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HeadHunter Group PLC (NASDAQ:HHR)
Q1 2020 Earnings Call
Jun 1, 2020, 9:00 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 today's HeadHunter Group First Quarter 2020 Financial Results Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today on the 1st of June 2020.

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

Roman Safiyulin -- Head of Investor Relations

Hello, everyone, and welcome to HeadHunter Group first quarter 2020 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 first quarter 2020 result was issued earlier today and a copy may be obtained through our website at investor.hh.ru.

Now, I will quickly walk you through the Safe Harbor 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 20-F report that was filed with the U.S. Securities and Exchange Commission on March 16th, 2020.

During this call, we'll 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 on our website at investor.hh.ru.

Now, I'll turn the call over to Mikhail. Please go ahead.

Mikhail Zhukov -- Chief Executive Officer

Thank you, Roman, and good afternoon, everyone. Welcome to today's call. Entering the 2020, no one could imagine the scale of global disruption brought by the COVID-19 pandemic. And right now, it is obvious that all areas of our life have faced significant challenges. But, we feel increasingly confident that we can get successfully through this.

Recruitment activity reacts extremely fast to any change in business and social environment. It can serve as a barometer to the economic sentiment. Companies usually adjust their recruitment plans before GDP numbers or any other economic statistics testify global trend inversion. We saw how quickly businesses reacted early in March when COVID situation was not yet fully evident in Russia, and in the similar way, we saw how they gained bigger confidence despite still being under severe economic restrictions.

Over the last few months, we have taken certain unpopular actions to ensure company's financial stability, safety of our employees, our clients and our candidates. I am very proud of how HeadHunter adopted all functions and operations to the evolving situation in a matter of days.

Despite staying prudent, we're equally cognizant of our natural advantages in this new social resistant world as the most effective online recruitment solution. We ought to use it to solidify our leadership and speed up future growth potential. Any crisis is opportunity. Current management team has done it a few times in the past and we will make our best to do it again.

Now I'll turn it to Dmitry to walk you through the key highlights of the first quarter results. Thank you.

Dmitry Sergienkov -- Chief Strategy Officer

Thank you, Mikhail, and hello to everyone. So, I would generally state that the Q1 was a very sound quarter. Before the third week of March when COIVD situation started to have a material effect on recruitment business, our year-to-date revenue growth was in line with the market guidance range 21% to 25% [Phonetic].

So after that, we noted a significant COVID impact on the labor market and our business, when companies started moving their personnel to work from home arrangements. So situation worsened even more after the government instituted a countrywide locked down on the 26th of March and a substantial part of the economy, especially in the service area and small and medium businesses just halted their operations for indefinite time.

So as a result, our revenue in Q1 decelerated to approximately 19% year-on-year growth. On the back of favorable FX effect and certain budget optimization initiatives, we continue to demonstrate EBITDA margin expansion by circa 6% compared to Q1 2019 reaching 52.5%. Capex, excluding one-off expenses, was below 3% of revenue and we also put certain capital initiatives on hold until further clarity on the full impact of the COVID pandemic.

As to the recent operating performance over the quarantine period, please refer to Page 4 of the supplemental material. Generally, the lockdown coincided with the usual seasonal drop in recruitment activity, which we observe every year in April/May due to extended holidays. The restrictions imposed by the government, however, initially cause a severe year-on-year drop, both employers and candidate activity on platform.

So candidate metrics such as number of unique daily visitors, number of mobile downloads, new CVs inflow; they behave quite similarly, dropping in mid-March and bottoming out in mid-April and then recovering month over month at a double-digit growth pace. So many candidate metrics, as you can see already, above the last year levels, but yet to reach pre-COVID time.

On the employer side, we experienced similar dynamics. So the number of total vacancies on the platform declining fast at the end of April, and especially on the back of significant drop in new posting in the lockdown position and then recovering rapidly, for still lagging behind levels in early March.

During this period, we managed to acquire high quality new blue collar content in the most economically active segments of the economy, such as online grocery, healthcare, online delivery e-Commerce. So this result in share of blue collar content grew by 10%, exceeding 40% in total. So we also see hiring sentiment improving from both side of the equation, which reflect a gradual recovery in such metrics of interaction as candidate applications and poor invitation to interview.

As to the financial performance of the lockdown, as I said in the third week of March, when companies started actually moving personnel to home office, we experienced a rapid decline across major financial metrics reaching the lowest point in mid-April.

Since then, we've been seeing a significant improvement in financial across the board, especially in May when, for instance, decline in average daily cash flows compared to 2019 reduced by nearly 2 times over April, right. So in some days in May, we even saw daily inflows higher than respective days in 2019. And just to remind you, we're still under quite strict limitations.

