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 Yandex Announces Fourth Quarter and Full-Year 2015 Financial Results
   Tuesday, February 16, 2016 6:00:36 AM ET

Yandex (YNDX ), one of Europe’s largest internet companies and the leading search provider in Russia, today announced its unaudited financial results for the fourth quarter and the full year ended December 31, 2015.

<span style="text-decoration: underline;" data-mce-style="text-decoration: underline;">Q4 2015 Financial Highlights</span>

-- Revenues of RUB 18.1 billion ($248.3 million), up 23% compared with Q4 2014

-- Ex-TAC revenues (excluding traffic acquisition costs) up 24% compared with Q4 2014

-- Income from operations of RUB 2.7 billion ($37.5 million), down 39% compared with Q4 2014

-- Adjusted EBITDA of RUB 6.6 billion ($90.0 million), up 8% compared with Q4 2014

-- Operating margin of 15.1%

-- Adjusted EBITDA margin of 36.3%

-- Adjusted ex-TAC EBITDA margin of 45.6%

-- Net income of RUB 2.9 billion ($39.1 million), down 62% compared with Q4 2014

-- Adjusted net income of RUB 3.6 billion ($49.8 million), down 8% compared with Q4 2014

-- Net income margin of 15.8%

-- Adjusted net income margin of 20.1%

-- Adjusted ex-TAC net income margin of 25.3%

-- Cash, cash equivalents, term deposits and short-term investments in debt securities of RUB 60.7 billion ($832.9 million) as of December 31, 2015

<span style="text-decoration: underline;" data-mce-style="text-decoration: underline;">FY 2015 Financial Highlights</span>

-- Revenues of RUB 59.8 billion ($820.4 million), up 18% compared with FY 2014

-- Ex-TAC revenues (excluding traffic acquisition costs) up 19% compared with FY 2014

-- Income from operations of RUB 9.6 billion ($131.6 million), down 37% compared with FY 2014

-- Adjusted EBITDA of RUB 21.0 billion ($287.7 million), flat compared with FY 2014

-- Operating margin of 16.0%

-- Adjusted EBITDA margin of 35.1%

-- Adjusted ex-TAC EBITDA margin of 44.6%

-- Net income of RUB 9.7 billion ($132.8 million), down 43% compared with FY 2014

-- Adjusted net income of RUB 12.2 billion ($167.1 million), down 11% compared with FY 2014

-- Net income margin of 16.2%

-- Adjusted net income margin of 20.4%

-- Adjusted ex-TAC net income margin of 25.9%

"I am very proud of our accomplishments in 2015," said Arkady Volozh, Chief Executive Officer of Yandex. "In the face of economic headwinds and a highly competitive environment, we managed to stabilize our market share, improve product quality, significantly increase the size of our web index, and introduce a sophisticated new auction model that is already having a material impact on monetization."

"Q4 was an excellent quarter in which we delivered strong top line growth at 23% year-over-year and served a record number of advertisers," said Alexander Shulgin, Chief Operating Officer of Yandex. "We continued to broaden our business beyond search with the creation of three new business units - Yandex.Taxi, Auto.ru, and Yandex.Market - in which we will invest aggressively to accelerate growth in 2016."

Pursuant to SEC rules regarding convenience translations, Russian ruble (RUB) amounts have been translated into U.S. dollars at a rate of RUB 72.8827 to $1.00, the official exchange rate quoted as of December 31, 2015 by the Central Bank of the Russian Federation.

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.

The following table provides a summary of key financial results for the three and twelve months ended December 31, 2014 and 2015:

In RUB millions        Three months           Twelve months
                       ended December 31,     ended December 31,
                       2014   2015   Change   2014   2015   Change
Revenues               14,667 18,094 23   %   50,767 59,792 18   %
Ex-TAC revenues        11,572 14,374 24   %   39,691 47,051 19   %
Income from operations 4,478  2,728  -39  %   15,323 9,593  -37  %
Adjusted EBITDA        6,078  6,560  8    %   21,052 20,969 0    %
Net income             7,572  2,851  -62  %   17,020 9,679  -43  %
Adjusted net income    3,967  3,632  -8   %   13,751 12,179 -11  %

<span style="text-decoration: underline;" data-mce-style="text-decoration: underline;">Q4 2015 Operational and Corporate Highlights</span>

