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HeadHunter Group PLC (NASDAQ:HHR)
Q4 2019 Earnings Call
Mar 13, 2020, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to that Fourth Quarter and Full-Year 2019 Financial Results Conference Call.

[Operator Instructions]

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

Roman Safiyulin -- Head of Investor Relations

Hello, everyone, and welcome to HeadHunter Group fourth quarter and full-year 2018 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 containing our fourth quarter and full-year 2018 results was issued earlier today and the copy may be obtained through our website at investor.hh.ru.

Now, I will quickly walk you through the safe harbor statement. 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 could cause actual results to differ, please see the Risk Factors section in our final prospectus in connection with our initial public offering that was filed with the U.S. Securities and Exchange Commission on May 9, 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. A reconciliation of the non-IFRS financial measures to the most directly comparable IFRS measures is provided in the earnings release, we issued today, and the slide presentation, each of which is available at our website at investor.hh.ru.

Now, I will turn the call over to Mikhail to make a quick opening remark. Please go ahead.

Mikhail Zhukov -- Chief Executive Officer

Thank you, Roman, and good afternoon everyone. I wish I could start off by discussing the great business results that we delivered in our first year, post IPO. But as we now find the globe in one of the most volatile environments observed during the past decade, I have to shift focus to that, and let my colleagues discuss the rest.

The rapid and violent coronavirus outbreak, which has turned into global pandemic, forces the entire world to confront challenges not faced in the long time, plunging all aspects of our daily life into a period of high unpredictability. Although the virus's direct impact on Russia, in general, has been limited so far and we have not observed an impact on our business to date, we have little doubt that should those economies, which have been hit the hardest, lead to a global recession, it will have a material impact on our economy, as well as with the decline in the price of crude oil and the corresponding weakness in the ruble exchange rate.

In this uncertainty, I think it is a matter of extreme importance to reassure and remind our investors of the fundamental strength of our business and its resilience. Firstly, we are operating at consistently high profitability and very low capex needs, both of which consistently help us generate stable cash flows throughout the year. Secondly, our business model is based on this significant part of predictable subscription-based revenues paid in advance and we serve a very diversified number of clients and industries. Thirdly, we have a strong balance sheet and substantial unutilized debt capacity that could be put to work if required. We are not exposed to hard currency that didn't meet[Phonetic] its obligations and we do not incur material foreign currency costs as it deviate from our functional currency.

And finally, during our 20-year history, we have successfully overcome several economic and geopolitical crisis. And we are an experienced management team that fully expects not only to overcome the current market challenges, but to be able to use our market-leading position to take advantage of opportunities that may arise. We are taking the virus problem very seriously and we have developed all necessary contingency plans for various scenarios in the event of escalation, which we stand ready to activate in the most optimal way, as the challenge continues to evolve and the picture becomes more clear.

We are facing this volatility in the strongest business position we have ever been in and we remain confident that we will overcome these challenges until we finally see global stabilization, which should benefit the business environment in general, and our industry, in particular. Meanwhile, please take care of yourselves and your relatives.

Now, let me turn it to Dmitry to walk you through our key highlights of the fourth quarter and the full year.

Dmitry Sergienkov -- Chief Strategy Officer

Thanks, Mikhail. Good afternoon and thank you for joining us on this call. We will begin with some full-year highlights and then jump into regular quarterly updates, including proposal for dividends and annual guidance. As usual, we'll try to leave plenty of time for Q&A. Let's kick it off.

So overall, as you can see on Page 3 of supplementary materials, we have delivered very strong results in 2019. We made a great progress expanding our business across all strategic areas, while coupling top-line growth with the margin expansion year-on-year. As a result, delivering on the upgraded market guidance, given in December. We've shown considerable revenue expansion. Our revenue, adjusted for the effect of disposal went up by 28%. We sustained growth of our client base, having acquired almost 70,000 net new customers across all geographies, extending offerings to small and medium accounts in blue collar areas, both feeding into our powerful matter of effect, that is reinforcing our future growth and creating strong competitor barriers.

