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HeadHunter Group PLC (NASDAQ:HHR)
Q1 2021 Earnings Call
May 27, 2021, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the First Quarter 2021 Financial Results Conference call. At this time, all participants are in listen-only mode. After the speaker presentation, there will be the question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

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

Roman Safiyulin -- Investor Relations

Thank you. Hello, everyone, and welcome to HeadHunter Group first quarter 2021 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 2021 results 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 statements.

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 Annual Report on Form 20-F for the year ended December 31, 2020.

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. 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 will turn the call over to Mikhail for opening remarks. Please, go ahead.

Mikhail Zhukov -- Chief Executive Officer

Thank you, Roman, and good afternoon, everyone. A year ago we were at the point of great uncertainty and couldn't imagine how much stronger our business would emerge from this crisis. So today, we are especially happy to deliver a solid set of financial and operating results.

Positive market trends this year keep driving business' confidence up, resulting in ever-increasing competition for labor. In this environment of short supply, employers have to allocate budgets toward the most effective recruitment channels. And that is why we see over 1 million active job vacancies on our platform right now.

Recently, we consolidated our ownership in HR tech company skills, which we believe would result in further expansion of our business beyond job advertising. Finally, as we have seen fundamental trends strengthening, we are significantly upgrading our growth guidance and I also would like to reward our shareholders with a 75% of 2020 net profits to be paid in dividends.

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

Dmitry Sergienkov -- Chief Strategy Officer

Thanks, Mikhail. Good afternoon and thank you for joining us on this call. Overall, as Mikhail said, we're very happy to report an excellent set of results in Q1. Our revenue was up 43% year-on-year, even despite a relatively limited low base FX set for the quarter last year. Growth rates accelerated significantly compared to Q4 across all client and product categories.

Our adjusted EBITDA margin including Zarplata came at 47%, while our core business EBITDA margin excluding Zarplata reached 51%. Our CapEx comprised just 1.9% of revenues by contributing to a strong cash flow generation over the quarter.

Our key product dynamic is generally consistent with the previous quarter. Job posting demonstrated the strongest growth trend in the first quarter, growing 59% year-on-year. The growth came on the back of solid intake of new customers, redundantly small and medium businesses, as well as the 2020 differentiated monetization applied to key accounts.

Bundle subscription ACV base access demonstrated solid revenue growth of 33% and 25%, respectively, mainly, driven by small and medium business consumption growth. Even though over 90% of our clients already migrated a new subscription monetization model, the impact on revenue at this stage is relatively small.

And we expect it to gradually accelerate over the year as heavy users use up all their contacts included in the basic subscription and start consuming on a per contract basis. Value-added services outperformance is explained by strong growth in usage of media ads and price for performance products by virtual recruiter both by key accounts and small and medium businesses.

We managed to accelerate revenue growth across all client categories as I said. Apart from rapid organic growth at HeadHunter in Q1, we added a big part of unique customers from Zarplata. Almost all of them were allocated into regional key accounts or small and medium businesses.

So those customers who are not unique to HeadHunter has significantly increased the combined average revenue per customer almost doubling its growth in regional key accounts and small and medium business category.

Core dynamics remain strong with small and medium businesses acquired during 2020 increasing their spend more than 100% in Q1 and key accounts by more than 60%. Our key account revenue increased by 31% in the first quarter of 2021 year-on-year.

The growth is mainly attributable to the 18% RPC growth driven by both substantial enhancement and monetization and high consumption per customer. It's really nice to see very limited consumption adjustment despite all the monetization moves in the key account segment just give you a sense of our actual pricing power potential.

Small and medium revenue increased by impressive 56% in the first quarter, primarily due to growth in number of clients. The share of its new revenue reached 62% versus 57% a year ago. Our business becomes more diverse and online marketing interest keeps on growing.

Revenue in Moscow and St. Petersburg increased by 36%, while revenue from other regions of Russia went up by impressive 65% year-on-year. In Q1, we reached a share of revenue generated outside of Moscow and St. Petersburg of 61% compared to 56% a year ago. So we think this number already is evidence of great traction across strategic growth areas as well as indicate the potential that is still ahead of us.

Now let Grigorii to talk about profitability and cash flow.

Grigorii Moiseev -- Chief Financial Officer

Yes. Thank you, Dmitry and hello, everyone. In the first quarter of 2021, our total operating costs and expenses increased by 37.8% compared to the first quarter of 2020. Almost half of this increase is related to consolidation of Zarplata.