Our revenue quarter-to-date is estimated to decline by circa 25% year-on-year, with the caveat, obviously, that this number is unaudited, subject to certain the verification procedures. But the biggest revenue decline was noted in job posting category, while long-term access products and bundled subscription have showed much greater resilience to economic downturn.

Our revenues from small and medium businesses have been hit the most and -- but already in May, we saw this segment recovering faster week-over-week than Key Accounts, and as economy gradually reopens and adopts. So construction, retail sectors are kind of leading the way here.

Strategically, we consider second half of this year to be a unique window opportunity for us to capitalize on clients' necessity to optimize budgets toward the most effective recruitment channels and thus consolidated the market around kind of segment leader. So acquiring new clients; acquiring and engaging broader candidate pool would be the highest priority for us in this early recovery stage. Even if sometimes it conflicts with the certain financial metrics.

Now, turning to Q1 results by customer segment. So our key accounts revenue grew by 20.5%, driven predominantly by strong ARPC growth on the back of new monetization and client base expansion in Russian regions. Moscow key accounts RPC were significantly affected by last two weeks of March where we lost, we estimate, several percentage growth points mainly due to reduced up-sell and new postings and value-added products.

Regional key accounts showed very strong RBC dynamics as they managed to retain or even grow consumption on the backdrop of certain price initiatives. Compared to key accounts, small and medium business has been affected the most especially in such traditional areas as HoReCa, retail construction. So coupled with a high base of 2019, this resulted in our revenue growth from small and medium businesses dropping to 17% in Q1. But now we're seeing segment recovering, as I said.

So geographically, Moscow and St. Petersburg being the most affected by the pandemic and related restrictions and therefore you see it already in Q1. So Russian regions generally introduced containment measures circa two weeks later than Moscow. So the impact is less evident.

Now here's Grigorii to talk about other financial metrics.

Grigorii Moiseev -- Chief Financial Officer

Thank you Dmitry and hello, everyone. Let me gives you some detail on our expenses and margins. In the first quarter of 2020, total operating expenses increased 22% year-on-year. Let's start with the personnel expenses, they have increased by 21% year-on-year, which was a combination of several factors. First, about 11% increase was due to a RUB54 million share-based compensation expense we recognized from a new transfer of options issued last year, which obviously was not occurring in the first quarter of 2019.

Then the second factor is the increase in headcount and indexation of wages, which resulted in circa 18% increase in personal expression. We have hired circa 80 people in our development product and sales over the last 12 months, including 30 people in the first quarter of this year before we introduced hiring freeze, and we have also increased wages by circa 5% to 10% from 1st February 2020.

And finally, the third factor was an offsetting factor of our cost savings program, which we -- when we decreased our various bonus arrangements by circa RUB35 million in the first quarter 2020 due to COVID-19 situation and this result in about 7% decrease in personnel expenses.

So we think the important conclusion from these numbers is that the underlying growth of personnel expenses driven by headcount and bridges, excluding share-based compensation and excluding our cost savings program has actually declined from 24% in the year 2019 to 18% in this quarter.

Personnel expenses, excluding share-based compensation, decreased by 1.7 percentage points as a percentage of revenue this quarter with nearly all of these decrease explained by our cost cutting program that I have mentioned before. Our budget optimization in response to COVID-19 includes freeze on all non-essential hiring as well as reduction or cancellation of bonuses of administrative personnel and salespeople, but it doesn't include any layoffs or unpaid leaves as we want to keep our team in place. Looking forward to some recovery.

Now moving to marketing expenses, they increased by 23.3% in this first quarter 2020 year-on-year. So quite sizable increase. But if you remember, in the first quarter 2019, we had quite low marketing expense due to sort of unusual allocation. And this adds up to this relatively high growth rate in this quarter.

We were pretty active across all markets and channels in the first quarter 2020 and there is -- there was no sort of reasonable effect of our cost cutting program in the first quarter on our marketing expense. As a response to COVID-19, we have partially cut our marketing expenses in April and May compared -- sizably compared to the second quarter last year across the various channels.

Our other costs mainly consist of professional services, office rent and maintenance for subcontractor fees and insurance costs. Our general and administrative expenses increased by circa 22%, mostly due to IPO related insurance expenses not occurring in the first quarter 2019. General and administrative expenses were flat at 12% of revenue in this first quarter because of the increase in insurance cost by 2% as a percentage of revenue was offset by the decrease in most of other components in this expense line.

