Yandex

Yandex Announces Third Quarter 2021 Financial Results

October 27, 2021

MOSCOW and AMSTERDAM, the Netherlands, October 27, 2021 -- Yandex (NASDAQ and MOEX: YNDX), one of Europe's largest internet companies and the leading search and ride-hailing provider in Russia, today announced its unaudited financial results for the third quarter ended September 30, 2021

Q3 2021 Financial and Operational Highlights 1,2

         
In RUB millions  

Three months ended September 30, 

 

 

2020

2021

Change

  Total Revenues

 59,882

 91,305

52%

Total Group on a 

Online Ad Revenues

 33,598

 42,605

27%

like-for-like basis

Online Ad Revenues Ex-TAC

 29,042

 35,730

23%

including

Total Adjusted EBITDA

 14,847

 5,622

-62%

 Yandex.Market

Total Adjusted EBITDA margin, %

24.8%

6.2%

-18.6 pp

in 2020

Net income/(loss)

 21,688

 (3,908)

n/m

  Adjusted Net Income

 7,506

 1,340

-82%

  Share of Russian search market, %

59.3%

59.3%

0.0 pp

 

Search share on Android, %

58.7%

58.9%

0.2 pp

Search and Portal3

Revenues

 32,072

 42,713

33%

 

Revenues Ex-TAC

 26,975

 35,075

30%

  Adjusted EBITDA

 16,781

 20,684

23%

 

Adjusted EBITDA margin, %

52.3%

48.4%

-3.9 pp

  Revenues

 18,552

 34,011

83%

  Rides YoY growth in the Ride-hailing service, %

22.0%

44.2%

22.2 pp

 

GMV4 of Ride-hailing

 93,722

 151,987

62%

Taxi (MLU)

GMV of FoodTech

 9,524

 21,206

123%

 

GMV5 of Logistics

 2,317

 7,877

240%

  Total MLU Adjusted EBITDA

 1,740

 1,223

-30%

  Ride-hailing Adjusted EBITDA margin (as % of GMV)

3.0%

2.8%

-0.2 pp

 

Total E-Commerce GMV6

 13,307

 41,827

214%

Yandex.Market

Yandex.Market marketplace GMV

 10,145

 31,620

212%

 

Yandex.Market Adjusted EBITDA 

 (1,221)

 (11,673)

n/m

Media Services

Yandex Plus subscribers, MM

 5.1

 10.3

102%

Zen

Zen DAU, MM

 18.2

 20.6

13%

  Share of video as % of time spent on Zen

19.0%

40.0%

21.0 pp

(1) Pursuant to SEC rules regarding convenience translations, Russian ruble (RUB) amounts have been translated into U.S. dollars at a rate of RUB 72.7608 to $1.00, the official exchange rate quoted as of September 30, 2021 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 net income, adjusted net income margin, financial results on a like-for-like basis including Yandex.Market in the prior year period. Please see the section “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.

(3) In Q3 2021 we transferred Yandex.TV from Search & Portal to Other Business Units and Initiatives segment. This change is applied retroactively to all periods presented.

(4) GMV (or gross merchandise value) is the value of orders delivered (and settled by customers) recognized on the date of delivery at their final prices, including VAT.

(5) GMV of Yandex.Delivery (Logistics) is defined as total transaction amounts paid by individual users and B2B clients for a last-mile delivery service, including VAT and excluding any adjustment for consumer discounts and refunds, partner (Driver / Courier) earnings and partner incentives.

(6) E-Commerce GMV is defined as the value of all merchandise sold through our Yandex.Market marketplace and Yandex.Lavka as well as the value of grocery products sold through Yandex.Eats (delivered and paid for) including VAT. 

Financial outlook

Based on recent performance, we currently expect our total group revenues to be between RUB 340 and 350 billion for the full year 2021.

We are increasing our Search & Portal ruble-based revenue outlook to high-twenties growth (from mid-twenties previously) for the full year 2021 compared with 2020. The higher-than-expected growth is underpinned by our targeted investments into enhancement of search and advertising technologies, products for small and mid-sized businesses and increases in the search market share on iOS devices. We thus estimate Adjusted EBITDA margin for the full year 2021 to be marginally lower compared with full year 2020, although still over 48%.

We also increase our guidance for GMV growth in ride-hailing from the 60% we expected previously to a range of 65% to 70% for the full year 2021 compared to 2020.

We expect our total E-Commerce GMV (including GMV of Yandex.Market marketplace, our e-grocery business Yandex.Lavka and grocery-originated GMV of Yandex.Eats) to increase up to 3x for the full year 2021 compared with 2020.

Our outlook reflects our current view, based on the trends that we have seen in the first ten months of the year, and may change subject to developments in market conditions, including the economic impact of the coronavirus pandemic and potential further disruptions caused by the health crisis.

Corporate Events

  • On August 30, 2021, Yandex entered into a Framework Agreement with Uber to restructure their joint ventures, MLU B.V. and Yandex Self-Driving Group B.V.  Under this agreement, for total consideration of $1.0 billion in cash, Yandex acquires from Uber its entire 18.2% equity interest in SDG, an additional 4.5% equity interest in MLU and Uber’s 29% indirect interest in Yandex.Eats, Yandex.Lavka and Yandex.Delivery (after they are demerged from the MLU). Uber has also granted to Yandex an option to acquire Uber’s remaining 29% equity interest in the newly restructured MLU (which will focus on mobility businesses) during the two-year period at an initial exercise price of $1.8 billion (subject to agreed increases to approximately $2.0 billion).
  • Yandex repurchased 581,164 Class A shares in open market repurchases in Q3 2021, for total consideration of $46 million, as part of the Company’s ongoing share repurchase program. We intend to hold such shares in treasury for use under the Yandex equity incentive plan.

Consolidated Results

The following table provides a summary of our key consolidated financial results for the three and nine months ended September 30, 2020 and 2021, which includes the results of Yandex.Market from July 24, 2020 (the date of consolidation):

             
In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2020

2021

Change

2020

2021

Change

Revenues

 58,335

 91,305

57%

 146,745

 245,843

68%

Ex-TAC revenues

 53,819

 84,430

57%

 132,715

 227,336

71%

Income/(loss) from operations

 6,258

 (5,684)

n/m

 11,563

 (10,674)

n/m

Adjusted EBITDA

 14,984

 5,622

-62%

 35,580

 22,423

-37%

Net income/(loss)

 21,761

 (3,908)

n/m

 23,445

 (11,792)

n/m

Adjusted net income

 7,521

 1,340

-82%

 14,552

 5,360

-63%

The table below provides a summary of our key financial results on a like-for-like basis (including Yandex.Market for the full periods in 2020) for the three and nine months ended September 30, 2020 and 2021:

             
In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2020

2021

Change

2020

2021

Change

Revenues

 59,882

 91,305

52%

 160,226

 245,843

53%

Ex-TAC revenues

 55,327

 84,430

53%

 145,764

 227,336

56%

Income/(loss) from operations

 5,920

 (5,684)

n/m

 5,434

 (10,674)

n/m

Adjusted EBITDA

 14,847

 5,622

-62%

 31,408

 22,423

-29%

Net income/(loss)

 21,688

 (3,908)

n/m

 20,404

 (11,792)

n/m

Adjusted net income

 7,506

 1,340

-82%

 12,117

 5,360

-56%

Our segment disclosure is provided in the Segment financial results section below.