Going by the each bucket our personnel expenses increased by 45.5% compared to the first quarter 2020. Most of the growth in this bucket came from our main business where we increased our headcount by circa 8% or 68 people over the last 12 months.

As usual, this new hiring was mostly in our development and sales functions. However, it was smaller than in the same period last year due to COVID-related hiring freeze in 2020.

We also have increased wages by circa 10% in the second half of 2020. Additionally, Zarplata segment has driven approximately one-third of the growth in our personnel expenses in the first quarter of 2021.

We also had the COVID-related cost-cutting initiative in the first quarter of 2020, which saved us approximately RUB35 million through reduction in bonuses and -- which is not occurring in the first quarter of 2021 and thus also contributes to the growth in our personnel expenses.

As a percentage of revenue, our personnel expenses excluding share-based compensations and other items have increased in the first quarter of 2021 by circa one percentage point to 27.5%. This was a result of a decrease in personnel expenses as a percentage of revenue in our main business which was offset by additional Zarplata segment in which personnel expenses as a percentage of revenue is higher as well as COVID-related savings in the first higher as well as COVID-related savings in the first quarter of 2020 not occurring in the first quarter of 2021.

Moving on, our marketing expenses increased by 39% compared to the first quarter of 2020. More than half of this increase was attributable to Zarplata consolidation. Marketing expenses were 15.5% of revenue, a slight decrease compared to 16% in the first quarter of 2020. This was similar to personnel expenses a result of a decrease in marketing expenses as a percentage of revenue in our main business, which was partly offset by additional Zarplata segment, in which marketing spend is higher as a percentage of revenue in general and also skewed toward the first quarter in this year in particular.

Our other general and administrative expenses in the first quarter of 2021 increased by 17.4% to RUB281 million, mostly on the back of aiding our Zarplata segment expenses.

Now, a few words on margins. Our adjusted EBITDA margin in the first quarter of 2021 decreased by circa one and a half percentage points to 47.2%. We saw a sizable margin increase in our main business, which was offset by lower margins in our Zarplata segment due to a more accentuated revenue seasonality and timing of marketing expenses in this segment in the first quarter 2021, which is why we think this decrease is not indicative of the full year results. We expect that in the full year Zarplata's lower profitability will continue to have a dilutive impact on our margins, but this impact will be absorbed by operating leverage embedded in our main business.

Moving on to other key indicators, our capital expenditure in the first quarter 2021 excluding acquisition of Skillaz was RUB59 million or approximately 2% of revenue which was a sharp decrease compared to RUB103 million in the first quarter 2020 primarily because our office fit-out project was completed in 2020.

Our net working capital as of the first quarter end decreased by RUB1.4 billion to minus RUB5.3 billion compared to 2020 year end, primarily due to customer advances we received in the first quarter of 2021 and an increase in other payables due to RUB630 million consideration payable for the acquisition of Skillaz.

Our income tax expense was RUB254 million in the first quarter of 2021 compared to RUB231 million in the first quarter of 2020, which is circa 10% increase. Our effective tax rates include -- excluding various short-term effects was 26% in the first quarter of 2021 same as in the first quarter of 2020 also excluding various short-term effects.

Now, turning to cash generation metrics. In the first quarter of 2021, we generated almost RUB2 billion from operating activities compared to RUB942 million in the first quarter of 2020. This growth was primarily driven by an increase in sales. We use circa RUB200 million in investment activities in the first quarter of 2021, compared to approximately RUB100 million in the first quarter of 2020. This increase was mainly due to the RUB234 million consideration paid in the first quarter 2021 for acquisition of Zarplata, which was partly offset by a decrease in the acquisition of fixed assets as we completed our renovations in Moscow and Yaroslavl offices in the second quarter of 2020.

Net cash used in financing activities was RUB258 million in the first quarter 2021, compared to RUB59 million in the first quarter of 2020. This change between the periods was primarily due to the repayment of bank and other loans in the amount of RUB121 million in the first quarter of 2021, not occurring in the first quarter of 2020 due to COVID-related period of nonworking days, as well as RUB42 million fees paid in relation with the RUB4 billion nonconvertible bond issue in the fourth quarter of 2020 to finance acquisition of Zarplata.

