Yandex (NASDAQ:YNDX), one of Europe's largest internet companies
and the leading search provider in Russia, today announced its
unaudited financial results for the first quarter ended March 31,
2016.
Q1 2016 Consolidated Financial
Highlights(1)(2)
- Revenues of RUB 16.5 billion ($243.7 million),
up 34% compared with Q1 2015
- Adjusted EBITDA of RUB 5.8 billion ($85.3
million), up 62% compared with Q1 2015, adjusted EBITDA
margin of 35.0%
- Adjusted net income of RUB 3.2 billion
($46.9 million), up 41% compared with Q1 2015, adjusted net
income margin of 19.2%
- Cash, cash equivalents, term deposits and short-term
investments in debt securities of RUB 60.5 billion ($895.1
million) as of March 31, 2016
Q1 2016 Operational and Corporate
Highlights
- Share of Russian search market (including
mobile) averaged 57.6% in Q1 2016 compared to 57.3% in Q4 2015
(according to LiveInternet)
- Search queries in Russia grew 7% compared with
Q1 2015
- Yandex announced its intention to acquire its Moscow
headquarters
“Yandex is off to a solid start in 2016 and we are starting to
see signs of stabilization in the overall economic environment,"
said Arkady Volozh, Chief Executive Officer of Yandex. "Based on
the current conditions, we are raising our revenue outlook for the
year from a range of 12% to 18% to a revised range of 15% to
19%.”
“We continue to invest aggressively in our three business units
- Yandex.Taxi, Classifieds and Yandex.Market - to accelerate their
growth in 2016," said Alexander Shulgin, Chief Operating Officer of
Yandex. "Going forward, we will share more financial information on
these units to provide shareholders with greater visibility into
their performance.”
The following table provides a summary of our key
consolidated financial results for the three
months ended March 31, 2015 and 2016:
In RUB millions |
Three months |
ended March 31, |
|
2015 |
2016 |
Change |
Revenues |
12,339 |
16,473 |
|
34 |
% |
Ex-TAC revenues2 |
9,622 |
13,083 |
|
36 |
% |
Income from operations |
1,486 |
2,440 |
|
64 |
% |
Adjusted EBITDA2 |
3,571 |
5,770 |
|
62 |
% |
Net income |
2,127 |
1,069 |
|
-50 |
% |
Adjusted net income2
|
2,249 |
3,168 |
|
41 |
% |
1 Pursuant to SEC rules regarding convenience translations,
Russian ruble (RUB) amounts have been translated into U.S. dollars
at a rate of RUB 67.6076 to $1.00, the official exchange rate
quoted as of March 31, 2016 by the Central Bank of the Russian
Federation.
2 The following measures presented in this release are
“non-GAAP financial measures”: ex-TAC revenues; adjusted EBITDA;
adjusted EBITDA margin; adjusted ex-TAC EBITDA margin; adjusted net
income; adjusted net income margin and adjusted ex-TAC net income
margin. Please see the section headed “Use of Non-GAAP Financial
Measures” below for a discussion of how we define these measures,
as well as reconciliations at the end of this release of each of
these measures to the most directly comparable US GAAP
measures.
There have been no changes to our consolidated reporting, other
than to the presentation of the breakdown of our online
advertising. As online advertising formats continue to converge, we
are no longer providing a breakdown of our online ad revenues into
text-based and display revenues. We continue to separately present
revenues from Yandex websites and revenues from our ad network.
Following the revision of our organizational structure, we now
report the results of the following operating segments:
- Search and Portal, which includes all our services offered in
Russia, Ukraine, Belarus and Kazakhstan, other than those,
described below;
- E-commerce, which includes our Yandex.Market service;
- Taxi, which includes our Yandex.Taxi service;
- Classifieds, which includes Auto.ru, Yandex.Realty, Yandex.Jobs
and Yandex.Travel;
- Experimental businesses, which includes:
- Media Services, including Kinopoisk, Yandex.Music,
Yandex.Radio, Yandex.Tickets, Yandex.Afisha and Yandex TV
program,
- Yandex Data Factory,
- Discovery services, including Yandex Zen and Yandex Launcher,
and
- Search and Portal in Turkey.
Historical information on revenues and adjusted EBITDA of our
segments is provided at the end of this financial release and
contains quarterly data for the five quarters from Q1 2015 through
Q1 2016 and annual data for the three years from 2013 through 2015.
Further this information will be available in the supplementary
slides accompanying our financial releases.
Consolidated revenue breakdown
In RUB millions |
Three months |
ended March 31, |
|
2015 |
2016 |
Change |
Online Advertising Revenues: |
|
|
|
Yandex websites |
8,969 |
11,404 |
|
27 |
% |
Advertising network |
3,094 |
4,428 |
|
43 |
% |
Total online advertising revenues |
12,063 |
15,832 |
|
31 |
% |
Other |
276 |
641 |
|
132 |
% |
Total revenues
|
12,339 |
16,473 |
|
34 |
% |
|
|
|
|
|
|
Online advertising revenues grew 31% compared
with Q1 2015 and continued to drive overall top-line performance,
contributing 96% of total revenues in Q1 2016. Online advertising
revenues include revenues derived from text-based and display
advertising on Yandex websites and in our ad network.
Online advertising revenues from Yandex
websites increased 27% compared with Q1 2015 and accounted
for 69% of total revenues during Q1 2016. Online
advertising revenues from our ad network increased 43%
compared with Q1 2015 and contributed 27% of total revenues during
Q1 2016, 2 percentage points higher than in Q1 2015.