We have demonstrated our abilities to manage resources in efficient way and scale up the business scale up the business faster than the cost base, which result in the growth in our EBITDA margin by nearly 4% compared to previous year, reaching 50.5%. Mikhail mentioned the volatility, uncertainty around virus outbreak going forward. But having considered the strengths of our business model and the health of our balance sheet, we've still decided to reward our shareholders with dividends, growing nearly 60% in absolute term year-on-year.

Now, to reflect on the past year operationally this time around, I wanted to touch upon our core operating metrics development, outlined on Page 4. Our traffic, measured by number of user sessions, increased by 35% in Q4 year-on-year, predominantly driven by growing mobile audience. As we migrated to mobile-first product development this year and targeting the areas where a small screen is sometimes the only device in use, we consider circa 80% share of mobile traffic being quite a milestone to us. We managed to significantly expand our native app installation by adding 7 million new downloads and reaching total of more than 22 million downloads, both iOS and Android. That demonstrates the breadth of our multi platform capabilities sets a very strong basis for interest in user interaction going forward and future product development. This will remain our key focus going forward as well.

In terms of content on both sides of our marketplace, it has demonstrated healthy dynamics on the back of continuous product personalization, customization and effective investments across a number of marketing channels. Even though penetration into our employable population of Russia is already trending toward a 50%, we still absorbed great CV database growth. In '19, we've added close to 8 million CVs, which is nearly equal to half of our total all time CV database over the course as competitor. We sustained leadership in all Russian regions in terms of new CV in force and see the gap between HeadHunter and competitors expanding. Especially strong growth, we see in blue collar job seekers, who have demonstrated 23% year-on-year candidate base growth.

Number of total job postings has been growing at mid-single digit versus previous year and it is mainly to intensive promotional activity at [Indecipherable], where many of our existing clients had opportunity to post free blue collar job vacancies in regions in order to broaden our content database. In '19, we made efforts to monetize that content with somewhat reduced promotions, so if you adjust for this promotional activity than in terms of paid vacancy content, we demonstrated strong mid-teens growth in '19.

To conclude, we've managed to address all the critical elements of this virtuous cycle embedded in the business model and we expect this to grow and to drive our business growth going forward.

Now moving on to Page 5, we'd also like to give you some perspective on our performance against competitors, which is always quite challenging because of the lack of official data, also variety of ways how we can look at it, we believe the traffic evolution being, if not the most about but definitely one of the most important indicators of the situation. Again, you can use various vendors as ways to look[Phonetic], so we decided to take probably two of the most frequently used sources, Liveinternet and SimilarWeb. So, I would encourage you to disregard the absolute numbers because they actually deviate from our internal metrics, when we use it, for instance, derived from Google Analytics, but rather look at relative dynamics in the gap evolution.

In 2019, we managed to widen the gap against all players, despite them starting investing more in products, more in marketing, than the year before. As you can see, this trend is actual consistent growth both sources. These dynamics proved that our strong leadership position, reinforced by investment, is highly resilient, and that despite all the increased focus and higher capital deployment, it's becoming increasingly difficult for our competitors overcome this competitive mode. And at the core of this defense line, we see the share of organic traffic, that we enjoy in user acquisition, in customer acquisition, in app downloads everywhere, all shares of organic traffic well above 80% of total.

Now moving to Page 6, I would like to quickly talk through quarterly financial results. In the fourth quarter, our revenue was up by 23% year-on-year. The growth pace came slower comparing to previous nine months, fully driven by this quarter and the previous quarter's effect from the free job posting cancellations, so no other signs of deceleration contributors that is worth mentioning. Our adjusted EBITDA margin in fourth quarter remained relatively flat compared to the same period last year at the level of 49.5%[Phonetic], but we followed a slightly different investment allocation strategy last year, especially with regards to marketing. Our capex in Q4 was RUB155 million, primarily due to RUB79 million in office renovation costs. So excluding renovation costs, our capex would have been broadly flat versus previous year and the level of 3.7% of revenue was a very high cash conversion.