There was also no visible effect of our cost savings in Q1 under these general administrative expenses. However, since April, all non-vital G&A expenses are effectively on pause. So, as a result, our adjusted EBITDA for the first quarter reached RUB1.45 billion, which was an increase of RUB271 million compared to the first quarter 2019. This increase in adjusted EBITDA was most driven by an increase in revenue and adjusted EBITDA margin has increased 52.5% [Phonetic] compared to 46.1% in the first quarter 2019 or by 6.4 percentage points.

The sizable increase in net foreign exchange gain of RUB98 million has contributed to about 5.1 percentage point increase out of these 6.4 points total increase. This foreign exchange gain resulted from the revaluation of our United States dollar denominated cash balances, as Rubles were significantly weakened to U.S. dollar over this quarter.

Our capital expenses in the first quarter was RUB102 million, an increase of RUB17 million year-on-year. But Adjusted on office renovation costs, our capex was broadly in line with the last year absolute amount. We expect to spend additionally circa RUB50 million for our office renovation in 2020.

Net working capital as of March 31st, 2020 grew by RUB136 million or 4.5% versus the end of last year, primarily due to increase in contract liabilities by land 9.2%. This growth was actually affected by our decision not to provide discounts to customer who would pay us in the Q4 last year and this resulted in a substantial amount of advanced payments shifting from the end of last year to the first quarter this year.

Income tax expense was RUB231 million in Q1 compared to RUB177 million in the Q1 2019. Effective tax rate decreased to 35.9% from 42.5% in the year before. In this quarter, effective tax rate was affected by the ForEx loss on dividends payable which I actually mentioned before, which is not recognized for tax purposes. And without this effect from the ForEx loss, the effective tax rate for Q1 would have been 29.4%.

Turning to cash generation metrics. In Q1, we generated RUB942 million from operating activities compared to RUB375 million in Q1 last year. This growth was primarily driven by sales growth, also by timing of advanced payments for annual access renewals, which shifted from the end of last year to Q1, as I've mentioned before, and an increase in freight payables and decrease of interest paid and income tax paid as the final days in March 2020 were announced as you know, not working days, and effectively these payments shifted to the second quarter of 2020.

Net cash used in investing activities was RUB101 million in Q1 compared to RUB190 million in Q1 last year, which was mostly attributed to acquisition of 24% stake in Skillaz, which were made in this quarter a year before. Net cash used in financing activities was RUB59 million compared to RUB574 million for the Q1 last year. The change between the periods was due to the shift of our regular quarterly repayment to VTB from the end of March to April 6th, 2020 as a result of the non-working days in the end of March and also due to RUB270 million repayment of a loan to an associate of our non-controlling shareholder that we have made in first quarter 2019.

Our net debt decreased mostly due to net increase in cash generated from operating activities, also a decrease of cash used in investing activities and the effect of exchange rate fluctuations on cash. So as a result, as you have seen from this quarter, our leverage has declined from 0.8 times to 0.5 times EBITDA.

On April 15, 2020, we have announced the deferral of the dividend payment for the year 2019 until further notice due to uncertainty over the impacts of the COVID-19 pandemic on our business. As Dmitry said before, since then, we saw clear upward trend in our performance as well as generally in situation with COVID-19. However, we think there is still uncertainty over how pandemic will develop on the back of gradual easing or for restrictions, which we witnessed now in Moscow specifically and which actually may potentially lead to increase in new cases and reinforcing the same restrictions again.

So out of prudence, we'll continue reserving this cash on our balance sheet. And for similar reasons, we will provide an updated outlook for the full year 2020 at a later stage as soon as we have better visibility into how economy rebounds after the pandemic. We plan to provide new updates on our next quarterly call.

This concludes our Q1 review. So thank you very much. And we are now opening the floor to your questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] The first question comes from the line of Ivan Kim from Xtellus Capital. Please ask your question.

Ivan Kim -- Xtellus Capital Partners -- Analyst

Good afternoon. Two questions please. Firstly on your expectations in the second half of the year, I understand it's fairly hard to speak about that yet, but even directionally, do you think your revenues would be still going down in the second half, be flattish or maybe it will go up? So any color on that, just directionally, will be very helpful.

And secondly, on the competition and the marketing plans, so do you see this as an opportune time to just continue solidify your already dominant position. Do you think that it's a good time to may be ramp up some of the marketing expenditure, increase market share? So, any thoughts on that dynamic would be helping too. Thank you.

Dmitry Sergienkov -- Chief Strategy Officer

Yes, hi Ivan. Thanks. It's Dmitry here. On your first question. Yeah, you're absolutely right. It's probably hard to make a precise estimates at this point of time, because we all kind of believe and hope that quarantine measures will be eased substantially soon, including Moscow, already in June. So the shape of the economic recovery would ultimately kind of define how quickly the recruitment market will progress from this point. And it actually depends on a number of variables that are quite hard to predict at this point of time.