Other revenues grew 132% compared with Q1 2015,
and were mainly driven by growth of Yandex.Taxi revenues.
Paid clicks on Yandex’s and its partners’
websites, in aggregate, increased 18% compared with Q1 2015.
Our average cost per click grew 12% compared
with Q1 2015.
Segment revenues:
In RUB millions |
Three months ended March 31, |
|
2015 |
|
|
2016 |
|
Change |
Revenues: |
|
|
|
Search and Portal |
|
11,620 |
|
|
15,147 |
|
|
30 |
% |
E-commerce |
|
671 |
|
|
1,043 |
|
|
55 |
% |
Taxi |
|
161 |
|
|
445 |
|
|
176 |
% |
Classifieds |
|
179 |
|
|
241 |
|
|
35 |
% |
Experiments |
|
99 |
|
|
185 |
|
|
87 |
% |
Eliminations* |
|
(391 |
) |
|
(588 |
) |
|
50 |
% |
Total revenues |
|
12,339 |
|
|
16,473 |
|
|
34 |
% |
|
|
|
|
*Eliminations represent the elimination of transaction results
between the reportable segments, primarily related to
advertising.
Consolidated Operating Costs and Expenses
Yandex’s operating costs and expenses consist of cost of
revenues, product development expenses, sales, general and
administrative expenses (SG&A), and depreciation and
amortization expenses (D&A). Apart from D&A, each of the
above expense categories includes personnel-related costs and
expenses, relevant office space rental, and related share-based
compensation expense. Increases across all cost categories reflect
investments in overall growth. In Q1 2016, Yandex’s headcount
remained nearly flat compared with December 31, 2015, and was down
2% from March 31, 2015. The total number of full-time employees was
5,464 as of March 31, 2016.
Costs of revenues, including traffic acquisition costs
(TAC)
In RUB millions |
Three months |
ended March 31, |
|
|
2015 |
|
|
2016 |
|
Change |
TAC: |
|
|
|
Related to the Yandex ad network |
|
1,866 |
|
2,495 |
|
34 |
% |
Related to distribution partners |
|
851 |
|
895 |
|
5 |
% |
Total TAC |
|
2,717 |
|
3,390 |
|
25 |
% |
Total TAC as a % of total revenues |
|
22.0 |
% |
|
20.6 |
% |
|
Other cost of revenues |
|
996 |
|
1,114 |
|
12 |
% |
Other cost of revenues as a % of revenues |
|
8.1 |
% |
|
6.8 |
% |
|
Total cost of revenues |
|
3,713 |
|
4,504 |
|
21 |
% |
Total cost of revenues as a % of revenues |
|
30.1 |
% |
|
27.3 |
% |
|
|
|
|
|
TAC decreased as a percentage of total revenues from 22.0% in Q1
2015 to 20.6% in Q1 2016 and grew 25% compared with Q1 2015. Our ad
network TAC grew 34% in Q1 2016 compared with Q1 2015, slower than
revenues from our advertising network, primarily reflecting changes
in our partner revenue mix. Our distribution TAC increased 5% in Q1
2016 compared with Q1 2015.
Other cost of revenues in Q1 2016 increased 12%
compared with Q1 2015.
Product development
In RUB millions |
Three months |
ended March 31, |
|
|
2015 |
|
|
2016 |
|
Change |
Product development |
|
3,347 |
|
3,877 |
|
16 |
% |
As a % of revenues |
|
27.1 |
% |
|
23.6 |
% |
|
|
|
|
|
Growth in product development costs in Q1 2016 primarily related
to salary increases in early 2016.
Selling, general and administrative
(SG&A)
In RUB millions |
Three months |
ended March 31, |
|
|
2015 |
|
|
2016 |
|
Change |
Sales, general and administrative |
|
2,303 |
|
3,258 |
|
41 |
% |
As a % of revenues |
|
18.7 |
% |
|
19.8 |
% |
|
|
|
|
|
SG&A costs increased 41% compared to Q1 2015 as a result of
growth in advertising and marketing spend, aimed to support our
emerging businesses, such as Yandex.Market, Yandex.Taxi and
Classifieds, as well as our Yandex Browser.
Share-based compensation (SBC) expense
SBC expense is included in each of the cost of revenues, product
development, and SG&A categories discussed above.
In RUB millions |
Three months |
ended March 31, |
|
|
2015 |
|
|
2016 |
|
Change |
SBC expense included in cost of revenues |
|
43 |
|
49 |
|
14 |
% |
SBC expense included in product development |
|
379 |
|
595 |
|
57 |
% |
SBC expense included in SG&A |
|
138 |
|
247 |
|
79 |
% |
Total SBC expense |
|
560 |
|
891 |
|
59 |
% |
As a % of revenues |
|
4.5 |
% |
|
5.4 |
% |
|
|
|
|
|
|
|
|
|
Total SBC expense increased 59% in Q1 2016 compared with Q1
2015. The increase primarily related to new equity-based grants
made in 2015 and 2016, as well as to the equity award exchange
programs we completed in April and July 2015.
Depreciation and amortization (D&A)
expense
In RUB millions |
Three months |
ended March 31, |
|
|
2015 |
|
|
2016 |
|
Change |
Depreciation and amortization |
|
1,490 |
|
2,394 |
|
61 |
% |
As a % of revenues |
|
12.1 |
% |
|
14.5 |
% |
|
D&A expense increased 61% in Q1 2016 compared with Q1 2015
and primarily reflected investments in servers and data centers
made in 2015.
