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 Yandex Announces Second Quarter 2017 Financial Results
   Friday, July 28, 2017 6:00:17 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 second quarter ended June 30, 2017.

Q2 2017 Financial Highlights(1)(2)

-- Revenues of RUB 22.1 billion ($374.1 million), up 23% compared with Q2 2016

-- Net income of RUB 3.5 billion ($59.0 million), up 69% compared with Q2 2016; net income margin of 15.8%

-- Adjusted net income of RUB 4.0 billion ($67.5 million), up 2% compared with Q2 2016; adjusted net income margin of 18.1%

-- Adjusted EBITDA of RUB 7.2 billion ($122.1 million), up 7% compared with Q2 2016; adjusted EBITDA margin of 32.6%

-- Cash, cash equivalents, term deposits and short-term investments in debt securities of RUB 66.2 billion ($1,120.0 million) as of June 30, 2017

Q2 2017 Operational and Corporate Highlights

-- Share of Russian search market, including mobile, averaged 54.3% in Q2 2017, compared with 54.7% in Q1 2017 (according to Yandex.Radar, a search traffic and browser usage analytics tool based on Yandex.Metrica data)

-- Search queries in Russia grew 5% compared with Q2 2016

-- Paid clicks on Yandex’s and its partners’ websites, in aggregate, increased 10% compared with Q2 2016

-- Average cost per click grew 9% compared with Q2 2016

-- Yandex.Taxi number of rides grew 425% year-on-year compared with Q2 2016

Q2 2017 Subsequent Events

-- Yandex and Uber announced an agreement to combine their ridesharing businesses in Russia and five neighboring countries

-- Yandex launched Yandex.Radar, a search traffic and browser usage analytics tool based on Yandex.Metrica data

"Our team delivered another strong quarter," said Arkady Volozh, Chief Executive Officer of Yandex. "Our agreement with Uber to combine ridesharing operations in Russia and five neighboring countries demonstrates the potential of our business units to accelerate innovation and create substantial shareholder value."

"We delivered solid results across all business segments in Q2, and I was pleased to see strong growth and profitability in our core business," said Alexander Shulgin, Chief Operating Officer of Yandex. "We expect continued investments in Taxi, e-Commerce, Classifieds, and other new initiatives to drive further growth."

The following table provides a summary of our key consolidated financial results for the three and six months ended June 30, 2016 and 2017:

In RUB millions         Three months ended June 30,  Six months ended June 30,
                        2016    2017    Change       2016    2017    Change
Revenues                18,040  22,104  23   %       34,513  42,756  24   %
Ex-TAC revenues         14,486  17,888  23   %       27,569  34,605  26   %
Income from operations  3,517   2,997   -15  %       5,957   6,372   7    %
Adjusted EBITDA         6,762   7,213   7    %       12,532  14,087  12   %
Net income              2,058   3,484   69   %       3,127   4,303   38   %
Adjusted net income     3,906   3,990   2    %       7,074   7,739   9    %

(1) Pursuant to SEC rules regarding convenience translations, Russian ruble (RUB) amounts have been translated into U.S. dollars at a rate of RUB 59.0855 to $1.00, the official exchange rate quoted as of June 30, 2017 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 U.S. GAAP measures.

Consolidated revenues breakdown

In RUB millions                    Three months ended June 30,  Six months ended June 30,
                                   2016    2017    Change       2016    2017    Change
Online advertising revenues:
Yandex properties                  12,562  15,531  24   %       23,966  29,887  25   %
Advertising network                4,740   5,403   14   %       9,168   10,562  15   %
Total online advertising revenues  17,302  20,934  21   %       33,134  40,449  22   %
Other                              738     1,170   59   %       1,379   2,307   67   %
Total revenues                     18,040  22,104  23   %       34,513  42,756  24   %

Online advertising revenues grew 21% in Q2 2017 compared with Q2 2016 and continued to determine overall top-line performance, contributing 95% of total revenues. Online advertising revenues include revenues derived from performance and brand advertising on Yandex properties and in our advertising network.

Online advertising revenues from Yandex properties increased 24% in Q2 2017 compared with Q2 2016 and accounted for 70% of total revenues.

Online advertising revenues from our advertising network increased 14% in Q2 2017 compared with Q2 2016 and contributed 24% of total revenues.

Other revenues grew 59% in Q2 2017 compared with Q2 2016, and were mainly driven by growth in Yandex.Taxi revenues.