-- Share of Russian search market (including mobile) averaged 57.3% in Q4 2015 compared to 57.1% in Q3 2015 (according to LiveInternet)

-- Search queries in Russia grew 5% compared with Q4 2014

-- The number of advertisers increased to 394,000, up 24% from Q4 2014 and up 11% from Q3 2015

-- Launched cooperation with Microsoft to deliver Windows 10 with Yandex search in Russia, Ukraine, Turkey and several other countries

Revenues

In RUB millions              Three months            Twelve months
                             ended December 31,      ended December 31,
                             2014   2015   Change    2014   2015   Change
Advertising revenues:
Text-based advertising
Yandex websites              9,965  11,925 20   %    35,228 40,243 14   %
Ad network                   3,270  4,411  35   %    11,410 14,506 27   %
Total text-based advertising 13,235 16,336 23   %    46,638 54,749 17   %
Display advertising
Yandex websites              997    958    -4   %    3,034  2,856  -6   %
Ad network                   184    224    22   %    475    605    27   %
Total display advertising    1,181  1,182  0    %    3,509  3,461  -1   %
Total advertising revenues   14,416 17,518 22   %    50,147 58,210 16   %
Other                        251    576    129  %    620    1,582  155  %
Total revenues               14,667 18,094 23   %    50,767 59,792 18   %

Text-based advertising revenues grew 23% compared with Q4 2014 and continued to determine overall top-line performance, contributing 90% of total revenues in Q4 2015.

Text-based advertising revenues from Yandex websites increased 20% compared with Q4 2014 and accounted for 66% of total revenues during Q4 2015.

Text-based advertising revenues from our ad network increased 35% compared with Q4 2014 and contributed 24% of total revenues during Q4 2015, 2 percentage points higher than in Q4 2014.

Paid clicks on Yandex’s and its partners’ websites, in aggregate, increased 10% in Q4 2015 compared with Q4 2014. Our average cost per click in Q4 2015 grew 12% compared with Q4 2014.

Display advertising revenue, accounting for 7% of total revenues in Q4 2015, was flat compared with Q4 2014.

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), depreciation and amortization expenses (D&A) and goodwill impairment. Apart from D&A and goodwill impairment, 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, excluding goodwill impairment, reflect investments in overall growth. In Q4 2015, Yandex added 51 full-time employees, an increase of 1% from September 30, 2015, and down 3% from December 31, 2014. The total number of full-time employees was 5,463 as of December 31, 2015.

Costs of revenues, including traffic acquisition costs (TAC)

In RUB millions                           Three months                Twelve months
                                          ended December 31,          ended December 31,
                                          2014      2015      Change  2014       2015       Change
TAC:
Related to the Yandex ad network          2,102     2,669     27  %   7,520      8,981      19  %
Related to distribution partners          993       1,051     6   %   3,556      3,760      6   %
Total TAC                                 3,095     3,720     20  %   11,076     12,741     15  %
Total TAC as a % of total revenues        21.1  %   20.6  %           21.8   %   21.3   %
Other cost of revenues                    912       1,077     18  %   3,260      4,069      25  %
Other cost of revenues as a % of revenues 6.2   %   6.0   %           6.4    %   6.8    %
Total cost of revenues                    4,007     4,797     20  %   14,336     16,810     17  %
Total cost of revenues as a % of revenues 27.3  %   26.5  %           28.2   %   28.1   %

TAC decreased as a percentage of total revenues from 21.1% in Q4 2014 to 20.6% in Q4 2015 and grew 20% compared with Q4 2014. Our ad network TAC grew 27% in Q4 2015 compared with Q4 2014, slower than revenues from our advertising network, primarily reflecting changes in our partner revenue mix. This partner TAC includes traffic acquisition costs related to both our text-based and our display advertising networks.

Other cost of revenues in Q4 2015 increased 18% compared with Q4 2014.

Product development

In RUB millions     Three months                Twelve months
                    ended December 31,          ended December 31,
                    2014      2015      Change  2014      2015       Change
Product development 2,673     3,606     35  %   8,842     13,421     52  %
As a % of revenues  18.2  %   19.9  %           17.4  %   22.5   %

Growth in product development costs in Q4 2015 primarily relates to salary increases we implemented in early 2015, as well as increases in our rent expenses attributable to the material appreciation of the U.S. dollar in Q4 2015 compared to Q4 2014, since the rent for our Moscow headquarters is U.S. dollar-denominated. In 2015, development headcount decreased 1% from 3,329 as of December 31, 2014, to 3,286 as of December 31, 2015, with 13 employees added since September 30, 2015.