As a result of the factors described above, income from
operations was RUB 2.4 billion ($36.1 million) in Q1 2016,
a 64% increase from Q1 2015.
Adjusted EBITDA
Consolidated adjusted EBITDA
In RUB millions |
Three months ended March 31,
|
2015 |
2016 |
Change |
Adjusted EBITDA |
3,571 |
5,770 |
|
62 |
% |
|
|
|
|
|
|
Adjusted EBITDA by segments
In RUB millions |
Three months ended March 31, |
2015 |
|
2016 |
|
Change |
Adjusted EBITDA: |
|
|
|
|
|
|
Search and Portal |
3,585 |
5,911 |
65 |
% |
E-commerce |
393 |
380 |
-3 |
% |
Taxi |
87 |
- |
-100 |
% |
Classifieds |
10 |
(6 |
) |
-160 |
% |
Experiments |
(504 |
) |
(515 |
) |
-2 |
% |
Total adjusted EBITDA |
3,571 |
5,770 |
62 |
% |
|
Interest income, net in Q1 2016 was RUB 523
million, up from RUB 484 million in Q1 2015.
Foreign exchange loss in Q1 2016 was RUB 1,281
million, compared with a foreign exchange gain of RUB 716 million
in Q1 2015. This loss reflects the appreciation of the Russian
ruble during Q1 2016 from RUB 72.8827 to $1.00 on December 31,
2015, to RUB 67.6076 to $1.00 on March 31, 2016. Yandex's Russian
operating subsidiaries' functional currency is the Russian ruble,
and therefore changes due to exchange rate fluctuations in the
ruble value of these subsidiaries' monetary assets and liabilities
that are denominated in other currencies are recognized as foreign
exchange gains or losses within other income, net in the condensed
consolidated statements of income. Although the U.S. dollar value
of Yandex's U.S. dollar-denominated assets and liabilities was not
impacted by these currency fluctuations, they resulted in a
downward revaluation of the ruble equivalent of these U.S.
dollar-denominated monetary assets and liabilities in Q1 2016.
Income tax expense for Q1 2016 was RUB 713
million, up from RUB 676 million in Q1 2015. Our effective tax rate
of 40.0% was higher in Q1 2016 than in Q1 2015 primarily due to the
increase in SBC expense which is non-deductible. Adjusted for
SBC expense, our effective tax rate is 26.7%, compared with 22.7%
in 2015 if also adjusted for SBC expense and one-off effects of
that year.
Adjusted net income in Q1 2016 was RUB 3.2
billion ($46.9 million), a 41% increase from Q1 2015.
Adjusted net income margin was 19.2% in Q1
2016, compared with 18.2% in Q1 2015.
Net income was RUB 1.1 billion ($15.8 million)
in Q1 2016, down 50% compared with Q1 2015 mainly due to the
foreign exchange loss that we recognized in Q1 2016 compared to the
foreign exchange gain recognized in Q1 2015.
As of March 31, 2016, Yandex had cash, cash equivalents,
term deposits and short-term investments in debt
securities of RUB 60.5 billion ($895.1 million).
Net operating cash flow for Q1 2016 was an
inflow of RUB 5.6 billion ($83.1 million) and capital
expenditures were RUB 1.5 billion ($21.5 million).
During Q1 2016, we repurchased $23.0 million in principal amount
of our 1.125% convertible senior notes due 2018
for approximately $20.1 million.
The total number of shares issued and
outstanding as of March 31, 2016 was 319,696,831,
including 274,098,861 Class A shares, 45,597,969 Class B shares,
and one Priority share and excluding 10,359,923 Class A shares held
in treasury and all Class C shares outstanding solely as a result
of the conversion of Class B shares into Class A shares; all such
Class C shares will be cancelled. There were also employee share
options outstanding to purchase up to an additional 3.8 million
shares, at a weighted average exercise price of $6.18 per share,
all of which, excluding options for approximately 26,000 shares,
were fully vested; equity-settled share appreciation rights (SARs)
for 0.2 million shares, at a weighted average measurement price of
$28.62, all of which, excluding SARs for approximately 11,000
shares, were fully vested; and restricted share units (RSUs)
covering 7.6 million shares, of which RSUs to acquire 1.9 million
shares were fully vested. Financial outlook
Based on the strong start of the year, we expect our ruble-based
revenue to grow in the range of 15% to 19% in the full year 2016
compared with 2015.
This outlook reflects our current view, based on the trends that
we currently see, and may change in light of market and economic
developments in our markets.