Segment revenues

In RUB millions   Three months ended June 30,      Six months ended June 30,
                  2016        2017        Change   2016        2017        Change
Revenues:
Search and Portal 16,532      20,135      22  %    31,679      38,791      22  %
E-commerce        1,069       1,168       9   %    2,112       2,463       17  %
Taxi              528         772         46  %    973         1,550       59  %
Classifieds       313         462         48  %    554         833         50  %
Experiments       153         344         125 %    338         670         98  %
Eliminations      (555   )    (777   )    40  %    (1,143 )    (1,551 )    36  %
Total revenues    18,040      22,104      23  %    34,513      42,756      24  %

Search and Portal segment includes all our services offered in Russia, Belarus and Kazakhstan (and, for periods prior to the imposition of sanctions on Yandex by the government of Ukraine in May 2017, all our services offered in Ukraine), other than those described below;

E-commerce segment includes our Yandex.Market service;

Taxi segment consists of our Yandex.Taxi service;

Classifieds segment includes Auto.ru, Yandex.Realty, Yandex.Jobs and Yandex.Travel;

Experiments segment includes Media Services (including KinoPoisk, Yandex.Music, Yandex.Afisha and Yandex.TV program), Yandex Data Factory, Discovery services (including Yandex Zen and Yandex Launcher international revenues) and Search and Portal in Turkey.

Eliminations represent the elimination of transactions 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 Q2 2017 Yandex’s headcount increased by 32 full-time employees. The total number of full-time employees was 6,517 as of June 30, 2017, unchanged compared with March 31, 2017, and up 17% from June 30, 2016.

Cost of revenues, including traffic acquisition costs (TAC)

In RUB millions                            Three months ended June 30,    Six months ended June 30,
                                           2016       2017       Change   2016       2017        Change
TAC:
Related to the Yandex advertising network  2,641      3,148      19  %    5,136      6,044       18  %
Related to distribution partners           913        1,068      17  %    1,808      2,107       17  %
Total TAC                                  3,554      4,216      19  %    6,944      8,151       17  %
Total TAC as a % of total revenues         19.7  %    19.1  %             20.1  %    19.1   %
Other cost of revenues                     1,142      1,531      34  %    2,256      2,944       30  %
Other cost of revenues as a % of revenues  6.3   %    6.9   %             6.5   %    6.9    %
Total cost of revenues                     4,696      5,747      22  %    9,200      11,095      21  %
Total cost of revenues as a % of revenues  26.0  %    26.0  %             26.7  %    25.9   %

TAC grew 19% in Q2 2017 compared with Q2 2016 and represented 19.1% of total revenues, 60 basis points lower than in Q2 2016 and flat compared with Q1 2017. The decrease of partner TAC as a percent of revenues from the Yandex advertising network was due to changes in partner revenue mix.

Other cost of revenues in Q2 2017 increased 34% compared with Q2 2016, primarily due to an increase in services provided to Taxi corporate clients, for which revenue and related costs are recorded on a gross basis.

Product development

In RUB millions      Three months ended June 30,    Six months ended June 30,
                     2016       2017       Change   2016       2017       Change
Product development  3,794      4,473      18  %    7,671      8,991      17  %
As a % of revenues   21.1  %    20.2  %             22.2  %    21.0  %

Growth in product development expenses in Q2 2017 primarily reflects salary increases and new hires in 2016 and in early 2017.

Sales, general and administrative (SG&A)

In RUB millions                    Three months ended June 30,    Six months ended June 30,
                                   2016       2017       Change   2016       2017        Change
Sales, general and administrative  3,717      6,064      63  %    6,975      11,012      58  %
As a % of revenues                 20.6  %    27.4  %             20.2  %    25.8   %

SG&A expenses grew faster than revenue, increasing by 63% in Q2 2017 compared to Q2 2016 as we continued to invest in advertising and marketing to support our business units, primarily Taxi.

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 June 30,  Six months ended June 30,
                                             2016      2017      Change   2016       2017       Change
SBC expense included in cost of revenues     46        64        39  %    95         106        12  %
SBC expense included in product development  545       542       -1  %    1,140      1,118      -2  %
SBC expense included in SG&A                 290       359       24  %    537        699        30  %
Total SBC expense                            881       965       10  %    1,772      1,923      9   %
As a % of revenues                           4.9  %    4.4  %             5.1   %    4.5   %

Total SBC expense increased 10% in Q2 2017 compared with Q2 2016. The increase is primarily related to new equity-based grants made in 2016-2017.

