Third Quarter 2020 Financial and Operational Highlights
(in millions of RUB(1) and USD(2)) | Three months ended | Three months ended | Change(3) | Three months ended | ||||
RUB | RUB | USD(4) | ||||||
Revenue | 2,308 | 2,142 | 7.7% | 29.0 | ||||
Russia Segment Revenue | 2,165 | 1,984 | 9.1% | 27.2 | ||||
Net Income | 585 | 571 | 2.6% | 7.3 | ||||
Net Income Margin, % | 25.4% | 26.6% | (1.3) ppts | |||||
Adjusted EBITDA(5) | 1,296 | 1,145 | 13.2% | 16.3 | ||||
Adjusted EBITDA Margin, %(5) | 56.1% | 53.5% | 2.7 ppts | |||||
Adjusted Net Income(5) | 856 | 732 | 17.0% | 10.7 | ||||
Adjusted Net Income Margin, %(5) | 37.1% | 34.2% | 2.9 ppts | |||||
(1) | “RUB” or “₽” denote Russian Ruble throughout this release. | |
(2) | “USD” or “$” denote | |
(3) | Percentage movements and certain other figures in this release may not recalculate exactly due to rounding. This is because percentages and/or figures contained herein are calculated based on actual numbers and not the rounded numbers presented. | |
(4) | Dollar translations are included solely for the convenience of the reader and were calculated at the exchange rate quoted by the | |
(5) | Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Net Income Margin are non-IFRS measures. See “Use of Non-IFRS Financial Measures” elsewhere in this release for a description of these measures and a reconciliation to the nearest IFRS measure. |
- Revenue is up 7.7%, primarily due to the increase in the number of paying customers in our
Russia segment across all customer segments, reflecting the gradual recovery in business activity in the third quarter of 2020 after the COVID-19 restrictions were lifted in the end of the second quarter of 2020. - Net income was ₽585 million, relatively flat compared to ₽571 million in the third quarter 2019, as the increase in revenue and the decrease in finance costs were offset by the increase in operating expenses related to our SPO occurring in the third quarter of 2020, and the increase in income tax expense.
- Adjusted EBITDA is up 13.2% due to increase in revenue, and Adjusted EBITDA Margin is up to 56.1% from 53.5%, or by 2.7 ppts, as our marketing expenses declined as a percentage of revenue due to allocation of expenses.
- Adjusted Net Income is up 17.0% and Adjusted Net Income Margin is up to 37.1% from 34.2%, due to the increase in Adjusted EBITDA, together with a decrease in finance costs, partially offset by the increase in income tax expense.
(in millions of RUB and USD) | As of | As of | Change | As of | ||||
RUB | RUB | USD | ||||||
(3,111) | (2,994) | 3.9% | (39.0) | |||||
Net Debt(1) (2) | 3,102 | 3,040 | 2.0% | 38.9 | ||||
Net Debt to Adjusted EBITDA Ratio(1) | 0.8x | 0.8x |
(1) Net Working Capital, Net Debt, and Net Debt to Adjusted EBITDA Ratio are non-IFRS financial measures. See “Use of Non-IFRS Financial Measures” elsewhere in this release for a description of these measures and a reconciliation to the nearest IFRS measure.
(2) For the purposes of calculation of this ratio as of
Net Working Capital as ofSeptember 30, 2020 decreased by ₽117 million, or 3.9%, primarily due to an increase in trade and other payables and decrease in advances paid, caused by (i) deferral of annual D&O insurance policy prepayment to the fourth quarter of 2020; (ii) SPO-related professional services rendered in the third quarter of 2020 not paid as of the quarter-end, and (iii) an increase in payables attributable to on-line advertisement due to the timing of incurring these expenses in the period.
- Net Debt increased by ₽62 million, or 2.0%, primarily due to cash generated from operating activities (see “Cash Flows”), which was partly offset by decrease in loans and borrowings as of
September 30, 2020 , due to repayments to PJSC ‘VTB Bank’ in accordance with the repayment schedule. - Net Debt to Adjusted EBITDA Ratio as of
September 30, 2020 was 0.8x, flat compared toDecember 31, 2019 , as our Net Debt and Adjusted EBITDA on a last twelve months basis remained flat.
“Solid performance in the third quarter confirmed the continuous recovery trend observed since April, with improved KPIs translating into revenue growth across all client and product categories” said
“We see meaningful opportunities arising in the transforming labor market, on the back of heightened digitalization of employment patterns. While this trend has already become increasingly prevalent across the industry in recent years, the lockdown has highlighted an importance and efficiency of remote solutions and accelerated the structural transition from offline to online recruitment channels.
Whilst the final outcome remains unclear, to date we have seen the second spike of the COVID-19 disrupting business activity to a much lower extent compared to the beginning of the pandemic. Employers and job seekers seem to have at least partially adapted to the ‘new reality’ whilst the Russian Government has managed to combat the spreading of the virus without imposing harsh restrictions on the economy. As a result, we have not observed any particular negative effect on our operational and financial metrics from the second spike to date and expect to keep further growing our resilient business.”
Impact of COVID-19 on Our Operations and Financial Position
In
We observed no specific impact of COVID-19 on our financial position as of
Our liquidity analysis based on our recent performance and current estimates shows that we have adequate resources to finance our operations for the foreseeable future. As at
Our financial position, results and liquidity may be affected in the future by any further adverse developments related to COVID-19.
Operating Segments
For management purposes, we are organized into operating segments based on the geography of our operations. Our operating segments include “Russia,” “Belarus,” “Kazakhstan” and other countries. As each segment, other than
Customers
We sell our services predominantly to businesses that are looking for job seekers to fill vacancies inside their organizations. We refer to such businesses as “customers.” In
Seasonality
Revenue
We generally do not experience seasonal fluctuations in demand for our services and prior to COVID-19 our revenue remained relatively stable throughout each quarter. However, our customers are predominately businesses and, therefore, use our services mostly on business days. As a result, our quarterly revenue is affected by the number of business days in a quarter, with the exception of our services that represent “stand-ready” performance obligations, such as subscriptions to access our curriculum vitae (“CV”) database, which are satisfied over the period of subscription, including weekends and holidays.