Our net debt decreased by circa RUB1.5 billion and leverage has decreased from 1.2 times to 0.7 times EBITDA compared to December 31, 2020, primarily due to an increase in cash balances from cash generated and operating activities in the first quarter of 2021.

Now, moving to the dividend. We took some time this year to evaluate market situation. And considering strong performance year-to-date, we are glad to announce as Mikhail said, the full year 2020 dividend of RUB0.55 per share, representing approximately 75% of our adjusted net income for the year 2020. The record date for this dividend is June 9, 2021 and the payment date is July 16, 2021. We encourage investors, who believe they are eligible to lower withholding tax rates under double taxation treaties to submit relevant documentation to us and to apply for a lower rate. Please see details on this process in our earnings release.

And now, I would like to turn the word back to Dmitry to discuss Skillaz consolidation and provide updated guidance for 2021. Thank you.

Dmitry Sergienkov -- Chief Strategy Officer

Thank you, Grigorii. We're pretty excited to announce the acquisition of additional 40% stake in Skillaz. This week, we finally triggered our rights that we received at the time of the original transaction two years ago. We had the pretty convenient final decision time line or which Skillaz without help expanded their revenue base by almost 10 times and evolve from a promising technology start-up to one of the leading SaaS platform in the market.

We acquired 40% in Skillaz from various financial investors for RUB623 million, a building company at circa RUB1.5 billion and planned over 60% discount to HeadHunter revenue multiple. So the implied price is quite attractive due to the way we structured the Co-option.

Post-closing, HeadHunter will own 65%, while the remaining 35% will stay with the founder and the CEO. To remind you, Skillaz develops a cloud-based HCM [Phonetic] software allowing it to automate many integral parts of the recruitment process and significantly improved speed and cost per hire. This product strategy, Skillaz target large enterprises with complex recruitment processes and high customization demands.

The company operates a highly attractive SaaS business model with average contract duration of 2, 3 years leading to high revenue visibility. It's perfectly scalable. Now you are enjoying high pricing leverage effect when Skillaz as they grow. Strategically we believe that getting control our basic recruitment system is very important for HeadHunter future growth. And this is expected to increase our client retention guide, our product development strategy and also allow us to expand into various HR take areas down the road.

In terms of Skillaz operating traction, the company demonstrated sound diversification of an inter enterprise client base now heading exposure to over 15 different industry segments. That facilitated strong expansion, the contract portfolio and growing share of recurring SaaS revenue. For this year, we expect the company to at least double their revenue base as their prebooked revenue of 2021 to-date already exceeding full year revenue of 2020.

A few words about market opportunity the addressable market for enterprise solution is estimated to be over RUB10 billion which only 7% is currently taken by Skillaz and the smaller ATS competitors. The vast majority of the market still use outdated or legacy home build systems lacking to compete with modern cloud solutions. So in terms of real impact on core recoupment KPIs. This facilitates a rapid penetration of SaaS ATS platform, posting overall over 60% CAGR since 2018. But Skillaz has been growing even faster. We believe the company's share in SaaS ATS markets almost doubled over the last two years, reaching over 50% now.

Going forward being seamlessly integrated with our sourcing platform Skillaz as we represent a total unique customer proposition and that should help them benefit from the structural trends and gradually grab a bigger share of this RUB10 billion market. One of general successor presidents of building sizable and profitable business in this space globally and that's why we're really excited about this opportunity.

Finally turning to our guidance. To reflect the impact of Skillaz consolidation, as well as core business outperformance year-to-date, we'd like to increase our revenue growth guidance range by 8% to 45% to 50% year-on-year. That is it for Q1, 2021. We are now opening the floor for your questions.

Questions and Answers:

Operator

[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. Couple of questions. Firstly, can you share your thoughts how much of the recent spike in vacancies is attributed to a temporary one-off factors, like the lack of migrants for example? And how much of the structural developments like the -- like demographic problems in Russia or digitalization across the industry that is happening on the back of COVID? And my second question would be, if you can elaborate how you approached the addressable market definition basically this RUB10 billion opportunity for Skillaz? Thank you.

Dmitry Sergienkov -- Chief Strategy Officer

Thanks Slava. I'll take these questions. On the first one kind of trying to decompose this the outperformance happen in Q1. Well first of all circa 10% growth is driven by Zarplata consolidation, right? And is -- in our estimate around 5% growth due to low basis debt that kind of was said two weeks last year on the end of March.

