of value-added services.

 

11


USE OF NON-IFRS FINANCIAL MEASURES

To supplement our condensed consolidated interim financial information, which is prepared and presented in accordance with IAS 34 Interim Financial Reporting, we present the following non-IFRS (denotes the International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”)) financial measures: Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin and Adjusted Net Income Margin. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with IFRS. For more information on these non-IFRS financial measures, please see the tables captioned “Reconciliations of non-IFRS financial measures to the nearest comparable IFRS measures,” included following the accompanying financial tables. We define the various non-IFRS financial measures we use as follows:

 

   

Adjusted EBITDA as net income (loss) plus: (1) income tax expense; (2) net interest income or expense; (3) depreciation and amortization; (4) transaction costs related to business combinations; (5) gain on the disposal of subsidiary; (6) expenses related to equity-settled awards and (7) IPO-related costs.

 

   

Adjusted Net Income as net income (loss) plus: (1) transaction costs related to the acquisition of the outstanding equity interests of Headhunter FSU Limited by HeadHunter Group PLC from Mail.Ru Group Limited (the “Acquisition”); (2) gain on the disposal of subsidiary; (3) transaction costs related to the disposal of subsidiary; (4) amortization of intangible assets recognized upon the Acquisition; (5) the tax effect of the adjustment described in (4) and (6) (gain)/loss related to the remeasurement and expiration of a tax indemnification asset.

 

   

Adjusted EBITDA Margin as Adjusted EBITDA divided by revenue.

 

   

Adjusted Net Income Margin as Adjusted Net Income divided by revenue.

Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin and Adjusted Net Income Margin are used by our management to monitor the underlying performance of the business and its operations. Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin and Adjusted Net Income Margin are used by different companies for differing purposes and are often calculated in ways that reflect the circumstances of those companies. You should exercise caution in comparing Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin and Adjusted Net Income Margin as reported by us to Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin and Adjusted Net Income Margin as reported by other companies. Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin and Adjusted Net Income Margin are unaudited and have not been prepared in accordance with IFRS or any other generally accepted accounting principles.

Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin and Adjusted Net Income Margin are not measurements of performance under IFRS or any other generally accepted accounting principles, and you should not consider Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin or Adjusted Net Income Margin as alternatives to net income, operating profit or other financial measures determined in accordance with IFRS or other generally accepted accounting principles. Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin and Adjusted Net Income Margin have limitations as analytical tools, and you should not consider them in isolation. Some of these limitations are:

 

   

Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin and Adjusted Net Income Margin do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments,

 

   

Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin and Adjusted Net Income Margin do not reflect changes in, or cash requirements for, our working capital needs, and

 

12


   

the fact that other companies in our industry may calculate Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin and Adjusted Net Income Margin differently than we do, which limits their usefulness as comparative measures.

The tables at the end of this release provide detailed reconciliations of each non-IFRS financial measure we use to the most directly comparable IFRS financial measure.

A reconciliation of our Adjusted EBITDA Margin guidance to the most directly comparable IFRS financial measure cannot be provided without unreasonable efforts and is not provided herein because of the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including depreciation and amortization, expenses related to equity-settled awards and the other adjustments reflected in our reconciliation of historical non-IFRS financial measures, the amounts of which, could be material.

 

13


FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this release that do not relate to matters of historical fact should be considered forward-looking statements, including, without limitation, statements regarding our expected financial performance and operational performance for the fiscal year ending December 31, 2019, as well as statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “forecast,” “estimate,” “may,” “should,” “anticipate” and similar statements of a future or forward-looking nature. These forward-looking statements are based on management’s current expectations. Actual results may differ materially from the results predicted or implied by such statements, and our reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted or implied by such statements include, among others, significant competition in our markets, our ability to maintain and enhance our brand, our ability to improve our user experience and product offerings, our ability to respond to industry developments, our reliance on Russian Internet infrastructure, macroeconomic and global geopolitical developments affecting the Russian economy or our business, changes in the political, legal and/or regulatory environment, privacy and data protection concerns and our need to expend capital to accommodate the growth of the business, as well as those risks and uncertainties included under the caption “Risk Factors” in our final prospectus pursuant to Rule 424B filed with the SEC on May 9, 2019 as such factors may be updated from time to time in our other filings with the U.S. Securities and Exchange Commission (“SEC”), which is on file with the SEC and is available on the SEC website at www.sec.gov. In addition, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements that we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this release are inherently uncertain and may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Accordingly, you should not rely upon forward-looking statements as predictions of future events. In addition, the forward-looking statements made in this release relate only to events or information as of the date on which the statements are made in this release. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.