On Page 7, you can see our key product dynamics. That's generally consistent with what you saw in the previous quarters. Job posting remained the highest growing category, due to the expansion of SMA customer base and our efforts to drive consumption growth in key accounts. We maintained a comfortable share of subscription revenue in our fourth quarter[Phonetic], approximately 49%. Value-added service revenue growth was somewhat slower compared to third quarter, because part of each hh annual HR conference revenue was allocated to Q3, while last year's revenue was fully financed in Q4. So, it's just seasonal effect.

Turning now to our results by customer segment. Key accounts in Moscow and St. Petersburg, demonstrated revenue growth of 14%. The growth of key accounts is mainly attributable to 17% increase in ARPC Moscow, St. Petersburg, driven equally by monetization initiatives and increase in service usage. To pre-empt your questions, judging by experience of previous calls, you could probably notice again an obstacle [Indecipherable] in the key accounts. Circa 80% of reach is explained just by integration from one paying legal entity to another, that is temporary classified as SMA, due to lack of reliable segmentation data. So, aside from that, there was [Indecipherable] in key accounts to reach [Indecipherable].

Regional key accounts demonstrated revenue growth of 22% on the back of solid customer base growth of 80% and accelerating 13% increase in ARPC. Revenue from small and medium accounts in Moscow, St Petersburg was up 17%, driven by 12% increase in number of paying customers that have [Indecipherable]. Finally, revenue from SMA in regions demonstrating the highest revenue expansion base on the level of 26%[Phonetic] by increasing number of paying customers by 21% and 12% ARPC growth.

Now, we have Grigorii talk about our financial performance and profitability.

Grigorii Moiseev -- Chief Financial Officer

Thanks, Dima, and hello everyone. As Dmitry mentioned, we have managed to significantly expand our EBITDA margin in 2019 full year. This is on the back of our personnel, marketing and other costs decrease in the percentage of revenue, excluding the adjustable items. And let me walk you through these expense markets one by one.

If we start from the personnel expenses, they have increased by circa RUB156 million in Q4 compared to the last year or 35% growth. The main factor that contributed to this increase is the share-based compensation awards. We also hired 80 new employees during 2019, primarily in our development and production teams, and made the wages indexation in the first quarter of the last year. Our personnel expenses, excluding share-based compensations, remained relatively flat as a percentage of revenue. For the full-year 2019, personnel expenses, excluding share-based compensation, decreased by 0.6 percentage points to 26.4% of revenue.

Now moving to marketing expenses, they increased by RUB66 million or 30% in the fourth quarter 2019 year-on-year. This increase is primarily due to the -- actually different allocation in this year, when the expenses are more evenly allocated throughout the whole year. On a full-year basis, marketing costs, as a percentage of revenue, have decreased by circa 2 percentage points to 13.4% of revenue.

And our other costs are mostly presented by subcontractor and other direct costs, office rents and professional services. As you can see, they have increased by circa RUB43 million, mainly because of the insurance cover related to the IPO. And excluding these items, the other costs have actual decreased by circa 1 percentage point on a full-year basis.

So as a result, our adjusted EBITDA for the fourth quarter reached RUB1,023 million, which is 49.5% margin. And for the full year, our adjusted EBITDA was RUB3.9 billion with a margin of 50.5% or up 3.8 percentage points year-on-year. Our capex in 2019 was RUB492 million, which is a increase of RUB237 million year-on-year, which was primarily due to the circa RUB200 million renovation costs in our offices in Moscow and Yaroslavl, which we nearly completely redesigned, and we expect some part of this budget to appear in 2020 due to some construction delays. Our net working capital, as of the December 31, 2019, increased to RUB2.9 billion or 14.1% year-on-year, mostly due to the increase in contract liabilities just from the growth in sales.

Income tax expense was RUB644 million in 2019, compared to RUB509 million in 2018. We had a significant progress in the effective tax rate, which decreased from 33% in 2018 to 29% in 2019, due to us migrating to Russian tax residence and also eliminating some inter-group interest expense, which was not deductible.

