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HeadHunter Group PLC (NASDAQ:HHR)
Q4 2020 Earnings Call
Mar 18, 2021, 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 Fourth Quarter 2020 Financial Results Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today on the 18th of March. 2021.

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

Thank you. Hello, everyone, and welcome to HeadHunter Group fourth quarter and full year 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 fourth quarter and full year 2020 results was issued earlier today and the copy may be obtained through our website at investor.hh.ru.

Now, I will briefly walk you through the safe harbor statements. Today's discussion will contain forward-looking statements. Actual results may differ materially from the results predicted or implied by such statements, and the 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 factor section in our annual report on Form 20-F for the year ended December 31st, 2019 and our final prospectus in connection with our public offering that was filed with the U.S. Securities and Exchange Commission on June 16th, 2020.

During this call, we will be referring to some non-IFRS financial measures. This 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 to make a quick opening remark. Please go ahead.

Mikhail Zhukov -- Chief Executive Officer

Thank you, Roman, and good afternoon, everyone. Last year, HeadHunter celebrated it's 20th anniversary. And without a doubt, there hasn't been a year like that before. COVID-19 pandemic has changed everybody's life, adversely impacting some businesses and opening up new opportunities to the others.

Our business emerged from this backdrop even stronger than they have ever been. The powerful network effect of our platform, reinforced by timely marketing and monetization steps during recovery, allowed us to further consolidate the market and significantly improve key operating metrics. In February 2021, the number of CVs on the platform reached 50 million milestone, and vacancy seat holding on a record level of above 800,000 job postings. Despite those challenges, we have not only defended our leading market position, but also accelerated our development in certain key strategic areas, with acquisition of strong regional job platforms Zarplata.ru, and introduction of new consumption patterns into our product suite.

Now we see life is slowly getting back to normal, which gives businesses more confidence and visibility. The competition for labor is intensifying in Russia, forcing employers to leverage the most effective channels of recruitment. All these factors, alongside accelerated digitalization, makes us to believe that 2021 will be a really exciting year for HeadHunter.

Now, I'll turn it to Dmitry to walk you through the key highlights of the fourth quarter and the full year. Thank you.

Dmitry Sergienkov -- Chief Strategy Officer

Thank you, Mikhail. Good afternoon, everyone, and thank you for joining us on this call. I will do quick overview of year-end results, and as usual, have enough time for Q&A.

Looking backwards, 2020 by no stretch of imagination can be called a dull year, as it turned out to be one of the most difficult, but equally important year in company history. We once again demonstrated the resilience of our business and our ability to earn economic volatility in our favor, hence coming out of recession even stronger than ever.

Our 2020 revenue went up by 6.3% year- on-year, with a full recovery to pre-COVID revenue growth levels by end of fourth quarter. And despite overall challenging year, we progressed significantly on our monetization strategy, switching to a new subscription model, which will hopefully have a long-lasting effect on ARPC growth. Our pre-COVID pricing differentiation initiatives became noticeable and made significant impact in Q4, facilitating overall revenue recovery. Throughout this year, we demonstrated strict financial discipline and ability to manage our cost base in line with our business performance.

We retained 40%-plus profitability in all quarters, and eventually even managed to increase our annual EBITDA margin compared to 2019. On top of organic growth, we have carried out acquisition of strong online platform in the most untapped market segments, regional blue collars and SMA. In 2020, Zarplata generated revenue of RUB780 million, which is right on top of the range provided in November. Last year, dynamics of our core operating metrics indicate the continuous product development and overall online equivalent market expansion in Russia, despite all the economic headwinds.

During 2020, we added more than 6 million net new CVs, sustaining leadership in all Russian regions in terms of new candidate inflow and expanding the gap with competitors. More importantly, we maintained high share of active CVs. 70% of total visible CVs on our platform either applied or were updated over the last two years. So, this database remains very relevant. And as we move to new access monetization, this becomes very crucial. Especially strong trends we see in blue collar worker categories, where we have demonstrated circa 45% year-on-year CV growth. As of the end of 2020, circa 35% of all job secured CVs from this category, just -- this testifies our considerable traction in blue collar market.

On employer side, we observed quite similar dynamics. As of the end of 2020, total number of job postings on the platform was 25% up, supported by strong new customer inflow and consumption growth of existing clients. Similar to casual content, blue collar vacancies are growing especially strong, representing 43% of total vacancy seats. It's very important for us strategically to strike right balance between demand and supply side in blue collars. And therefore, it's very pleased -- we're very pleased with such concurrent dynamic. Our sentiment in terms of interview invitation remained strong during 2020 and in quarter four, and almost no seasonal decline, growing 18% year-on-year in December.