Historical financial data by segments
|
|
|
|
|
|
|
|
|
|
In RUB millions |
Quarterly data |
|
|
Annual data |
Q1'15 |
Q2'15 |
Q3'15 |
Q4'15 |
Q1'16 |
|
|
2013 |
|
|
2014 |
|
|
2015 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
Search and Portal |
|
11,620 |
|
|
13,107 |
|
|
14,505 |
|
|
16,673 |
|
|
15,147 |
|
|
|
37,039 |
|
|
47,920 |
|
|
55,905 |
|
E-commerce |
|
671 |
|
|
730 |
|
|
827 |
|
|
1,172 |
|
|
1,043 |
|
|
|
2,810 |
|
|
2,889 |
|
|
3,400 |
|
Taxi |
|
161 |
|
|
194 |
|
|
234 |
|
|
395 |
|
|
445 |
|
|
|
112 |
|
|
327 |
|
|
984 |
|
Classifieds |
|
179 |
|
|
211 |
|
|
243 |
|
|
261 |
|
|
241 |
|
|
|
327 |
|
|
539 |
|
|
894 |
|
Experiments |
|
99 |
|
|
94 |
|
|
106 |
|
|
142 |
|
|
185 |
|
|
|
179 |
|
|
337 |
|
|
441 |
|
Eliminations* |
|
(391 |
) |
|
(416 |
) |
|
(476 |
) |
|
(549 |
) |
|
(588 |
) |
|
|
(965 |
) |
|
(1,245 |
) |
|
(1,832 |
) |
Total Revenues |
|
12,339 |
|
|
13,920 |
|
|
15,439 |
|
|
18,094 |
|
|
16,473 |
|
|
|
39,502 |
|
|
50,767 |
|
|
59,792 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In RUB millions |
Quarterly data |
|
|
Annual data |
Q1'15 |
Q2'15 |
Q3'15 |
Q4'15 |
Q1'16 |
|
|
2013 |
|
|
2014 |
|
|
2015 |
|
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
Search and Portal |
|
3,585 |
|
|
4,897 |
|
|
6,041 |
|
|
7,128 |
|
|
5,911 |
|
|
|
16,136 |
|
|
20,417 |
|
|
21,651 |
|
E-commerce |
|
393 |
|
|
411 |
|
|
436 |
|
|
486 |
|
|
380 |
|
|
|
2,071 |
|
|
1,873 |
|
|
1,726 |
|
Taxi |
|
87 |
|
|
50 |
|
|
44 |
|
|
(19 |
) |
|
- |
|
|
|
57 |
|
|
217 |
|
|
162 |
|
Classifieds |
|
10 |
|
|
67 |
|
|
83 |
|
|
(14 |
) |
|
(6 |
) |
|
|
221 |
|
|
278 |
|
|
146 |
|
Experiments |
|
(504 |
) |
|
(608 |
) |
|
(583 |
) |
|
(1,021 |
) |
|
(515 |
) |
|
|
(1,118 |
) |
|
(1,733 |
) |
|
(2,716 |
) |
Total Adjusted EBITDA |
|
3,571 |
|
|
4,817 |
|
|
6,021 |
|
|
6,560 |
|
|
5,770 |
|
|
|
17,367 |
|
|
21,052 |
|
|
20,969 |
|
|
|
|
|
|
|
|
|
|
|
*Eliminations represent the elimination of transaction results
between the reportable segments, primarily related to
advertising.
Conference Call Information
Yandex’s management will hold an earnings conference call on
April 28, 2016 at 8:00 AM U.S. Eastern Time (3:00 PM Moscow time;
1:00 PM London time).
|
|
To access the
conference call live, please dial: |
|
|
US: +1 877 280 1254 |
UK/International: +44(0)20 3427 1901 |
Russia: 8 800 500 9312 |
|
Passcode: 4132490# |
|
|
A replay of
the call will be available until May 4, 2016. To access the replay,
please dial: |
|
US: +1 866 932 5017 |
UK/International: +44 20 3427 0598 |
Russia: 810 800 2870 1012 |
|
Passcode: 4132490# |
|
A live and archived webcast of this conference call will be
available
at http://edge.media-server.com/m/p/bycuzqqn
ABOUT YANDEX
Yandex (NASDAQ:YNDX) is one of the largest European internet
companies, providing a wide variety of search and other online
services. Yandex’s mission is to help users solve their everyday
problems by building people-centric products and services. Based on
innovative technologies, the company provides the most relevant,
locally tailored experience on all digital platforms and devices.
Yandex operates Russia's most popular search engine and also serves
Ukraine, Belarus, Kazakhstan and Turkey. More information on Yandex
can be found at https://yandex.com/company.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements that
involve risks and uncertainties. These include statements regarding
our anticipated revenues for full-year 2016. Actual results may
differ materially from the results predicted or implied by such
statements, and our reported results should not be considered as an
indication of future performance. The potential risks and
uncertainties that could cause actual results to differ from the
results predicted or implied by such statements include, among
others, macroeconomic and geopolitical developments affecting the
Russian economy, competitive pressures, changes in advertising
patterns, changes in user preferences, changes in the political,
legal and/or regulatory environment, technological developments,
and our need to expend capital to accommodate the growth of the
business, as well as those risks and uncertainties included under
the captions “Risk Factors” and “Operating and Financial Review and
Prospects” in our Annual Report on Form 20-F for the year ended
December 31, 2015, which is on file with the Securities and
Exchange Commission and is available on our investor relations
website at http://ir.yandex.com/sec.cfm and on the SEC website at
www.sec.gov. All information in this release and in the attachments
is as of April 28, 2016, and Yandex undertakes no duty to update
this information unless required by law.