The first is just permanent damage to the economy, right. So especially in SMB areas, once all the restrictions are gone, how many business will actually return? Of course now we're quite exposed to this segment and we saw pretty encouraging dynamics last months. So hopefully this trend will continue.

The second, what happens is consumer demand, right because either there will be a surge in consumption, just to make up for this lost quarter where the population got generally poor, and they remain on sidelines. So that's, I think, just define how generally our clients feel in how quickly the recession would kind of turn, and that's quite a hard to predict at this point I think -- I think it's the -- probably the biggest unknown. Of course it would ultimately depend on the -- in the packages how efficiently they're delivered via government programs.

So then just the third unknown about the global growth, right, international trade, border openings. So this is all quite unclear and lastly on vaccine so and would be -- would there be a second wave. If there is a second wave, would businesses be locked again, we really can actually deal without lockdown.

So I think if we just continue the trend that we've seen in the second quarter, as I said we were sort of decline in revenue 25% but quite rapid recovery since bottom in April, we probably hope that in the second half, well at some point, we'll turn back to growth, more likely in the fourth quarter. But as I said, they're just too many unknowns at this stage and you can just hope and do what we can.

And I think on competition your remark is also very valid and it's exactly kind of consistent with our view of the situation that because we already passed the worst point and now we ensured liquidity, right, we ensured stability of the company. And at this point of time, we see that the competition got probably bigger damage, right.

Especially if you look at the traffic and compare traffic dynamics us versus competitors, but also CVs and new postings. So clearly this -- in this market budgets tend to consolidate around market leaders, the platform that deliver efficiency and I think for us, it would be the most important to kind of deliver the message to the highest number of clients and highest candidates that we are actually the most efficient platform.

And we also see how quickly this acceleration of online equipment adoption happening in blue collars, right, because in this area, they just -- a massive workforce was locked home without opportunity to reach employers via traditional offline channels. So they had to actually interact by online and that's a great opportunity for us, again, and that's why I think from a marketing standpoint, it also made sense for us to accelerate and just probably -- just probably sacrifice shorter term financials toward bigger opportunity in the mid-term.

Ivan Kim -- Xtellus Capital Partners -- Analyst

Great, thank you very much.

Operator

Thank you. The next question comes from the line of Vyacheslav Degtyarev from Goldman Sachs. Please ask your question.

Vyacheslav Degtyarev -- Goldman Sachs -- Analyst

Yeah, thank you very much for the presentation. Also two questions. Firstly, can you comment on whether you believe the crisis may boost the penetration of online recruitment markets in the medium term? Do you envisage any structural shifts on the back of the pandemic? So would appreciate any additional thought here.

And secondly, can you highlight your exposure to different industries in terms of their revenue diversification and which industries were affected most which were the least? You elaborated on some of the recent recovery trends. But yes, maybe any additional thoughts here. Thank you.

Dmitry Sergienkov -- Chief Strategy Officer

Yes, thanks Vyacheslav. It's Dmitry again. Okay. On your first question, as I said, we see the biggest opportunity in the areas with lower online penetration in blue collar and regions just because we saw clearly that adoption of services was kind of artificially boosted. And even on our platform, we got over 10,000 new vacancies from Wildberries, 2.5 thousand from Ozon etc.

So we're picking up clients in this economy quite rapidly. I think we believe it's a great opportunity for us, this e-commerce delivery. And we actually strengthened our positions in healthcare. I think we kind of boosted our content by more than 100% during this -- the pandemic. And honestly, it was never the strongest area of our platform. In terms of industries, we are well diversified.

We have presence across various sectors and both of those who benefited and those who suffered from the crisis. We're not overexposed to any particular industry. And I would say that there are two probably industries that are sticking out lately were food retail and financial institutions, because they are kind of very rapidly adopting service and gaining share in our kind of total revenue pie.

But food and retail was just kind of driving force during current term. So they're really dealing very well with the crisis. And banks, they're dominated by state enterprises. So unlikely with the fairway. So from this perspective, we don't see, I don't think that anything was changed. But as I said, we see a new economy picking up e-Commerce, mobility, IT services.

I think that probably would continue and hopefully we will kind of retain our share, will increase our share in this areas. So I think post-recovery we'll also see -- we would see high activity in those segments that kind of survives and -- but had to optimize stuff and therefore just to address this reemerging demand, they would require quick efficient mass requirement tools.

I'm firstly talking about the non-food retail, of course. That's quite -- quite a big segment and we believe there will be quite significant activity and we saw it before crisis and the market is quite sizable.

I guess Vyacheslav I addressed both your question with this, yeah.