Now, giving a little bit more specific about Q4 numbers. In the fourth quarter, our revenue growth came back to pre-pandemic levels, growing 19% year-on-year. Importantly, we see our revenue trends trending in January and February despite the postponement of price increase from 1st January, as we usually do, to 1st April this year. Our adjusted EBITDA margin in the fourth quarter was a level of 47.4%, affected slightly by resumed hiring and some discretionary bonuses paid to our employees in quarter four.

Our capex in Q4 2020 was only RUB48 million, or 2% of revenue, as we finally completed our office renovation. Our key product dynamics is also encouraging and generally consistent with the trends we've seen in previous quarter. Being more sensitive to business environment, job posting demonstrated the strongest recovery dynamics in the fourth quarter, growing 32% year-on-year. Growth came back on -- came on the back of inflow of new customers, mostly small and medium businesses, as well as growth of Key Account consumption and effect of 2020 price increase, which became fully effective for the year-end. Bundled subscription proved to be less susceptible to short-term volatility due to predominance of long-term contracts. In Q4, this product category accelerated to 12% year-on-year.

CV database growth accelerated to 9% year-on-year. We saw uplift in average duration by access. And that actually contributes to visibility of our future revenues in this segment. We significantly advanced transition to a new pay-per-contact model, with the vast majority of Key Accounts already working and moved to a new scheme. We expect that migration to be substantially over this year, and we expect very meaningful revenue effects from 2022 onwards.

We maintained a comfortable share of subscription revenue in our portfolio, approximately 47%, which helped us to withstand the periods of heightened volatility and what we experienced last year.

Other value-added service growth acceleration was affected by some offline events that were canceled last year for this reason. However, branding and price of performance product have shown solid growth, above 20% year-on-year. And in the end, our VAS category demonstrated revenue growth, exceeding group average year-on-year.

Turning now to the results by customer segment. Despite the fact that this year we saw a higher than usual churn rate during lockdown, affecting SMA segment, especially hire, we have increased our paying client base by circa 30,000 customers. During Q4, all client categories demonstrated strong double-digit revenue growth with SMA being mostly driven by customer base expansion, while Key Accounts, both pricing initiatives and consumption growth in big packages.

Our client acquisition plan executed in Q3 and Q4 facilitated new customer intake. During the fourth quarter, a number of new customer registrations request grew by 50% year-on-year, with record high conversion to paying customers. We see average revenue per customer growing across all client categories with very encouraging vintage dynamics. Clients from all categories acquired during '19 increased their spending in 2020 by more than 70%. Those kind of customers who started using HeadHunter before '19 demonstrated ARPC 20% growth on average. So, that meaning, we have been advancing long our monetization strategy even in such a turbulent year.

Now, handing it to Grigorii to talk for our financial performance.

Grigorii Moiseev -- Chief Financial Officer

Thank you, Dima, and hello, everyone. Let me first give you some detail on the cost side. As you see on Slide 11, in the fourth quarter 2020, our adjusted EBITDA margin has decreased by circa 2 percentage points from 49.5% in the fourth quarter 2019 to 47.4% in the fourth quarter 2020. As Dima already probably mentioned, that was due to the elevated growth in our personnel expenses in the fourth quarter 2020, which I will explain later. At the same time, for the full year 2020, we are able to sustain profitability. Our adjusted EBITDA margin for the full year was 50.6% compared to 50.5% in the year 2019.

Let's dive into our key expense buckets in the fourth quarter 2020. Our personnel expenses increased by 33.6% to RUB808 million, and that was driven by three key factors: first, indexation of wages in the beginning of 2020; second, we increased our hiring and hired approximately 30 new people during the fourth quarter of 2020, and most of these hirings were in development, sales and marketing teams; and the third factor, we decided to pay a discretionary bonus to our personnel to compensate for a reduction of bonuses earlier in the year, which was part of our cost reduction program in response to COVID-19. As a result of increase in hiring and the discretionary bonus paid, personnel expenses as a percentage of revenue has increased, resulting in the decrease of adjusted EBITDA margin by 2 percentage points, which I've mentioned in the beginning.