USE OF NON-GAAP FINANCIAL MEASURES
To supplement our condensed consolidated financial statements,
which are prepared and presented in accordance with US GAAP, we
present the following non-GAAP financial measures: ex-TAC revenue,
adjusted EBITDA, adjusted EBITDA margin, adjusted ex-TAC EBITDA
margin, adjusted net income, adjusted net income margin and
adjusted ex-TAC net income margin. The presentation of these
financial measures is not intended to be considered in isolation or
as a substitute for, or superior to, the financial information
prepared and presented in accordance with US GAAP. For more
information on these non-GAAP financial measures, please see the
tables captioned "Reconciliations of non-GAAP financial measures to
the nearest comparable US GAAP measures," included following the
accompanying financial tables. We define the various non-GAAP
financial measures we use as follows:
- Ex-TAC revenue means US GAAP revenues less
total traffic acquisition costs (TAC)
- Adjusted EBITDA means net income plus (1)
depreciation and amortization, (2) SBC expense, (3) accrual of
expense related to the contingent compensation that may be payable
to employees in connection with certain business combinations, and
(4) provision for income taxes, less (A) interest income, net and
(B) other income, net
- Adjusted EBITDA margin means adjusted EBITDA
divided by US GAAP revenues
- Adjusted ex-TAC EBITDA margin means adjusted
EBITDA divided by ex-TAC revenues
- Adjusted net income means US GAAP net income
plus (1) SBC expense adjusted for the income tax reduction
attributable to SBC expense, (2) accrual of expense related to the
contingent compensation that may be payable to certain employees in
connection with certain business combinations, and (3) amortization
of debt discount related to our convertible debt adjusted for the
related reduction in income tax; less (A) foreign exchange
gains/losses adjusted for the increase in income tax attributable
to the foreign exchange gains/losses and (B) gain from repurchases
of our convertible notes adjusted for the related increase in
income tax
- Adjusted net income margin means adjusted net
income divided by US GAAP revenues
- Adjusted ex-TAC net income margin means
adjusted net income divided by ex-TAC revenues
These non-GAAP financial measures are used by management for
evaluating financial performance as well as decision-making.
Management believes that these metrics reflect the organic, core
operating performance of the company, and therefore are useful to
analysts and investors in providing supplemental information that
helps them understand, model and forecast the evolution of our
operating business.
Although our management uses these non-GAAP financial measures
for operational decision making and considers these financial
measures to be useful for analysts and investors, we recognize that
there are a number of limitations related to such measures. In
particular, it should be noted that several of these measures
exclude some costs, particularly share-based compensation, that are
recurring. In addition, the components of the costs that we exclude
in our calculation of the measures described above may differ from
the components that our peer companies exclude when they report
their results of operations.
Below we describe why we make particular adjustments to certain
US GAAP financial measures:
TAC
We believe that it may be useful for investors and analysts to
review certain measures both in accordance with US GAAP and net of
the effect of TAC, which we view as comparable to sales commissions
but, unlike sales commissions, are not deducted from US GAAP
revenues. By presenting revenue, adjusted EBITDA margin and
adjusted net income margin net of TAC, we believe that investors
and analysts are able to obtain a clearer picture of our business
without the impact of the revenues we share with our partners.
SBC
SBC is a significant expense item, and an important part of our
compensation and incentive programs. As it is a non-cash charge,
however, and highly dependent on our share price at the time of
equity award grants, we believe that it is useful for investors and
analysts to see certain financial measures excluding the impact of
these charges in order to obtain a clear picture of our operating
performance.
Acquisition-related costs
We may incur expenses in connection with acquisitions that are
not indicative of our recurring core operating performance. In
particular, we are required under US GAAP to accrue as expense the
contingent compensation that is payable to certain employees in
connection with certain business combinations. We eliminate these
acquisition-related expenses from adjusted EBITDA and adjusted net
income to provide management and investors a tool for comparing on
a period-to-period basis our operating performance in the ordinary
course of
operations.
Foreign exchange gains and losses
Because we hold significant assets in currencies other than our
Russian ruble operating currency, and because foreign exchange
fluctuations are outside of our operational control, we believe
that it is useful to present adjusted net income and related margin
measures excluding these effects, in order to provide greater
clarity regarding our operating performance.
Amortization of debt discount
We also adjust net income for interest expense representing
amortization of the debt discount related to our convertible notes
issued in Q4 2013 and Q1 2014.We have eliminated this expense from
adjusted net income as it is non-cash in nature and is not
indicative of our ongoing operating performance.
Gain from repurchases of convertible debt
Adjusted net income also excludes a gain from repurchase of
$23.0 million in principal amount of our 1.125% convertible senior
notes due 2018 for approximately $20.1 million that we recorded in
Q1 2016. We have eliminated this gain from adjusted net income as
it is not indicative of our ongoing operating performance.
The tables at the end of this release provide detailed
reconciliations of each non-GAAP financial measure we use to the
most directly comparable US GAAP financial measure.
|
YANDEX N.V. |
Unaudited Condensed Consolidated Balance
Sheets |
|
|
|
|
|
|
(in millions of Russian rubles and U.S.
