Q1-10 Call: Naukri Expects A Tough Q2

During the Info Edge earnings conference call, CEO & MD Sanjeev Bikhchandani said that the company expects a challenging second quarter for the company, but with an improvement in hiring activity, might see an improvement in the third quarter of the 2009-10 fiscal. Hiring had bottomed out in December, and has been low since, but indications are that hiring has picked up June. If hiring picks up in the next few months, revenue will follow in the quarter that follows. The company was unable to give a guidance for Q2 growth, saying that it could be negative. “We don’t expect great savings in costs in Q2, and if revenue does not improve, margins will be under pressure,” Bikhchandani said.

Note: numbers mentioned below are YoY, unless specified otherwise

Recruitment Business: Margin & Pricing Pressures

Margins

Recruitment accounted for around 84 percent of operating topline. EBITDA margins for the recruitment vertical (Naukri and Quadrangle) were 39.07 percent, versus 43.76 percent in Q1 last year. For Naukri.com, the EBITDA margin moved down to 41.8 percent from 47.13 percent a year ago. The company said these numbers are internal numbers, and have not been audited or reviewed: Naukri Recruitment Solutions topline declined 21.4 percent, Naukri Candidate Services declined 1.6 percent, while Quadrangle declined 36 percent. Note that at an average, Naukri Recruitment solutions accounts for 90 percent.

Pricing Pressures

The recruitment business is facing pricing pressure, and customers are buying some of the cheaper solutions. COO Hitesh Oberoi said that to begin with, there was higher pressure from top customers, “but now its across the board. Pressure is in terms of price cuts – they’re buying fewer licenses and fewer branding solutions than earlier.”

Responding to a question from MediaNama about whether lower prices will remain despite a recovery, Bikhchandani said that “Once there is recovery and hiring is back, our prices will come back, and more importantly, we will have a higher traffic share and higher revenue share as opposed to competition. It remains to be seen how it works out. Competition is discounting heavily to get customers since they are worse affected than us” . Naukri.com has around 18 million resumes. Around 12,000 resumes are being added, and 49,000 being modified daily, comparatively higher than last quarter.

Sectorwise Breakup

Six sectors in particular remain challenged – IT, Retail, real estate, Banking & Financial Segments, Media, Advertising and Exports, though the company says there is gradual pickup in other sectors.

IT: once contributed as much as 32 percent to the topline, now contributes only 25%, down from 27% last year. The company has over 4000 IT clients
Recruitment Consultants: 24.6% vs 23.5% YoY
Infrastructure: 22%, flat
BFSI: 5%, flat

The company also said that prior to the downturn, they had estimated Online to have 35-40% of the total revenue of Online + Print in recruitment advertisement market. They believe that Print has declined more than online, with the downturn. Info Edge is also exploring conversations with a few campuses for First Naurki, and will revamp and improve the product with time. It will take a year or a year and a half for revenue to kick in.

Other Verticals: 99 Acres, JeevanSathi & Shiksha etc

Net Sales for other verticals grew 15% YoY to Rs. 8.6 crores, with EBITDA losses reducing by 42% to Rs. 4.4 Crores. Brijj, Shiksha and ACD earned a topline of Rs. 8.9 million, and lost Rs. 26 million at the EBITDA level in Q1

99Acres

Reported a loss of Rs. 1.6 crores for the quarter, and a decline in topline 20% over the same quarter the previous year. EBITDA losses reduced by 54%, largely due to cuts in advertising. This was largely due to a reduction in advertising and competition advertised less. There was some headcount reduction in sales force. There is some traction in the Real Estate sector in pockets, with lower priced projects. The company is expecting weakness in the sector, but expects marketshare to increase. The total number of listings has declined to 271,000 from 287,000 in Q4-09, though the number of paid transactions remained flat at 4900.

Jeevansathi

Reported a loss of Rs. 35 lakhs for the quarter. Net Sales grew 27% YoY, with EBITDA losses reducing 83% YoY. Profiles ever added increased to 3.12 million as of June 30th 2009. The company plans to add to its 14 offline centres. “We are hoping to break even JS this financial year, but have reduced losses substantially. Main competitors challenged for cash and capital, this means we get more bang for our marketing dollars,” Bikhchandani added. Jeevansathi adds 1,846 profiles daily, and had 23,370 unique paid profiles last quarter, down from Q4-09, with Rs. 1,864 as the “Average amount realized”, up from Q4-09.

Shiksha

Shiksha did a product and site revamp – UI has improved, rich listings are on. The sales team is in place, the feedback on the product is good. The building blocks are falling into place, though revenues are still small.

They claim that Shiksha gets 15-20,000 visitors a day. “The business model is both advertising and leads. We’re not approaching the site through our content, it’s mostly through user content. We have listings, ask & answer, my speak, where the content is generated by users. Therefore, it will not require significant investment from our side on the content. We are building platforms to enable users to contribute to the side. We get a tiny fraction of the budget in the education sector, but as the concept of looking online to generate leads for admission picks up and penetration grows, we hope and believe that our revenue will grow,” COO Hitesh Oberoi said.

Brijj vs Linked In

“I don’t have LinkedIn numbers. The total number of registered users on Brijj is probably more than that on LinkedIn from India. Having said that, LinkedIn is ahead in terms of quality of profiles and quality of engagement. The task in front of Brijj is to first improve quality of engagement and there fore traction among registered users. Over time, improve quality of profiles. These are two taskes ahead of us, and revenue will not happen for a while,” Bikhchandani said, responding to a question from MediaNama. Brijj has seen in increase in profiles being added daily, at 2,440 as compared to 2000 in Q4-09. The professional network had 2 million profiles at the end of Q1-10.

All Check Deals: closed over 300 deals in Q1. Business slowed down in Q3 and Q4 last year, due to a slowdown in the real estate market.

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