Public holidays in
The number of business days in a quarter may also be affected by calendar layout in a specific year. In addition, the Government of
The following table illustrates the number of business days by quarter for the years 2018 to 2020. In 2020 there is 1 business day more in the second quarter and in the total year and the same number of business days in the first, third and fourth quarters, meaning that the calendar layout in 2020 is substantially the same as in 2019, allowing for good comparability of our quarterly results:
Number of business days | As % of total business days per year | ||||||||||||||
2020 | 2019 | 2018 | 2020 | 2019 | 2018 | ||||||||||
First quarter | 57 | 57 | 56 | 23.0 | % | 23.1 | % | 22.7 | % | ||||||
Second quarter | 60 | 59 | 61 | 24.2 | % | 23.9 | % | 24.7 | % | ||||||
Third quarter | 66 | 66 | 65 | 26.6 | % | 26.7 | % | 26.3 | % | ||||||
Fourth quarter | 65 | 65 | 65 | 26.2 | % | 26.3 | % | 26.3 | % | ||||||
Year | 248 | 247 | 247 | 100.0 | % | 100.0 | % | 100.0 | % |
On
Operating costs and expenses (exclusive of depreciation and amortization)
Our operating costs and expenses (exclusive of depreciation and amortization) consist primarily of personnel and marketing expenses. Personnel and marketing expenses, in total, accounted for 76.3% and 77.4% of our total operating costs and expenses (exclusive of depreciation and amortization) for the years ended
Marketing expenses are more volatile in terms of allocation to quarters and are affected by our decisions on how we realize our strategy in a particular year, which can differ from year to year. Therefore, total marketing expenses as a percentage of revenue for a particular quarter may not be fully representative of the whole year. Personnel expenses are relatively stable over the year; however, they are also affected by other dynamics, such as our hiring decisions. Some costs and expenses, such as share-based compensation or foreign exchange gains or losses, can be significantly concentrated in a particular quarter.
As an example, the third quarter segment external expenses in our
Net income and Adjusted EBITDA
Even though our revenue remains relatively stable throughout each quarter, seasonal revenue fluctuations, as described above, affect our net income. As a result of revenue seasonality, our profitability in the first quarter is usually lower than in other quarters and for the full year, because our expenses as a percentage of revenue are usually higher in the first quarter due to lower revenue. For example, our Adjusted EBITDA margin was 46.1% for the first quarter of 2019, compared to 50.5% for the full year 2019. Our profitability is also affected by our decisions on timing of expenses, again as described above.
Contract liabilities
Our contract liabilities are affected by the annual subscriptions’ renewal cycle in our Key Accounts customer segment. A substantial number of our Key Accounts renew their subscriptions in the first quarter but prepay us in the fourth quarter of a previous year, as per our normal payment terms. As a result, we receive substantial prepayments from our customers in the fourth quarter which causes a consequential increase in our contract liabilities at the end of that quarter. For example, our contract liabilities as of
Net cash generated from operating activities
Our net cash generated from operating activities is affected by seasonal fluctuations in business activity as explained in “Revenue” and by substantial prepayments from our customers (see “Contract liabilities”), as well as by our decisions in regard to timing of expenses (see “Operating expenses (exclusive of depreciation and amortization)”), and to a lesser extent by payment terms provided to us by our largest suppliers, such as TV advertising agencies and others.
Net Working Capital
Our
Third Quarter 2020 Results
Our revenue was ₽2,308 million for the three months ended
The following table breaks down revenue by product:
For the three months ended | For the nine months ended | |||||||||||||
(in thousands of RUB) | 2020 | 2019 | Change | 2020 | 2019 | Change | ||||||||
Bundled Subscriptions | 616,501 | 584,492 | 5.5 | % | 1,718,711 | 1,642,467 | 4.6 | % | ||||||
CV Database Access | 504,234 | 493,409 | 2.2 | % | 1,321,800 | 1,312,798 | 0.7 | % | ||||||
973,618 | 879,272 | 10.7 | % | 2,260,150 | 2,290,258 | (1.3 | )% | |||||||
Other value-added services | 213,848 | 185,149 | 15.5 | % | 531,784 | 476,860 | 11.5 | % | ||||||
Total revenue | 2,308,201 | 2,142,322 | 7.7 | % | 5,832,445 | 5,722,383 | 1.9 | % |
The following table sets forth the revenue broken down by type of customer and region:
For the three months ended | For the nine months ended | |||||||||||||
(in thousands of RUB) | 2020 | 2019 | Change | 2020 | 2019 | Change | ||||||||
Key Accounts in | ||||||||||||||
564,798 | 515,281 | 9.6 | % | 1,493,220 | 1,443,978 | 3.4 | % | |||||||
Other regions of | 214,301 | 178,432 | 20.1 | % | 578,475 | 464,018 | 24.7 | % | ||||||
Sub-total | 779,099 | 693,713 | 12.3 | % | 2,071,695 | 1,907,996 | 8.6 | % | ||||||
Small and Medium Accounts in | ||||||||||||||
735,865 | 731,744 | 0.6 | % | 1,779,545 | 1,930,182 | (7.8 | )% | |||||||
Other regions of | 539,058 | 461,140 | 16.9 | % | 1,288,564 | 1,195,879 | 7.8 | % | ||||||
Sub-total | 1,274,923 | 1,192,884 | 6.9 | % | 3,068,109 | 3,126,061 | (1.9 | )% | ||||||
Foreign customers of segment | 14,283 | 6,098 | 134.2 | % | 42,014 | 36,128 | 16.3 | % | ||||||
Other customers in | 96,949 | 91,774 | 5.6 | % | 243,153 | 227,535 | 6.9 | % | ||||||
Total for “Russia” operating segment | 2,165,254 | 1,984,469 | 9.1 | % | 5,424,971 | 5,297,720 | 2.4 | % | ||||||
Other segments | 142,947 | 157,853 | (9.4 | )% | 407,474 | 424,663 | (4.0 | )% | ||||||
Total revenue | 2,308,201 | 2,142,322 | 7.7 | % | 5,832,445 | 5,722,383 | 1.9 | % |