dollars, except share and per share data) |
|
|
|
|
|
|
|
As of |
|
December 31, |
|
March 31, |
|
March 31, |
|
2015* |
|
|
2016 |
|
|
|
2016 |
|
|
RUB |
|
RUB |
|
$ |
ASSETS |
|
|
|
|
|
Current
assets: |
|
|
|
|
|
Cash and
cash equivalents |
|
24,238 |
|
|
|
28,075 |
|
|
|
415.3 |
|
Term
deposits |
|
15,150 |
|
|
|
29,734 |
|
|
|
439.8 |
|
Investments in debt securities |
|
2,915 |
|
|
|
2,704 |
|
|
|
40.0 |
|
Accounts
receivable, net |
|
5,586 |
|
|
|
5,608 |
|
|
|
82.9 |
|
Prepaid
expenses |
|
1,505 |
|
|
|
1,369 |
|
|
|
20.3 |
|
Other
current assets |
|
3,835 |
|
|
|
2,835 |
|
|
|
41.9 |
|
Total
current assets |
|
53,229 |
|
|
|
70,325 |
|
|
|
1,040.2 |
|
|
|
|
|
|
|
Property
and equipment, net |
|
20,860 |
|
|
|
19,279 |
|
|
|
285.2 |
|
Intangible assets, net |
|
5,988 |
|
|
|
5,923 |
|
|
|
87.6 |
|
Goodwill |
|
8,581 |
|
|
|
8,519 |
|
|
|
126.0 |
|
Long-term prepaid expenses |
|
1,488 |
|
|
|
1,440 |
|
|
|
21.3 |
|
Restricted cash, non-current |
|
533 |
|
|
|
494 |
|
|
|
7.3 |
|
Term
deposits, non-current |
|
18,399 |
|
|
|
- |
|
|
|
- |
|
Investments in non-marketable equity securities |
|
1,122 |
|
|
|
1,381 |
|
|
|
20.4 |
|
Deferred
tax assets |
|
226 |
|
|
|
242 |
|
|
|
3.6 |
|
Other
non-current assets |
|
1,392 |
|
|
|
1,449 |
|
|
|
21.4 |
|
TOTAL ASSETS |
|
111,818 |
|
|
|
109,052 |
|
|
|
1,613.0 |
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
Accounts
payable and accrued liabilities |
|
6,994 |
|
|
|
6,700 |
|
|
|
99.1 |
|
Taxes
payable |
|
2,800 |
|
|
|
2,122 |
|
|
|
31.4 |
|
Deferred
revenue |
|
1,875 |
|
|
|
1,726 |
|
|
|
25.5 |
|
Total
current liabilities |
|
11,669 |
|
|
|
10,548 |
|
|
|
156.0 |
|
Convertible debt |
|
27,374 |
|
|
|
24,230 |
|
|
|
358.4 |
|
Deferred
tax liabilities |
|
1,552 |
|
|
|
1,411 |
|
|
|
20.9 |
|
Other
accrued liabilities |
|
1,126 |
|
|
|
1,056 |
|
|
|
15.6 |
|
Total
liabilities |
|
41,721 |
|
|
|
37,245 |
|
|
|
550.9 |
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
Priority
share: €1.00 par value; 1 share authorized, issued and
outstanding |
|
— |
|
|
|
— |
|
|
|
— |
|
Preference shares: €0.01 par value; 1,000,000,001 shares
authorized, nil shares issued and outstanding |
|
— |
|
|
|
— |
|
|
|
— |
|
Ordinary
shares: par value (Class A €0.01, Class B €0.10 and Class C
€0.09); shares authorized (Class A: 1,000,000,000, Class B:
61,295,523, and Class C: 61,295,523); shares issued (Class A:
282,161,148 and 284,458,784, Class B: 47,895,605 and 45,597,969,
and Class C: 12,000,000 and 14,297,636, respectively); shares
outstanding (Class A: 271,356,566 and 274,098,861, Class B:
47,895,605 and 45,597,969, and Class C: nil) |
|
75 |
|
|
|
285 |
|
|
|
4.2 |
|
Treasury
shares at cost (Class A: 10,804,582 and 10,359,923,
respectively) |
|
(12,531 |
) |
|
|
(12,026 |
) |
|
|
(177.9 |
) |
Additional paid-in capital |
|
17,257 |
|
|
|
17,479 |
|
|
|
258.5 |
|
Accumulated other comprehensive income |
|
3,099 |
|
|
|
2,803 |
|
|
|
41.5 |
|
Retained
earnings |
|
62,197 |
|
|
|
63,266 |
|
|
|
935.8 |
|
Total
shareholders’ equity |
|
70,097 |
|
|
|
71,807 |
|
|
|
1,062.1 |
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
111,818 |
|
|
|
109,052 |
|
|
|
1,613.0 |
|
|
|
|
|
|
|
* Derived from audited
consolidated financial statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YANDEX N.V. |
|
Unaudited Condensed Consolidated
Statements of Income |
|
(in millions of Russian rubles and U.S.
dollars, except share and per share data) |
|
|
|
|
|
Three months
ended March 31, |
|
|
|
|
2015 |
|
|
2016 |
|
|
|
2016 |
|
|
|
|
|
RUB |
|
RUB |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
12,339 |
|
|
16,473 |
|
|
|
243.7 |
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues(1) |
|
3,713 |
|
|
4,504 |
|
|
|
66.6 |
|
|
|
Product
development(1) |
|
3,347 |
|
|
3,877 |
|
|
|
57.3 |
|
|
|
Sales,
general and administrative(1) |
|
2,303 |
|
|
3,258 |
|
|
|
48.3 |
|
|
|
Depreciation and amortization |
|
1,490 |
|
|
2,394 |
|
|
|
35.4 |
|
|
|
Total operating costs and
expenses |
|
10,853 |
|
|
14,033 |
|
|
|
207.6 |
|
|
|
Income
from operations |
|
1,486 |
|
|
2,440 |
|
|
|
36.1 |
|
|
|
Interest
income, net |
|
484 |
|
|
523 |
|
|
|
7.7 |
|
|
|
Other
income, net |
|
833 |
|
|
(1,181 |
) |
|
|
(17.4 |
) |
|
|
Net income before income taxes |
|
2,803 |
|
|
1,782 |
|
|
|
26.4 |
|
|
|
Provision for income taxes |
|
676 |
|
|
713 |
|
|
|
10.6 |
|
|
|
Net
income |
|
2,127 |
|
|
1,069 |
|
|
|
15.8 |
|
|
|
Net
income per Class A and Class B share: |
|
|
|
|
|
|
|
|
Basic |
|
6.69 |
|
|
3.35 |
|
|
|
0.05 |
|
|
|
Diluted |
|
6.61 |
|
|
3.31 |
|
|
|
0.05 |
|
|
|
Weighted
average number of Class A and Class B shares outstanding |
|
|
|
|
|
|
|
|
|
|
Basic |
|
317,732,854 |
|
|
319,433,919 |
|
|
|
319,433,919 |
|
|
|
Diluted |
|
321,880,889 |
|
|
322,969,840 |
|
|
|
322,969,840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)These
balances exclude depreciation and amortization expenses, which are
presented separately, and include share‑based compensation
expenses of: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues |
|
43 |
|
|
49 |
|
|
|
0.7 |
|
|
|
Product
development |
|
379 |
|
|
595 |
|
|
|
8.8 |
|
|
|
Sales,
general and administrative |
|
138 |
|
|
247 |
|
|
|
3.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
YANDEX N.V. |
|
Unaudited Condensed Consolidated Statements of
Cash Flows |
|
(in millions of Russian rubles and U.S.
