Page 189 - RusRPTSept21

to management. However, there are certain factors that are definitely sustainable, such as monetisation initiatives and the new subscription model (to have at least a 2x the effect on the 2022 numbers than in 2021) and customer growth. Management is confident it can sustain the high growth level next year.
Profitability. On the cost side, HHR expects increased investments, as 1H21 was still conservative on expenses. We are heading into autumn, which typically has a high marketing spend. Zarplata.ru and Skillaz are to have a dilutive impact of some 3pp on FY21 (similar to 2Q21), according to management. So conservatively, HHR is looking at a 50%+ adj EBITDA margin. We forecast closer to a 53% adj EBITDA margin in 2021F
Marketing spend is to be closer to last year’s 12-13% of revenue in 2H21, after 9% in 2Q21. It is not entirely driven by competition, as HHR sees a positive effect of investments in brand awareness as well as performance-based spend. In some instances, this is reactive. In 2H21, HHR is to increase spending in every marketing channel, including performance-based, management guides
2Q21 growth decomposition. Of 155% y/y growth, 80pp came from the low base effect, and 15-20pp was attributable to Zarplata and Skillaz. So 55-60% growth is organic, which in turn consists of: i) monetisation of the existing business (about a quarter of the growth); ii) average consumption per client, e.g. SMAs consume some 50% more and Key Accounts 100% more than historically (another quarter of the growth and unsustainable); iii) intake of new customers (half of the growth). The latter accelerates long-term growth, and primarily comes from accelerated digitalisation, but also company initiatives (e.g. an improved client onboarding experience, which accounted for 7% of total growth).
Labour market trend in autumn remains strong. The market is to be quite stretched in coming few years, but some factors might disappear over time, management said. HHR gained market share in candidate delivery.
New incentive plan and buyback. The new RSU (restricted stock unit) is to be granted through August 2025 (probably 10-15% of the programme is to be granted this year). It is for up to 6% of the stock. The primary goal of the buyback is to fund this programme without diluting existing shareholders.
189 RUSSIA Country Report September 2021 www.intellinews.com