Cash, cash equivalents and term deposits as of September 30, 2021:

  • RUB 134.6 billion ($1,850.1 million) on a consolidated basis
  • Of which RUB 14.1 billion ($193.3 million) is related to Taxi segment
  • In September 2021, Yandex paid RUB 58.4 billion* ($0.8 billion) in cash under the agreed payment terms and following the completed milestones of the recently announced transaction with Uber. The remaining part of consideration will be paid upon the completion of the deal.

*at the exchange rate as of payment date.

Segment financial results

Search & Portal

Our Search and Portal segment includes Search, Geo, Yandex 360, Weather, News, Travel, Alice voice assistant and a number of other services offered in Russia, Belarus and Kazakhstan.

Key operational trends:

  • Share of Russian search market, including mobile, averaged 59.3% in Q3 2021, unchanged from 59.3% in Q3 2020 and down slightly from 59.7% in Q2 2021 (primarily reflecting a seasonal normalization of the desktop market share as well as methodology changes), according to Yandex.Radar
  • Search share on Android in Russia was 58.9% in Q3 2021, up slightly from 58.7% in Q3 2020 and down from 59.5% in Q2 2021 (primarily reflecting a methodology changes), according to Yandex.Radar 
  • Mobile search traffic was 66.2% of our total search traffic in Q3 2021. Mobile revenues represented 57.5% of our search revenues in Q3 2021
  • Search queries in Russia grew 8% in Q3 2021 compared with Q3 2020
             
In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2020

2021

Change

2020

2021

Change

Revenues

32,072 

42,713 

33%

88,162 

117,280 

33%

Revenues Ex-TAC

26,975 

35,075 

30%

72,497 

96,252 

33%

Adjusted EBITDA

16,781 

20,684 

23%

42,587 

56,094 

32%

Adjusted EBITDA margin

52.3%

48.4%

-3.9 pp

48.3%

47.8%

-0.5 pp

Revenues increased by 33% and Revenues Ex-TAC increased by 30% year-on-year in Q3 2021. On a two-year stack basis, which we are presenting to provide a clearer picture of our business by smoothing out the effect of the Covid-19 pandemic, the revenues grew by 16% in Q3 2021. The solid growth momentum reflects the robust performance of the core search business, improved search share and mobile monetization as well as strong trends in the Yandex Ad Network on the back of investments in further enhancements of our advertising products, instruments and technologies.

Adjusted EBITDA margin came to 48.4% in Q3 2021 compared with 52.3% in Q3 2020. The year-on-year dynamic was primarily driven by the investments in advertising technologies (including enhancements to the effectiveness of our conversion strategies and development of SMB products) and in product and performance marketing to support the growth of iOS market share, as well as high base effect from the pandemic-related cost cutting measures implemented in 2020.

Taxi

The Taxi segment includes our mobility businesses, which consist of the (i) Ride-hailing business (including Yandex.Taxi in Russia and 17 other countries across CIS and EMEA, and Uber in Russia and CIS) for both B2C and B2B, (ii) Yandex.Drive, our car-sharing business; (iii) the FoodTech businesses (including Yandex.Eats, our ready-to-eat and grocery delivery service; and Yandex.Lavka, our hyperlocal convenience store delivery service); and (iv) Yandex.Delivery (Logistics), our last mile logistics solution for individuals, SMBs and enterprises.

Key operational trends:

  • Number of rides in the Ride-hailing service increased 44% compared with Q3 2020
  • The number of our own dark stores in Yandex.Lavka service reached 395 stores as of the end of September 2021
             
In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2020

2021

Change

2020

2021

Change

GMV:  

 

 

 

 

 

 

Mobility

 97,052

 156,136

61%

 233,780

 414,118

77%

Ride-hailing

 93,722

 151,987

62%

 226,443

 403,302

78%

Drive

 3,330

 4,149

25%

 7,337

 10,816

47%

Yandex.Delivery (Logistics)

 2,317

 7,877

240%

 4,413

 18,160

312%

FoodTech

 9,524

 21,206

123%

 24,234

 53,654

121%

Total GMV

 108,893

 185,219

70%

 262,427

 485,932

85%

Revenues:

 

 

 

 

 

 

Mobility

 13,697

 22,090

61%

 34,415

 58,670

70%

Ride-hailing

 10,985

 18,632

70%

 28,414

 49,658

75%

Drive

 2,712

 3,458

28%

 6,001

 9,012

50%

Yandex.Delivery (Logistics)

 739

 3,316

349%

 1,544

 7,619

393%

FoodTech

 4,396

 9,840

124%

 10,291

 25,030

143%

Eliminations

 (280)

 (1,235)

341%

 (546)

 (2,625)

381%

Total revenues

 18,552

 34,011

83%

 45,704

 88,694

94%

Adjusted EBITDA:

 

 

 

 

 

 

Mobility

 2,900

 4,785

65%

 4,775

 15,527

225%

Ride-hailing

 2,829

 4,317

53%

 6,644

 14,756

122%

Drive

 71

 468

n/m

 (1,869)

 771

n/m

Yandex.Delivery (Logistics)

 (222)

 (346)

56%

 (407)

 (847)

108%

FoodTech

 (938)

 (3,216)

243%

 (2,698)

 (8,147)

202%

Total Adjusted EBITDA

 1,740

 1,223

-30%

 1,670

 6,533

291%

Adjusted EBITDA margin as % of GMV:

 

 

 

 

 

 

Mobility

3.0%

3.1%

0.1 pp

2.0%

3.7%

1.7 pp

Ride-hailing

3.0%

2.8%

-0.2 pp

2.9%

3.7%

0.8 pp

Drive

2.1%

11.3%

9.2 pp

-25.5%

7.1%

n/m

Yandex.Delivery (Logistics)

-9.6%

-4.4%

5.2 pp

-9.2%

-4.7%

4.5 pp

FoodTech

-9.8%

-15.2%

-5.4 pp

-11.1%

-15.2%

-4.1 pp

Total Adjusted EBITDA as % of GMV

1.6%

0.7%

-0.9 pp

0.6%

1.3%

0.7 pp

Taxi segment revenues increased by 83%, with Ride-hailing (including our corporate Taxi business) and Yandex.Lavka as the largest contributors to growth, followed by the Yandex.Delivery (Logistics) business, as well as the growth of car-sharing. Ride-hailing and Drive revenue increased by 70% and 28% respectively, driven by solid growth in rides and even faster growth in GMV. Yandex.Delivery (Logistics) revenue increased by 349% year-on-year and demonstrated acceleration of quarter-over-quarter growth compared to Q2 2021, as a result of continuously increasing demand of last-mile delivery services. FoodTech revenue delivered solid 124% year-on-year growth primarily driven by the growth of Yandex.Lavka on the back of increased demand and new dark stores openings, as well as by the solid performance of Yandex.Eats Grocery; its share reached 22% of Yandex.Eats GMV in Q3. On a two-year stack basis, revenue in Ride-Hailing, Drive and FoodTech increased by 46%, 28% and 235%, respectively (including 108% two-year stack growth for Yandex.Eats).

Eliminations related to the Taxi segment represent the eliminations of intercompany revenues between different businesses within the Taxi Group. The increase of 341% in Q3 2021 compared with Q3 2020 was mainly attributed to a higher volume of FoodTech orders fulfilled by our Yandex.Delivery (Logistics) business.

Adjusted EBITDA of Taxi was RUB 1,223 million in Q3 2021, down from RUB 1,740 million in Q3 2020. Adjusted EBITDA of the Mobility businesses reached RUB 4,785 million and increased 65% in Q3 2021 compared to Q3 2020, which was however offset by our investments into the rapidly growing Yandex.Lavka and Yandex.Eats (grocery delivery from retail chains in particular) businesses as well as our Logistics services.