Vyacheslav Degtyarev -- Goldman Sachs -- Analyst

Yes, thank you.

Operator

Thank you. The next question comes from the line of Miriam Adisa from Morgan Stanley. Please ask your question.

Miriam Adisa -- Morgan Stanley -- Analyst

Hi, everyone. Good morning and thank you for the call. Three questions from me. Firstly, if you could just talk a bit more about the different dynamics between SMAs and key accounts. I think you mentioned that you've seen encouraging dynamics in SMA, just wondering if that could impact you. I guess you would typically expect key accounts to be more resilient. So anything you can say on the different dynamics there would be helpful.

And then on -- second question just on the acceleration of online that you're seeing. Just wondering if that could benefit some of the product development is doing around Talantix and Skillaz. If you could just give us an update there and perhaps talk about the opportunity and how that might have expanded post COVID. And then -- yeah, no, sorry, those are my three questions. Thank you.

Dmitry Sergienkov -- Chief Strategy Officer

Hi, Miriam. It's Dmitry again. On your -- I think your first question, yeah the SMEs and key accounts behave quite differently in this crisis. So you saw that. And actually, I think the biggest impact from the crisis we noticed especially in Q1, we noticed in Moscow, small and medium businesses right where effectively double-digit growth where it helps growth that we experienced in the first 10 weeks of the quarter kind of turned into a mid-single-digit growth that you eventually see in our financials. And there the impact was quite rapid I'm saying right -- so kind of off the cliff as the restriction were effectively imposed.

In regional SMEs, the effect was somewhat delayed, so you don't see it in the Q1. I think that deceleration in Q1 that you see is mostly explained by the high base effect in 2019. We talked this through I think many times already and of course, we got a lot of new micro clients last year who used to receive certain services for free until end of '18. So this -- we're not having this driver this year. So you kind of see this as sort of certain deceleration.

In Moscow, I would say that probably the biggest or -- sorry not in Moscow, the key accounts, the biggest impact from COVID was in Moscow again and you see it in the RPC dynamics, because again after kind of 10 weeks or maybe nine weeks of this quarter, we actually had the similar RPC dynamics as we saw last year and that was consistent with our targets for the year and then we kind of lost a few percentage points in paid share growth.

But last -- so obviously the decrease in kind of content from small and medium business was much more severe. But we saw that this segment as kind of recovering in content, in daily cash flows are double-digit since mid-April literally across the board in all the industries, including those that are still under severe restrictions. We see SMBs outperform in key accounts.

So it just shows that the economy, to some extent, adopted and we -- and yeah, we see this year and hopefully once we are out of this quarantine period, especially in Moscow, as a big market for SMBs, then the growth in SMB would just accelerate. That's the first question.

I think the second one was on our product development, right and opportunities? I think here we just have to distinguish between the kind of the demands of the market in this exceptional circumstances that would just disappear as non-sustainable post the crisis right and those who would kind of remain with us for longer and I think we are still making up our mind whether there should be certain tendencies, the long -- the first or second category.

Clearly, recruitment process, we will be adopting to social distancing and shorter term in-person meetings will be off the table, just job interviews will be conducted remotely more often. And for there, for example, we introduced home-build video interview solution, actually developed by Skillaz into our Virtual Recruiter product. So we're trying to address this kind of currently needs. But from the other hand, we're trying to kind of define what are they, actually a longer-term trends and do we -- of course the product development is something that is not a super flexible, right. You indicate your sources, and then the return will be delayed for over a period of time. So we have to prioritize resources efficient way.

So we see that probably online on-boarding, online learning will be accelerating post COVID and we are also -- from that perspective, we are thinking how to develop our management post-measure solutions like Talantix, Skillaz. We saw increase in usage of chat bots, for example. If we restarted this year with say 15,000 monthly users and chat bots and in April, at the worst point of the crisis, it was already 200,000, right. So 10 times bigger traffic in chat bots. So question again whether this sustain or not, but we -- clearly we see there is opportunity.

So, quite a lot has been going on and I think it would be important to carefully monitor our activity and see how our economy and how recruitment market adopts to the post recovery period. Hopefully I answered.

Miriam Adisa -- Morgan Stanley -- Analyst

Great, thank you.

Operator

Thank you. The next question comes from the line of Svetlana Sukhanova from Sberbank. Please ask your question.

Svetlana Sukhanova -- Sberbank CIB -- Analyst

Hi, everyone, congratulations for great results. My question will drive back to what you said about your marketing spend, you said that you are ready to sacrifice some kind of short-term financials toward big opportunity in the longer term. May I ask two questions here? Just how deeply are you ready to sacrifice? Can you kind of quantify us your intention in this area and how badly it will -- and how it could not -- how could it effect EBITDA.