The rest is in our view is gaining growth. And largely that is caused by intensifying competition for labor and just general online market consolidation. You rightfully mentioned that -- actually the market is not really driven now by the kind of existing lease balances. We believe that they are quite, I would say, fundamental and well entrenched and long lasting.

Because at the moment, of course, the market has kind of misbalanced and unprecedented employer activity and reactive shortage of the candidates, we see business confidence generally is going up on the back of vaccination rollout and just general growing consumer activity. So, a lot of demand from new economy, especially for low-skilled labor, such colliers, drivers, et cetera.

And so, employer activities in January in our estimate grew by circa 60%, while candidate activity grew by single-digit the same time, right? So the major trend that is kind of behind this and why we believe, it's quite fundamental is a kind of negative demography prevailing in Russia over the last 10 years.

That was kind of amplified by the kind of alterations caused by lockdowns and the current situation, employment population, especially in certain categories like 20-24 age declined by whopping 50% over 10 years. In the age 24-25, the decline was circa 25%. So, this is actually the core labor force, the target of the new economy, right? And obviously, the demand that is coming from the mobility from e-commerce. They're mostly the target in these categories that are in the sharp decline.

And now, you -- as you also mentioned, you're adding to this circa million immigrants all four that hit the contraction industry first of all but also e-commerce, and new economy. And also, there's a general of employees. We see the job in this environment. So probably that will kind of, roll back over time. But the overall macro and demographic situation, I don't think it will change. And we're probably just entering the phase of a very kind of candidate-centric market.

And so, that is kind of forcing large companies advertise a bigger number of vacancies more intensely use new channels and its immediate turning to online in kind of expedite manner. And so we see this kind of structural tailwinds. And some of it may actually disappear over time as the kind of situation normalizes, right? And employees become more -- again, more willing to leave, but the vast majority of course, will stay for some years. That's the answer to the first question.

And second the addressable market. We actually did a certain kind of bottom-up research. We look at the companies in the market their profiles. We kind of created their target profile for systems like Skillaz caters. So we ended up having circa 1,500 companies, kind of the biggest 500 from every K list, and then somewhat smaller but still quite big enterprises.

And we look at their existing solutions and the potential kind of average check that these companies could pay just for the best example in the industry, right. Because we see actually how Skillaz as effects improves costs be higher at the company. So we believe that the others would just follow suite.

So strictly we just did it bottom-up, multiplying the number of clients by average check. So we end up having this RUB10 billion. In our view it's quite a conservative estimate we believe that this total recruitment spend would grow further cost. We applied to a pretty small check. I think the check would be even big over time.

Vyacheslav Degtyarev -- Goldman Sachs -- Analyst

Thank you very much.

Operator

Thank you. The next question comes from the line of Stephen Ju from Credit Suisse. Please ask your question.

Stephen Ju -- Credit Suisse -- Analyst

Okay. Thank you so much. So will you talk about the overlap of the Skillaz client versus the HeadHunter client? It seems like the overlap should be among your -- perhaps the larger key accounts. And I guess from an integration perspective, when do you anticipate that your salespeople will also begin to sell the Skillaz product as well? Thank you.

Dmitry Sergienkov -- Chief Strategy Officer

Thanks Stephen. This is Dmitry here again. In terms of overlap, it's actually 100% overlap because they really target the blue chip clients. And we think very small exemptions. We actually serve that market in its all entirety. So we don't expect the any clients over Skillaz to not using basic HeadHunter services. It's rather actually more for us to upsell Skillaz product.

We actually been working with Skillaz for two years already right? We I think quite in good shape in terms of understanding the differences between selling our marketplace and access product versus SaaS product and automation product because the later actually requires quite a lot of client work for maybe months or two. Although even technically it's a lot of automated on the Skillaz side as I said, but still it actually requires a very strong customer success team.

So from that perspective I think it would be up to Skillaz to build up that capability mostly, and we see our sales force rather as lead generation for Skillaz, right, because we have pretty deep end client dialogue. We understand their needs. We identified the need first. And then we transfer that to a very professional, very focused to own SaaS sales force by Skillaz. I think that's what we have already been doing and some successful upsells on our side and we'll just roll it out further.

Stephen Ju -- Credit Suisse -- Analyst

Okay. Thank you.