Selling, general and administrative (SG&A)

In RUB millions                   Three months                Twelve months
                                  ended December 31,          ended December 31,
                                  2014      2015      Change  2014      2015       Change
Sales, general and administrative 2,303     4,112     79  %   7,782     11,601     49  %
As a % of revenues                15.7  %   22.7  %           15.3  %   19.4   %

SG&A costs grew 79% in Q4 2015 compared to Q4 2014. The growth was mainly driven by an increase in advertising and marketing spending aimed to support our core products and our business units.

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            Twelve months
                                            ended December 31,      ended December 31,
                                            2014    2015    Change  2014      2015      Change
SBC expense included in cost of revenues    32      43      34  %   101       168       66  %
SBC expense included in product development 254     629     148 %   780       1,860     138 %
SBC expense included in SG&A                90      221     146 %   329       690       110 %
Total SBC expense                           376     893     138 %   1,210     2,718     125 %
As a % of revenues                          2.6 %   4.9 %           2.4   %   4.5   %

Total SBC expense increased 138% in Q4 2015 compared with Q4 2014. The increase is primarily related to the material appreciation of the U.S. dollar during Q4 2015 as well as to new equity-based grants made in 2014 and 2015.

Depreciation and amortization (D&A) expense

In RUB millions               Three months                Twelve months
                              ended December 31,          ended December 31,
                              2014      2015      Change  2014      2015      Change
Depreciation and amortization 1,206     2,275     89  %   4,484     7,791     74  %
As a % of revenues            8.2   %   12.6  %           8.8   %   13.0  %

D&A expense increased 89% in Q4 2015 compared with Q4 2014 and primarily reflected investments in servers and data centers made in 2014 and the first half of 2015.

Goodwill impairment

In RUB millions     Three months        Twelve months
                    ended December 31,  ended December 31,
                    2014 2015    Change 2014 2015    Change
Goodwill impairment -    576     n/m    -    576     n/m
As a % of revenues  n/m  3.2 %          n/m  1.0 %

The goodwill impairment recorded in Q4 2015 of RUB 576 million relates to Kinopoisk acquisition and was a result of the Company’s annual goodwill impairment test reflecting more conservative projected free cash flows.

As a result of the factors described above, income from operations was RUB 2.7 billion ($37.5 million) in Q4 2015, a 39% decrease from Q4 2014, while adjusted EBITDA reached RUB 6.6 billion ($90.0 million) in Q4 2015, up 8% from Q4 2014.

Interest income, net in Q4 2015 was RUB 489 million, up from RUB 257 million in Q4 2014.

Foreign exchange gain in Q4 2015 was RUB 1,109 million, compared with a foreign exchange gain of RUB 4,707 million in Q4 2014. This gain is due to the material appreciation of the U.S. dollar during Q4 2015 from RUB 66.2367 to $1.00 on September 30, 2015, to RUB 72.8827 to $1.00 on December 31, 2015. 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 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 an upward revaluation of the ruble equivalent of these U.S. dollar-denominated monetary assets and liabilities in Q4 2015.

Income tax expense for Q4 2015 was RUB 1,503 million, down from RUB 2,338 million in Q4 2014. Our effective tax rate of 34.5% was higher in Q4 2015 than in Q4 2014 due to the effects of goodwill impairment, certain allowances recognized in Q4 2015, as well as an increase in SBC expense which is non-deductible. Adjusted for these effects, our effective tax rate is 25.8%, compared with 23.6% in Q4 2014.

Adjusted net income in Q4 2015 was RUB 3.6 billion ($49.8 million), an 8% decrease from Q4 2014.

Adjusted net income margin was 20.1% in Q4 2015, compared with 27.0% in Q4 2014.

Net income was RUB 2.9 billion ($39.1 million) in Q4 2015, down 62% compared with Q4 2014.

As of December 31, 2015, Yandex had cash, cash equivalents, term deposits and short-term investments in debt securities of RUB 60.7 billion ($832.9 million).

Net operating cash flow and capital expenditures for Q4 2015 were inflow of RUB 5.5 billion ($75.5 million) and outflow of RUB 1.7 billion ($22.8 million), respectively.