Depreciation and amortization (D&A) expense

In RUB millions                Three months ended June 30,    Six months ended June 30,
                               2016       2017       Change   2016       2017       Change
Depreciation and amortization  2,316      2,823      22  %    4,710      5,286      12  %
As a % of revenues             12.8  %    12.8  %             13.6  %    12.4  %

D&A expense increased 22% in Q2 2017 compared with Q2 2016, primarily reflecting investments in servers and data centers made in 2016 and 2017, and was partially offset by the currency translation effect related to the D&A expense of our data center in Finland, which is denominated in euros.

Income from operations

In RUB millions         Three months ended June 30,  Six months ended June 30,
                        2016   2017   Change         2016   2017   Change
Income from operations  3,517  2,997  -15  %         5,957  6,372  7    %

Income from operations decreased 15% in Q2 2017 compared with Q2 2016, due to an increase in our advertising and marketing costs related to business units, primarily Taxi.

Adjusted EBITDA

Consolidated adjusted EBITDA

In RUB millions  Three months ended June 30,  Six months ended June 30,
                 2016   2017   Change         2016    2017    Change
Adjusted EBITDA  6,762  7,213  7    %         12,532  14,087  12   %

Adjusted EBITDA increased 7% in Q2 2017 compared with Q2 2016.

Adjusted EBITDA by segments

In RUB millions       Three months ended June 30,      Six months ended June 30,
                      2016       2017        Change    2016        2017        Change
Adjusted EBITDA:
Search and Portal     6,927      9,098       31   %    12,838      17,071      33   %
E-commerce            325        445         37   %    705         1,005       43   %
Taxi                  (153  )    (1,966 )    n/m       (153   )    (3,211 )    n/m
Classifieds           23         (17    )    -174 %    17          (13    )    -176 %
Experiments           (360  )    (347   )    -4   %    (875   )    (765   )    -13  %
Total adjusted EBITDA 6,762      7,213       7    %    12,532      14,087      12   %

Adjusted EBITDA of Taxi was negative RUB 1,966 million in Q2 2017, compared with negative RUB 1,245 million in Q1 2017, and was mainly related to an increase in our advertising and marketing costs, primarily driven by expansion to the new cities, introduction of minimum fare guarantees to drivers in Q3 2016 as well as discounts and coupons to our users.

Interest income in Q2 2017 was RUB 688 million, down from RUB 735 million in Q2 2016.

Interest expense in Q2 2017 was RUB 217 million, down from RUB 298 million in Q2 2016.

Foreign exchange gain in Q2 2017 was RUB 1,273 million, compared with a foreign exchange loss of RUB 958 million in Q2 2016. This gain reflects the depreciation of the Russian ruble during Q2 2017 from RUB 56.3779 to $1.00 on March 31, 2017, to RUB 59.0855 to $1.00 on June 30, 2017. 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 the Other gain, net line 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 an upward revaluation of the ruble equivalent of these U.S. dollar-denominated monetary assets and liabilities in Q2 2017.

Income tax expense for Q2 2017 was RUB 1,373 million, up from RUB 1,054 million in Q2 2016. Our effective tax rate of 28.3% in Q2 2017 was higher than in Q2 2016, primarily due to provision of certain reserves resulting from sanctions in Ukraine, partly offset by the effects of certain provisions reversed in Q2 2017 related to the results of prior years’ tax audits. Adjusted for these effects and SBC expense, our effective tax rate for Q2 2017 was 23.1%, compared with 23.4% for full year 2016 as adjusted for SBC expense and similar provisions in that year.

Net income was RUB 3.5 billion ($59.0 million) in Q2 2017, up 69% compared with Q2 2016, mainly due to foreign exchange gain in Q2 2017.

Adjusted net income in Q2 2017 was RUB 4.0 billion ($67.5 million), a 2% increase from Q2 2016.

Adjusted net income margin was 18.1% in Q2 2017, compared with 21.7% in Q2 2016.

As of June 30, 2017, Yandex had cash, cash equivalents, term deposits and short-term investments in debt securities of RUB 66.2 billion ($1,120.0 million).

Net cash flow provided by operating activities for Q2 2017 was RUB 7.2 billion ($121.4 million) and capital expenditures were RUB 3.9 billion ($65.4 million).

During Q2 2017, we repurchased $4.0 million in principal of our 1.125% convertible senior notes due 2018 for approximately $3.9 million.

Redeemable noncontrolling interests presented in our condensed consolidated balance sheets relate to the equity incentive arrangements we have made available to the senior employees of the Taxi, Classifieds and E-commerce segments, pursuant to which such persons are eligible to acquire depositary receipts, or receive options to acquire depositary receipts, which entitle them to economic interests in the respective business unit subsidiaries.