The following table sets forth the number of paying customers and ARPC for the periods indicated:
For the three months ended | For the nine months ended | |||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||
Number of paying customers | ||||||||||||||
Key Accounts | ||||||||||||||
4,716 | 4,517 | 4.4 | % | 5,280 | 5,144 | 2.6 | % | |||||||
Other regions of | 5,222 | 4,570 | 14.3 | % | 5,938 | 5,340 | 11.2 | % | ||||||
Key Accounts, total | 9,938 | 9,087 | 9.4 | % | 11,218 | 10,484 | 7.0 | % | ||||||
Small and Medium Accounts | ||||||||||||||
72,313 | 68,376 | 5.8 | % | 106,793 | 107,066 | (0.3 | )% | |||||||
Other regions of | 101,253 | 85,525 | 18.4 | % | 150,950 | 138,743 | 8.8 | % | ||||||
Small and Medium Accounts, total | 173,566 | 153,901 | 12.8 | % | 257,743 | 245,809 | 4.9 | % | ||||||
Foreign customers of | 700 | 493 | 42.0 | % | 1,297 | 990 | 31.0 | % | ||||||
Total for “Russia” operating segment | 184,204 | 163,481 | 12.7 | % | 270,258 | 257,283 | 5.0 | % | ||||||
Other segments, total | 11,237 | 14,013 | (19.8 | )% | 19,049 | 21,665 | (12.1 | )% | ||||||
Total number of paying customers | 195,441 | 177,494 | 10.1 | % | 289,307 | 278,948 | 3.7 | % | ||||||
ARPC (in RUB) | ||||||||||||||
Key Accounts | ||||||||||||||
119,762 | 114,076 | 5.0 | % | 282,807 | 280,711 | 0.7 | % | |||||||
Other regions of | 41,038 | 39,044 | 5.1 | % | 97,419 | 86,895 | 12.1 | % | ||||||
Key Accounts, total | 78,396 | 76,341 | 2.7 | % | 184,676 | 181,991 | 1.5 | % | ||||||
Small and Medium Accounts | ||||||||||||||
10,176 | 10,702 | (4.9 | )% | 16,663 | 18,028 | (7.6 | )% | |||||||
Other regions of | 5,324 | 5,392 | (1.3 | )% | 8,536 | 8,619 | (1.0 | )% | ||||||
Small and Medium Accounts, total | 7,345 | 7,751 | (5.2 | )% | 11,904 | 12,717 | (6.4 | )% | ||||||
Other segments, total | 12,721 | 11,265 | 12.9 | % | 21,391 | 19,601 | 9.1 | % |
- Lifting of COVID-19 related restrictions resulted in gradual recovery in business activity during the third quarter of 2020, and the increase in the number of paying customers in all customer segments.
- Our ARPC dynamics in the third quarter of 2020 reflects our price increases effective from 2020, as well as reduced consumption on the back of COVID-19.
º The increase in the ARPC in our Key Accounts by 2.7% was due to an increase in the average price per unit (e.g. by 13.0% and 10.2% on average for CV database and bundled subscriptions inMoscow andSt. Petersburg and Other regions, respectively, and by 21.4% and 18.4% on average for job postings inMoscow andSt. Petersburg and Other regions, respectively), that was partly offset by a decline in the number of units per customer (e.g. by 7.2% and 5.8% on average for CV database and bundled subscriptions inMoscow andSt. Petersburg and Other regions, respectively, and by 6.7% on average for job postings inMoscow andSt. Petersburg ).
º The decrease in the ARPC in our Small and Medium Accounts by 5.2% was mostly driven by a decline in the number of units per customer (e.g. by 23.0% and 15.6% on average for CV and bundled subscriptions inMoscow andSt. Petersburg and Other regions, respectively, and by 3.9% on average for job postings in Other regions), partly offset by an increase in the average price per unit (e.g. by 14.1% and 11.7% on average for CV database and bundled subscriptions inMoscow andSt. Petersburg and Other regions, respectively, and by 10.2% on average for job postings in Other regions). - In both Key Accounts and Small and Medium Accounts, our customers in the Other regions of
Russia were evidently less impacted by the COVID-19 pandemic, as restrictive measures in the regions were less severe than inMoscow andSt. Petersburg .
Operating Costs and Expenses (exclusive of depreciation and amortization)
Operating costs and expenses (exclusive of depreciation and amortization) were ₽1,183 million for the three months ended
(in thousands of RUB) | For the three months ended | For the nine months ended | ||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||
Personnel expenses | (649,869 | ) | (557,037 | ) | 16.7 | % | (1,771,614 | ) | (1,629,293 | ) | 8.7 | % |
Marketing expenses | (234,768 | ) | (292,801 | ) | (19.8 | )% | (787,028 | ) | (772,404 | ) | 1.9 | % |
Other general and administrative expenses: | ||||||||||||
Subcontractors and other expenses related to provision of services | (52,873 | ) | (47,398 | ) | 11.6 | % | (130,701 | ) | (126,854 | ) | 3.0 | % |
Office rent and maintenance | (42,390 | ) | (48,625 | ) | (12.8 | )% | (122,425 | ) | (148,352 | ) | (17.5 | )% |
Professional services | (128,178 | ) | (50,865 | ) | 152.0 | % | (245,048 | ) | (295,592 | ) | (17.1 | )% |
Insurance expense | (46,354 | ) | (43,624 | ) | 6.3 | % | (133,397 | ) | (68,797 | ) | 93.9 | % |
Hosting and other web-site maintenance | (11,960 | ) | (10,893 | ) | 9.8 | % | (34,543 | ) | (28,703 | ) | 20.3 | % |
Other operating expenses | (16,428 | ) | (40,392 | ) | (59.3 | )% | (47,748 | ) | (87,148 | ) | (45.2 | )% |
Total other general and administrative expenses | (298,183 | ) | (241,797 | ) | 23.3 | % | (713,862 | ) | (755,446 | ) | (5.5 | )% |
Operating costs and expenses (exclusive of depreciation and amortization) | (1,182,820 | ) | (1,091,635 | ) | 8.4 | % | (3,272,504 | ) | (3,157,143 | ) | 3.7 | % |
Operating costs and expenses (exclusive of depreciation and amortization) as percentage of revenue:
For the three months ended | For the nine months ended | |||||||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||
Personnel expenses | 28.2 | % | 26.0 | % | 2.2 | % | 30.4 | % | 28.5 | % | 1.9 | % | ||||||
Marketing expenses | 10.2 | % | 13.7 | % | (3.5 | )% | 13.5 | % | 13.5 | % | 0.0 | % | ||||||
Other general and administrative expenses: | ||||||||||||||||||
Subcontractors and other expenses related to provision of services | 2.3 | % | 2.2 | % | 0.1 | % | 2.2 | % | 2.2 | % | 0.0 | % | ||||||