Our marketing expenses in the fourth quarter 2020 increased by 16% to RUB318 million. Marketing spend was 13% of revenue, which was flat compared to 13.3% in the fourth quarter of 2019. Our other general and administrative expenses in the fourth quarter of 2020 increased by 10.8% to RUB292 million. This expense bucket has decreased as percentage of revenue, but excluding certain non-operating items, it was flat as a percentage of revenue.

For the full year 2020, as we've said before, our adjusted EBITDA margin was 50.6%, flat compared to 50.5% in the full year of 2019. Our personnel expenses adjusted for various non-operating items have increased as percentage of revenue, while our marketing spend and other general and administrative expenses also adjusted for non-operating items, were flat as a percentage of revenue in the full year 2020. The change in personnel expense was offset by the increase in foreign exchange gain, resulting in flat adjusted EBITDA margin for the full year. The change in personnel expense in the full year 2020 as a percentage of revenue was mostly on the back of indexation of wages and hiring additional 60 people during the year, resulting in increase in headcount to 832 people as of the year-end.

Moving on to other key indicators. Our capex in 2020, excluding the acquisition of assets of Zarplata, was RUB261 million, and it was down RUB131 million year-on-year, primarily due to a decline in office renovation costs as we finalized our project in the summer of 2020. As a result, capital expenses were 3.1% of revenue for the full year 2020, including our office renovation costs.

Net working capital as of December 31, 2020 decreased by RUB855 million to circa minus RUB3.8 billion, primarily due to an increase in contract liabilities of RUB418 million from customer prepayments, and an increase in other payables due to consideration payable for the acquisition of Zarplata. Our income tax expense was RUB686 million in 2020 compared to RUB644 million in 2019. And the effective tax rate for the full year has decreased to 26.7% in 2020 from 29% in 2019, on the back of the decrease in nondeductible expenses.

Now, turning to cash generation metrics. In the full year 2020, we generated RUB3.2 billion from operating activities compared to RUB2.6 billion generated in 2019. This growth was primarily due to the increase in interest -- sorry, decrease in interest paid on the back of the decrease in the Key Rate of Central Bank of Russia, and the increase in sales. Net cash used in investing activities was RUB3.2 billion in the year 2020 compared to RUB637 million used in 2019. The key change driver here was a RUB3.1 billion payment for the acquisition of Zarplata.

We have generated RUB1.1 billion from financing activities in 2020 compared to RUB2.6 billion used in 2019. The major change driver here was the issuance of RUB4 billion bond in 2020. Also, last year, we have paid RUB1.9 billion dividend compared to RUB1.1 billion payment in 2019. Our bank and other loans repayments decreased from RUB1.3 billion in 2019 to circa RUB800 million in 2020, mostly on the back of the other one-time loan repayment in 2019, and also due to the decrease in payouts, as we amended our bank loan duration and repayment schedule in 2020. Our net debt increased in 2020 by circa RUB1.9 billion, mostly due to a RUB3.1 billion paid for Zarplata acquisition, and RUB1.9 billion dividend payout, which were offset by RUB3.2 billion generated from operating activities. And as a result, our leverage has increased from 0.8 times EBITDA to 1.2 times EBITDA as of the end 2020.

And finally, moving to our outlook for 2021. Assuming no further escalation of the COVID-19 pandemic and based on our competitive position and solid year-to-year performance, we expect our revenue on the group level to increase in the range from 37% to 42% in 2021 compared to 2020.

This concludes our presentation of the fourth quarter and the full year 2020 results. 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 Vyacheslav Degtyarev from Goldman Sachs. Please ask your question.

Vyacheslav Degtyarev -- Goldman Sachs -- Analyst

Yes, thank you very much for the presentation. A couple of questions. Firstly, how do you think about the margins, how they'll perform in 2021 on a like-for-like basis, excluding the acquisitions? Basically, do you think that revenues will outgrow the key cost components, being the personnel expenses and the marketing expenses? So, any color would be appreciated here. And also, secondly, how would you assess your market share trends across the blue collar segment, in particular? And among the competitors, who do you think are the most active and potential relative share gainer among the competition? Thank you.

Dmitry Sergienkov -- Chief Strategy Officer

Thanks, Slava. This is Dima. Just to clarify, your question was on the margins for 2021, right? So, we take the guideline on margins?

Vyacheslav Degtyarev -- Goldman Sachs -- Analyst

Yes.