Yandex.Market

The Yandex.Market segment includes our marketplace, price comparison service, and several small experiments.

Key operational trends:

  • Total E-CommerceGMV (Yandex.Market marketplace, our e-grocery business Yandex.Lavka and grocery-originated GMV of Yandex.Eats) increased by 214% year-on-year in Q3 2021
  • The share of GMV sold by third-party sellers on our Yandex.Market marketplace reached 78% in Q3 2021 compared to 60% in Q3 2020
  • Marketplace’s assortment reached 20.9 million SKUs as of the end of Q3 2021 compared to 16.8 million SKUs as of the end of Q2 2021 and 1.4 million SKUs as of the end of Q3 2020
  • The number of active buyers7 on Yandex.Market marketplace increased by 95% year-on-year and reached 8.4 million as of the end of Q3 2021
  • The number of active sellers8 on Yandex.Market marketplace increased by 178% year-on-year and reached 17.7 thousand as of the end of Q3 2021

(7) An active buyer is a buyer who made at least 1 purchase in the last 12 months prior to the reporting date.

(8) An active seller is a seller who made at least 1 sale in the last 1 month prior to the reporting date.

The table below presents the financial results of the Yandex.Market segment on a like-for-like basis for the full three and nine months periods ended September 30, 2020 and 2021.

             
In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2020 *

2021

Change

2020 *

2021

Change

GMV of Yandex.Market

 10,145

 31,620

212%

 28,920

 75,980

163%

Revenues:

 6,910

 8,662

25%

 20,172

 24,834

23%

     Revenues from sale of goods (1P)

 3,377

 5,795

72%

 10,860

 17,298

59%

     Commission and other marketplace revenues (3P)

 1,367

 1,941

42%

 3,035

 3,582

18%

     CPC revenues9

 2,166

 926

-57%

 6,277

 3,954

-37%

Adjusted EBITDA:

 (1,221)

 (11,673)

n/m

 (5,257)

 (28,079)

n/m

Adjusted EBITDA margin:

-17.7%

-134.8%

-117.1 pp

-26.1%

-113.1%

-87.0 pp

* Financial results of Yandex.Market for the three and nine months ended September 30, 2020 were included in Yandex’s consolidated financial results on a consolidated basis since July 24, 2020. Yandex’s portion of the results of Yandex.Market prior the date of acquisition were recognized in the line item “Loss from equity method investments”.

(9) CPC revenues are defined as revenues from price comparison services priced on a CPC (cost-per-click) basis and recognized only when a user clicks on product offerings placed by merchants on Yandex.Market. Marketplace revenues (from sales of goods (1P) and commission and other marketplace revenues (3P)) are priced on CPA (cost per action) model.

The GMV of Yandex.Market marketplace accelerated to 212% year-on-year in Q3 2021 compared with 144% in Q2 2021. The acceleration was driven by a combination of factors, including audience growth, significant expansion in assortment and logistics infrastructure, swift transition of merchants from CPC to CPA (powered by dropship by seller “DBS” model), product improvement, as well as support from the integration with our Yandex Plus program.

Yandex.Market total revenues grew 25% in Q3 2021 compared with Q3 2020. The slower-than-GMV revenue growth is explained by the changes in marketplace revenue mix (increase in the share of 3P GMV to 78% in Q3 2021 compared with 60% in Q3 2020), the decrease of the merchants commission as well as the decline in price comparison revenue (by 57% year-on-year on the back of the conversion of merchants from CPC to our 3P marketplace model). Revenues from sale of goods (1P) grew 72% and were influenced by overall business growth and partially offset by a decrease in 1P as a share of GMV. Commission and other marketplace revenues (3P) increased by 42% driven by the overall growth of 3P GMV, partially offset by the decrease of the merchant commissions and 3P blended take-rates (on the back of the expansion of the DBS model).

Adjusted EBITDA loss of the Yandex.Market business was RUB 11.7 billion in Q3 2021,reflecting investments in the growth of our operations, including an expansion of our logistics infrastructure by adding 10 logistics premises, launch of an Express delivery, preparation for the launch of a fashion category as well as targeted marketing campaigns to expand customer base and strengthen our brand’s recognition as a multicategory marketplace (including a TV campaign with Yandex Plus).

Media Services

The Media Services segment includes our subscription service Yandex Plus, Yandex.Music, KinoPoisk, Yandex.Afisha and our production center Yandex.Studio.

Key operational trends:

  • Number of Yandex Plus subscribers reached 10.3 million as of the end of Q3 2021, up 102% from the end of Q3 2020
             
In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2020

2021

Change

2020

2021

Change

Revenues

1,773 

4,311 

143%

4,906 

11,891 

142%

Adjusted EBITDA

(1,027)

(1,589)

55%

(2,594)

(4,578)

76%

Adjusted EBITDA margin

-57.9%

-36.9%

21 pp

-52.9%

-38.5%

14.4 pp

Media Services revenues grew 143% in Q3 2021 compared with Q3 2020. The increase was primarily driven by the growth of Yandex Plus subscription on the back of the rapid growth of paying members of the Yandex Plus program as well as other revenue streams, including advertising and newly developing licensing revenues (due to increased activities in licensing sales of KinoPoisk Originals and sublicensing of exclusives). The adjusted EBITDA losses of RUB 1.6 billion reflect our investments in content (including original and exclusive content) and marketing to support the growth of the Yandex Plus subscriber base.

Classifieds

The Classifieds segment includes Auto.ru, Yandex.Realty, Yandex.Jobs, and Yandex Classifieds.

             
In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2020

2021

Change

2020

2021

Change

Revenues

1,586 

2,078 

31%

3,960 

5,856 

48%

Adjusted EBITDA

495 

468 

-5%

471 

1,581 

236%

Adjusted EBITDA margin

31.2%

22.5%

-8.7 pp

11.9%

27.0%

15.1 pp

Classifieds revenues increased by 31% in Q3 2021 compared with Q3 2020 and was driven mainly by the increase in revenues from auto dealers’ listings, the launch of our auction model and a respective increase in prices. Auto finance and insurance services revenue has grown by more than 2.8x as compared to Q3 2020 due to the fine-tuning of our monetization strategies and a number of operational improvements in the brokerage model. The Adjusted EBITDA decreased by 5% in Q3 2021 compared with Q3 2020, driven by increased investments into the development and marketing of new products, which allowed for improvement to our market share despite intensifying competition.

Other Business Units and Initiatives

The Other Business Units and Initiatives segment includes our self-driving vehicles business (“Yandex SDG”), Zen, Yandex.Cloud, Yandex.Education, Devices, FinTech, Yandex.Uslugi (“Services”) and Yandex.Lavka experiments in international markets (“Lavka Overseas”), as well as several other experiments.

Key operational trends:

  • Zen's daily average users was 20.6 million in September 2021, up 7% from June 2021 and 13% from September 2020
  • Share of video as percentage of time spent on Zen is around 40% as of the end of September 2021 compared to 28% in the end of June 2021 and 19% in the end of September 2020
             
In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2020

2021

Change

2020

2021

Change

Revenues

2,703 

5,812 

115%

6,485 

15,440 

138%

Adjusted EBITDA

(2,006)

(3,563)

78%

(5,713)

(9,367)

64%

Adjusted EBITDA margin

-74.2%

-61.3%

12.9 pp

-88.1%

-60.7%

27.4 pp

Other Business Units and Initiatives revenues increased 115% in Q3 2021 compared with Q3 2020. The increase was primarily driven by the fast growth in Devices (revenue increased 160% year-on-year to RUB 2.2 billion in Q3 2021 on the back of the strong demand for our stations), Zen and Cloud.