Office rent and maintenance | 1.8 | % | 2.3 | % | (0.4 | )% | 2.1 | % | 2.6 | % | (0.5 | )% | ||||||
Professional services | 5.6 | % | 2.4 | % | 3.2 | % | 4.2 | % | 5.2 | % | (1.0 | )% | ||||||
Insurance expense | 2.0 | % | 2.0 | % | 0.0 | % | 2.3 | % | 1.2 | % | 1.1 | % | ||||||
Hosting and other web-site maintenance | 0.5 | % | 0.5 | % | 0.0 | % | 0.6 | % | 0.5 | % | 0.1 | % | ||||||
Other operating expenses | 0.7 | % | 1.9 | % | (1.2 | )% | 0.8 | % | 1.5 | % | (0.7 | )% | ||||||
Total other general and administrative expenses | 12.9 | % | 11.3 | % | 1.6 | % | 12.2 | % | 13.2 | % | (1.0 | )% | ||||||
Operating costs and expenses (exclusive of depreciation and amortization) | 51.2 | % | 51.0 | % | 0.3 | % | 56.1 | % | 55.2 | % | 0.9 | % |
Personnel expenses
- Personnel expenses for the three months ended
September 30, 2020 increased by ₽93 million, or 16.7%, compared to the three months endedSeptember 30, 2019 primarily due to: (i) an increase in salaries due to indexation of wages effective from the beginning of 2020 and an increase in headcount from 758 as ofSeptember 30, 2019 to 800 as ofSeptember 30, 2020 , and (ii) cash bonus and cash-settled share-based awards related to the SPO transaction inJuly 2020 .
- Personnel expenses increased as a percentage of revenue from 26.0% in the third quarter 2019 to 28.2% in the third quarter of 2020. Personnel expenses excluding share-based compensations and expenses related to SPO transaction in
July 2020 were 24.3% of our revenue in the third quarter of 2020, flat compared to 23.9% in the third quarter of 2019. See “Use of Non-IFRS Financial Measures” elsewhere in this release for a reconciliation to the nearest IFRS measure.
Marketing expenses
Marketing expenses for the three months ended
Marketing expenses as percentage of revenue decreased to 10.2% in the third quarter of 2020 from 13.7% in the third quarter of 2019, due to allocation of expenses.
Other general and administrative expenses
Our other general and administrative expenses consist primarily of professional services, insurance costs and office rent and maintenance costs. Our total other general and administrative expenses for the three months ended
Our other general and administrative expenses as a percentage of revenue increased to 12.9% in the third quarter of 2020 from 11.3% in the third quarter 2019, due to the increase in expenses related to the SPO transaction in
Net foreign exchange gain
Net foreign exchange loss was ₽10 million for the three months ended
Depreciation and amortization
Depreciation and amortization were ₽187 million for the three months ended
Finance income and costs
Our finance income was ₽15 million for the three months ended
Finance costs were ₽93 million for the three months ended
Income tax expense
Income tax expense for the three months ended
The effective tax rate has increased to 31.1% for the three months ended
Net income, Adjusted EBITDA and Adjusted Net Income
In the three months ended
Cash Flows
The following table sets forth the summary cash flow statements for the periods indicated:
(in thousands of RUB) | For the nine months ended September 30, | ||||||||
2020 | 2019 | Change | |||||||
Net cash generated from operating activities | 1,948,946 | 1,569,252 | 379,694 | ||||||
Net cash used in investing activities | (180,524 | ) | (493,824 | ) | 313,300 | ||||
Net cash used in financing activities | (2,735,530 | ) | (2,334,096 | ) | (401,434 | ) | |||
Net increase/(decrease) in cash and cash equivalents | (967,108 | ) | (1,258,668 | ) | 291,560 | ||||
Cash and cash equivalents, beginning of period | 2,089,215 | 2,861,110 | (771,895 | ) | |||||
Effect of exchange rate changes on cash | 197,821 | (63,035 | ) | 260,856 | |||||
Cash and cash equivalents, end of period | 1,319,928 | 1,539,407 | (219,479 | ) |
Net cash generated from operating activities
For the nine months ended
Net cash used in investing activities
For the nine months ended
Net cash used in financing activities
For the nine months ended
Capital Expenditures
Our additions to property and equipment and intangible assets for the nine months ended
Third Quarter 2020 Financial Results Conference Call
Conference Call Information
We will host a conference call and webcast to discuss results at
We recommend using the dial-in option only if you would like to ask questions. In this case please dial in at least 15 minutes prior to the call start time and clearly state the requested information. For listen only mode, please use the webcast link.
To participate in the conference call, please use the following details:
+44 (0) 2071 928338 | |
+44 (0) 8444 819752 | |
0800 279 6619 | |
+1 646 741 3167 | |
+1 877 870 9135 | |
+7 495 249 9851 | |
810 800 2114 4011 | |
Conference ID: | 2992016 |
Webcast:
https://edge.media-server.com/mmc/p/xcs64ueg
Contacts:
Investor Inquiries:
Roman Safiyulin
Phone: +7 966 005-17-82
E-mail: r.safiyulin@hh.ru
Media Inquiries:
Phone: +7 926 687-2624
E-mail: a.dzhabarov@hh.ru
About
HeadHunter is the leading online recruitment platform in
USE OF NON-IFRS FINANCIAL MEASURES
To supplement our consolidated financial statements, which is prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the
- “Adjusted EBITDA” as net income (loss) plus: (1) income tax expense; (2) net interest expense/(income); (3) depreciation and amortization; (4) transaction costs related to business combinations; (5) (gain)/loss on the disposal of subsidiary; (6) transaction costs related to disposal of subsidiary; (7) expenses related to equity-settled awards, including related social taxes; (8) IPO-related costs and other income/(loss) not related to underlying business activity; (9) insurance expenses related to the IPO; (10) (income) from the depositary; (11) one-off litigation settlement and related legal costs; and (12) share of (profit)/loss of equity-accounted investees; (13) other financing and transactional costs.