 

14


Unaudited Condensed Consolidated Interim Statement of Income (Loss) and Comprehensive Income (Loss)

For the three months ended

(in thousands of RUB and USD, except per share amounts)

 

     March 31,
2018*
    March 31,
2019
    March 31,
2019
 
     RUB     RUB     USD  

Revenue

     1,273,676       1,678,437       25,928  

Operating costs and expenses (exclusive of depreciation and amortization)

     (894,322     (933,540     (14,421

Depreciation and amortization

     (144,032     (165,104     (2,550
  

 

 

   

 

 

   

 

 

 

Operating income

     235,322       579,793       8,956  

Finance income

     19,468       26,207       405  

Finance costs

     (165,866     (167,830     (2,593

Net foreign exchange loss

     (674     (22,641     (350
  

 

 

   

 

 

   

 

 

 

Profit before income tax

     88,250       415,529       6,419  

Income tax expense

     (101,809     (176,782     (2,731
  

 

 

   

 

 

   

 

 

 

Net (loss)/income for the period

     (13,559     238,747       3,688  

Attributable to:

      

Owners of the Company

     (25,115     209,391       3,235  

Non-controlling interest

     11,556       29,356       453  

Comprehensive income/(loss)

      

Items that are or may be reclassified subsequently to profit or loss:

      

Foreign currency translation differences

     9,292       (23,925     (370
  

 

 

   

 

 

   

 

 

 

Total comprehensive (loss)/income, net of tax

     (4,267     214,822       3,318  
  

 

 

   

 

 

   

 

 

 

Attributable to:

      

Owners of the Company

     (16,256     186,770       2,885  

Non-controlling interest

     11,989       28,052       433  

(Loss)/earnings per share

      

Basic and diluted (in Russian Roubles per share)

     (0.50     4.19       0.06  

 

* 

The Group has initially applied IFRS 16 at January 1, 2019, using the modified retrospective approach. Under the approach, comparative information is not restated.

 

15


Unaudited Condensed Consolidated Interim Statement of Financial Position

As at

 

(in thousands of RUB and USD)    December 31,
2018 *
    March 31,
2019
    March 31,
2019
 
   RUB     RUB     USD  

Non-current assets

      

Goodwill

     6,989,255       6,968,858       107,653  

Intangible assets

     3,154,605       3,056,811       47,221  

Property and equipment

     133,810       168,969       2,610  

Right-of-use assets

     —         332,140       5,131  

Deferred tax assets

     92,094       112,814       1,743  

Other non-current assets

     3,304       237,452       3,668  
  

 

 

   

 

 

   

 

 

 

Total non-current assets

     10,373,068       10,877,044       168,025  

Current assets

      

Trade and other receivables

     40,718       53,337       824  

Prepaid expenses and other current assets

     64,386       116,118       1,794  

Cash and cash equivalents

     2,861,110       2,339,012       36,132  
  

 

 

   

 

 

   

 

 

 

Total current assets

     2,966,214       2,508,467       38,750  
  

 

 

   

 

 

   

 

 

 

Total assets

     13,339,282       13,385,511       206,775  
  

 

 

   

 

 

   

 

 

 

Equity

      

Share capital

     8,547       8,547       132  

Share premium

     1,729,400       1,734,643       26,796  

Foreign currency translation reserve

     (66,957     (89,578     (1,384

Retained earnings

     1,302,981       1,512,372       23,363  
  

 

 

   

 

 

   

 

 

 

Total equity attributable to owners of the Company

     2,973,971       3,165,984       48,907  

Non-controlling interest

     29,449       9,138       141  
  

 