Adjusted EBITDA loss amounted to RUB 3.6 billion, up from a loss of RUB 2.0 billion in Q3 2020, as a result of increased investments in Zen and Yandex SDG (where adjusted EBITDA loss was RUB 1.1 billion in Q3 2021) and launch of new experiments, which did not exist a year ago, such as FinTech, Services, Lavka Overseas and other initiatives. The Adjusted EBITDA margin of the Devices business has improved from -26.5% in Q3 2020 to -9.2% in Q3 2021, primarily driven by increasing economies of scale, optimization of procurement prices, logistics costs and positive foreign exchange effect.

Eliminations

Eliminations related to our revenues represent the elimination of transactions between the reportable segments, including advertising revenues, intercompany revenues related to brand royalties, data centers, logistics service, devices intercompany sales and others.

             
In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2020

2021

Change

2020

2021

Change

Revenues:

 

 

 

 

 

 

Segment revenues

61,894 

97,587 

58%

154,425 

263,995 

71%

Eliminations

(3,559)

(6,282)

77%

(7,680)

(18,152)

136%

Total revenues

58,335 

91,305 

57%

146,745 

245,843 

68%

Adjusted EBITDA:

 

 

 

 

 

 

Segment adjusted EBITDA

14,906 

5,550 

-63%

35,344 

22,184 

-37%

Eliminations

78 

72 

-8%

236 

239 

1%

Total adjusted EBITDA

14,984 

5,622 

-62%

35,580 

22,423 

-37%

Eliminations related to our revenues increased 77% in Q3 2021 compared with Q3 2020. On a like-for-like basis (including Yandex.Market in both Q3 2021 and Q3 2020), eliminations related to our revenues increased 69% in Q3 2021. The increase was mainly attributed to higher intercompany TAC related to fast growing Zen business, intercompany revenue in Search and Portal (related to brand royalties, data centers rent paid by business units as well as cross-service advertising and marketing activities) as well as the intercompany eliminations related to logistics activities between Yandex.Market and Yandex.Taxi.

Consolidated revenues breakdown10

(10) The full definition of our consolidated revenues by source is presented under the caption “Revenues” in Item 5 in our Annual Report on Form 20-F for the year ended December 31, 2020.

             
In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2020

2021

Change

2020

2021

Change

Online advertising revenues

 33,179

 42,605

28%

 88,048

 118,187

34%

Revenues related to Taxi segment, excluding sales of goods

 15,801

 26,279

66%

 39,825

 68,460

72%

Revenues related to sales of goods

 5,922

 13,971

136%

 9,997

 38,252

283%

Other revenues

 3,433

 8,450

146%

 8,875

 20,944

136%

Total revenues

 58,335

 91,305

57%

 146,745

 245,843

68%

Online advertising revenues in Q3 2021 on a like-for-like basis (including revenues of Yandex.Market for the full three and nine months periods ended September 30, 2020) grew 27% year-on-year; excluding TAC they grew 23%. On a two-year stack basis online advertising revenues grew by 14%, excluding TAC by 15%.

Consolidated Operating Costs and Expenses

Our 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 include personnel-related costs and expenses, relevant office space rental, and related share-based compensation expenses. Increases across all cost categories reflect investments in overall growth. In Q3 2021 our headcount increased by 2,356 full-time employees. The total number of full-time employees was 17,206 as of September 30, 2021, up by 16% compared with June 30, 2021, and up 50% from September 30, 2020, which was primarily driven by the accelerated pace of hiring in E-commerce (including Yandex.Market, Yandex.Lavka and Yandex.Eats) and Search and Portal as well as by the fast growth of Ride-hailing, Media Services, Cloud and other businesses.

Cost of revenues, including traffic acquisition costs (TAC)

             
In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2020

2021

Change

2020

2021

Change

TAC

 4,516

 6,875

52%

 14,030

 18,507

32%

Total TAC as a % of total revenues

7.7%

7.5%

-0.2 pp

9.6%

7.5%

-2.1 pp

Costs related to Taxi segment, excluding sales of goods

 7,520

 14,298

90%

 19,919

 36,341

82%

Costs related to Taxi segment, excluding sales of goods as a % of revenues

12.9%

15.7%

2.8 pp

13.6%

14.8%

1.2 pp

Cost of devices and other goods sold11

 5,019

 12,358

146%

 8,384

 34,692

314%

Cost of devices and other goods sold as a % of revenues

8.6%

13.5%

4.9 pp

5.7%

14.1%

8.4 pp

Other cost of revenues

 5,086

 12,140

139%

 11,955

 31,947

167%

Other cost of revenues as a % of revenues

8.7%

13.3%

4.6 pp

8.1%

13.0%

4.9 pp

Total cost of revenues

 22,141

 45,671

106%

 54,288

 121,487

124%

Total cost of revenues as a % of revenues

38.0%

50.0%

12.0 pp

37.0%

49.4%

12.4 pp

(11) Including sales of 1P products on Yandex.Market marketplace.

TAC grew 52% in Q3 2021 compared with Q3 2020 and represented 7.5% of total revenues, down 20 basis points compared with Q3 2020. The year-on-year dynamic of TAC as a share of revenue was primarily driven by a decrease in the share of advertising revenues as a percentage of total revenues as well as the optimization of TAC rates.

Operating Expenses

             
In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2020

2021

Change

2020

2021

Change

Product development

 9,414

 12,222

30%

 26,312

 34,465

31%

As a % of revenues

16.1%

13.4%

-2.7 pp

17.9%

14.0%

-3.9 pp

Sales, general and administrative

 15,742

 32,961

109%

 41,740

 83,532

100%

As a % of revenues

27.0%

36.1%

9.1 pp

28.4%

34.0%

5.6 pp

Depreciation and amortization

 4,780

 6,135

28%

 12,842

 17,033

33%

As a % of revenues

8.2%

6.7%

-1.5 pp

8.8%

6.9%

-1.9 pp

Total operating expenses

 29,936

 51,318

71%

 80,894

 135,030

67%

As a % of revenues

51.3%

56.2%

4.9 pp

55.1%

54.9%

-0.2 pp

Total operating expenses increased 71% in Q3 2021 compared with Q3 2020. On a like-for-like basis (including Yandex.Market in both Q3 2021 and Q3 2020) total operating expenses increased 68% in Q3 2021 mainly due to an increase in advertising and performance marketing activities to support our market share gains and expansion of our customer base in a number of services (primarily, E-commerce businesses and our Yandex Plus subscription program) as well as in personnel expenses, which supported GMV growth acceleration of Yandex.Market and revenue growth of Taxi and Search and Portal. Q3 2021 dynamics were also affected by the low operating costs base in Q3 2020 due to pandemic-related cost optimization measures that were implemented in 2020.