Operator

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

Ivan Kim -- Xtellus Capital -- Analyst

Yes, hi. Just -- can you talk about the longer term outlook? So I guess it's just building on what you've been talking before, but you reached impressive one million job postings on your platform. But what is next so to say? So do you see over these or next year a significant upside risk to this number? So can or cannot increase significantly further from here? That's the first question.

The second question on Skillaz, when do you expect it to reach positive EBITDA and what could be the steady state EBITDA margin in that business?

And lastly, just the marketing expense, so that was 16% of revenue. So I was just wondering what should we expect in the remainder of the year, or if you're comfortable just providing some estimate of marketing to sales for the year as a whole? Thank you.

Dmitry Sergienkov -- Chief Strategy Officer

Yes. Thanks, Ivan. I think -- Dmitry here. I'll take the first two and then Grigorii will comment on marketing. Look, I think we're clearly kind of revising at the moment our longer-term targets, right? Because it was always a bit of a kind of unknown zone where is the potential in this especially small and medium businesses penetration and where the market is going to saturate.

Now we see with the dynamics that have been kind of absorbed last half year that this target definitely should be revised upwards. And we believe that with the level of digitalization in Russia among the population. We should be actually exceeding even the kind of European benchmarks set by companies like StepStone or -- in some US examples just because of the pace of adoption at the moment and candidate interaction which is most important. So I think that should result in kind of accelerated adoption, especially from small and medium businesses, right?

I think on the kind of general growth upside. This is a big chunk of and key accounts monetization. And I think in the environment that as I said, we are entering -- it's kind of -- it's much more favorable to execute our amortization strategy. So I think from that perspective, we're also now kind of revising the -- our monetization plan toward acceleration.

And then the third one, I think the kind of third pillar of our growth is entering other areas of HR. And I think that the situation that is happening at the moment that should also spur the high demand not only in sourcing of the candidate, but also in the processing and just the increasing overall efficiency of the process. I think that's highly beneficial for HR that market. And that's why I think that in the longer run, we should also benefit the solutions like Skillaz and others.

So I think we actually see that -- of course that, we may not be experiencing this type of growth quarter-over-quarter for long-term right, but at some point, it will be small deceleration as I said as market normalized. But I think the -- in terms of kind of achieving longer-term targets, I think we really -- we'll be kind of a few steps ahead of our own plans two years ago.

And on EBITDA from Skillaz, I think a quick answer. We -- it's going to be kind of dilutive for this year probably two percentage points and Skillaz of course is focused on developing their products, so they are hiring a lot of R&D and sales. And so they are a bit less concerned about the profitability in the short-term.

But I think as per our internal models even last -- from next year the Mail.Ru Group is on break-even. They've actually done really a great job over the last two years on this front. But I don't think we will kind of squeeze their growth potential just to kind of feed some EBITDA margin on the Skillaz level. Because as I said even now on a group level it's not material right 2% and it will go further over time.

Here I'll hand over to Grigorii to comment on marketing.

Grigorii Moiseev -- Chief Financial Officer

Yes. Hello, Ivan. I think I kind of mentioned during the presentation that we do see the decrease in marketing as a percentage of revenue in our main business in the first quarter, right? Basically, we expect the same decrease in marketing as a percentage of revenue for the full year in the core business. But at the same time in Zarplata, marketing is slightly higher as a percentage of revenue than in the HeadHunter. We think the kind of on consolidated level, it will be essentially probably flat compared to the last year. I understand the -- I don't know if that answers your question.

Ivan Kim -- Xtellus Capital -- Analyst

Yes. Thank you.[Operator Instructions] The next question comes from the line of Anna Kurbatova from Alfa-Bank. Please ask your question.

Anna Kurbatova -- Alfa-Bank -- Analyst

Yes. Good afternoon. Thank you much, everyone for the call and for a great top line performance. I have actually three questions. The first one, you indicate on your chart with the total addressable market for Skillaz that Skillaz has 51% share -- the market share.

And there is another big rival with 18% share and which is more or less three times bigger than the all remaining participants. So it would be great to understand who this player is advantages or strong and -- strong parts of the business or disadvantages?

The second question would be, what preserves you now from giving us profitability guidance? Because if I'm not mistaken, when you -- right after the IPO two years ago that was a common practice that you gave top line growth guidance both -- and EBITDA guidance. And just the third question is technical one. Did I understand correctly that Skillaz will be consolidated in your P&L statement and financial results from 1st of April, 2021? Thank you.