During Q4 2015, we repurchased $24.9 million in principal amount of our 1.125% convertible senior notes due 2018 for approximately $21.5 million.

The total number of shares issued and outstanding as of December 31, 2015 was 319,252,172, including 271,356,566 Class A shares, 47,895,605 Class B shares, and one Priority share and excluding 10,804,582 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 4.0 million shares, at a weighted average exercise price of $5.94 per share, all of which, excluding approximately 40,000 options, were fully vested; equity-settled share appreciation rights (SARs) equal to 0.3 million shares, at a weighted average measurement price of $27.27, 0.2 million of which were fully vested; and restricted share units (RSUs) covering 7.4 million shares, of which RSUs to acquire 1.8 million shares were fully vested.

<span style="text-decoration: underline;" data-mce-style="text-decoration: underline;">Financial outlook</span>

We expect our ruble-based revenue to grow in the range of 12% to 18% in the full year 2016 compared with 2015.

This outlook reflects our current and preliminary view, based on the trends that we currently see.

<span style="text-decoration: underline;" data-mce-style="text-decoration: underline;">Conference Call Information</span>

Yandex’s management will hold an earnings conference call on February 16, 2016 at 8:00 AM U.S. Eastern Time (4:00 PM Moscow time; 1:00 PM London time).

To access the conference call live, please dial:

US: +1 646 254 3365

UK/International: +44 (0) 20 3427 1908

Russia: 8 800 500 9311

Passcode: 8412945#

A replay of the call will be available until February 22, 2016. To access the replay, please dial:

US: +1 866 932 5017,

UK/International: +44 (0) 20 3427 0598

Russia: 8 10 800 2870 1012

Passcode: 8412945#

A live and archived webcast of this conference call will be available at

http://edge.media-server.com/m/p/qgc3d7gr

<span style="text-decoration: underline;" data-mce-style="text-decoration: underline;">ABOUT YANDEX</span>

Yandex (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.

<span style="text-decoration: underline;" data-mce-style="text-decoration: underline;">FORWARD-LOOKING STATEMENTS </span>

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, 2014, 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 February 16, 2016, and Yandex undertakes no duty to update this information unless required by law.

<span style="text-decoration: underline;" data-mce-style="text-decoration: underline;">USE OF NON-GAAP FINANCIAL MEASURES</span>

To supplement our 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 <span style="text-decoration: underline;" data-mce-style="text-decoration: underline;">plus</span> (1) depreciation and amortization, (2) share-based compensation expense, (3) accrual of expense related to the contingent compensation that may be payable to employees in connection with certain business combinations, (4) goodwill impairment related to Kinopoisk and (5) provision for income taxes, <span style="text-decoration: underline;" data-mce-style="text-decoration: underline;">less</span> (A) interest income 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) share-based compensation expense adjusted for the income tax reduction attributable to share-based compensation expense, (2) accrual of expense related to the contingent compensation that may be payable to certain employees in connection with certain business combinations, (3) impairment of investment in equity securities recorded in Q3 2014 adjusted for reduction in income tax attributable to impairment of investment in such securities, (4) goodwill impairment related to Kinopoisk and (5) amortization of debt discount related to our convertible debt adjusted for the related reduction in income tax; less (A) foreign exchange gains adjusted for the increase in income tax attributable to the foreign exchange gains 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.

Impairment of investment in equity securities

Adjusted net income for Q3 2014 excludes a loss from the impairment of our equity investment in Blekko Inc. We review our investments quarterly for indicators of other-than-temporary impairment. In Q3 2014 our review identified certain adverse external and internal events indicating that the decline in fair value of our investment in Blekko Inc. is other-than-temporary and recorded an impairment charge of RUB 700 million. We believe that it is useful to present adjusted net income and related margin measures excluding impacts not related to our core operations.