Now, turning to cash generation metrics. In 2019 full year, we have generated a circa RUB2.6 billion from operating activities. This is compared to RUB2.1 billion in the year 2018. The growth was primarily driven by the increase in sales. We used circa RUB637 million in investing activities in 2019. A key component of net cash used in investing activities was the acquisition of 25% ownership interest in Skillaz for RUB235 million. Our net cash used in financing activities was RUB2.6 billion in 2019 and the change between the risk was primarily due to the dividends paid to shareholders of RUB1.1 billion and other financing activities. Our net debt decreased, mostly due to net increase in cash generated from operating activities and debt repayment. Leverage has declined from 1.3 times EBITDA as of the end of 2018 to 0.8 times as of the end of last year.

Now, moving to the dividends. The combination of strong cash flows and prudent capital structure means we have a strong balance sheet. In terms of credit metrics, we also operate well within our banking covenants. So, we are pleased to announce the full-year 2019 total proposed dividend of $25 million, which represents circa 75% of the adjusted net income for 2019.

Now, thank you very much, and I would like to turn the word back to Dima to comment on guidance for 2020 and make the closing remarks.

Dmitry Sergienkov -- Chief Strategy Officer

Thank you, Grigorii. Adding to what Mikhail said at the beginning, this is probably the most, kind of, unfortunate point to provide the guidance for the year. And from the other hand, we haven't seen any direct impact on our business year-to-date. The vast majority of our clients operate business as usual and from the other hand, we have all fundamental reasons to believe that OPEC deal collapse leading to oil price drop and currency devaluation, alongside global turmoil caused by the virus, will impact business activity in our markets. And as a result, may affect our operations.At this point, it's very early to draw any certain conclusions and [Indecipherable] global stabilization. At the same time, we retain option to review this guidance again, once we digest the impact on our business and come up with a wise CY[Phonetic] in due course.

Having said that, ignoring the above mentioned external shocks and fully based on our competitive position and performance year-to-date, we expect our revenue to grow in the range of 21% to 25% in 2020 compared to 2019. On the profitability side, we see opportunity to retain and even expand our margins compared to last year, especially to manage to delivering our growth targets on the back of high operating leverage, based on our business model, before we expect our adjusted EBITDA margin stand between 50% and 52%.

And that is it for Q4 and full-year results on our side, and are now opening the floor for your questions.

Questions and Answers:

Operator

Thank you.

[Operator Instructions]

The first question is coming from the line of Vyacheslav Degtyarev from Goldman Sachs. Please go ahead.

Vyacheslav Degtyarev -- Goldman Sachs -- Analyst

Yeah. Thanks a lot for the presentation. Two questions. Firstly, that was quite a sizable deceleration of small and medium accounts in other regions in Q4, would you attribute that to any specific factor and how do you see that progressing in 2020?And secondly, can you elaborate on the process of price setting for the next year? When are you planning to make those decisions and how the process is going to be structured for this year?Thank you.

Dmitry Sergienkov -- Chief Strategy Officer

Okay. Thanks, Slava. I think I can probably comment. First of all, on the question on SMBs, as I mentioned, we believe that the full deceleration effect is explained by the cancellation of free job posting that happened in 2018 in Q4. It's actually, we got that revenue boost in 2018, which effectively kind of extinguished in Q4 2019. And that I think explains circa 5% of total revenue growth. As I mentioned during the presentation, we don't see any other deceleration signs. So, we still see SMB markets are very underpenetrated. So, we expect client growth remains very strong in this segment. But otherwise, with the effects from cancellation of free job posting that resulted in that higher growth in 2018, is not expected to have a significant effect going forward. That's on SMB question.