Dmitry Sergienkov -- Chief Strategy Officer

Thanks, Anna. I'll answer the first one. Yes, the second player in the kind of special CTS market that we carve-out is a company called [Indecipherable] is entirely private-owned company. We obviously tracking their performance. I think they are a bit more kind of positioned in the lower end of the enterprise market. And our -- in our view there -- their capabilities of delivering complex enterprise solutions are not that strong as Skillaz.

And a few years ago, when we actually decided to go after the best kind of bet horse in the market, we are obviously considering both assets. And at the time these companies were more or less equal size. And now, actually we see that the Skillaz is much more just scalable because of the kind of addressing the -- probably part of the market that is the most advanced in their demand because they're really struggling now the most. And they -- it seems like they kind of reached the point when the budgets for HR are easily -- more easier to kind of accept within such enterprises than say five years ago. If it answers your question. I hand over to Grigorii comment on profitability on Skillaz consolidation.

Grigorii Moiseev -- Chief Financial Officer

Yeah. Thank you. Anna, this is Grigorii. Frankly, this year -- so on the first question, right about profitability. This year, we're kind of more focused on business expansion, because as you can see the market is quite turbulent. And we saw the tremendous demand for labor force in the Q1, right? We would like to kind of keep our options open on this kind of market in terms of expenses and do not target kind of specific EBITDA margin in 2021. But what we see from conceptual Q1 results, right we saw expansion in our main business in our adjusted EBITDA margin, as I -- as Dmitry said before I think. And we probably expect it to kind of go on in the rest of the year. As we said, the quarter will dilute this, but we expect this dilution to be absorbed kind of fully by this operating leverage in the main business plus Skillaz will also have a smaller dilutive effect, right. So basically, overall for the full year, we're kind of looking at margin in the ballpark of 50% as we said on the call last quarter, which is slightly above the 2020 adjusted EBITDA margin. But again, it's a ballpark right, it could be a slight less, could be slightly more.

Anna Kurbatova -- Alfa-Bank -- Analyst

Yes. Thank you. Thank you very much. And on the exact date of consolidation of Skillaz?

Grigorii Moiseev -- Chief Financial Officer

Yeah. Yeah, it's -- you're totally right. The -- we will consolidate the company from the April 1 from the second quarter. So second quarter, we'll have the full Skillaz results for the fourth quarter.

Anna Kurbatova -- Alfa-Bank -- Analyst

Thank you, Grig. Thank you very much.

Operator

Thank you. The next question comes from the line of John Kim from UBS. Please ask your question.

John Kim -- UBS -- Analyst

Hi, everybody. Two questions please. Can you comment on business velocity in the April and March months? Are those sustainable levels for you, or is there a bit of time in place in here? Secondly, are you seeing anything new or innovative from competitors on any of the core products? Thanks.

Dmitry Sergienkov -- Chief Strategy Officer

Hi, John. Well I will start with the second. I don't think we see any significant changes in the -- on the competitive front the product voice. We see that they are obviously trying to kind of exploit the existing market opportunities. Generally, the whole market is kind of benefited from this situation and we see the vacancy -- vacancies are -- vacancy base is also growing. Although, if you look at the kind of gap against the number two between us and competitors, I think that the gap was growing both on kind of content side and also on candidate side, if you look at the traffic dynamics. Again, the whole market is going to struggle for candidate in this environment, but disproportionately. And so we believe that our traffic market share also keeps growing. But for product-wise, we don't really see that any of the competitors coming up is anything that is kind of very unique to the market. It's more now to kind of addressing that that is coming up in the market from the audience perspective and client perspective. And the first one, could you -- John, please repeat? Because I was really hearing you very hardly.

John Kim -- UBS -- Analyst

Sure. So just about the business velocity in April and May, I seem to be backing out growth rates around 50% to 40%. Does that make sense? And is that sustainable?

Dmitry Sergienkov -- Chief Strategy Officer

In the first quarter, I think we were more or less discussed this question before, right? Because there were some sectors that were kind of helping, right, we're coming into the low business sector at the end of Q1 that will continue and accelerate as you may expect in the second quarter, right, because I think we are kind of consistently seeing our double-digit growth numbers in the back of very low base last year.