             
In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2020

2021

Change

2020

2021

Change

SBC expense included in cost of revenues

 111

 117

5%

 325

 367

13%

SBC expense included in product development

 2,337

 2,734

17%

 6,617

 8,768

33%

SBC expense included in SG&A

 1,505

 2,284

52%

 3,971

 6,666

68%

Total SBC expense

 3,953

 5,135

30%

 10,913

 15,801

45%

As a % of revenues

6.8%

5.6%

-1.2 pp

7.4%

6.4%

-1.0 pp

Total SBC expense increased 30% in Q3 2021 compared with Q3 2020. The growth primarily reflects new equity-based grants made in 2020-2021 as well as the increased share price of Yandex N.V., largely offset by the high base effect related to the exchange of Yandex.Market and MLU equity awards for new Yandex N.V. RSUs in Q3 2020.

Income/(loss) from operations

             
In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2020

2021

Change

2020

2021

Change

Income/(loss) from operations

 6,258

 (5,684)

n/m

 11,563

 (10,674)

n/m

Loss from operations amounted to RUB 5.7 billion in Q3 2021 compared to income from operations of RUB 6.3 billion in Q3 2020. Including Yandex.Market in both periods, income from operations in Q3 2020 was RUB 5.9 billion. The decrease reflects the changes in segment mix amid the continuing investments in our rapidly growing new businesses (primarily Yandex.Market, FoodTech and Media Services).

Adjusted EBITDA decreased 62% in Q3 2021 compared with Q3 2020. On a like-for-like basis (including Yandex.Market in both Q3 2021 and Q3 2020), adjusted EBITDA decreased 62%. The decline was mainly driven by investments in E-commerce (including Yandex.Market, Yandex.Lavka and Yandex.Eats), Other Business Units and Initiatives (including Yandex SDG, Zen, FinTech and other experiments) and Media Services, which were partially offset by Search and Portal and Ride-hailing revenue growth.

Interest income increased 14% in Q3 2021 compared with Q3 2020, reflecting an increase in interest rates. 

Interest expense grew 30% in Q3 2021 compared with Q3 2020, reflecting our investments in the finance lease of warehouses for Yandex.Market and cars for car-sharing business.

Foreign exchange gain decreased insignificantly by RUB 101 million in Q3 2021 compared with Q3 2020 as the Russian ruble remained stable in both quarters.

Income tax expense for Q3 2021 was RUB 1,122 million, down from RUB 3,573 million in Q3 2020. Our effective tax rate in Q3 2021 was negative of 40.3% compared to positive tax rate of 14.1% in Q3 2020. If we remove the effects of deferred tax asset valuation allowances, SBC expense and tax on dividends our effective tax rate for Q3 2021 was 26.6%, compared to 21.5% for Q3 2020 as adjusted for similar effects in that period, as well as gain on Yandex.Market consolidation and loss on Yandex.Money disposal. The increase in the tax rate without above-mentioned effects was primarily driven by the permanent difference between US GAAP and tax accounting in the books of certain of our subsidiaries. In Q3 2021 we made adjustments to our policy for dividend distributions by Yandex LLC, our principal Russian operating subsidiary, to Yandex N.V. reflecting our plans to re-invest a larger share of our profits into numerous attractive opportunities and businesses in Russia. As a result of these changes, which reduced the amount of distributions deemed to be made for tax purposes, we recognized a gain in the amount of RUB 1,965 million.

Net loss was RUB 3.9 billion ($53.7 million) in Q3 2021, compared with net income of RUB 21.8 billion in Q3 2020. Apart from the described above drivers that affected the results of operations and income taxes the change in net income/(loss) was driven by one-off gain from the consolidation of Yandex.Market in Q3 2020, and gain on investments revaluation in Q3 2021.

Adjusted net income decreased 82% compared with Q3 2020, primarily driven by the decline in the results of operations partly offset by gain on investments revaluation and decrease of income tax expense. Respective adjusted net income margin down 1,140 basis points from 12.9% in Q3 2020 to 1.5% in Q3 2021.

As of September 30, 2021, Yandex had cash, cash equivalents and term deposits of RUB 134.6 billion ($1,850.1 million), including cash, cash equivalents and term deposits of Yandex.Taxi.

Net cash flow provided by operating activities for Q3 2021 was RUB 2.2 billion ($30.3 million) and capital expenditures were RUB 8.5 billion ($116.8 million).

The total number of shares issued and outstanding as of September 30, 2021 was 358,558,997, including 322,860,322 Class A shares, 35,698,674 Class B shares, and one Priority share and excluding 940,157 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. Any such Class C shares will be cancelled.

There were also employee share options outstanding to purchase up to an additional 2.9 million shares, at a weighted average exercise price of $44.26 per share, 1.7 million of which were fully vested; equity-settled share appreciation rights (SARs) for 0.1 million shares, at a weighted average measurement price of $32.85, all of which were fully vested; restricted share units (RSUs) covering 14.1 million shares, of which RSUs to acquire 4.7 million shares were fully vested; performance share units (PSUs) for 0.4 million shares, none of which were vested or earned, and synthetic options for 2.0 million, 0.6 million of which were fully vested.

Impact of the COVID-19 Pandemic

In Q3 2021 we have seen a continuing strengthening of the Russian economy as well as gradual recovery of consumer demand across our key markets. The growth rates of our key businesses, advertising and ride-hailing, have normalized in Q3 2021 compared to Q2 2021, which was influenced by the lower base as a result of the pandemic. The businesses that saw an acceleration of demand during the pandemic continued to demonstrate solid growth trends on the back of fewer COVID-19 restrictions, including our FoodTech businesses, Yandex.Market marketplace and Media Services. We believe this is related to the change in consumer behavior and habits, and low penetration of these services in Russia.

The number of new COVID-19 cases in Russia started to grow again in September and October and reached a new record high. As such, many regions in Russia began to introduce various lockdown measures and restrictions. The performance in the upcoming months will highly depend on the epidemiological situation in Russia and the magnitude of the potential restrictive measures implemented by authorities.

With regards to our financial position as of the end of September 30, 2021, our analysis of the effect from COVID-19 on goodwill, non-current assets and redeemable non-controlling interests shows no measurable impact. The development of the situation with respect to COVID-19 may also lead to changes in estimates and assumptions that affect the reported amounts of assets and liabilities. Actual results could differ from those estimates.

Conference Call Information

Yandex’s management will hold an earnings conference call on October 27, 2021 at 8:00 AM U.S. Eastern Time (3:00 PM Moscow time; 1:00 PM London time).

We recommend using the dial-in option if you plan to ask questions. In this case please dial-in at least 10 minutes prior to the call start time (using dial-in number and confirmation code stated below).

To access the conference call live, please dial:

US: +1 929 477 0402

UK/International: +44 (0) 330 336 9125

Russia: +7 495 213 1767

Passcode: 6487932

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

https://www.webcast-eqs.com/yandex20211027

Following the call, a webcast replay will be available at the Yandex Investor Relations website at https://ir.yandex/events-and-presentations 

ABOUT YANDEX

Yandex (NASDAQ and MOEX: 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 more than 30 offices worldwide, has been listed on the NASDAQ since 2011 and on the MOEX since 2014.

More information on Yandex can be found at https://ir.yandex/.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements that involve risks and uncertainties. All statements contained in this press release other than statements of historical facts, including, without limitation, statements regarding our future financial and business performance, our business and strategy and the impact of the COVID-19 pandemic on our industry, business and financial results, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “guide,” “intend,” “likely,” “may,” “will” and similar expressions and their negatives are intended to identify forward-looking statements. 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, the impact of the ongoing COVID-19 pandemic and regulatory and business responses to that crisis, macroeconomic and geopolitical developments affecting the Russian economy or our business, changes in the political, legal and/or regulatory environment, competitive pressures, changes in advertising patterns, changes in user preferences, 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, 2020 and “Risk Factors” in the Shareholder Circular filed as Exhibit 99.2 to our Current Report on Form 6-K, which were filed with the U.S. Securities and Exchange Commission (SEC) on April 1, 2021 and November 18, 2019, respectively, and are available on our investor relations website at https://ir.yandex/sec-filings and on the SEC website at https://www.sec.gov/. All information in this release and in the attachments is as of October 27, 2021, and Yandex undertakes no duty to update this information unless required by law.