Goodwill impairment

Adjusted net income and adjusted EBITDA for Q4 2015 exclude a loss from goodwill impairment related to Kinopoisk. We test our goodwill annually for impairment. In Q4 2015, we recognized a goodwill impairment charge for RUB 576 million which is the amount by which the carrying value of goodwill exceeds its implied fair value. We believe that it is useful to present adjusted net income and related margin measures excluding impacts not indicative of our ongoing 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 $24.9 million in principal of our 1.125% convertible senior notes due 2018 for approximately $21.5 million that we recorded in Q4 2015. 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,        December 31,     December 31,
                                                                                                         2014*               2015             2015
                                                                                                         RUB             RUB                $
ASSETS
Current assets:
Cash and cash equivalents                                                                                17,645              24,238           332.6
Term deposits                                                                                            5,863               15,150           207.9
Investments in debt securities                                                                           3,124               2,915            40.0
Accounts receivable, net                                                                                 3,703               5,586            76.6
Prepaid expenses                                                                                         1,508               1,505            20.6
Other current assets                                                                                     3,736               3,835            52.6
Total current assets                                                                                     35,579              53,229           730.3
Property and equipment, net                                                                              17,107              24,337           333.9
Intangible assets, net                                                                                   2,425               2,511            34.5
Goodwill                                                                                                 8,920               8,581            117.7
Long-term prepaid expenses                                                                               1,436               1,488            20.5
Restricted cash                                                                                          932                 533              7.3
Term deposits                                                                                            25,663              18,399           252.4
Investments in non-marketable equity securities                                                          871                 1,122            15.4
Deferred tax assets                                                                                      56                  226              3.1
Other non-current assets                                                                                 1,605               1,392            19.1
TOTAL ASSETS                                                                                             94,594              111,818          1,534.2
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities                                                                 5,053               6,994            96.0
Taxes payable                                                                                            2,930               2,800            38.4
Deferred revenue                                                                                         1,808               1,875            25.7
Total current liabilities                                                                                9,791               11,669           160.1
Convertible debt                                                                                         26,123              27,374           375.6
Deferred tax liabilities                                                                                 1,464               1,552            21.3
Other accrued liabilities                                                                                1,480               1,126            15.4
Total liabilities                                                                                        38,858              41,721           572.4
Commitments and contingencies
Shareholders’ equity:
Priority share: EUR1.00 par value; 1 share authorized, issued and outstanding                            --                  --               --
Preference shares: EUR0.01 par value; 1,000,000,001 shares authorized, nil shares issued and outstanding --                  --               --
Ordinary shares: par value (Class A EUR0.01, Class B EUR0.10  and Class C EUR0.09); shares               182                 75               1.0
authorized (Class A: 1,000,000,000, Class B: 71,870,411 and 61,295,523, and
Class C: 71,870,411 and 61,295,523); shares issued (Class A: 267,970,405
and 282,161,148, Class B: 62,051,348 and 47,895,605, and Class C: 8,919,063
and 12,000,000, respectively); shares outstanding (Class A: 255,592,322 and
271,356,566, Class B: 62,051,348 and 47,895,605, and Class C: nil)
Treasury shares at cost (Class A: 12,378,083 and 10,804,582)                                             (14,179      )      (12,531      )   (171.9       )
Additional paid-in capital                                                                               16,192              17,257           236.8
Accumulated other comprehensive income                                                                   1,023               3,099            42.5
Retained earnings                                                                                        52,518              62,197           853.4
Total shareholders’ equity                                                                               55,736              70,097           961.8
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY                                                               94,594              111,818          1,534.2
* In Q4 2015, Yandex elected to early adopt Accounting Standards Update ("ASU") No. 2015-03--Interest--Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires the presentation of debt issuance costs as a direct deduction from the related debt liability rather than an asset, on a retrospective basis. In Q4 2015, Yandex also elected to early adopt ASU No. 2015-17--Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which requires the classification of deferred tax liabilities and assets as non-current, on a retrospective basis. Prior period amounts have been adjusted accordingly
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 December 31,
                                                                  2014                      2015                      2015
                                                                  RUB                       RUB                       $
Revenues                                                          14,667                    18,094                    248.3
Operating costs and expenses:
Cost of revenues(1)                                               4,007                     4,797                     65.8
Product development(1)                                            2,673                     3,606                     49.5
Sales, general and administrative(1)                              2,303                     4,112                     56.4