Dmitry Sergienkov -- Chief Strategy Officer

Yeah, look. yeah, we debated this internally. And I think just at this point of time, we decided not to provide any official guidance on margins at all because the prevailing environment is still relatively uncertain. It's quite -- I would say quite encouraging how things developing year-to-date, overall. And -- but at the same time, we understand that we are not out of woods yet. And economy is still experiencing -- certain segments of the economy still struggle. So, we provide quite a wide range on revenue next year and feel quite comfortable with that. For margins, we just preserve, and -- but maybe we'll come back to the market later once we kind of adjust further growth and recovery of the economy. But just from a longer-term perspective, I think we're always guided toward gradual market expansion, right? It not always happens year after year, because it also to some extent a function of combat [Phonetic] situation and some upside. It could be at a certain cost upfront. But generally, we expect that margins continue growing as a vast majority of our expenses are not tied to revenue expansion.

And on the market share gain, it's always a bit a speculative, right, because our competitors don't report, and all of them actually report revenue numbers. But for last year, we may try to speculate a little bit because it feels quite safe to say that our market share significantly increased, right? First of all, inorganically, we acquired a substantial player. Market share was estimated be around 6% -- 7% of the market. So, that's accretive. And they predominantly operate in the segment of blue collars and regions and among smaller businesses. So, I think that also affected more or less proportionately our share in blue collar.

As to the just kind of organic market share evolution, we also believe that we are gaining market share, and there are clearly two players who are significantly outperforming the others, right? It's us and Avita. And we look at their dynamics. Because effectively, almost the entire business of Avita is targeted at blue collars, right? So, we're actually not splitting out any revenue streams or vacancies, while our business is kind of split into blue and white. And if you look at our blue dynamic, that is clearly outstripping white collars, right? And even if you look, for example, at the job posting dynamic -- revenue dynamics in Q4, it was 32% up. And I can tell you that if you are going to split out and look at only blue collar vacancies, that growth rate would be almost twice as high. And I believe it sits relatively comparable to what Avita is experiencing for the last few months, quite a dynamic growth. So generally, the other players, we don't see that they're growing anyhow close to this before, it seems like we are gaining.

Vyacheslav Degtyarev -- Goldman Sachs -- Analyst

Okay, thank you very much.

Operator

Thank you. The next question comes from the line of Ivan Kim from Xtellus Capital. Please ask your question.

Ivan Kim -- Xtellus Capital Partners -- Analyst

Yes, good afternoon. Two questions from my side, please. Firstly, can you just maybe comment on the revenue growth that you're seeing in January and February, which will be more sort of pre-monetization kind of growth because the pricing comes later this year than last year? And then, my second question on the marketing, specifically. If you can talk about what to expect in terms of marketing to sales in '21, given that the marketing budgets of your rivals remain fairly high, but also your revenue grows a lot. So, any comments on that will be appreciated. Thank you.

Dmitry Sergienkov -- Chief Strategy Officer

Thank you, Ivan. This is Dima here. Yeah, just a few words on the year-to-date performance. We started all this year with exceptionally strong performance across literally all market segments and products. We noticed acceleration compared to December, quite significant, while December was the best month in 2020. And now, we also see that, effectively, February is better than January and March is stronger than February. So, we kind of noticed month-over-month growth acceleration across all segments. I wouldn't provide specific on numbers, but I think from our guidance, you may kind of read that we would expect -- what kind of numbers we expect for the whole year. And we, at this point of time, feel pretty comfortable within this range.

We see that the main kind of growth drivers for this outperformance is just accelerated kind of shift to online from small and medium businesses, and their consumption of our job posting product, and also constantly improving consumption of Key Accounts, driven predominantly by monetization. And also, it's kind of side effects from our introduction of our CV data base monetization last year, because we see Key Accounts started consuming more vacancies than they did before the introduction, just -- they're trying to save on contacts somewhere. So, we believe that these both factors there quite robust. We don't expect them to significantly roll back over the year. And as you rightfully said, we effectively not increased prices yet. And we plan to do so from April the 1st, almost all products prices would grow by 10% -- almost around 10%, some products a bit more, but not less. That's on the first question.

On the second, as you know, we were not big sense of kind of guiding on marketing strategy, right -- especially at the beginning of the year because we see that you mentioned competitors investing. They keep investing in this business. Because they also see that the more the economy is recovering and the market is growing, and so we do. And at this point of time, it's within our expectations and budgets. We retained some flexibility throughout the year depending on our topline performance to increase or decrease marketing spend. Generally, a lot of our expenses are discretionary. So, effectively [Phonetic], which is reflection of; first, the competitive environment; second, our expectations on kind of return on investment, right, because we increased the marketing in the second half last year, actually defining regardless of competition just because we saw that that's a great potential for us to boost revenue growth. So, well see how the market develops this year, and maybe we'll also just follow the same strategy. For us, the priority would be just driving revenue growth, first of all. But we don't expect the margin fall below 50%.