USE OF NON-GAAP FINANCIAL MEASURES

To supplement the financial information 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 net income, adjusted net income margin, financial results on a like-for-like basis including Yandex.Market. 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/(loss) plus (1) depreciation and amortization, (2) SBC expense, (3) interest expense, (4) income tax expense/(benefit), (5) one-off restructuring expenses, (6) accrual of expense related to the contingent compensation payable to employees in connection with certain business combinations, (7) loss from equity method investments, less (1) interest income and (2) other income, net
  • Adjusted EBITDA margin means adjusted EBITDA divided by U.S. GAAP revenues
  • Adjusted net income means U.S. GAAP net income/(loss) plus (1) SBC expense adjusted for the income tax attributable to the SBC expense, (2) accrual of expense related to the contingent compensation payable to certain employees in connection with certain business combinations, (3) one-off restructuring expenses adjusted for the related reduction in income tax, (4) amortization of debt discount related to our convertible debt adjusted for the related reduction in income tax, (5) foreign exchange losses/(gains) adjusted for (reduction)/increase in income tax attributable to foreign exchange losses/(gains)
  • Adjusted net income margin means adjusted net income divided by U.S. GAAP revenues
  • Financial results on a like-for-like basis including Yandex.Market means revenues, ex-TAC revenues, income from operations, adjusted EBITDA, adjusted net income and net income of the combined results of operations as if the acquisition of Yandex.Market completed as of January 1, 2020. These amounts have been calculated after the elimination of revenue related to intercompany transactions and adjusting the results of Yandex.Market to reflect amortization associated with intangibles acquired and related income tax results

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 bonuses but, unlike sales bonuses, are not deducted from U.S. GAAP revenues. By presenting revenue, 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

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 EBITDA, adjusted net income and related margin measures excluding these effects, in order to provide greater clarity regarding our operating performance.

One-off restructuring expenses

Adjusted net income and adjusted EBITDA exclude expenses related to restructuring targeted amendments to Corporate Governance Structure approved by shareholders in December 2019.  We believe that it is useful to present adjusted net income, adjusted EBITDA and related margin measures excluding impacts not related to our operating activities.

Effect of Yandex.Market consolidation 

We adjust net income and EBITDA for gain on Yandex.Market consolidation. We have eliminated this gain from adjusted net income and adjusted EBITDA as we believe that it is useful to present adjusted net income, adjusted EBITDA and related margins measures excluding impacts not related to our operating activities. 

Loss from disposal of investment in Yandex.Money 

We adjust net income for loss from disposal of investment in Yandex.Money. We have added this loss to adjusted net income as we believe that it is useful to present adjusted net income and related margin measures excluding impacts not related to our operating activities.

Amortization of debt discount

We also adjust net income for interest expense representing amortization of the debt discount related to our convertible senior notes due 2025 issued in Q1 2020. 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.

The tables at the end of this release provide detailed reconciliations of each non-GAAP financial measure we use from 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,

 

September 30, 

 

September 30, 

   

2020*

 

2021

 

2021

   

RUB

 

RUB

 

$

ASSETS  

 

 

 

 

 

    Cash and cash equivalents   

 132,398

 

 81,425

 

 1,119.1

    Term deposits   

 105,787

 

 53,189

 

 731.0

    Investments in marketable equity securities  

 -

 

 3,792

 

 52.1

    Accounts receivable, net   

 25,440

 

 32,111

 

 441.3

    Prepaid expenses  

 6,727

 

 12,902

 

 177.4

    Inventory  

 4,810

 

 7,039

 

 96.7

    Funds receivable, net   

 2,289

 

 2,685

 

 36.9

    Investments in debt securities  

 -

 

 657

 

 9.0

    VAT reclaimable  

 7,573

 

 12,310

 

 169.2

    Other current assets   

 5,377

 

 6,957

 

 95.6

            Total current assets  

 290,401

 

 213,067

 

 2,928.3

    Property and equipment, net   

 61,772

 

 88,788

 

 1,220.3

    Operating lease right-of-use assets  

 20,800

 

 37,097

 

 509.8

    Intangible assets, net   

 21,842

 

 22,946

 

 315.4

    Content assets, net  

 7,464

 

 12,704

 

 174.6

    Goodwill  

 104,275

 

 117,701

 

 1,617.6

    Long-term prepaid expenses  

 1,391

 

 3,011

 

 41.5

    Investments in non-marketable equity securities   

 1,135

 

 3,923

 

 53.9

    Deferred tax assets  

 1,639

 

 5,736

 

 78.8

    Other non-current assets   

 4,893

 

 7,620

 

 104.7

            Total non-current assets  

 225,211

 

 299,526

 

 4,116.6

                 TOTAL ASSETS  

 515,612

 

 512,593

 

 7,044.9

LIABILITIES AND SHAREHOLDERS’ EQUITY  

 

 

 

 

 

    Accounts payable and accrued liabilities  

 43,634

 

 87,172

 

 1,198.0

    Income and non-income taxes payable   

 12,573

 

 12,804

 

 176.0

    Deferred revenue    

 6,645

 

 7,777

 

 106.9

    Bank deposits and liabilities, current  

 -

 

 91

 

 1.3

            Total current liabilities  

 62,852

 

 107,844

 

 1,482.2

    Convertible debt  

 83,277

 

 83,549

 

 1,148.3

    Deferred tax liabilities  

 3,705

 

 2,910

 

 40.0

    Operating lease liabilities  

 12,830

 

 26,218

 

 360.3

    Finance lease liabilities  

 3,387

 

 13,697

 

 188.2

    Bank deposits and liabilities, non current  

 -

 

 141

 

 1.9

    Other accrued liabilities   

 1,459

 

 4,109

 

 56.6

            Total non-current liabilities  

 104,658

 

 130,624

 

 1,795.3

                 Total liabilities  

 167,510

 

 238,468

 

 3,277.5

Redeemable noncontrolling interests  

 3,167

 

 1,058

 

 14.5

Shareholders’ equity:  

 

 

 

 

 

Priority share: €1 par value; 1 share authorized, issued and outstanding  

 

 

Ordinary shares: par value (Class A €0.01, Class B €0.10 and Class C €0.09); shares authorized (Class A: 500,000,000, Class B: 37,138,658 and Class C: 37,748,658); shares issued (Class A: 320,430,479 and 323,800,479, Class B: 35,708,674 and 35,698,674, and Class C: 1,429,984 and 10,000, respectively); shares outstanding (Class A: 318,501,858 and 322,860,322, Class B: 35,708,674 and 35,698,674, and Class C: nil)  

 278

 

 281

 

 3.9

Treasury shares at cost (Class A: 1,928,621 and 940,157, Priority share: nil and nil, respectively)  

 (6)

 

 (3,361)

 

 (46.2)

Additional paid-in capital   

 160,857

 

 108,804

 

 1,495.4

Accumulated other comprehensive income   

 17,923

 

 16,570

 

 227.7

Retained earnings   

 145,789

 

 135,920

 

 1,868.0

            Total equity attributable to Yandex N.V.  