And the second part of this question would be about TV and overall pricing, I understand that prices have dropped, but would you be able to benefit from this kind of our price declines for TV, for Internet advertising especially for TV of course all you had -- it's pre-contracted?

And my second question would be on effective tax rate. What should we expect for the full year in terms of effective tax rate? Thank you.

Grigorii Moiseev -- Chief Financial Officer

Yeah, hi, Svetlana. This is Grigorii. I'll probably take these. So basically, as we said, in sort of the lowest performance month like in April, for instance, we have significantly cut our expenses, actually, across the board, not just marketing, right. Well we also had initiatives in personnel, specifically in our bonuses for instance, etc., and certainly in some other nonessential sort of general administrative expenses.

So it was quite sizable cut compared to the last year. Probably sort of two-digit -- significant two-digit cut compared to the last year. As Dmitry said, yes we see -- we see these times as sort of an opportunity, right. We do not probably plan to -- significantly to continue these cost savings program in June for instance, if we will continue to see the recovery may be even not to the pre-COVID levels. But if we see speedy recovery, we think we will discontinue this cost saving program.

So I guess that's what we probably mean when we say sacrifice rate because effectively we will not be cutting costs. But at the same time for some period of time, revenue would still be, you know, it could be lower than the year before. We probably don't mean that we sort of -- we will increase marketing budgets twofold compared to the last year, etc. but rather this sort of period when the marketing could be higher as percentage of revenue than it was before. But again, this is sort of directionally and the exact numbers, I think it's even harder to estimate and tell you at this point.

So in terms of effective tax rate, as you saw, we have decreased it slightly in this in Q1. If we remove the ForEx loss which is non-deductible, we arrive at circa 28% effective tax rate as compared to 32% maybe even 33%, of course it was 33% last year. I would say the -- we have the same sort of target. We probably told you the year before in range of 25% to 27% for 2020.

Svetlana Sukhanova -- Sberbank CIB -- Analyst

That's clear. Thank you very much. And I also asked a question about TV pricing, will you be able to benefit say from TV -- lower TV advertising or cheap TV advertising, or you had already everything as pre-booked and prepaid? Thank you.

Grigorii Moiseev -- Chief Financial Officer

Yeah, sorry for missing that one. Frankly, I don't think I have the sort of sensible update for you. This is quite sort of complicated area in terms of especially now when there is a sort of changes in our schedules and the TV you market itself is in at least some distress as some advertisers are decrease in their budgets, etc. So I'm not convinced that frankly we will have the -- some sort of discount points due to this sort of lower consumption of -- or a crisis situation in this year. I frankly would not account for that for this year.

Svetlana Sukhanova -- Sberbank CIB -- Analyst

Very clear. Thank you very much.

Operator

Thank you. [Operator Instructions] The next question comes from the line of Irina Fomkina from ITI Capital. Please ask your question.

Irina Fomkina -- ITI Capital -- Analyst

Hello, thank you for taking my question. Could you please provide your estimates on the increase in the number of clients from state agency's job postings? Hello?

Dmitry Sergienkov -- Chief Strategy Officer

Yeah, Irina, it's Dmitry. It's not like a group of clients that we normally disclose publicly. But over a last -- over the last two months, as you could guess, this category has been especially important and active, especially in healthcare area, but I would say that in terms of paid content, the share of the state agencies had increased significantly, but in terms of the total content, I think this year is definitely going up, but still there is no concentration whatsoever.

Irina Fomkina -- ITI Capital -- Analyst

Thank you.

Operator

Thank you. The next question comes from the line of Svetlana Sukhanova from Sberbank. Please ask your question.

Svetlana Sukhanova -- Sberbank CIB -- Analyst

Yeah, if I may a quick follow-up question. I was a bit surprised by a comment that you have passed the bottom, the trough in mid-April, I was more expecting it like in mid-May rather than mid-April. How would you be -- because Russia was still in the official imposed lockdown by the end of April? So my -- I'll ask your opinion, how do you -- would you explain that the trough was in Mid-April rather than say in mid-May or late-April from your perspective?

Dmitry Sergienkov -- Chief Strategy Officer

Sure. So that's a -- it's a good question and Dmitry here. I think it's actually was partly in the remark done by Mikhail at the beginning that recruitment generally is dealing with expectations and sentiment all right. And I think the deepest point was at the end of March actually when the first non-working week was announced and no one really was understanding where kind of heading to, right, and there were little global support that we can get through this anyhow successfully. And clearly, all the businesses, they best put their recruitment plans on hold or try to optimize costs, including HeadHunter by the way.