The total number of shares issued and outstanding as of June 30, 2017 was 325,021,108 including 280,167,373 Class A shares, 44,853,734 Class B shares, and one Priority share and excluding 5,035,646 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 1.3 million shares, at a weighted average exercise price of $5.30 per share, all of which were fully vested; equity-settled share appreciation rights (SARs) for 0.2 million shares, at a weighted average measurement price of $31.95, all of which, excluding SARs for approximately 1,000 shares, were fully vested; and restricted share units (RSUs) covering 9.8 million shares, of which RSUs to acquire 2.0 million shares were fully vested. Equity awards in respect of business unit subsidiaries are described under Redeemable noncontrolling interests above.

Please note that historical information on revenues and adjusted EBITDA of our segments is provided in the supplementary slides accompanying our Q2 2017 earnings release, including quarterly data for the ten quarters from Q1 2015 through Q2 2017 and annual data for the four years from 2013 through 2016.

Financial outlook

Based on the solid first half of the year, we currently expect our ruble-based revenue to grow in the range of 18% to 21% for the full year 2017.

This outlook reflects our current view, based on the trends that we see at this time, and may change in light of market and economic developments in the business sectors and jurisdictions in which we operate.

Conference Call Information

Yandex’s management will hold an earnings conference call on July 28, 2017 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 2296

UK/International: +44 20 3427 1904

Russia: 8 800 500 9311

Passcode: 1461276#

A replay of the call will be available until Aug 3, 2017. To access the replay, please dial:

US: +1 866 932 5017

UK/International: +44 20 3427 0598

Russia: 810 800 2870 1012

Passcode: 1461276#

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

https://edge.media-server.com/m6/p/j28o33g4

ABOUT YANDEX

Yandex (YNDX ) is a technology company that builds intelligent products and services powered by machine learning. Our goal is to help consumers and businesses better navigate the online and offline world. Since 1997, we have delivered world-class, locally relevant search and information services. Additionally, we have developed market-leading on-demand transportation services, navigation products, and other mobile applications for millions of consumers across the globe. Yandex, which has 17 offices worldwide, has been listed on the NASDAQ since 2011.

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 2017. 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, 2016, which is on file with the U.S. Securities and Exchange Commission (SEC) 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 July 28, 2017, 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 U.S. GAAP, we present the following 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. 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 U.S. 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 U.S. GAAP measures", included following the accompanying financial tables. We define the various non-GAAP financial measures we use as follows:

-- Ex-TAC revenues means U.S. GAAP revenues less total traffic acquisition costs (TAC)

-- Adjusted EBITDA means U.S. GAAP 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, (4) interest expense, (5) other loss/(gain), net, (6) operating losses resulting from sanctions in Ukraine imposed in May 2017 and (7) provision for income taxes, less interest income

-- Adjusted EBITDA margin means adjusted EBITDA divided by U.S. GAAP revenues

-- Adjusted ex-TAC EBITDA margin means adjusted EBITDA divided by ex-TAC revenues

-- Adjusted net income means U.S. 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, (3) foreign exchange losses/gains adjusted for reduction/increase in income tax attributable to the foreign exchange losses/gains, (4) gains/losses from repurchases of our convertible notes adjusted for the related increase/reduction in income tax, (5) amortization of debt discount related to our convertible debt adjusted for the related reduction in income tax and (6) losses resulting from sanctions in Ukraine imposed in May 2017

-- Adjusted net income margin means adjusted net income divided by U.S. 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 recurring costs, particularly share-based compensation. 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 U.S. GAAP financial measures:

TAC

We believe that it may be useful for investors and analysts to review certain measures both in accordance with U.S. GAAP and net of the effect of TAC, which we view as comparable to sales commissions but, unlike sales commissions, are not deducted from U.S. 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 clearer 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 U.S. 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 and liabilities 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.

Gains and losses from repurchases of convertible debt

Adjusted net income is also adjusted for a loss from the repurchase of $4.0 million in principal of our 1.125% convertible senior notes due 2018 for approximately $3.9 million that we recorded in Q2 2017. We have eliminated this loss from adjusted net income as it is not indicative of our ongoing operating performance.