 

   

 

 

   

 

 

 

Total equity

     3,003,420       3,175,122       49,048  
  

 

 

   

 

 

   

 

 

 

Non-current liabilities

      

Loans and borrowings

     5,203,692       4,937,807       76,278  

Lease liabilities

     —         279,360       4,315  

Deferred tax liabilities

     1,070,240       1,023,091       15,804  

Trade and other payables

     13,967       7,487       116  
  

 

 

   

 

 

   

 

 

 

Total non-current liabilities

     6,287,899       6,247,745       96,513  

Current liabilities

      

Contract liabilities

     2,072,640       2,107,348       32,554  

Trade and other payables

     655,877       734,119       11,340  

Loans and borrowings (current portion)

     1,233,924       987,798       15,259  

Lease liabilities (current portion)

     —         58,242       900  

Income tax payable

     85,522       75,137       1,161  
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     4,047,963       3,962,644       61,214  
  

 

 

   

 

 

   

 

 

 

Total liabilities

     10,335,862       10,210,389       157,727  
  

 

 

   

 

 

   

 

 

 

Total equity and liabilities

     13,339,282       13,385,511       206,775  
  

 

 

   

 

 

   

 

 

 

 

* 

The Group has initially applied IFRS 16 at January 1, 2019, using the modified retrospective approach. Under the approach, comparative information is not restated.

 

16


Unaudited Condensed Consolidated Interim Statement of Cash Flows

For the three months ended

 

        
   March 31,
2018*
    March 31,
2019
    March 31,
2019
 
(in thousands of RUB and USD)    RUB     RUB     USD  

OPERATING ACTIVITIES:

      

Net income/(loss) for the period

     (13,559     238,747       3,688  

Adjusted for non-cash items and items not affecting cash flow from operating activities:

      

Depreciation and amortization

     144,032       165,104       2,550  

Net finance costs

     146,398       141,623       2,188  

Net foreign exchange loss

     674       22,641       350  

Other non-cash items

     (508     224       3  

Management incentive agreement

     26,552       8,975       139  

Income tax expense

     101,809       176,782       2,731  

Change in trade receivables and other operating assets

     (86,155     (64,415     (995

Change in contract liabilities

     134,341       40,090       619  

Change in trade and other payables

     10,550       63,714       984  

Income tax paid

     (127,473     (253,881     (3,922

Interest paid

     (161,484     (164,839     (2,546
  

 

 

   

 

 

   

 

 

 

Net cash generated from operating activities

     175,177       374,765       5,789  

INVESTING ACTIVITIES:

      

Acquisition of equity-accounted investment

     —         (232,000     (3,584

Acquisition of intangible assets

     (57,283     (31,848     (492

Acquisition of property and equipment

     (11,518     (52,708     (814

Interest received

     16,518       26,081       403  
  

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (52,283     (290,475     (4,487

FINANCING ACTIVITIES:

      

Bank and other loans repaid

     (200,000     (515,000     (7,956

Payment for lease liabilities

     —         (11,391     (176

Dividends paid to non-controlling interest

     (28,525     (47,550     (735
  

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

     (228,525     (573,941     (8,866
  

 

 

   

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (105,631     (489,651     (7,564

Cash and cash equivalents, beginning of period

     1,416,008       2,861,110       44,197  

Cash and cash equivalents included in assets held for sale, beginning of period

     10,801       —         —    

Effect of exchange rate changes on cash

     (1,558     (32,447     (501
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period, including cash balance classified in assets held for sale

     1,319,620       2,339,012       36,132  

Cash classified in assets held for sale

     (13,749     —         —    
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

     1,305,871       2,339,012       36,132  
  

 

 

   

 

 

   

 

 

 

 

*

The Group has initially applied IFRS 16 at January 1, 2019, using the modified retrospective approach. Under the approach, comparative information is not restated.