Ivan Kim -- Xtellus Capital Partners -- Analyst

All right, thank you very much.

Operator

Thank you. The next question comes from the line of Dmitry Vlasov from Wood & Company. Please ask your question.

Dmitry Vlasov -- Wood & Company -- Analyst

Hi. Thank you very much. So, the first question is on your strategy. When do you see -- when do you expect prices for small and medium enterprises to increase? When do you actually start -- expect to start to see some monetization opportunity in those accounts? And the second question is on other segments. When do you -- when would you expect to start to see monetization of your users? And when do you expect to start entering new segments? Thank you.

Dmitry Sergienkov -- Chief Strategy Officer

Yeah, thank you, Dmitry. Well, actually, we -- in SMA, we have already been seeing constantly enhancing monetization and growth and average check, right? At the time when you see kind of outpacing customer base growth in this segment, obviously, the average RPC may go down. But if you kind of split up and look at the historical vintages, almost in all vintages, you see healthy growth, around 20% plus, even in small and medium, although it's not our main target for monetization. It's not going to become our main target for the next two to three years, because we see much higher potential of monetizing bigger clients with bigger consumption just because at this point, they disproportionately can use more -- and cheaper use our services. And they can definitely pay more for the value that we provide. But for small accounts, we -- I think we already started a few years ago, a little bit more aggressive monetization, and we didn't notice any churn. So, I would say that they also contribute to overall ARPC dynamics.

In terms of new market segments, well, we have strategy, right, where we say that it's one of the three major growth pillars to our business expansion of portfolio. And we already invested in HR automation products, where we see significant potential. We believe that that market is just a scratching surface. And the growth in the segment of HR automation will be long lasting, and we should definitely take a significant role in this opportunity. We look at other areas, specifically now we look at very attentively at temporary market, because it's driven by some legislation changes, and it's probably one of the most dynamic markets, and we definitely also want to be present as a significant player in the space. But I think, we're constantly monitoring. We're just trying to find the right way, whether we do it internally or acquire the right platform to start with. And in the shorter term, I think HR automation is the area where we've actually made steps and we see some early benefits.

Dmitry Vlasov -- Wood & Company -- Analyst

Thank you very much.

Operator

Thank you. [Operator Instructions] The next question comes from the line of Yulia Kazakovtseva from UBS. Please ask your question.

Yulia Kazakovtseva -- UBS -- Analyst

Hello, everyone. I have a quick question on your leverage. Do you expect it to go down this year from the current 1.2?

Grigorii Moiseev -- Chief Financial Officer

Yeah, hi, Yulia. This is Grigorii. I think it would kind of depend on whether we are acquiring any new debt or making any M&A projects. So, it's kind of hard to say definitely. Provided that we are not, I would say that the leverage would go slightly down as we make these regular payments for that, and also as the EBITDA is increasing in 2021.

Yulia Kazakovtseva -- UBS -- Analyst

Okay, thank you.

Operator

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

Miriam Adisa -- Morgan Stanley -- Analyst

Hi, sorry, I was on mute. Thanks for the call. Just two questions from me. Firstly, just on your personnel costs. I mean, I know you're not giving any specific margin guidance, but any color you can share there on how you're thinking about hiring for this year, and if there needs to be another big step-up from Q4 level? And then, just on Zarplata, if you could just give a bit more color on the business? I know you mentioned the strong current trading. Is there anything specifically to call out for the Zarplata? Or have they seen the same trends as for the broader business? And then, also just to confirm that you're also going to be putting up prices in April on Zarplata as well, in line with the rest of the group? Thanks.

Grigorii Moiseev -- Chief Financial Officer

Yeah, hi, Miriam. This is Grigorii. I think, on personnel expenses, as Dima already mentioned, we are kind of not actually making the guidance on expense buckets, because to some extent it is kind of moving parts during the year, depending on what we see in terms of revenue development, competition situation, etc., etc. Probably, I wouldn't say that there's kind of specific plan in place to significantly increase headcount or salaries in the company, right? I would also say that the -- our major investments in personnel would probably lie in our development team for 2021. Yeah, that probably is the strategy.