And on the price setting, I think we use our usual kind of playbook. Now, we are getting prepared for kind of mid-year or maybe in the third quarter, a discussion with our clients on the next year pricing. As we mentioned before, we, at the moment, are writing very important experiments of immigration to a new monetization model of our subscriptions. We plan to effectively enforce some kind of limits and gradually integrate our pay per contract model of monetization in subscriptions. For that, we kind of chosen a number of clients, who all kind of voluntarily immigrated to this model already. So, we are assessing their, effectively, the behavior. We are getting feedback to implementing it in our price set up, etc. So, I think in next two, three months, we probably will have good picture on the final configuration and we plan to discuss that with our Board of Directors by end of May. And actually, if everything goes as planned, then we'll be in a position to start discussing with clients softly and casualty in third quarter and probably we will kind of announce something to the market in third or fourth quarter[Phonetic] similar to what we did last year.

Vyacheslav Degtyarev -- Goldman Sachs -- Analyst

Okay, thank you very much.

Operator

Next question is coming from the line of Miriam Adisa from Morgan Stanley. Please go ahead.

Miriam Adisa -- Morgan Stanley -- Analyst

Hi, everyone. Two questions from me. Firstly, just on small and medium accounts in other region that this time in the ARPU, we've seen a bit of a further deceleration there, just wondering when you expect ARPU in small and medium accounts to stabilize? And secondly, on the guidance, if you could just talk about the difference to the variables between 21% and the 25% growth, is it mainly higher volumes or is it mainly [Indecipherable]? Thank you.

Dmitry Sergienkov -- Chief Strategy Officer

Yes, Miriam. To be honest, I think the first one, I addressed. At least, my comprehension actually is the same, as it was to the Slava's question. I said, we probably kind of extinguished one significant growth driver in SMBs by way of cancellation of job postings in regions, free job posting in regions, but always that we're still driving new customers to our platform. We believe that probably monetization will become bit more sizable and significant factor in our SMB growth. And we, even, considering potentially opportunity to raise prices for in these products by mid-year, if we feel that's actually appropriate, competition-wise and just economy wise. So, that's probably it.

On your second question, on guidance. That is entirely defined and probably they could be a product of future economic development because on the lower end of the guidance, obviously, we see some future impact from the existing turmoil regarding the virus and the oil price and then ruble devaluation. So, that's kind of downside risk and and we believe that there are no circular stimulus from the new cabinets to the economy and the economy performed as it performed last year, then, we'll probably be closer to the lower end. On the other side, if there are some stimulus and the global arrest settle down, then we'll actually get up the ladder. And this is very earlier in the year actually. Because in first few months, nearly 50% or 40% of our contracts actually activated at old prices. So, we actually haven't seen the actual impact from the monetization yet. And it's also quite holiday[Phonetic] intense period, that's why it's quite hard for us, sometimes to come up with a kind of narrowed guidance in the first few months.

Miriam Adisa -- Morgan Stanley -- Analyst

Okay, great. That's helpful. Thank you.

Operator

Next question is coming from the line of Ivan Kim from Xtellus Capital. Please go ahead.

Ivan Kim -- Xtellus Capital -- Analyst

I guess, I just have two questions please on my side. Firstly, on the guidance, I just wanted to make sure, if you look at the trend so far and I understand that a lot of replacing hasn't happened yet and you haven't seen any impact clearly from the virus, but based on what you see in the first quarter, the growth should be 25%. Is that right? That's the first question.

And the second question is on tax expense. I might have missed that, but I was just wondering why the effective tax rate came down to 17% in the fourth quarter? Thank you.

Dmitry Sergienkov -- Chief Strategy Officer

Thanks, Ivan. I don't think we can really comment on the year-to-date performance with sizable precision, right. Because firstly, the quarter hasn't been over yet. And as I said, we have to see how our actual monetization kicks in and there might be actual effects in different directions, also the economic situations. Therefore, Ivan, really I would like to avoid, kind of, providing very exact numbers here, what we see year-to-date. I would say that we, kind of, comfortable ignoring. Comparing all other external shocks, we are quite comfortable providing this guidance seeing how the year actually been developing since the beginning.

On tax, I think I'll hand over to Grigorii.