And in the middle of April, we -- first, we saw a significant improvement, all the businesses still a significant improvement with the virus outside of Russia and at least, there was a clarity that, yeah, probably until mid-May no one actually are going to get back to the office. You have to adopt, you have to kind of adopt a new channel, marketing channels, advertising channels. And our businesses, including SMBs, done it quite successfully.

We're two, three weeks, starting from end of March. So we felt that kind of recruitment sentiment significantly improved and of course we are doing the surveys, effectively weekly, right. We're asking what are the recruitment plans, how many people you're kind of laying off and clearly that this kind of confidence index of employers improved starting from, I would say, second week of April and that result in higher activity on our platform.

Svetlana Sukhanova -- Sberbank CIB -- Analyst

Very clear. Thank you very much.

Operator

Thank you. The next question comes from the line of Kirill Panarin from Renaissance Capital. Please ask your question.

Kirill Panarin -- Renaissance Capital -- Analyst

Hi, everyone, and thanks for the call. A few questions from me. So firstly, you mentioned that now is a good opportunity to consolidate the market. What trends have you seen so far versus competition? Do competitors -- do you think feel better or worse versus HeadHunter? Secondly, can you give us an update on your pricing policy at the moment and do you plan to provide any material discounts post the lockdown if you continue seeing market and activity recovery?

And lastly, just a follow up. If I heard it right, you said that quarter-to-date growth stands at about minus 25%. Can you give us some color how this number has progressed throughout the quarter, what are the latest trends in terms of revenue growth? That's it, thank you.

Dmitry Sergienkov -- Chief Strategy Officer

Yes, thanks Kirill I think -- to some extent I already commented on the competition that generally we saw during lockdown that all competitors significantly optimized their budgets. So they -- most of them removed TV, then they trim their spending in digital channels, been quite constructive in terms of pricing, I would say. So, we didn't see there that price wars that we saw in other verticals like cars, real estate.

So in this environment, normally kind of players are relying on their gaining traffic, they are gaining awareness, right? And we of course on this environment, our KPI is behaving by far stronger, because in normal circumstances, we -- our organic traffic normally comprises over 90%. But in this environment, when you kind of put all your pay channels on hold, in our case, it's actually reaching 100%, nearly 100%.

And obviously, if you are not benefiting from this organic flow, and you normally had to kind of burn certain cash to kind of engage audience, then you get into trouble. Therefore, we saw clearly that across the board in terms of traffic, in terms of CDs, our performance was by far better. Only player who kind of showed similar dynamic was Rabota, but they -- again they just benefit from the very well-known brand in their regions.

And that's opportunity for us because we are seeing businesses are picking up and hopefully on this recovery trend, they will come back to active recruitment and being stretched in terms of budgets, they would have to kind of find the solution that should deliver us the highest number of quality candidate, right, and provides best customer service and hopefully will prove that our platform is, is the one.

And also I think we proved that during this period, we are no longer a white collar platform, right. We are already nearly half blue collar and we proved to be efficient for blue-collar recruitment, just judging by number of new vacancies in this area. And I think this holds another opportunity for us to probably grab a bigger share in this kind of new emerging market for us.

In terms of pricing, I think we adopt our monetization strategy. So generally, I mean global I'll say, this situation doesn't changed our strategic plan on monetization. We always pursue gradual improvement in monetization over long term, right. We never plan to rush-in in any particular year. So we -- all initiatives we had designed to link price to value remain in place. We'll move toward individual pricing and we'll progress with the new monetization model for subscription this summer.

The only thing, we all understand that in this challenging environment, we must be careful how kind of painful all these changes for our clients, right, because we don't want to retain a memory as a vendor who's screening up clients at a challenging time. So we probably just set the economic levels for -- or limits or what I mean is price increase, albeit just make them a milder and softer in the shorter term.

But again, just using this and leveraging this upward trend, we may win more clients in the longer run, it will be both revenue and value accretive. And I think on the last question 25%. Well, I got to only say that May is better than this number, April probably slightly worse.

Kirill Panarin -- Renaissance Capital -- Analyst

Okay, that's great. Thank you. Thank you for your comments.

Operator

Thank you. [Operator Instructions] The next question comes from the line of Alexey Krivoshapko from Prosperity. Please ask your question.

Alexey Krivoshapko -- Prosperity Capital Management -- Analyst

Hello, everybody, and thank you very much for the details. I'm really sorry, but I really would like to get a bit more numeric data on kind of how competition is evolving, can you give us the most latest information about number of CVs, which are basically in your platform and what is basically in place for your number one and number two competitors, just for us to understand kind of how it evolved lately?

Dmitry Sergienkov -- Chief Strategy Officer

Sure, Alexey. We actually reached the milestone, this -- this day we had 45 million CVs on our platform. I don't know exactly what is the absolute number from the competitors?