Dmitry Sergienkov -- Chief Strategy Officer

I'll take the second and third. Hi, Miriam. On Zarplata, what we see now that they also recovered, and they performed quarter-to-date stronger than before in the fourth quarter. A little bit lagging, I would say, group average dynamic, and that's kind of reflective of their market position. I think, it's a good example of a smaller player operating in today's environment compared to a much bigger company like HeadHunter, first thing.

And second, as our competitor, Zarplata used to utilize that tax benefit, particularly non-VATable. They were selling non-VATable licenses that became VATable this year. So, that made also certain effect, of course, some clients of Zarplata who can actually deduct that from their taxable income, right? And so, that limits to a certain extent monetization in this year. But same problem faced by all of our competitors, I think, besides Avita, of course, it's just us and them who actually never sold the license. But generally we see that in February, they already kind of returning to growth. And now, they are more or less operating within the budget that we agreed. In terms of prices, they have a slightly different cycle. We are trying to align it now. And that's a kind of first priority in terms of our integration process and roadmap, because we see a lot of potential cross-sell and Zarplata product across our group, and also align some extent our products in terms of pricing. I think that will be clearly our high priority for the second quarter. And some results and synergies would be hopefully absorbable in the second half this year. But, they also plan to grow prices and even more aggressive than what we budgeted originally for HeadHunter.

Miriam Adisa -- Morgan Stanley -- Analyst

That should be helpful. Thank you.

Operator

Thank you. [Operator Instructions] The next question comes from the line of Maria Sukhanova from BCS. Please ask your question.

Maria Sukhanova -- BCS -- Analyst

Yes, good afternoon. Thank you for the opportunity. I have question about automation, HR automation segment. Could you please update us what happened in 2020 to user base or like revenue trends of Skilaz and the user base of Talantix. I'm just wondering whether you saw any strategic benefits, like for instance, with group of specializing companies, like using more of the services, something like that? Or it's more like the services were pressured by the macro environment? And probably, what are your -- if you could voice it, what are your plans for 2021, for instance, Talantix, in terms of monetization? Thank you.

Mikhail Zhukov -- Chief Executive Officer

Thank you, Maria. I'll start with Skilaz. We're very pleased with Skilaz performance last year. I wouldn't say that the environment and circumstances helped them a lot, to be honest, because the second quarter was almost lost in terms of revenue. They were severely under budget. And obviously, companies, they tried to put all expensive programs on hold with the lack of visibility in the second quarter. So that affected effectively their kind of client base penetration. Although the need for our clients to automate and kind of go on remote interaction increased, they just didn't receive approval for budget expansion. So, the second quarter was very challenging, but they effectively, they managed to recover that second quarter -- in the second and third and fourth, especially. And they managed to double their revenue base. They managed to double their client base. And it's actually almost reaching their original budget targets. For this year, we'll have -- we will consider acquisition -- I think, consider additional control in Skilaz, while also option of exercise later this spring. And because we have actually time until end of June. But so far, we're very pleased. And also, we identified a lot of synergies between our sourcing products and their processing products, so not always stand-alone revenue performance, it's also about boosting and kind of cross sell our services to clients.

As to Talantix, same -- it's probably the same problem, but just kind of smaller scale, because Talantix is gated [Phonetic]. So, it's midsized segment, which was under the biggest pressure due to pandemic. At the same time, in the first year of monetization, Talantix managed to gain around 400 paying clients, which is a pretty good result. We never consider Talantix as a significant revenue stream, to be honest. And just monetization launch was more to just crystallize client base. It's more the stickiness. So, in this mid segment, it's more about data flowing through the funnel. And from that perspective, we see Talantix as very strategic. But we don't think that Talantix will become noticeable in our P&L, while Skilaz hopefully will, over time. And generally, we saw that the need in automation and some restrictions on kind of offline interactions happened during pandemic just gave a raise in client interest, and that should help us sell these two products this year.

Maria Sukhanova -- BCS -- Analyst

That is very helpful, thank you.

Operator

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

Roman Safiyulin -- Head of Investor Relations

Thank you, everybody, for joining the call, and take care. Bye, bye.

Mikhail Zhukov -- Chief Executive Officer

Bye, bye.

Grigorii Moiseev -- Chief Financial Officer

Thanks, bye.

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

Ivan Kim -- Xtellus Capital Partners -- Analyst

Dmitry Vlasov -- Wood & Company -- Analyst

Yulia Kazakovtseva -- UBS -- Analyst

Miriam Adisa -- Morgan Stanley -- Analyst

Maria Sukhanova -- BCS -- Analyst

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