 324,841

 

 258,214

 

 3,548.8

Noncontrolling interests  

 20,094

 

 14,853

 

 204.1

            Total shareholders’ equity   

 344,935

 

 273,067

 

 3,752.9

                 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY  

 515,612

 

 512,593

 

 7,044.9

    Derived from audited consolidated financial statements and revised in the first quarter of 2021 due to immaterial discrepancies


 

YANDEX N.V.

Unaudited Condensed Consolidated Statements of Operations

(in millions of Russian rubles and U.S. dollars, except share and per share data)

             
   

Three months ended September 30, 

   

2020

 

2021

 

2021

   

RUB

 

RUB

 

$

   

 

       
Revenues  

58,335

 

91,305

 

1,254.9

Operating costs and expenses:  

 

 

 

 

 

Cost of revenues(1)  

22,141

 

45,671

 

627.7

Product development(1)   

9,414

 

12,222

 

168.0

Sales, general and administrative(1)  

15,742

 

32,961

 

453.0

Depreciation and amortization   

4,780

 

6,135

 

84.3

    Total operating costs and expenses  

52,077

 

96,989

 

1,333.0

Income/(loss) from operations  

6,258

 

 (5,684)

 

 (78.1)

Interest income  

1,009

 

1,146

 

15.8

Interest expense  

 (723)

 

 (938)

 

 (12.9)

Effect of Yandex.Market consolidation  

 19,230

 

 -

 

 -

Income/(loss) from equity method investments  

 (94)

 

 4

 

 0.1

Other income/(loss), net  

 (346)

 

 2,686

 

 36.8

    Net income/(loss) before income taxes  

 25,334

 

 (2,786)

 

 (38.3)

Income tax expense  

 3,573

 

 1,122

 

 15.4

    Net income/(loss)  

 21,761

 

 (3,908)

 

 (53.7)

Net loss attributable to noncontrolling interests  

 239

 

 523

 

 7.2

    Net income/(loss) attributable to Yandex N.V.  

 22,000

 

 (3,385)

 

 (46.5)

Net income/(loss) per Class A and Class B share:  

 

 

 

 

 

Basic  

 62.61

 

 (9.32)

 

 (0.13)

Diluted  

 60.72

 

 (9.32)

 

 (0.13)

Weighted average number of Class A and Class B
shares used in per share computation
           
Basic  

351,372,700

 

363,390,831

 

363,390,831

Diluted  

361,941,154

 

363,390,831

 

363,390,831

   

 

 

 

 

 

(1)        These balances exclude depreciation and amortization expenses, which are presented separately, and include share-based compensation expenses of:
             
Cost of revenues  

111

 

117

 

1.6

Product development  

2,337

 

2,734

 

37.6

Sales, general and administrative  

1,505

 

2,284

 

31.4

 

YANDEX N.V.

Unaudited Condensed Consolidated Statements of Operations

(in millions of Russian rubles and U.S. dollars, except share and per share data)

               
   

Nine months ended September 30, 

 
   

2020

 

2021

 

2021

 
   

RUB

 

RUB

 

$

 
   

 

         
Revenues  

146,745

 

245,843

 

3,378.8

 
Operating costs and expenses:  

 

 

 

 

 

 

Cost of revenues(1)  

54,288

 

121,487

 

1,669.7

 
Product development(1)   

26,312

 

34,465

 

473.7

 
Sales, general and administrative(1)  

41,740

 

83,532

 

1,148.0

 
Depreciation and amortization   

12,842

 

17,033

 

234.1

 
    Total operating costs and expenses  

135,182

 

256,517

 

3,525.5

 
Income/(loss) from operations  

11,563

 

 (10,674)

 

 (146.7)

 
Interest income  

2,708

 

3,503

 

 48.1

 
Interest expense  

 (1,626)

 

 (2,592)

 

 (35.6)

 
Effect of Yandex.Market consolidation  

 19,230

 

 -

 

 -

 
Loss from equity method investments  

 (2,177)

 

 (2)

 

 -

 
Other income, net  

 2,976

 

 3,375

 

 46.4

 
    Net income/(loss) before income taxes  

 32,674

 

 (6,390)

 

 (87.8)

 
Income tax expense  

 9,229

 

 5,402

 

 74.3

 
    Net income/(loss)  

 23,445

 

 (11,792)

 

 (162.1)

 
Net loss attributable to noncontrolling interests  

 952

 

 1,551

 

 21.4

 
    Net income/(loss) attributable to Yandex N.V.  

 24,397

 

 (10,241)

 

 (140.7)

 
Net income/(loss) per Class A and Class B share:  

 

 

 

 

 

 
Basic  

72.49

 

 (28.28)

 

 (0.39)

 
Diluted  

70.27

 

 (28.28)

 

 (0.39)

 
Weighted average number of Class A and Class B
shares used in per share computation
             
Basic  

336,558,174

 

362,097,366

 

362,097,366

 
Diluted  

346,728,394

 

362,097,366

 

362,097,366

 
   

 

 

 

 

 

 
(1)        These balances exclude depreciation and amortization expenses, which are presented separately, and include share-based compensation expenses of:  
               
Cost of revenues  

325

 

367

 

5.0

 
Product development  

6,617

 

8,768

 

120.5

 
Sales, general and administrative  

3,971

 

6,666

 

91.7

 


 

YANDEX N.V.

Unaudited Condensed Consolidated Statements of Cash Flows

(in millions of Russian rubles and U.S. dollars)

             
   

Three months ended September 30, 

   

2020

 

2021

 

2021

   

RUB

 

RUB

 

$

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:            
Net income/(loss)  

 21,761

 

 (3,908)

 

 (53.7)

Adjustments to reconcile net income/(loss) to net cash provided by operating activities:            
     Depreciation of property and equipment  

 3,549

 

 4,704

 

 64.6

     Amortization of intangible assets  

 1,231

 

 1,431

 

 19.7

     Amortization of content assets  

 728

 

 2,373

 

 32.6

     Operating lease right-of-use assets amortization and the lease liability accretion  

 2,890

 

 3,010

 

 41.4

     Amortization of debt discount and issuance costs  

 504

 

 518

 

 7.1

     Share-based compensation expense  

 3,953

 

 5,135

 

 70.6

     Deferred income tax expense/(benefit)  

 (707)

 

 (1,338)

 

 (18.4)

     Foreign exchange gains  

 (478)

 

 (377)

 

 (5.2)

     Loss/(income) from equity method investments  

 94

 

 (4)

 

 (0.1)

     Effect of Yandex.Market consolidation  

 (19,230)

 

 -

 

 -

     Other  

 980

 

 (2,468)

 

 (33.9)

Changes in operating assets and liabilities excluding the effect of acquisitions:            
     Accounts receivable, net  

 (1,331)

 

 (3,961)

 

 (54.4)

     Prepaid expenses and other assets  

 4,049

 

 (3,967)

 

 (54.5)

     Inventory  

 (2,944)

 

 (269)

 

 (3.6)

     Accounts payable and accrued liabilities  

 4,406

 

 3,990

 

 54.8

     Deferred revenue  

 490

 

 886

 

 12.2

     Bank deposits and liabilities  

 -

 

 (48)

 

 (0.7)

     Content assets  

 (2,194)

 

 (2,056)

 

 (28.3)

     Content liabilities  

 1,151

 

 (1,449)

 

 (19.9)

          Net cash provided by operating activities  

 18,902

 

 2,202

 