Losses resulting from sanctions in Ukraine

We also adjusted our net income and EBITDA for losses and gains from write-off of assets and liabilities in our Ukrainian legal entities. In May 2017, the government of Ukraine imposed sanctions on our Ukrainian operations. The sanctions resulted in the freezing of the assets held by our Ukrainian legal entities and restricting our services in Ukraine. We believe that it is useful to present adjusted net income and adjusted EBITDA measures excluding the one-off impact of these events, which are not related to our operating activities.

The tables at the end of this release provide detailed reconciliations of each non-GAAP financial measure we use to the most directly comparable U.S. 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,  June 30,    June 30,
                                                                                   2016*         2017        2017
                                                                                   RUB           RUB         $
ASSETS
Current assets:
Cash and cash equivalents                                                          28,232        14,606      247.2
Term deposits                                                                      31,769        45,255      765.9
Investments in debt securities                                                     3,033         1,182       20.0
Accounts receivable, net                                                           7,741         7,784       131.7
Prepaid expenses                                                                   1,481         1,558       26.5
Other current assets                                                               2,714         2,998       50.7
Total current assets                                                               74,970        73,383      1,242.0
Property and equipment, net                                                        18,817        22,355      378.4
Intangible assets, net                                                             5,514         5,549       93.9
Goodwill                                                                           8,436         8,689       147.1
Long-term prepaid expenses                                                         1,385         1,488       25.0
Term deposits, non-current                                                         -             5,135       86.9
Investments in non-marketable equity securities                                    1,513         1,741       29.5
Deferred tax assets                                                                662           1,173       19.9
Other non-current assets                                                           2,811         3,163       53.5
TOTAL ASSETS                                                                       114,108       122,676     2,076.2
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities                                           9,532         10,840      183.4
Taxes payable                                                                      2,963         3,774       63.9
Deferred revenue                                                                   2,127         2,150       36.4
Total current liabilities                                                          14,622        16,764      283.7
Convertible debt                                                                   18,750        17,947      303.7
Deferred tax liabilities                                                           1,040         1,224       20.7
Other accrued liabilities                                                          1,104         1,127       19.1
Total liabilities                                                                  35,516        37,062      627.2
Commitments and contingencies
Redeemable noncontrolling interests                                                1,506         4,970       84.1
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           284           284         4.8
EUR0.09); shares authorized (Class A: 1,000,000,000, Class B: 46,997,887 and
Class C: 46,997,887); shares issued (Class A: 285,019,019 and
285,203,019, Class B: 45,037,734 and 44,853,734, and Class C: 560,235 and
744,235, respectively); shares outstanding (Class A: 277,579,206 and 280,167,373,
Class B: 45,037,734 and 44,853,734, and Class C: nil)
Treasury shares at cost (Class A: 7,439,813 and 5,035,646, respectively)           (8,368   )    (5,174   )  (87.6    )
Additional paid-in capital                                                         16,579        15,489      262.1
Accumulated other comprehensive income                                             896           1,511       25.7
Retained earnings                                                                  67,695        68,534      1,159.9
Total shareholders’ equity                                                         77,086        80,644      1,364.9
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY                                         114,108       122,676     2,076.2