- “Adjusted Net Income” as net income (loss) plus: (1) transaction costs related to business combinations; (2) (gain)/loss on the disposal of subsidiary; (3) transaction costs related to the disposal of subsidiary; (4) expenses related to equity-settled awards, including related social taxes; (5) IPO-related costs and other income/(loss) not related to underlying business activity; (6) insurance expenses related to IPO; (7) (income) from the depositary; (8) one-off litigation settlement and related legal costs; (9) share of (profit)/loss of equity-accounted investees; (10) amortization of intangible assets recognized upon the acquisition by
HeadHunter Group PLC of the outstanding equity interests ofHeadHunter FSU Limited fromMail.Ru Group Limited ; (11) the tax effect of the adjustment described in (10); (12) (gain) or loss related to the remeasurement and expiration of a tax indemnification asset; (13) net (gain) or loss on financial assets measured at fair value through profit and loss; (14) other financing and transactional costs - “Adjusted EBITDA Margin” as Adjusted EBITDA divided by revenue.
- “Adjusted Net Income Margin” as Adjusted Net Income divided by revenue.
Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin and Adjusted Net Income Margin are used by our management to monitor the underlying performance of the business and its operations. Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin and Adjusted Net Income Margin are used by different companies for differing purposes and are often calculated in ways that reflect the circumstances of those companies. You should exercise caution in comparing Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin and Adjusted Net Income Margin as reported by us to Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin and Adjusted Net Income Margin as reported by other companies. Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin and Adjusted Net Income Margin are unaudited and have not been prepared in accordance with IFRS or any other generally accepted accounting principles.
Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin and Adjusted Net Income Margin are not measurements of performance under IFRS or any other generally accepted accounting principles, and you should not consider Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin or Adjusted Net Income Margin as alternatives to net income, operating profit or other financial measures determined in accordance with IFRS or other generally accepted accounting principles. Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin and Adjusted Net Income Margin have limitations as analytical tools, and you should not consider them in isolation. Some of these limitations are:
________________________
1 Denotes International Financial Reporting Standards as issued by the
- Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin and Adjusted Net Income Margin do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments,
- Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin and Adjusted Net Income Margin do not reflect changes in, or cash requirements for, our working capital needs, and
- the fact that other companies in our industry may calculate Adjusted EBITDA, Adjusted Net Income, Adjusted EBITDA Margin and Adjusted Net Income Margin differently than we do, which limits their usefulness as comparative measures.
The tables at the end of this release provide detailed reconciliations of each non-IFRS financial measure we use to the most directly comparable IFRS financial measure.
We provide earnings guidance on a non-IFRS basis and do not provide earnings guidance on an IFRS basis. A reconciliation of our Adjusted EBITDA Margin guidance to the most directly comparable IFRS financial measure cannot be provided without unreasonable efforts and is not provided herein because of the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including depreciation and amortization, expenses related to equity-settled awards and the other adjustments reflected in our reconciliation of historical non-IFRS financial measures, the amounts of which, could be material.
Adjusted Operating Costs and Expenses (Exclusive of Depreciation and Amortization)
Adjusted Operating Costs and Expenses (Exclusive of Depreciation and Amortization) is a financial measure not defined under IFRS. We believe that Adjusted Operating Costs and Expenses (Exclusive of Depreciation and Amortization) is a useful metric to assess our operating activities. We excluded expenses incurred in connection with potential financing and strategic transactions, including IPO and SPO- related expenses that are not indicative of our ongoing expenses. We also excluded equity-settled awards as these are non-cash expenses and highly dependent on our share price at the time of equity award grants. Therefore, we believe that it is useful for investors and analysts to see operating costs and expenses financial measures excluding the impact of these charges in order to obtain a clearer picture of our operating activity . Other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures. See the tables at the end of this release providing the calculation of Adjusted Operating Costs and Expenses (Exclusive of Depreciation and Amortization).
Net Debt and Net Debt to Adjusted EBITDA Ratio
Net Debt and Net Debt to Adjusted EBITDA Ratio are financial measure not defined under IFRS. We believe that Net Debt and Net Debt to Adjusted EBITDA Ratio are important measures that indicate our ability to repay outstanding debt. These measures should not be considered in isolation or as a substitute for any standardized measure under IFRS. Other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures. See the tables at the end of this release providing the calculation of Net Debt and discussion of Net Debt to Adjusted EBITDA Ratio.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this release that do not relate to matters of historical fact should be considered forward-looking statements, including, without limitation, statements regarding our expected financial performance and operational performance for the year ending