dollars) |
|
|
|
|
|
|
|
|
|
Three months
ended March 31, |
|
|
|
2015 |
|
|
2016 |
|
|
|
2016 |
|
|
|
RUB |
|
RUB |
|
|
|
$ |
|
CASH
FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
Net
income |
|
2,127 |
|
|
1,069 |
|
|
|
15.8 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
|
|
Depreciation of property and equipment |
|
1,135 |
|
|
1,923 |
|
|
|
28.4 |
|
Amortization of intangible assets |
|
355 |
|
|
471 |
|
|
|
7.0 |
|
Amortization of debt discount and issuance costs |
|
273 |
|
|
262 |
|
|
|
3.9 |
|
Share‑based compensation expense |
|
560 |
|
|
891 |
|
|
|
13.2 |
|
Deferred income taxes |
|
(335 |
) |
|
(116 |
) |
|
|
(1.7 |
) |
Foreign exchange (gains)/losses |
|
(716 |
) |
|
1,281 |
|
|
|
18.9 |
|
Gain
from repurchases of convertible debt |
|
(110 |
) |
|
(53 |
) |
|
|
(0.8 |
) |
Other |
|
|
- |
|
|
(36 |
) |
|
|
(0.6 |
) |
Changes in operating assets and liabilities excluding the
effect of acquisitions: |
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
(841 |
) |
|
(116 |
) |
|
|
(1.7 |
) |
Prepaid expenses and other assets |
|
(551 |
) |
|
511 |
|
|
|
7.6 |
|
Accounts payable and accrued liabilities |
|
(874 |
) |
|
(331 |
) |
|
|
(4.9 |
) |
Deferred revenue |
|
84 |
|
|
(137 |
) |
|
|
(2.0 |
) |
Net
cash provided by operating activities |
|
1,107 |
|
|
5,619 |
|
|
|
83.1 |
|
CASH
FLOWS PROVIDED BY INVESTING ACTIVITIES: |
|
|
|
|
|
Purchases of property and equipment and intangible
assets |
|
(4,836 |
) |
|
(1,455 |
) |
|
|
(21.5 |
) |
Proceeds from sale of property and equipment |
|
- |
|
|
22 |
|
|
|
0.3 |
|
Acquisitions of businesses, net of cash acquired |
|
(68 |
) |
|
- |
|
|
|
- |
|
Investments in non‑marketable equity securities |
|
(11 |
) |
|
(220 |
) |
|
|
(3.3 |
) |
Proceeds from maturity of debt securities |
|
2,323 |
|
|
- |
|
|
|
- |
|
Investments in term deposits |
|
(3,227 |
) |
|
(21,685 |
) |
|
|
(320.7 |
) |
Maturities of term deposits |
|
6,261 |
|
|
24,669 |
|
|
|
364.9 |
|
Loans
granted |
|
- |
|
|
(56 |
) |
|
|
(0.8 |
) |
Escrow cash deposit |
|
58 |
|
|
- |
|
|
|
- |
|
Net
cash provided by investing activities |
|
500 |
|
|
1,275 |
|
|
|
18.9 |
|
CASH
FLOWS USED IN FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of share options |
|
28 |
|
|
46 |
|
|
|
0.7 |
|
Repurchases of convertible debt |
|
(1,381 |
) |
|
(1,490 |
) |
|
|
(22.0 |
) |
Payments of contingent consideration |
|
- |
|
|
(65 |
) |
|
|
(1.0 |
) |
Net
cash used in financing activities |
|
(1,353 |
) |
|
(1,509 |
) |
|
|
(22.3 |
) |
Effect of exchange rate changes on cash and cash
equivalents |
|
535 |
|
|
(1,548 |
) |
|
|
(22.9 |
) |
Net
change in cash and cash equivalents |
|
789 |
|
|
3,837 |
|
|
|
56.8 |
|
Cash
and cash equivalents at beginning of period |
|
17,645 |
|
|
24,238 |
|
|
|
358.5 |
|
Cash
and cash equivalents at end of period |
|
18,434 |
|
|
28,075 |
|
|
|
415.3 |
|
|
|
|
|
|
|
|
Reconciliation of Ex-TAC Revenues to US GAAP
Revenues |
|
|
|
|
In RUB millions |
Three months |
ended March 31, |
|
2015 |
2016 |
Change |
Total revenues |
12,339 |
16,473 |
|
34 |
% |
Less: traffic acquisition costs (TAC) |
2,717 |
3,390 |
|
25 |
% |
Ex-TAC revenues |
9,622 |
13,083 |
|
36 |
% |
|
|
|
|
|
Reconciliation of Adjusted EBITDA to US GAAP
Net Income |
|
|
|
|
In RUB millions |
Three months |
ended March 31, |
|
|
2015 |
|
|
2016 |
|
Change |
Net income |
|
2,127 |
|
|
1,069 |
|
|
-50 |
% |
Add: depreciation and amortization |
|
1,490 |
|
|
2,394 |
|
|
61 |
% |
Add: share-based compensation expense |
|
560 |
|
|
891 |
|
|
59 |
% |
Add: compensation expense related to contingent consideration |
|
35 |
|
|
45 |
|
|
29 |
% |
Less: interest income, net |
|
(484 |
) |
|
(523 |
) |
|
8 |
% |
Less: other income, net |
|
(833 |
) |
|
1,181 |
|
n/m |
Add: provision for income taxes |
|
676 |
|
|
713 |
|
|
5 |
% |
Adjusted EBITDA |
|
3,571 |
|
|
5,770 |
|
|
62 |
% |
|
|
|
|
|
Reconciliation of Adjusted Net Income to US