I believe there is at least 2.5 gap against number two. We are normally -- but it's quite a rigid metric, total CV database, right. We normally are looking -- when we're analyzing dynamics, we're looking at the new CVs inflow, right And 40-day CVs and compare our dynamics against others and -- well at least in terms of total number of CVs, we saw that we're being two times better than Superjob and Rabota.

And Avita obviously has a very limited -- they're kind of picking up in terms of CVs but the basis is still extremely low, same for Workey. So effectively, the only player who has significant database is Superjob and as I said the dynamics is nearly 2 times worse for Superjob.

Alexey Krivoshapko -- Prosperity Capital Management -- Analyst

And what's the latest on those FAS hearings about basically third party's ability to basically access to your database?

Dmitry Sergienkov -- Chief Strategy Officer

Yeah. I think on FAS we're -- we got the decision from FAS and are effectively -- it was not a bad outcome for us. Well, I think with the -- we had to receive a fine estimate, but that point of time was thought to be less than RUB1 million, and still we filed the effectively appeal toward FAS' decision in April and we will have a hearing in the middle of June in court.

We just want to clarify certain statements, because in our view, there were kind of phrased quite sloppy and we want to avoid any misinterpretations for the future. But -- so yeah, we will go to the court in Mid-June and might be able update investors in the next call or earlier.

Alexey Krivoshapko -- Prosperity Capital Management -- Analyst

But just for me to understand. So basically you will go in court about some -- basically wording, but in principle, it looks like -- basically your court appeal, yes?

Dmitry Sergienkov -- Chief Strategy Officer

Yes, yes, absolutely right. Not they just stated that we are kind of taken, kind of monopoly position in the market and we wanted to clarify -- kind of combined monopoly with the few other players. So we want to clarify what does this mean being kind of dominant position with two others, effectively number two and number three players. We thought that's quite kind of new notion for the market. That's the only thing, otherwise their regional claim, I think was already dealt with.

Alexey Krivoshapko -- Prosperity Capital Management -- Analyst

Got it, thank you. And in terms of kind of timing of dividend decision, is it possible right now to say when it will happen or basically everything is a little bit up in the air?

Grigorii Moiseev -- Chief Financial Officer

Yeah Alexey, this is Grigorii. Well, as I said, we see that the sort of situation is improving, but still there is kind of -- there is no clear sort of picture that we are out of the pandemic in Moscow that these restrictions will not come back again. The business will not be locked down in like one-month time, etc., etc. So we just want to probably wait for some, I don't know, might be weeks, maybe a couple of months to see depending on how situation will improve and see a better picture and as soon as we have it, we will announce the payment. That may be during the next quarterly call or maybe earlier.

Alexey Krivoshapko -- Prosperity Capital Management -- Analyst

Okay. And just final question if I may, what is your current cost of debt and if you were to borrow incrementally, what would be the cost of debt?

Grigorii Moiseev -- Chief Financial Officer

We have floating rates. It's Central Bank of Russia plus 2%. So which is actually currently around 8% per year.

Alexey Krivoshapko -- Prosperity Capital Management -- Analyst

Okay, so basically just floaters, [Indecipherable], OK.

Grigorii Moiseev -- Chief Financial Officer

Yeah.

Alexey Krivoshapko -- Prosperity Capital Management -- Analyst

Thank you.

Operator

Thank you. [Operator Instructions] Dear speakers, there are no further questions at this time, please continue.

Mikhail Zhukov -- Chief Executive Officer

Thank you everybody for joining and have a nice day. Bye-bye.

Dmitry Sergienkov -- Chief Strategy Officer

Thanks everyone. Take care. Bye-bye.

Grigorii Moiseev -- Chief Financial Officer

Bye, thank you.

Roman Safiyulin -- Head of Investor Relations

Thank you. Bye-bye.

Operator

[Operator Closing Remarks]

Duration: 58 minutes

Call participants:

Roman Safiyulin -- Head of Investor Relations

Mikhail Zhukov -- Chief Executive Officer

Dmitry Sergienkov -- Chief Strategy Officer

Grigorii Moiseev -- Chief Financial Officer

Ivan Kim -- Xtellus Capital Partners -- Analyst

Vyacheslav Degtyarev -- Goldman Sachs -- Analyst

Miriam Adisa -- Morgan Stanley -- Analyst

Svetlana Sukhanova -- Sberbank CIB -- Analyst

Irina Fomkina -- ITI Capital -- Analyst

Kirill Panarin -- Renaissance Capital -- Analyst

Alexey Krivoshapko -- Prosperity Capital Management -- Analyst

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