There are some say kind of features in the market that are -- we believe that may not -- the met change over time especially kind of candidate behavior at the moment. There are maybe too relaxed and they may be kind of more active in the -- with the kind of high confidence over time. But what drives at the moment the kind of the market is a demographic situation. And we don't see how this can be really resolved in a short pace.

So from that perspective, I think that growth driver will just remain for quite a long time. And also monetization, obviously, was a really strong factor. And in our numbers, you see very limited impact from our last year change of subscription model, right, because as I said most of the clients already migrated to new subscriptions, but they're still using kind of the packages that are included in the basis of.

So in April, for example, we saw that the review from these contacts they kind of exceeded the revenue for the preceding three months. So that effect will accelerate I would say the fourth. It's a very strong environment for monetization improvement. And so we believe that may even enhance from current level over time.

John Kim -- UBS -- Analyst

Okay. Thank you.

Operator

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

Ivan Kim -- Xtellus Capital -- Analyst

Thank you for the opportunity. I just wanted to follow-up on the margin dilution effect from Skillaz. I'm not sure I heard it right. That it's going to be a three percentage point impact on margin. It seems a little high. So if you could elaborate on that would be great?

And then secondly, just on the key accounts ARPC. So what was driving the acceleration in that in the first quarter, which was quite significant even before the price increase in April, and also as Dmitry mentioned before paper contact effect kicks in this year which is later? Thank you.

Grigorii Moiseev -- Chief Financial Officer

Ivan, this is Grigorii. I think, I'll take the first question. No, actually the estimate is much lower, I think potentially maybe around one percentage point, on our full year results.

Yeah. Ivan and maybe here on the on your second question on RPC, actually there are two major centers. The first is the consolidation of Zarplata right, because we really acquired a lot of regional key accounts.

That shouldn't required but actually those who were -- and if you're not uniquely added there on top of ours, so that's kind of quite a technical. And I think but that does not the major. The major one was essentially the initiatives that we rolled out last year.

First of all, if you remember, maybe a year ago we were discussing lends our differentiated approach toward key accounts right? And obviously, all the initiatives that are kind of proposing in the market, they're having sort of delayed effect.

And starting from January, we kind of started reaping the rewards. And I think that was probably the major driver, especially given the dynamics in the key accounts job posting right because, I was first the intensified competition.

So they started consuming more and also side effect of our new subscriptions, because they are kind of trying to optimize their budget and replacing our contacts with job postings. And at the same time, we don't see a real impact on contract revenues. But on the job posting side we see incremental demand and revenue.

Ivan Kim -- Xtellus Capital -- Analyst

All right. Thank you very much.

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. Hello. Just a quick one, what is your message about the revenue growth guidance? Is it -- would you say, based on conservative assumptions, or you think that it's risen reflects what you see now? Thank you.

Dmitry Sergienkov -- Chief Strategy Officer

Yeah. Hi, Maria its Dmitry. We're -- well I would say that kind of the range that we're pretty much confident at this point. And we as I said the 2% would expect to be added from Skillaz consolidation.

And the remaining kind of we upgraded guidance by 8%. Remaining 6% actually stems from our business outperformance. We see very strong year-to-date or quarter-to-date results. And there are no signs of deceleration at this point of time.

But kind of bear in mind, that current situation is not over yet. And it won't be over in the second half, right? We're not safe from any potential lockdown, on this popular nonworking days, announcement all of a sudden.

So we I think at this point of time we're pretty much confident. And hit this range. And we also reserve the right to review it, later in the year.

Maria Sukhanova -- BCS -- Analyst

Thank you.

Operator

Thank you. [Operator Instructions] There are no further questions at this time. Please continue.

Dmitry Sergienkov -- Chief Strategy Officer

Thank you everybody for joining. And take care. Bye-bye.

Operator

[Operator Closing Remarks]

Duration: 48 minutes

Call participants:

Roman Safiyulin -- Investor Relations

Mikhail Zhukov -- Chief Executive Officer

Dmitry Sergienkov -- Chief Strategy Officer

Grigorii Moiseev -- Chief Financial Officer

Vyacheslav Degtyarev -- Goldman Sachs -- Analyst

Stephen Ju -- Credit Suisse -- Analyst

Ivan Kim -- Xtellus Capital -- Analyst

Anna Kurbatova -- Alfa-Bank -- Analyst

John Kim -- UBS -- Analyst

Maria Sukhanova -- BCS -- Analyst

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