Depreciation and amortization                                     1,206                     2,275                     31.2
Goodwill impairment                                               -                         576                       7.9
Total operating costs and expenses                                10,189                    15,366                    210.8
Income from operations                                            4,478                     2,728                     37.5
Interest income, net                                              257                       489                       6.7
Other income, net                                                 5,175                     1,137                     15.5
Net income before income taxes                                    9,910                     4,354                     59.7
Provision for income taxes                                        2,338                     1,503                     20.6
Net income                                                        7,572                     2,851                     39.1
Net income per Class A and Class B share:
Basic                                                             23.83                     8.93                      0.12
Diluted                                                           23.44                     8.82                      0.12
Weighted average number of Class A and Class B shares outstanding
Basic                                                             317,775,863               319,101,598               319,101,598
Diluted                                                           323,082,053               323,077,175               323,077,175
(1)These balances exclude depreciation and amortization expenses, which are presented separately, and include share??’based compensation expenses of:
Cost of revenues                                                  32                        43                        0.6
Product development                                               254                       629                       8.6
Sales, general and administrative                                 90                        221                       3.1
YANDEX N.V.
Unaudited Condensed Consolidated Statements of Income
(in millions of Russian rubles and U.S. dollars, except share and per share data)
                                                                  Twelve months ended December 31,
                                                                  2014*                     2015                      2015
                                                                  RUB                       RUB                       $
Revenues                                                          50,767                    59,792                    820.4
Operating costs and expenses:
Cost of revenues(1)                                               14,336                    16,810                    230.6
Product development(1)                                            8,842                     13,421                    184.1
Sales, general and administrative(1)                              7,782                     11,601                    159.3
Depreciation and amortization                                     4,484                     7,791                     106.9
Goodwill impairment                                               -                         576                       7.9
Total operating costs and expenses                                35,444                    50,199                    688.8
Income from operations                                            15,323                    9,593                     131.6
Interest income, net                                              856                       1,744                     23.9
Other income, net                                                 6,296                     2,259                     31.0
Net income before income taxes                                    22,475                    13,596                    186.5
Provision for income taxes                                        5,455                     3,917                     53.7
Net income                                                        17,020                    9,679                     132.8
Net income per Class A and Class B share:
Basic                                                             53.30                     30.39                     0.42
Diluted                                                           52.27                     29.90                     0.41
Weighted average number of Class A and Class B shares outstanding
Basic                                                             319,336,782               318,541,887               318,541,887
Diluted                                                           325,610,277               323,713,437               323,713,437
(1)These balances exclude depreciation and amortization expenses, which are presented separately, and include share??’based compensation expenses of:
Cost of revenues                                                  101                       168                       2.3
Product development                                               780                       1,860                     25.5
Sales, general and administrative                                 329                       690                       9.5
* Derived from audited financial statements
YANDEX N.V.
Unaudited Condensed Consolidated Statements of Cash Flows
(in millions of Russian rubles and U.S. dollars)
                                                                                  Three months ended December 31,
                                                                                  2014       2015       2015
                                                                                  RUB        RUB        $
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                        7,572      2,851      39.1
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment                           1,091      2,112      29.0
Amortization of intangible assets                                                 115        163        2.2
Amortization of debt discount and issuance costs                                  240        235        3.2
Share??’based compensation expense                                                376        893        12.3
Deferred income taxes                                                             136        (87      ) (1.2     )
Foreign exchange gains                                                            (4,707   ) (1,109   ) (15.2    )
Goodwill impairment                                                               -          576        7.9
Gain from repurchases of convertible debt                                         (548     ) (67      ) (0.9     )
Other                                                                             33         13         0.2
Changes in operating assets and liabilities excluding the effect of acquisitions:
Accounts receivable, net                                                          (352     ) (900     ) (12.3    )
Prepaid expenses and other assets                                                 (941     ) 106        1.5
Accounts payable and accrued liabilities                                          498        499        6.8
Deferred revenue                                                                  212        215        2.9
Net cash provided by operating activities                                         3,725      5,500      75.5
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
Purchase of property and equipment                                                (2,998   ) (1,659   ) (22.8    )
Proceeds from sale of property and equipment                                      96         60         0.8