* 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 June 30,
                                                                   2016           2017           2017
                                                                   RUB            RUB            $
Revenues                                                           18,040         22,104         374.1
Operating costs and expenses:
Cost of revenues(1)                                                4,696          5,747          97.3
Product development(1)                                             3,794          4,473          75.7
Sales, general and administrative(1)                               3,717          6,064          102.6
Depreciation and amortization                                      2,316          2,823          47.8
Total operating costs and expenses                                 14,523         19,107         323.4
Income from operations                                             3,517          2,997          50.7
Interest income                                                    735            688            11.6
Interest expense                                                   (298        )  (217        )  (3.7        )
Other (loss)/income, net                                           (842        )  1,389          23.6
Net income before income taxes                                     3,112          4,857          82.2
Provision for income taxes                                         1,054          1,373          23.2
Net income                                                         2,058          3,484          59.0
Net loss attributable to noncontrolling interests                  -              30             0.5
Net income attributable to Yandex N.V.                             2,058          3,514          59.5
Net income per Class A and Class B share:
Basic                                                              6.42           10.83          0.18
Diluted                                                            6.30           10.65          0.18
Weighted average number of Class A and Class B shares outstanding
Basic                                                              320,323,089    324,355,605    324,355,605
Diluted                                                            326,836,136    330,036,917    330,036,917
(1) These balances exclude depreciation and amortization expenses, which are presented separately, and include share-
based compensation expenses of:
Cost of revenues                   46              64              1.1
Product development                545             542             9.2
Sales, general and administrative  290             359             6.0
YANDEX N.V.
Unaudited Condensed Consolidated Statements of Income
(in millions of Russian rubles and U.S. dollars, except share and per share data)
                                                                   Six months ended June 30,
                                                                   2016           2017           2017
                                                                   RUB            RUB            $
Revenues                                                           34,513         42,756         723.6
Operating costs and expenses:
Cost of revenues(1)                                                9,200          11,095         187.8
Product development(1)                                             7,671          8,991          152.2
Sales, general and administrative(1)                               6,975          11,012         186.3
Depreciation and amortization                                      4,710          5,286          89.5
Total operating costs and expenses                                 28,556         36,384         615.8
Income from operations                                             5,957          6,372          107.8
Interest income                                                    1,608          1,397          23.6
Interest expense                                                   (648        )  (445        )  (7.5        )
Other loss, net                                                    (2,023      )  (866        )  (14.6       )
Net income before income taxes                                     4,894          6,458          109.3
Provision for income taxes                                         1,767          2,155          36.5
Net income                                                         3,127          4,303          72.8
Net loss attributable to noncontrolling interests                  -              46             0.8
Net income attributable to Yandex N.V.                             3,127          4,349          73.6
Net income per Class A and Class B share:
Basic                                                              9.78           13.43          0.23
Diluted                                                            9.59           13.20          0.22
Weighted average number of Class A and Class B shares outstanding
Basic                                                              319,878,504    323,803,590    323,803,590
Diluted                                                            326,019,560    329,455,881    329,455,881
(1) These balances exclude depreciation and amortization expenses, which are presented separately, and include share-
based compensation expenses of:
Cost of revenues                   95                106               1.8
Product development                1,140             1,118             18.9
Sales, general and administrative  537               699               11.8
YANDEX N.V.
Unaudited Condensed Consolidated Statements of Cash Flows
(in millions of Russian rubles and U.S. dollars)
                                                                                   Three months ended June 30,
                                                                                   2016*            2017             2017
                                                                                   RUB              RUB              $
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income                                                                         2,058            3,484            59.0
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment                                             1,847            2,205            37.3
Amortization of intangible assets                                                  469              618              10.5
Amortization of debt discount and issuance costs                                   225              165              2.8
Share-based compensation expense                                                   881              965              16.3
Deferred income taxes                                                              (98           )  (249          )  (4.2          )
Foreign exchange losses/(gains)                                                    958              (1,273        )  (21.5         )
Losses from repurchases of convertible debt                                        -                3                0.1
Other                                                                              (112          )  (39           )  (0.7          )
Changes in operating assets and liabilities excluding the effect of acquisitions:
Accounts receivable, net                                                           (87           )  (172          )  (2.9          )
Prepaid expenses and other assets                                                  525              (72           )  (1.3          )
Accounts payable and accrued liabilities                                           1,377            1,384            23.4
Deferred revenue                                                                   100              152              2.6
Net cash provided by operating activities                                          8,143            7,171            121.4