Unaudited Condensed Consolidated Interim Statement of Income and Comprehensive Income
(in thousands of RUB and USD, except per share amounts)
For the three months ended | For the nine months ended | ||||||||||||||||||
2020 | 2019 | 2020 | 2020 | 2019 | 2020 | ||||||||||||||
RUB | RUB | USD | RUB | RUB | USD | ||||||||||||||
Revenue | 2,308,201 | 2,142,322 | 28,967 | 5,832,445 | 5,722,383 | 73,194 | |||||||||||||
Operating costs and expenses (exclusive of depreciation and amortization) | (1,182,820 | ) | (1,091,635 | ) | (14,844 | ) | (3,272,504 | ) | (3,157,143 | ) | (41,068 | ) | |||||||
Depreciation and amortization | (187,187 | ) | (171,704 | ) | (2,349 | ) | (555,497 | ) | (505,531 | ) | (6,971 | ) | |||||||
Operating income | 938,194 | 878,983 | 11,774 | 2,004,444 | 2,059,709 | 25,155 | |||||||||||||
Finance income | 14,667 | 12,031 | 184 | 42,437 | 57,723 | 533 | |||||||||||||
Finance costs | (92,569 | ) | (145,481 | ) | (1,162 | ) | (320,066 | ) | (470,160 | ) | (4,017 | ) | |||||||
Net foreign exchange (loss)/gain | (10,294 | ) | 11,398 | 168 | 84,474 | (24,730 | ) | 426 | |||||||||||
Share of loss of equity-accounted investees (net of income tax) | (14,030 | ) | (3,536 | ) | (129 | ) | (38,776 | ) | (8,584 | ) | 1,060 | ||||||||
Other income | 13,358 | 8,613 | (176 | ) | 33,954 | 13,544 | (487 | ) | |||||||||||
Profit before income tax | 849,326 | 762,008 | 10,659 | 1,806,467 | 1,627,502 | 22,670 | |||||||||||||
Income tax expense | (263,987 | ) | (191,435 | ) | (3,313 | ) | (570,446 | ) | (542,918 | ) | (7,159 | ) | |||||||
Net income for the period | 585,339 | 570,573 | 7,346 | 1,236,021 | 1,084,584 | 15,511 | |||||||||||||
Attributable to: | |||||||||||||||||||
Owners of the Company | 545,198 | 531,399 | 6,842 | 1,127,945 | 982,092 | 14,155 | |||||||||||||
Non-controlling interest | 40,141 | 39,174 | 504 | 108,076 | 102,492 | 1,356 | |||||||||||||
Comprehensive income/(loss) | |||||||||||||||||||
Items that are or may be reclassified subsequently to profit or loss: | |||||||||||||||||||
Foreign currency translation differences | 25,484 | 1,331 | 320 | 42,024 | (25,591 | ) | 527 | ||||||||||||
Total comprehensive income, net of tax | 610,823 | 571,904 | 7,666 | 1,278,045 | 1,058,993 | 16,039 | |||||||||||||
Attributable to: | |||||||||||||||||||
Owners of the Company | 568,013 | 532,754 | 7,128 | 1,164,721 | 958,155 | 14,617 | |||||||||||||
Non-controlling interest | 42,810 | 39,150 | 537 | 113,324 | 100,838 | 1,422 | |||||||||||||
Earnings per share | |||||||||||||||||||
Basic (in Russian Roubles per share) | 10.8 | 10.6 | 0.14 | 22.5 | 19.6 | 0.28 | |||||||||||||
Diluted (in Russian Roubles per share) | 10.6 | 10.3 | 0.13 | 21.9 | 19.3 | 0.27 |
Unaudited Condensed Consolidated Interim Statement of Financial Position
As at
(in thousands of Russian Roubles) | ||||||||||
RUB | RUB | USD | ||||||||
Non-current assets | ||||||||||
6,981,576 | 6,954,183 | 87,615 | ||||||||
Intangible assets | 2,408,527 | 2,733,417 | 30,226 | |||||||
Property and equipment | 467,754 | 429,744 | 5,870 | |||||||
Equity-accounted investees | 140,070 | 178,847 | 1,758 | |||||||
Right-of-use assets | 223,757 | 279,249 | 2,808 | |||||||
Deferred tax assets | 154,833 | 149,835 | 181 | |||||||
Loans issued to equity-accounted investees | 14,426 | – | 1,943 | |||||||
Other financial assets | 16,917 | 25,341 | 212 | |||||||
Other non-current assets | 21,817 | 22,134 | 274 | |||||||
Total non-current assets | 10,429,677 | 10,772,750 | 130,887 | |||||||
Current assets | ||||||||||
Trade and other receivables | 73,486 | 57,908 | 922 | |||||||
Prepaid expenses and other current assets | 65,205 | 119,249 | 818 | |||||||
Loans issued to equity-accounted investees (current portion) | 4,809 | – | 60 | |||||||
Cash and cash equivalents | 1,319,928 | 2,089,215 | 16,565 | |||||||
Total current assets | 1,463,428 | 2,266,372 | 18,365 | |||||||
Total assets | 11,893,105 | 13,039,122 | 149,252 | |||||||
Equity | ||||||||||
Share capital | 8,597 | 8,547 | 108 | |||||||
Share premium | 1,958,087 | 1,863,877 | 24,573 | |||||||
Foreign currency translation reserve | (68,415 | ) | (105,191 | ) | (859 | ) | ||||
Retained earnings | 915,122 | 1,587,697 | 11,484 | |||||||
Total equity attributable to owners of the Company | 2,813,391 | 3,354,930 | 35,307 | |||||||
Non-controlling interest | 43,505 | 33,263 | 546 | |||||||
Total equity | 2,856,896 | 3,388,193 | 35,853 | |||||||
Non-current liabilities | ||||||||||
Loans and borrowings | 3,947,986 | 4,064,501 | 49,545 | |||||||
Lease liabilities | 176,859 | 230,802 | 2,219 | |||||||
Deferred tax liabilities | 450,436 | 512,804 | 5,653 | |||||||
Trade and other payables | 6,722 | 4,239 | 84 | |||||||
Provisions | 48,537 | 19,498 | 609 | |||||||
Other non-current liabilities | 105,622 | 126,828 | 1,326 | |||||||
Total non-current liabilities | 4,736,162 | 4,958,672 | 59,436 | |||||||
Current liabilities | ||||||||||
Contract liabilities | 2,323,073 | 2,367,416 | 29,153 | |||||||
Trade and other payables | 900,958 | 780,219 | 11,307 | |||||||
Loans and borrowings (current portion) | 473,571 | 1,064,554 | 5,943 | |||||||
Lease liabilities (current portion) | 72,877 | 59,816 | 915 | |||||||
Income tax payable | 434,505 | 369,974 | ||||||||
Provisions (current portion) | 69,377 | 26,398 | ||||||||
Other current liabilities | 25,686 | 23,880 | 322 | |||||||
Total current liabilities | 4,300,047 | 4,692,257 | 53,963 | |||||||
Total liabilities | 9,036,209 | 9,650,929 | 113,400 | |||||||
Total equity and liabilities | 11,893,105 | 13,039,122 | 149,252 |
Unaudited Condensed Consolidated Interim Statement of Cash Flows