Acquisitions of businesses, net of cash acquired                                  (531     ) (212     ) (2.9     )
Investments in non??’marketable equity securities                                 -          (35      ) (0.5     )
Investments in debt securities                                                    -          (2,564   ) (35.2    )
Proceeds from maturity of debt securities                                         575        -          -
Investments in term deposits                                                      (935     ) (15,150  ) (207.9   )
Maturities of term deposits                                                       5,518      20,044     275.0
Loans granted                                                                     2          (38      ) (0.4     )
Net cash provided by investing activities                                         1,727      446        6.1
CASH FLOWS USED IN FINANCING ACTIVITIES:
Proceeds from exercise of share options                                           68         29         0.4
Repurchases of convertible debt                                                   (4,675   ) (1,187   ) (16.3    )
Repurchases of ordinary shares                                                    (1,066   ) -          -
Payment for contingent consideration                                              -          (35      ) (0.5     )
Dividends received from equity securities                                         -          29         0.4
Net cash used in financing activities                                             (5,673   ) (1,164   ) (16.0    )
Effect of exchange rate changes on cash and cash equivalents                      4,947      1,417      19.5
Net change in cash and cash equivalents                                           4,726      6,199      85.1
Cash and cash equivalents at beginning of period                                  12,919     18,039     247.5
Cash and cash equivalents at end of period                                        17,645     24,238     332.6
YANDEX N.V.
Unaudited Condensed Consolidated Statements of Cash Flows
(in millions of Russian rubles and U.S. dollars)
                                                                                  Twelve months ended December 31,
                                                                                  2014*      2015       2015
                                                                                  RUB        RUB        $
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                        17,020     9,679      132.8
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment                           4,242      7,289      100.0
Amortization of intangible assets                                                 242        502        6.9
Amortization of debt discount and issuance costs                                  811        967        13.3
Share??’based compensation expense                                                1,210      2,718      37.3
Deferred income taxes                                                             115        (188    )  (2.6   )
Foreign exchange gains                                                            (6,553  )  (1,903  )  (26.1  )
Impairment of investment in equity securities                                     700        -          -
Goodwill impairment                                                               -          576        7.9
Gain from repurchases of convertible debt                                         (548    )  (310    )  (4.3   )
Other                                                                             38         (83     )  (1.1   )
Changes in operating assets and liabilities excluding the effect of acquisitions:
Accounts receivable, net                                                          (714    )  (1,763  )  (24.2  )
Prepaid expenses and other assets                                                 (3,069  )  888        12.2
Accounts payable and accrued liabilities                                          1,817      1,160      15.9
Deferred revenue                                                                  235        44         0.6
Net cash provided by operating activities                                         15,546     19,576     268.6
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of property and equipment                                                (9,679  )  (13,045 )  (179.0 )
Proceeds from sale of property and equipment                                      132        95         1.3
Acquisitions of businesses, net of cash acquired                                  (6,360  )  (398    )  (5.5   )
Investments in non??’marketable equity securities                                 (45     )  (110    )  (1.5   )
Proceeds from sale of equity securities                                           120        -          -
Investments in debt securities                                                    (2,546  )  (2,564  )  (35.2  )
Proceeds from maturity of debt securities                                         575        3,426      47.0
Investments in term deposits                                                      (17,157 )  (41,760 )  (573.0 )
Maturities of term deposits                                                       7,234      42,682     585.6
Loans granted                                                                     (207    )  (60     )  (0.7   )
Escrow cash deposit                                                               (656    )  58         0.8
Net cash used in investing activities                                             (28,589 )  (11,676 )  (160.2 )
CASH FLOWS USED IN FINANCING ACTIVITIES:
Proceeds from exercise of share options                                           191        168        2.3
Proceeds from issuance of convertible debt                                        2,981      -          -
Repurchases of convertible debt                                                   (6,414  )  (6,096  )  (83.6  )
Payment of debt issuance costs                                                    (42     )  -          -
Repurchases of ordinary shares                                                    (8,423  )  -          -
Payment for contingent consideration                                              -          (124    )  (1.7   )
Dividends received from equity securities                                         -          29         0.4
Net cash used in financing activities                                             (11,707 )  (6,023  )  (82.6  )
Effect of exchange rate changes on cash and cash equivalents                      9,001      4,716      64.7
Net change in cash and cash equivalents                                           (15,749 )  6,593      90.5
Cash and cash equivalents at beginning of period                                  33,394     17,645     242.1
Cash and cash equivalents at end of period                                        17,645     24,238     332.6
* Derived from audited financial statements
Reconciliation of Ex-TAC Revenues to US GAAP Revenues
In RUB millions                                                                             Three months                      Twelve months
                                                                                            ended December 31,                ended December 31,
                                                                                            2014        2015        Change    2014        2015        Change
Total revenues                                                                              14,667      18,094      23   %    50,767      59,792      18   %
Less: traffic acquisition costs (TAC)                                                       3,095       3,720       20   %    11,076      12,741      15   %