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of property and equipment and intangible assets                          (2,486        )  (3,864        )  (65.4         )
Proceeds from sale of property and equipment                                       43               14               0.2
Acquisitions of businesses, net of cash acquired                                   -                (364          )  (6.2          )
Investments in non-marketable equity securities                                    (22           )  (69           )  (1.2          )
Proceeds from maturity of debt securities                                          -                1,702            28.8
Investments in term deposits                                                       (12,157       )  (18,224       )  (308.4        )
Maturities of term deposits                                                        8,310            8,122            137.5
Loans granted                                                                      (50           )  (41           )  (0.6          )
Net cash used in investing activities                                              (6,362        )  (12,724       )  (215.3        )
CASH FLOWS PROVIDED BY/(USED IN) FINANCING ACTIVITIES:
Proceeds from exercise of share options                                            164              167              2.8
Repurchases of convertible debt                                                    -                (220          )  (3.7          )
Other financing activities                                                         -                (63           )  (1.1          )
Net cash provided by/(used in) financing activities                                164              (116          )  (2.0          )
Effect of exchange rate changes on cash and cash balances                          (719          )  345              5.8
Net change in cash and cash balances                                               1,226            (5,324        )  (90.1         )
Cash and cash balances at beginning of period                                      28,907           20,524           347.4
Cash and cash balances at end of period                                            30,133           15,200           257.3
Reconciliation of cash and cash balances:
Cash and cash equivalents, beginning of period                                     28,075           19,983           338.2
Restricted cash, beginning of period                                               832              541              9.2
Cash and cash balances, beginning of period                                        28,907           20,524           347.4
Cash and cash equivalents, end of period                                           29,506           14,606           247.2
Restricted cash, end of period                                                     627              594              10.1
Cash and cash balances, end of period                                              30,133           15,200           257.3
* In Q1 2017, Yandex elected to early adopt Accounting Standards Update ("ASU") No. 2016-18--Statement of Cash Flows (Topic
230): Restricted Cash, which provided revised guidance on the classification and presentation of restricted cash in the statement of
cash flows on a retrospective basis. Prior periods have been adjusted accordingly.
YANDEX N.V.
Unaudited Condensed Consolidated Statements of Cash Flows
(in millions of Russian rubles and U.S. dollars)
                                                                                   Six months ended June 30,
                                                                                   2016             2017             2017
                                                                                   RUB              RUB              $
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income                                                                         3,127            4,303            72.8
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment                                             3,770            4,170            70.6
Amortization of intangible assets                                                  940              1,116            18.9
Amortization of debt discount and issuance costs                                   487              338              5.7
Share-based compensation expense                                                   1,772            1,923            32.5
Deferred income taxes                                                              (214          )  (232          )  (3.9          )
Foreign exchange losses                                                            2,239            932              15.8
(Gains)/losses from repurchases of convertible debt                                (53           )  6                0.1
Other                                                                              (148          )  38               0.7
Changes in operating assets and liabilities excluding the effect of acquisitions:
Accounts receivable, net                                                           (203          )  (28           )  (0.5          )
Prepaid expenses and other assets                                                  1,042            (999          )  (16.9         )
Accounts payable and accrued liabilities                                           1,046            1,336            22.6
Deferred revenue                                                                   (37           )  12               0.2
Net cash provided by operating activities                                          13,768           12,915           218.6
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of property and equipment and intangible assets                          (3,941        )  (7,729        )  (130.8        )
Proceeds from sale of property and equipment                                       65               20               0.3
Acquisitions of businesses, net of cash acquired                                   -                (364          )  (6.2          )
Investments in non-marketable equity securities                                    (242          )  (103          )  (1.7          )
Proceeds from sale of equity securities                                            -                216              3.7
Proceeds from maturity of debt securities                                          -                1,702            28.8
Investments in term deposits                                                       (33,842       )  (58,482       )  (989.8        )
Maturities of term deposits                                                        32,979           39,560           669.5
Loans granted                                                                      (106          )  (39           )  (0.6          )
Net cash used in investing activities                                              (5,087        )  (25,219       )  (426.8        )
CASH FLOWS USED IN FINANCING ACTIVITIES:
Proceeds from exercise of share options                                            210              258              4.4
Repurchases of convertible debt                                                    (1,490        )  (668          )  (11.4         )
Payment for contingent consideration                                               (593          )  (195          )  (3.3          )
Other financing activities                                                         -                10               0.2
Net cash used in financing activities                                              (1,873        )  (595          )  (10.1         )
Effect of exchange rate changes on cash and cash balances                          (2,303        )  (711          )  (12.0         )
Net change in cash and cash balances                                               4,505            (13,610       )  (230.3        )