For the nine months ended
(in thousands of Russian Roubles) | |||||||||
For the nine months ended | For the nine months ended | For the nine months ended | |||||||
RUB | RUB | USD | |||||||
OPERATING ACTIVITIES: | |||||||||
Net income for the period | 1,236,021 | 1,084,584 | 15,511 | ||||||
Adjusted for non-cash items and items not affecting cash flow from operating activities: | |||||||||
Depreciation and amortization | 555,497 | 505,531 | 6,971 | ||||||
Net finance costs | 277,629 | 412,437 | 3,484 | ||||||
Net foreign exchange (gain)/loss | (84,474 | ) | 24,730 | (1,060 | ) | ||||
Other non-cash items | (4,307 | ) | 3,834 | (54 | ) | ||||
Management incentive agreement, including social taxes | 179,009 | 147,243 | 2,247 | ||||||
Share grant to the Board of Directors | 16,259 | 7,524 | 204 | ||||||
Share of loss of equity-accounted investees, net of income tax | 38,776 | 8,584 | 487 | ||||||
Income tax expense | 570,446 | 542,918 | 7,159 | ||||||
Change in trade receivables and other operating assets | 40,568 | (146,335 | ) | 509 | |||||
Change in contract liabilities | (52,575 | ) | (94,972 | ) | (660 | ) | |||
Change in trade and other payables | 65,716 | 85,000 | 825 | ||||||
Change in other liabilities | (29,141 | ) | 156,236 | (366 | ) | ||||
Income tax paid | (570,906 | ) | (710,947 | ) | (7,165 | ) | |||
Interest paid | (289,572 | ) | (457,115 | ) | (3,634 | ) | |||
Net cash generated from operating activities | 1,948,946 | 1,569,252 | 24,458 | ||||||
INVESTING ACTIVITIES: | |||||||||
Acquisition of equity-accounted investee | – | (234,729 | ) | – | |||||
Acquisition of intangible assets | (57,570 | ) | (71,251 | ) | (722 | ) | |||
Acquisition of property and equipment | (140,255 | ) | (245,500 | ) | (1,760 | ) | |||
Loans issued to equity-accounted investees | (19,235 | ) | – | (241 | ) | ||||
Interest received | 36,536 | 57,656 | 458 | ||||||
Net cash used in investing activities | (180,524 | ) | (493,824 | ) | (2,265 | ) | |||
FINANCING ACTIVITIES: | |||||||||
Bank loan received | 4,615,000 | – | 57,916 | ||||||
Bank loan restructuring fees | (52,762 | ) | – | (662 | ) | ||||
Bank and other loans repaid | (5,276,447 | ) | (1,055,000 | ) | (66,217 | ) | |||
Payment for lease liabilities | (41,710 | ) | (38,632 | ) | (523 | ) | |||
Dividends paid to shareholders | (1,885,441 | ) | (1,133,501 | ) | (23,662 | ) | |||
Dividends paid to non-controlling interest | (94,214 | ) | (106,963 | ) | (1,183 | ) | |||
Contribution from non-controlling interest | 44 | 1 | |||||||
Net cash used in financing activities | (2,735,530 | ) | (2,334,096 | ) | (34,330 | ) | |||
Net increase/(decrease) in cash and cash equivalents | (967,108 | ) | (1,258,668 | ) | (12,137 | ) | |||
Cash and cash equivalents, beginning of period | 2,089,215 | 2,861,110 | 26,219 | ||||||
Effect of exchange rate changes on cash | 197,821 | (63,035 | ) | 2,482 | |||||
Cash and cash equivalents, end of period | 1,319,928 | 1,539,407 | 16,564 | ||||||
Reconciliations of non-IFRS financial measures to the nearest comparable IFRS measures
Reconciliation of net income to EBITDA and Adjusted EBITDA, the most directly comparable IFRS financial measure:
(in thousands of RUB) | For the three months ended | For the nine months ended | ||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||
Net income | 585,339 | 570,573 | 1,236,021 | 1,084,584 | ||||||||
Add the effect of: | ||||||||||||
Income tax expense | 263,987 | 191,435 | 570,446 | 542,918 | ||||||||
Net interest costs | 77,902 | 133,450 | 277,629 | 412,437 | ||||||||
Depreciation and amortization | 187,187 | 171,704 | 555,497 | 505,531 | ||||||||
EBITDA | 1,114,415 | 1,067,162 | 2,639,593 | 2,545,470 | ||||||||
Add the effect of: | ||||||||||||
Equity-settled awards, including social taxes(1) | 56,929 | 43,956 | 166,963 | 117,062 | ||||||||
IPO-related costs(2) | – | – | – | 188,294 | ||||||||
Insurance cover related to IPO(3) | – | 39,064 | 54,772 | 61,874 | ||||||||
Income from depository(4) | (11,637 | ) | (8,613 | ) | (29,141 | ) | (13,544 | ) | ||||
Other financing and transactional costs(5) | 122,235 | – | 155,697 | – | ||||||||
Share of loss of equity-accounted investees(6) | 14,030 | 3,536 | 38,776 | 8,584 | ||||||||
Adjusted EBITDA | 1,295,973 | 1,145,105 | 3,026,660 | 2,907,740 | ||||||||
(1) | Represents non-cash expenses related to equity-settled awards issued in accordance with the Management Incentive Agreement, and equity-settled share-based awards issued to board members and related social taxes, which are payable as a result of us becoming Russian tax resident in | |
(2) | In connection with our initial public offering in | |
(3) | Subsequent to and in connection with our IPO, in | |
(4) | In connection with our IPO, we have signed the Deposit Agreement, in accordance with which we shall receive income from our depositary over the five-year period from the date of the IPO, provided that we meet certain covenants as specified in the Deposit Agreement. We believe that this income does not relate to our ordinary course of business. | |
(5) | Reflects legal, accounting and other professional fees incurred in connection with potential financing and strategic transactions that are not indicative of our ongoing expenses. In the third quarter of 2020, our other financing and transactional costs primarily consist of professional services and personnel expenses related to our SPO occurred in | |
(6) | On | |
Reconciliation of net income to Adjusted N Income, the most directly comparable IFRS financial measure:
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||
Net income | 585,339 | 570,573 | 1,236,021 | 1,084,584 | ||||||||
Add the effect of: | ||||||||||||
Equity-settled awards, including social taxes(1) | 56,929 | 43,956 | 166,963 | 117,062 | ||||||||
IPO-related costs(2) | – | – | – | 188,294 | ||||||||
