HeadHunter: 1Q21 – 2021 guidance upgraded, announces interim DPS of $0.55/share; positive
- HeadHunter (HHR US: E/W, $29.0 TP) reported 1Q21 results, which showed an expectedly strong revenue recovery trend
- Revenue from Russian customers accelerates to 45% y/y from 20% in Q4 on the improving market environment
- HeadHunter obtains a 65% control over HR B2B SaaS provider Skillaz following the exercise of a call option.
HeadHunter (HHR US: E/W, $29.0 TP) reported 1Q21 results, which showed an expectedly strong revenue recovery trend across all segments. The top line grew 43% y/y (+45% y/y in Russia) outpacing our and consensus projections by 7.6-4.8pp. Adj. EBITDA in absolute terms came broadly in line with our estimates. The company upgraded its 2021 revenue growth guidance to 45-50% y/y on the solid recovery trends of the recruitment market and consolidation of LLC “Skillaz”. This provides upside to the current BBG consensus forecast of 43% y/y growth. The 2021 interim dividend of $0.55/share offers a 1.4% yield. During the conference call, we expect the key focus to be on the QTD performance and additional color on business prospects for 2021. Overall, we see the results as positive for the stock price.
Revenue from Russian customers accelerates to 45% y/y from 20% in Q4 on the improving market environment and acquisition of Zarplata.ru. Revenue from Russian customers accelerated to 44.8% y/y in Q1 from 20.1% y/y in Q4, while non-Russian revenue came to positive territory of 18% y/y (vs. -1.3% in Q4 amid a challenging situation in Kazakhstan and Belarus). As a result, revenue on the group’s level increased 42.7% y/y to RUB2.8bn, coming 5.6-3.5% above our and consensus estimates. Key accounts showed a continuous recovery pace of 31.2% y/y (vs. 21.8% y/y growth in Q4) with the Moscow and St. Petersburg accounts being the key contributors to growth. SME accounts’ revenue grew 56.5% y/y driven both by regions (+79% y/y) and metropolitan areas (+41.2% y/y). ARPC dynamics became stronger for key accounts (17.8% y/y vs. 13.2% in Q4) and accelerated in the SME segment (5.2% y/y vs 0.6% in Q4). The total number of paying customers continued to grow with c.48,700 new accounts added from 4Q20 (+26.2% q/q). On the product side, all the product lines accelerated their growth from Q4: bundled subscriptions added 32.7% y/y, CV database access and other VAS verticals grew 25.2-50.1%, job postings accelerated to 59.3% y/y growth. The product mix continued its changing in favor of job postings.
Adj. EBITDA met expectations in absolute terms. Adj. EBITDA of RUB1.2bn (43.7% margin, 8.8pp lower y/y) came broadly in line with our estimates in absolute terms, while the cost structure somewhat differed from our forecasts. Personnel expenses as a percentage of revenue (30%) came better than we expected, while marketing costs (15.5% of revenue) were higher than forecast.
HeadHunter obtains a 65% control over HR B2B SaaS provider Skillaz following the exercise of a call option. LLC Skillaz is a Russian HR technology company, which automates and enhances recruitment processes by delivering sophisticated and flexible SaaS solutions. As at 31 March, HeadHunter had a 25.01% ownership in this company and obtained control over Skillaz for accounting purposes on the same date. The option to acquire 40.01% ownership interest in Skillaz was exercised on 26 May (exercise price not disclosed at this stage) raising the total equity stake to 65.02%. Skillaz’s operational results will be included into HHR’s P&L from Q2. The acquisition of Skillaz provides HH with a strategic opportunity to expand over the whole recruitment value chain. Skillaz enjoys a dominant 51% share in a c.RUB0.7bn recruitment automation solutions (ATS) market (data for 2020), which represents the current low (c. 7%) penetration of total addressable market of c.RUB10bn. The company renders services to customers on a subscription model with limited churn. Revenue amounted to RUB153bn in 2020 (+91% y/y) and is expected to more than double this year (RUB202mn in 2021 revenue pre-booked). Thus, this acquisition should contribute c.4pp to HH’s 2021 projected top-line growth, according to our estimates.
2021 guidance upgrade. HH has revised its 2021 guidance upwards to 45-50% y/y revenue growth (vs. 37-42% y/y revenue growth expected earlier) reflecting market recovery trends and the consolidation of LLC “Skillaz”. This implies room for a BBG consensus (+42.6% y/y) upgrade.
Dividends of $0.55/share declared, 1.4% yield. HH BoD approved an interim 2021 dividend of $0.55 per share. The dividend record date is 09 June. The dividend implies a 1.4% yield (5.4% annualized) to HHR close price on Wednesday, 26 June.
Conference call: HeadHunter management will host a conference call later today at 4pm (Moscow) / 2pm (London) / 9am (New York). Dial in numbers: Russia: +7 495 249 9851; UK: +44 (0) 8444 819752; USA: +1 646 741 3167; Conference ID: 2580407.
Figure 1. HeadHunter financials
Source: Company data, Alfa-Bank, Interfax
Figure 2. Skillaz financial and operational data
Source: Company data
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The contents of this document have been prepared by Joint Stock Company “Alfa-Bank” ("Alfa Bank") as Investment Research within the meaning of Article 36 of Commission Delegated Regulation (EU) 2017/5...