Ex-TAC revenues                                                                             11,572      14,374      24   %    39,691      47,051      19   %
Reconciliation of Adjusted EBITDA to US GAAP Net Income
In RUB millions                                                                             Three months                      Twelve months
                                                                                            ended December 31,                ended December 31,
                                                                                            2014        2015        Change    2014        2015        Change
Net income                                                                                  7,572       2,851       -62  %    17,020      9,679       -43  %
Add: depreciation and amortization                                                          1,206       2,275       89   %    4,484       7,791       74   %
Add: share-based compensation expense                                                       376         893         138  %    1,210       2,718       125  %
Add: compensation expense related to contingent consideration                               18          88          n/m       35          291         n/m
Add: goodwill impairment                                                                    -           576         n/m       -           576         n/m
Less: interest income, net                                                                  (257   )    (489   )    90   %    (856   )    (1,744 )    104  %
Less: other income, net                                                                     (5,175 )    (1,137 )    -78  %    (6,296 )    (2,259 )    -64  %
Add: provision for income taxes                                                             2,338       1,503       -36  %    5,455       3,917       -28  %
Adjusted EBITDA                                                                             6,078       6,560       8    %    21,052      20,969      0    %
Reconciliation of Adjusted Net Income to US GAAP Net Income
In RUB millions                                                                             Three months                      Twelve months
                                                                                            ended December 31,                ended December 31,
                                                                                            2014        2015        Change    2014        2015        Change
Net income                                                                                  7,572       2,851       -62  %    17,020      9,679       -43  %
Add: SBC expense                                                                            376         893         138  %    1,210       2,718       125  %
Less: reduction in income tax attributable to SBC expense                                   (5     )    (11    )    120  %    (20    )    (41    )    105  %
Add: compensation expense related to contingent consideration                               18          88          n/m       35          291         n/m
Less: foreign exchange gain                                                                 (4,707 )    (1,109 )    -76  %    (6,553 )    (1,903 )    -71  %
Add: increase in income tax attributable to foreign exchange gain                           937         216         -77  %    1,324       355         -73  %
Add: impairment of investment in equity securities                                          -           -           n/m       700         -           -100 %
Less: reduction in income tax attributable to impairment of investment in equity securities -           -           n/m       (175   )    -           -100 %
Add: goodwill impairment                                                                    -           576         n/m       -           576         n/m
Less: gain from repurchases of convertible debt                                             (548   )    (67    )    -88  %    (548   )    (310   )    -43  %
Add: increase in income tax attributable to gain from repurchases of convertible debt       137         16          -88  %    137         77          -44  %
Add: amortization of debt discount                                                          243         235         -3   %    811         967         19   %
Less: reduction in income tax attributable to amortization of debt discount                 (56    )    (56    )    0    %    (190   )    (230   )    21   %
Adjusted net income                                                                         3,967       3,632       -8   %    13,751      12,179      -11  %
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                                           Net           Adjustment (2)                                    Adjusted Adjusted        Adjusted
                                                   Actual Net                                        Income                                                          EBITDA   EBITDA          Ex-TAC
                                                   Income                                            Margin                                                                   Margin          EBITDA Margin
                                                                                                     (1)                                                                      (3)             (4)
Three months ended December 31, 2015               2,851                                                    15.8 % 3,709                                             6,560             36.3 %                                                   45.6 %
Twelve months ended December 31, 2015              9,679                                                    16.2 % 11,290                                            20,969            35.1 %                                                   44.6 %
(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, goodwill impairment, 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                                           Net           Adjustment (2)                                    Adjusted Adjusted        Adjusted
                                                   Actual Net                                        Income                                                          Net      Net             Ex-TAC
                                                   Income                                            Margin                                                          Income   Income          Net Income
                                                                                                     (1)                                                                      Margin          Margin
                                                                                                                                                                              (3)             (4)
Three months ended December 31, 2015               2,851                                                    15.8 % 781                                               3,632             20.1 %                                                   25.3 %
Twelve months ended December 31, 2015              9,679                                                    16.2 % 2,500                                             12,179            20.4 %                                                   25.9 %
(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 gain (as adjusted for the increase in income tax attributable to the gain), impairment of investment in equity securities (as adjusted for the income tax reduction attributable to the expense), goodwill impairment, 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, Vladimir Isaev
Phone: +7 495 739-70-00
E-mail: pr@yandex-team.ru

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