 

17


Reconciliations of non-IFRS financial measures to the nearest comparable IFRS measures

Reconciliation of EBITDA and Adjusted EBITDA to net income (loss), the most directly comparable IFRS financial measure:

 

(in thousands of RUB)    For the three months ended
March 31,
     For the year
ended
December 31,
 
   2018      2019      2018  

Net (loss)/income

     (13,559      238,747        1,032,845  

Add the effect of:

        

Income tax expense

     101,809        176,782        509,602  

Net interest costs

     146,398        141,623        553,724  

Depreciation and amortization

     144,032        165,104        586,131  
  

 

 

    

 

 

    

 

 

 

EBITDA

     378,680        722,256        2,682,302  

Add the effect of:

        

Gain on the disposal of a subsidiary(1)

                   (6,131

Equity-settled awards(2)

     19,007        5,243        68,776  

IPO-related costs(3)

     42,473        46,027        110,043  
  

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

     440,160        773,526        2,854,990  
  

 

 

    

 

 

    

 

 

 

 

(1)

On March 29, 2017, the Company sold its 100% subsidiary, CV Keskus, to a third party and recognized a one-off gain on disposal.

(2)

Represents non-cash expenses related to equity-settled awards issued in accordance with our management incentive agreement.

(3)

In connection with our initial public offering, we incurred expenses related to legal, accounting and other professional fees that are not indicative of our ongoing expenses.

Reconciliation of Adjusted Net Income to net income, the most directly comparable IFRS financial measure:

 

(in thousands of RUB)    For the three months ended
March 31,
 
   2018      2019  

Net (loss)/income

     (13,559      238,747  

Add the effect of:

     

Equity-settled awards

     19,007        5,243  

IPO-related costs

     42,473        46,027  

Amortization of intangible assets recognized upon the Acquisition(3)

     103,947        103,947  

Tax effect on adjustments(4)

     (20,789      (20,789
  

 

 

    

 

 

 

Adjusted Net Income

     131,079        373,175  
  

 

 

    

 

 

 

 

(3)

As a result of the Acquisition, we recognized intangible assets: (i) trademark and domain names in the amount of P1,634,306 thousand, (ii) non-contractual customer relationships in the amount of P2,064,035 thousand and (iii) CV database in the amount of P618,601 thousand, which have a useful life of 10 years, 5-10 years and 10 years, respectively.

(4)

Calculated by applying the statutory Russian tax rate of 20% to amortization of the assets recognized upon the Acquisition.

 

18


We believe that Net Working Capital is a useful metric to assess our ability to service debt, fund new investment opportunities, distribute dividends to our shareholders and assess our working capital requirements.

Calculation of our Net Working Capital is presented in the table below:

 

(in thousands of RUB)    As of March 31,
2019
     As of
December 31,
2018
 

Trade and other receivables

     53,337        40,718  

Prepaid expenses and other current assets

     116,118        64,386  

Contract liabilities

     (2,107,348      (2,072,640

Trade and other payables

     (734,119      (655,877
  

 

 

    

 

 

 

Net Working Capital

     (2,672,012      (2,623,413
  

 

 

    

 

 

 

We believe that Net Debt and Net Debt to Adjusted EBITDA Ratio are important measures that indicate our ability to repay outstanding debt.

Calculation of our Net Debt is presented in the table below:

 

(in thousands of RUB)    As of March 31,
2019
     As of
December 31,
2018
 

Loans and borrowings

     4,937,807        5,203,692  

Loans and borrowings (current portion)

     987,798        1,233,924  

Cash and cash equivalents

     (2,339,012      (2,861,110
  

 

 

    

 

 

 

Net Debt

     3,586,593        3,576,506  
  

 

 

    

 

 

 

Calculation of Adjusted EBITDA for the last twelve months as of March 31, 2019:

 

(in thousands of RUB)       

Adjusted EBITDA for the year ended December 31, 2018

     2,854,990  
  

 

 

 

Less Adjusted EBITDA for the three months ended March, 2018

     (440,160

Add Adjusted EBITDA for the three months ended March, 2019

     773,526  
  

 

 

 

Adjusted EBITDA on the last twelve months basis as of March 31, 2019

     3,188,356  
  

 

 

 

 

19