Grigorii Moiseev -- Chief Financial Officer

Yeah. Hello, Ivan, this is Grigorii. Yes, you're right. There is actually one item that contributed to this significant decrease except we have reversed certain provision for income tax, related to uncertain tax position, because of the expiration of the tax period. So, effectively, year 2016 is no longer open for authorities to claim any of them. And the provision that's related to that year was released in our financials, and that's contributed to the decrease in effective tax rate.

Ivan Kim -- Xtellus Capital -- Analyst

Okay. Thank you very much for both.

Operator

Next question is coming from the line of [Indecipherable] from Bank of America. Please go ahead.

Antony -- Bank of America -- Analyst

Good afternoon and thank you for the presentation. I have two questions please. First, on competition, given the launch of the large marketing campaign by Rabota data that you released this winter[Phonetic], can you please comment what impact on your traffic and marketing costs, it has if any. And if it was within your 2020 initial marketing budget? And second is on your guidance. Of course, you mentioned you do not incorporate any impact from the virus for now. But in general, can you please discuss how sensitive your product usage to the economic slowdown is? And if it's materially different for key accounts and SMEs, and probably could you remind the impact of the crisis in 2015 and how you acted for the changes probably via large price discounts. Thank you.

Dmitry Sergienkov -- Chief Strategy Officer

Yes, thanks. I will take the first and Grigorii will deal with second one. On Rabota and on competition overall, you're right. The recent competitors' marketing activity is quite high and we see literally all of them on TVs, so we noticed a certain uplift in investments in mobile downloads, specifically from Rabota, while Worki dropped. We respond in line with certain budget scenarios as you have it developed in advance, that is reflected in our market guidance. And so, in terms of the impact, to be honest, to our knowledge from our point of observation, this investment by Rabota or others have not led to any visible impact not only on our KPIs, but also on their KPIs, again from our point of observation, neither our new CV inflows, whether they see inflow in either[Phonetic] traffic, both on mobile and desktop. So, of course, you can see certain KPIs by Rabota are kind of bottoming up, right, but that's being from such low base. It's like that ten times gap results in terms of mobile audience, for example, and still growing quite relatively like low rate.

It's important to understand that probably apart from azita[Phonetic], and specifically Rabota, I don't think they have a high share of organic traffic. And their dynamics is actual function of continued cash burn. So, once you stop, it stops. We have seen this in the past and we're kind of seeing it again, not that we are dealing something extraordinary or something we haven't dealt in the past.

So, in terms of the cost you mentioned, again you're right. The application from this elevated investment in digital is that actually we see increase in traffic acquisition costs, right, also only in paid channels, because of kind of overheating to digital auctions. You can logically conclude that the uptick in the CPC net attractive[Phonetic] hurts competitors actual disproportionate right, because that corresponds to higher share and their actual traffic. Because we enjoying 86%[Phonetic] of organic traffic and even that the growth in paid traffic, that doesn't affect us the same way as our competitors. So, it actually also help us. That's on competition.

I think, on the second question, I will hand it to Grigorii.

Grigorii Moiseev -- Chief Financial Officer

Well, there is currently no reliable forecast, right, as to how Russian market will change in this year, right. So, we can just hold to speculate I think on whether we shall compare with the 2015, for instance, crisis, right. But if we do, we think our model was very resilient in this crisis specifically. Basically, we saw 4% decrease in GDP in Russia and 50% drop in oil prices in 2015, and our revenue in 2015 compared to '14, remained flat. That was a combination of several factors. There was a small drop in Moscow accounts, both in key accounts, and small and medium businesses, which was offset by regional clients actually growing, in spite of this crisis effects. And our adjusted EBITDA, for instance, that was relatively flat. I think, it even increased to circa 40% in 2015. So, very healthy levels.