GAAP Net Income |
|
|
|
|
In RUB millions |
Three months |
ended March 31, |
|
|
2015 |
|
|
2016 |
|
Change |
Net income |
|
2,127 |
|
|
1,069 |
|
|
-50 |
% |
Add: SBC expense |
|
560 |
|
|
891 |
|
|
59 |
% |
Less: reduction in income tax attributable to SBC expense |
|
(9 |
) |
|
(14 |
) |
|
56 |
% |
Add: compensation expense related to contingent consideration |
|
35 |
|
|
45 |
|
|
29 |
% |
Less: foreign exchange (gain)/loss |
|
(716 |
) |
|
1,281 |
|
n/m |
Add: increase/(decrease) in income tax attributable to foreign
exchange gain/(loss) |
|
127 |
|
|
(260 |
) |
n/m |
Less: gain from repurchases of convertible debt |
|
(110 |
) |
|
(53 |
) |
|
-52 |
% |
Add: increase in income tax attributable to gain from repurchases
of convertible debt |
|
27 |
|
|
13 |
|
|
-52 |
% |
Add: amortization of debt discount |
|
273 |
|
|
262 |
|
|
-4 |
% |
Less: reduction in income tax attributable to amortization of debt
discount |
|
(65 |
) |
|
(66 |
) |
|
2 |
% |
Adjusted net income |
|
2,249 |
|
|
3,168 |
|
|
41 |
% |
|
|
|
|
|
YANDEX N.V. |
RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURES |
TO THE NEAREST COMPARABLE US GAAP
MEASURES |
Reconciliation of Adjusted EBITDA Margin and Adjusted
Ex-TAC EBITDA Margin to US GAAP Net Income Margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In RUB
millions |
|
|
|
|
|
|
US GAAP Actual Net Income |
Net Income Margin (1) |
Adjustment (2) |
Adjusted EBITDA |
Adjusted EBITDA Margin (3) |
Adjusted Ex-TAC EBITDA Margin (4) |
Three months ended March 31, 2016 |
1,069 |
|
6.5 |
% |
4,701 |
5,770 |
|
35.0 |
% |
|
44.1 |
% |
|
|
|
|
|
|
|
|
(1) Net income margin is defined as net income divided
by total revenues. |
(2) Adjusted to eliminate depreciation and amortization
expense, SBC expense, expense related to contingent compensation,
interest income, net, other income, net, and provision for income
taxes. For a reconciliation of adjusted EBITDA to net income,
please see the table above. |
(3) Adjusted EBITDA margin is defined as adjusted EBITDA
divided by total revenues. |
(4) Adjusted ex-TAC EBITDA margin is defined as adjusted
EBITDA divided by ex-TAC revenues. For a reconciliation of
ex-TAC revenues to GAAP revenues, please see the table
above. |
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted Net Income Margin and
Adjusted Ex-TAC Net Income Margin to US GAAP Net Income
Margin |
|
|
|
|
|
|
|
|
In RUB
millions |
|
|
|
|
|
|
US GAAP Actual Net Income |
Net Income Margin (1) |
Adjustment (2) |
Adjusted Net Income |
Adjusted Net Income Margin (3) |
Adjusted Ex-TAC Net Income Margin
(4) |
Three months ended March 31, 2016 |
1,069 |
|
6.5 |
% |
2,099 |
3,168 |
|
19.2 |
% |
|
24.2 |
% |
|
|
|
|
|
|
|
|
(1) Net income margin is defined as net income divided
by total revenues. |
(2) Adjusted to eliminate SBC expense (as adjusted for
the income tax reduction attributable to SBC expense), expense
related to contingent compensation, foreign exchange gains and
losses (as adjusted for the increase in income tax attributable to
the gains and losses), gain from repurchases of convertible debt
(as adjusted for the increase in income tax attributable to the
gain) and amortization of debt discount (as adjusted for the
reduction in income tax attributable to the expense). For a
reconciliation of adjusted net income to net income, please see the
table above. |
(3) Adjusted net income margin is defined as adjusted
net income divided by total revenues. |
(4) Adjusted ex-TAC net income margin is defined as
adjusted net income divided by ex-TAC revenues. For a
reconciliation of ex-TAC revenues to US GAAP revenues, please see
the table above. |
Contacts:
Investor Relations
Katya Zhukova
Phone: +7 495 974-35-38
E-mail: askIR@yandex-team.ru
Media Relations
Ochir Mandzhikov, Asya Melkumova
Phone: +7 495 739-70-00
E-mail: pr@yandex-team.ru
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