Cash and cash balances at beginning of period                                      25,628           28,810           487.6
Cash and cash balances at end of period                                            30,133           15,200           257.3
Reconciliation of cash and cash balances:
Cash and cash equivalents, beginning of period                                     24,238           28,232           477.8
Restricted cash, beginning of period                                               1,390            578              9.8
Cash and cash balances, beginning of period                                        25,628           28,810           487.6
Cash and cash equivalents, end of period                                           29,506           14,606           247.2
Restricted cash, end of period                                                     627              594              10.1
Cash and cash balances, end of period                                              30,133           15,200           257.3
* In Q1 2017, Yandex elected to early adopt Accounting Standards Update ("ASU") No. 2016-18--Statement of Cash Flows (Topic
230): Restricted Cash, which provided revised guidance on the classification and presentation of restricted cash in the statement of
cash flows on a retrospective basis. Prior periods have been adjusted accordingly.
YANDEX N.V.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO THE NEAREST COMPARABLE U.S. GAAP MEASURES
Reconciliation of Ex-TAC Revenues to U.S. GAAP Revenues
In RUB millions                       Three months ended June 30, Six months ended June 30,
                                      2016   2017   Change        2016   2017   Change
Total revenues                        18,040 22,104 23     %      34,513 42,756 24     %
Less: traffic acquisition costs (TAC) 3,554  4,216  19     %      6,944  8,151  17     %
Ex-TAC revenues                       14,486 17,888 23     %      27,569 34,605 26     %
Reconciliation of Adjusted EBITDA to U.S. GAAP Net Income
In RUB millions                                               Three months ended June 30,      Six months ended June 30,
                                                              2016       2017        Change    2016        2017        Change
Net income                                                    2,058      3,484       69   %    3,127       4,303       38   %
Add: depreciation and amortization                            2,316      2,823       22   %    4,710       5,286       12   %
Add: share-based compensation expense                         881        965         10   %    1,772       1,923       9    %
Add: compensation expense related to contingent consideration 48         41          -15  %    93          119         28   %
Less: interest income                                         (735  )    (688   )    -6   %    (1,608 )    (1,397 )    -13  %
Add: interest expense                                         298        217         -27  %    648         445         -31  %
Add: other loss/(gain), net                                   842        (1,389 )    n/m       2,023       866         -57  %
Add: provision for income taxes                               1,054      1,373       30   %    1,767       2,155       22   %
Add: operating losses resulting from sanctions in Ukraine     -          387         n/m       -           387         n/m
Adjusted EBITDA                                               6,762      7,213       7    %    12,532      14,087      12   %
Reconciliation of Adjusted Net Income to U.S. GAAP Net Income
In RUB millions                                          Three months ended June 30,      Six months ended June 30,
                                                         2016       2017        Change    2016       2017       Change
Net income                                               2,058      3,484       69   %    3,127      4,303      38   %
Add: SBC expense                                         881        965         10   %    1,772      1,923      9    %
Less: reduction in income tax attributable               (10   )    (16    )    60   %    (24   )    (28   )    17   %
to SBC expense
Add: compensation expense related to                     48         41          -15  %    93         119        28   %
contingent consideration
Add: foreign exchange losses/(gains)                     958        (1,273 )    n/m       2,239      932        -58  %
Less: (decrease)/increase in income tax                  (198  )    270         n/m       (458  )    (161  )    -65  %
attributable to foreign exchange (losses)/gains
Add: (gains)/losses from repurchases of convertible debt -          3           n/m       (53   )    6          -111 %
Less: increase/(reduction) in income tax                 -          -           n/m       13         (1    )    -108 %
attributable to (losses)/gains from
repurchases of convertible debt
Add: amortization of debt discount                       225        165         -27  %    487        338        -31  %
Less: reduction in income tax                            (56   )    (42    )    -25  %    (122  )    (85   )    -30  %
attributable to amortization of debt discount
Add: losses resulting from sanctions in Ukraine          -          393         n/m       -          393        n/m
Adjusted net income                                      3,906      3,990       2    %    7,074      7,739      9    %
Reconciliation of Adjusted EBITDA Margin and Adjusted Ex-TAC EBITDA Margin to U.S. GAAP Net Income Margin
In RUB millions
                                 U.S.         Net            Adjustment   Adjusted     Adjusted       Adjusted
                                 GAAP         Income         (2)          EBITDA       EBITDA         Ex-TAC
                                 Actual       Margin                                   Margin         EBITDA
                                 Net          (1)                                      (3)            Margin (4)
                                 Income
Three months ended June 30, 2017 3,484        15.8         % 3,729        7,213        32.6         % 40.3         %
Six months ended June 30, 2017   4,303        10.1         % 9,784        14,087       32.9         % 40.7         %
(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, interest expense, other loss/(gain), net, operating losses resulting from sanctions in
Ukraine 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 U.S. GAAP revenues, please see the table above.
Reconciliation of Adjusted Net Income Margin and Adjusted Ex-TAC Net Income Margin to U.S. GAAP Net Income Margin
In RUB millions
                                 U.S.          Net             Adjustment    Adjusted      Adjusted        Adjusted
                                 GAAP          Income          (2)           Net           Net             Ex-TAC
                                 Actual        Margin                        Income        Income          Net
                                 Net           (1)                                         Margin          Income
                                 Income                                                    (3)             Margin (4)
Three months ended June 30, 2017 3,484         15.8          % 506           3,990         18.1          % 22.3          %
Six months ended June 30, 2017   4,303         10.1          % 3,436         7,739         18.1          % 22.4          %
(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 losses/(gains) as adjusted for the reduction/increase in income tax
attributable to the losses/(gains), (gains)/losses from repurchases of convertible debt (as adjusted for the related
increase/reduction in income tax), amortization of debt discount (as adjusted for the related reduction in income tax) and
losses resulting from sanctions in Ukraine. 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 U.S. 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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