We actually saw a little attrition -- a little increase in attrition, I would say, in key accounts, which virtually all kept their annual subscriptions. We saw some deceleration in usage, obviously. But we also positive impacts like key accounts, who used to pay to several market players, would choose to use our service only, just because of their budget restrictions in these times. So, overall we think that we went very well through that crisis. And again, it was very severe. It went on the backdrop of 50% oil price decline and 4% drop in GDP, which we don't think is the current estimation for 2020. And answering your question directly, I think you mentioned about discounts, I frankly do not recall any massive discounts, we would provide to key accounts, in order to keep them on with us in 2015.

Antony -- Bank of America -- Analyst

That's extremely helpful. Thanks so much.

Operator

Next question is coming from the line of Anna Kurbatova from Alfa Bank. Please go ahead.

Anna Kurbatova -- Alfa Bank -- Analyst

Good afternoon. Thank you for the presentation. I would like to now make a question about marketing expense. Should we expect your distribution of your marketing budget in 2020, more or less comparable and equally spread between the quarters as it was in 2019 or you now suggest some different distribution between periods, so might be it will be more volatility between the quarters.And a related question, as long as you make campaigns on TV, I would like to ask what do you observe in terms of -- what situation, do you observe in TV marketing, in TV advertising? So, can you, for example, tell us that in terms of the costs of the price of GRP, TV advertising is becoming or became, for example, more cheaper than in the previous years or it's stable? So, whether you enjoy this weakening demand for TV advertising, so you take advantage of, maybe, more beneficial pricing. Thank you.

And the second question, a small one but interesting for me. You showed, in the fourth quarter, some increase in, of value-added services share, in total revenue. So, and the same, I see in the fourth quarter last year. So, I wonder about some specifics of these value-added service revenue, whether you recognize some or see some contracts that have been signed at the end of the year, so that it drives this type of revenue going up in the total mix at the end of the year? Thank you.

Dmitry Sergienkov -- Chief Strategy Officer

Thanks, Anna. On the first, on the marketing location, I'm not sure if any of our competitors are listening to this call, but they would difference like me to respond to this question. And unfortunate, half of them are not going to do this, because it's extremely competition-sensitive, right. So obviously, we will have some budget flexibility in marketing. We have some strategy, when we go to address the audience and which audience we addressed when. And it very much also depends on what our competitors do, all right, and how the overall year unfolds. Therefore, at this point of time, I don't think we're going to really deep dive this, and I can only say that we guide on margins, you can kind of expect. You should be probably expecting something crazy on marketing side. But I don't want to discuss the exact of timing[Phonetic].

Then, on the TV side, it's actually, we're not marketing experts. We don't have chiefs marketing on the call. But as far as I remember, the cost for TV went slightly up. But again, it very much depends on the volumes and I don't want to discuss, to be honest, this open on the call.

And the last question, I would defer to Grigorii to discuss.

Okay. I can address it myself. The value-added services, and there, I really touched upon this during the presentation that we actually had etch us timing quite big conference that would be natural to sell tickets[Phonetic]. And the year before, it was fully in the fourth quarter, all right, while here, it was -- the part of of revenue was recognized in the third quarter, 50%, and 50% in fourth quarter. Therefore, you kind of saw the increase in the percentage of total in the third quarter, and then a drop in fourth. But eventually, the share of value-added services were kind of more or less flat year-over-year. So, they're growing more or less in line with the core revenue.

Anna Kurbatova -- Alfa Bank -- Analyst

That's helpful. Thank you.

Operator

[Operator Instructions] There are no more questions at this time, please continue.

Mikhail Zhukov -- Chief Executive Officer

Yeah. Thank you everybody for joining, goodbye.

Operator

[Operator Closing Remarks]

Duration: 43 minutes

Call participants:

Roman Safiyulin -- Head of Investor Relations

Mikhail Zhukov -- Chief Executive Officer

Dmitry Sergienkov -- Chief Strategy Officer

Grigorii Moiseev -- Chief Financial Officer

Vyacheslav Degtyarev -- Goldman Sachs -- Analyst

Miriam Adisa -- Morgan Stanley -- Analyst

Ivan Kim -- Xtellus Capital -- Analyst

Antony -- Bank of America -- Analyst

Anna Kurbatova -- Alfa Bank -- Analyst

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