Insurance cover related to IPO(3) | – | 39,064 | 54,772 | 61,874 | ||||||||
Income from depositary(4) | (11,637 | ) | (8,613 | ) | (29,141 | ) | (13,544 | ) | ||||
Other financing and transactional costs(5) | 122,235 | – | 155,697 | – | ||||||||
Share of loss of equity-accounted investees(6) | 14,030 | 3,536 | 38,776 | 8,584 | ||||||||
Amortization of intangible assets recognized upon the Acquisition(7) | 103,947 | 103,947 | 311,840 | 311,841 | ||||||||
Tax effect on adjustments(8) | (20,789 | ) | (20,789 | ) | (62,368 | ) | (62,368 | ) | ||||
Net (gain)/loss on financial assets measured at fair value through profit and loss(9) | 5,782 | – | 8,424 | – | ||||||||
Adjusted Net Income | 855,836 | 731,674 | 1,880,985 | 1,696,327 |
(1) | Represents non-cash expenses related to equity-settled awards issued in accordance with the Management Incentive Agreement, and equity-settled share-based awards issued to board members and related social taxes, which are payable as a result of us becoming Russian tax resident in | |
(2) | In connection with our initial public offering in | |
(3) | Subsequent to and in connection with our IPO, in | |
(4) | In connection with our IPO, we have signed the Deposit Agreement, in accordance with which we shall receive income from our depositary over the five-year period from the date of the IPO, provided that we meet certain covenants as specified in the Deposit Agreement. We believe that this income does not relate to our ordinary course of business. | |
(5) | Reflects legal, accounting and other professional fees incurred in connection with potential financing and strategic transactions that are not indicative of our ongoing expenses. In the third quarter of 2020, our other financing and transactional costs primarily consist of professional services and personnel expenses related to our SPO occurred in | |
(6) | On | |
(7) | As a result of the Acquisition, we recognized the following intangible assets: (i) trademark and domain names in the amount of ₽1,634,306 thousand, (ii) non-contractual customer relationships in the amount of ₽2,064,035 thousand and (iii) CV database in the amount of ₽618,601 thousand, which have a useful life of 10 years, 5-10 years and 10 years, respectively. | |
(8) | Calculated by applying the statutory Russian tax rate of 20% to amortization of the assets recognized upon the Acquisition. | |
(9) | We believe that the movements in fair values of financial assets measured at fair value through profit and loss are not indicative of our underlying business performance. | |
Reconciliation of operating costs and expenses (exclusive of depreciation and amortization) to Adjusted Operating Costs and Expenses (Exclusive of Depreciation and Amortization), the most directly comparable IFRS financial measure:
For the three months ended September 30, 2020 | For the three months ended September 30, 2019 | |||||||||||||||||||||||
Personnel expenses | Marketing expenses | Other general and administrative expenses | Total | Personnel expenses | Marketing expenses | Other general and administrative expenses | Total | |||||||||||||||||
Operating costs and expenses (exclusive of depreciation and amortization) | (649,869 | ) | (234,768 | ) | (298,183 | ) | (1,182,820 | ) | (557,037 | ) | (292,801 | ) | (241,797 | ) | (1,091,635 | ) | ||||||||
Add the effect of: | ||||||||||||||||||||||||
Equity-settled awards, including social taxes(1) | 56,929 | – | – | 56,929 | 43,956 | – | – | 43.956 | ||||||||||||||||
Insurance cover related to IPO(2) | – | – | – | – | – | – | 39,064 | 39,064 | ||||||||||||||||
Other financing and transactional costs(3) | 31,984 | – | 90,251 | 122,235 | – | – | – | – | ||||||||||||||||
Adjusted Operating Costs and Expenses (Exclusive of Depreciation and Amortization) | (560,956 | ) | (234,768 | ) | (207,932 | ) | (1,003,656 | ) | (513,081 | ) | (292,801 | ) | (202,733 | ) | (1,008,615 | ) |
(1) | Represents non-cash expenses related to equity-settled awards issued in accordance with the Management Incentive Agreement, and equity-settled share-based awards issued to board members and related social taxes, which are payable as a result of us becoming Russian tax resident in | |
(2) | Subsequent to and in connection with our IPO, in | |
(3) | Reflects legal, accounting and other professional fees incurred in connection with potential financing and strategic transactions that are not indicative of our ongoing expenses. In the third quarter of 2020, our other financing and transactional costs primarily consist of professional services and personnel expenses related to our SPO occurred in |
We believe that
Calculation of our
(in thousands of RUB) | ||||
Trade and other receivables | 73,486 | 57,908 | ||
Prepaid expenses and other current assets | 65,205 | 119,249 | ||
Contract liabilities | (2,323,073) | (2,367,416) | ||
Trade and other payables | (900,958) | (780,219) | ||
Other current liabilities | (25,686) | (23,880) | ||
(3,111,026) | (2,994,358) |
We believe that Net Debt and Net Debt to Adjusted EBITDA Ratio are important measures that indicate our ability to repay outstanding debt.
Calculation of our net debt is presented in the table below:
(in thousands of RUB) | ||||
Loans and borrowings | 3,947,986 | 4,064,501 | ||
Loans and borrowings (current portion) | 473,571 | 1,064,554 | ||
Cash and cash equivalents | (1,319,928) | (2,089,215) | ||
Net Debt | 3,101,629 | 3,039,840 |
We calculate our Net Debt to Adjusted EBITDA Ratio by dividing Net Debt by Adjusted EBITDA.
Calculation of Adjusted EBITDA on the last twelve months basis as of
(in thousands of RUB) | RUB | |
Adjusted EBITDA for the year ended | 3,930,747 | |
Less Adjusted EBITDA for the nine months ended | (2,907,740 | ) |
Add Adjusted EBITDA for the nine months ended | (3,026,660 | ) |
Adjusted EBITDA on the last twelve months basis | 4,049,667 |
Source:
2020 GlobeNewswire, Inc., source