 30.3

CASH FLOWS (USED IN)/PROVIDED BY INVESTING ACTIVITIES:            
Purchases of property and equipment and intangible assets  

 (4,694)

 

 (8,498)

 

 (116.8)

Proceeds from sale of property and equipment  

 36

 

 28

 

 0.4

Acquisitions of businesses, net of cash acquired  

 (33,374)

 

 (962)

 

 (13.2)

Investments in non-marketable equity securities  

 -

 

 (393)

 

 (5.4)

Proceeds from sale of marketable equity securities  

 -

 

 2,917

 

 40.1

Investments in term deposits  

 (145,965)

 

 (53,425)

 

 (734.3)

Maturities of term deposits  

 67,870

 

 121,423

 

 1,668.8

Loans granted  

 -

 

 (543)

 

 (7.4)

Proceeds from repayments of loans  

 375

 

 700

 

 9.6

          Net cash (used in)/provided by investing activities  

 (115,752)

 

 61,247

 

 841.8

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:            
Proceeds from exercise of share options  

 40

 

 175

 

 2.4

Repurchases of share options  

 -

 

 (25)

 

 (0.3)

Payment of debt issuance costs  

 (11)

 

 -

 

 -

Ordinary shares issuance costs  

 (87)

 

 -

 

 -

Repurchases of ordinary shares  

 -

 

 (3,530)

 

 (48.5)

Payment of contingent consideration and holdback amount  

 (53)

 

 (5,494)

 

 (75.5)

Payment for finance leases  

 (171)

 

 (234)

 

 (3.2)

Other financing activities  

 (47)

 

 (154)

 

 (2.2)

Purchase of redeemable noncontrolling interests  

 (3,031)

 

 (525)

 

 (7.2)

Purchase of non-redeemable noncontrolling interests  

 (1,709)

 

 (58,363)

 

 (802.1)

          Net cash used in financing activities  

 (5,069)

 

 (68,150)

 

 (936.6)

Effect of exchange rate changes on cash and cash equivalents, and restricted cash and cash equivalents  

 11,097

 

 (1,726)

 

 (23.9)

Net change in cash and cash equivalents, and restricted cash and cash equivalents  

 (90,822)

 

 (6,427)

 

 (88.4)

Cash and cash equivalents, and restricted cash and cash equivalents, beginning of period  

 184,335

 

 87,914

 

 1,208.3

Cash and cash equivalents, and restricted cash and cash equivalents, end of period  

 93,513

 

 81,487

 

 1,119.9

             
Reconciliation of cash and cash equivalents, and restricted cash and cash equivalents:            
Cash and cash equivalents, beginning of period  

 184,292

 

 87,867

 

 1,207.6

Restricted cash and cash equivalents, beginning of period  

 43

 

 47

 

 0.7

Cash and cash equivalents, and restricted cash and cash equivalents, beginning of period  

 184,335

 

 87,914

 

 1,208.3

             
Cash and cash equivalents, end of period  

 93,463

 

 81,425

 

 1,119.1

Restricted cash and cash equivalents, end of period  

 50

 

 62

 

 0.8

Cash and cash equivalents, and restricted cash and cash equivalents, end of period  

 93,513

 

 81,487

 

 1,119.9


 

YANDEX N.V.

Unaudited Condensed Consolidated Statements of Cash Flows

(in millions of Russian rubles and U.S. dollars)

             
   

Nine months ended September 30, 

   

2020

 

2021

 

2021

   

RUB

 

RUB

 

$

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:            
Net income/(loss)  

 23,445

 

 (11,792)

 

 (162.1)

Adjustments to reconcile net income/(loss) to net cash provided by operating activities:            
     Depreciation of property and equipment  

 10,218

 

 12,719

 

 174.8

     Amortization of intangible assets  

 2,624

 

 4,314

 

 59.3

     Amortization of content assets  

 2,276

 

 5,445

 

 74.8

     Operating lease right-of-use assets amortization and the lease liability accretion  

 7,036

 

 8,040

 

 110.5

     Amortization of debt discount and issuance costs  

 1,141

 

 1,554

 

 21.4

     Share-based compensation expense  

 10,913

 

 15,801

 

 217.2

     Deferred income tax expense/(benefit)  

 (15)

 

 (5,403)

 

 (74.3)

     Foreign exchange gains  

 (3,632)

 

 (86)

 

 (1.2)

     Loss from equity method investments  

 2,177

 

 2

 

 -

     Effect of Yandex.Market consolidation  

 (19,230)

 

 -

 

 -

     Other  

 1,112

 

 (2,288)

 

 (31.4)

Changes in operating assets and liabilities excluding the effect of acquisitions:            
     Accounts receivable, net  

 222

 

 (6,437)

 

 (88.5)

     Prepaid expenses and other assets  

 808

 

 (17,273)

 

 (237.3)

     Inventory  

 (3,907)

 

 (2,257)

 

 (30.9)

     Accounts payable and accrued liabilities  

 (5,114)

 

 9,897

 

 136.0

     Deferred revenue  

 666

 

 1,173

 

 16.1

     Bank deposits and liabilities  

 -

 

 (48)

 

 (0.7)

     Content assets  

 (4,797)

 

 (9,603)

 

 (132.0)

     Content liabilities  

 523

 

 2,132

 

 29.3

          Net cash provided by operating activities  

 26,466

 

 5,890

 

 81.0

CASH FLOWS (USED IN)/PROVIDED BY INVESTING ACTIVITIES:          

 

Purchases of property and equipment and intangible assets  

 (17,375)

 

 (25,742)

 

 (353.8)

Proceeds from sale of property and equipment  

 74

 

 62

 

 0.9

Acquisitions of businesses, net of cash acquired  

 (33,469)

 

 (8,236)

 

 (113.2)

Investments in non-marketable equity securities  

 (15)

 

 (658)

 

 (9.0)

Proceeds from sale of marketable equity securities  

 -

 

 5,652

 

 77.7

Investments in marketable equity securities  

 -

 

 (9,869)

 

 (135.6)

Investments in term deposits  

 (267,957)

 

 (240,676)

 

 (3,307.8)

Maturities of term deposits  

 161,456

 

 292,031

 

 4,013.6

Loans granted  

 -

 

 (1,103)

 

 (15.3)

Proceeds from repayments of loans  

 391

 

 1,277

 

 17.6

          Net cash provided by/(used in) investing activities  

 (156,895)

 

 12,738

 

 175.1

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:          

 

Proceeds from exercise of share options  

 88

 

 1,039

 

 14.3

Repurchases of share options  

 (642)

 

 (67)

 

 (0.9)

Proceeds from issuance of convertible debt   

 82,046

 

 -

 

 -

Payment of debt issuance costs  

 (11)

 

 -

 

 -

Proceeds from issuance of ordinary shares  

 72,650

 

 -

 

 -

Ordinary shares issuance costs  

 (91)

 

 -

 

 -

Repurchases of ordinary shares  

 (10,165)

 

 (3,530)

 

 (48.5)

Repayments of overdraft borrowings  

 -

 

 (397)

 

 (5.5)

Payment of contingent consideration and holdback amount  

 (63)

 

 (5,504)

 

 (75.6)

Payment for finance leases  

 (311)

 

 (436)

 

 (6.0)

Other financing activities  

 (113)

 

 (286)

 

 (4.0)

Purchase of redeemable noncontrolling interests  

 (3,078)

 

 (1,194)

 

 (16.4)

Purchase of non-redeemable noncontrolling interests  

 (1,709)

 

 (58,363)

 

 (802.1)

          Net cash provided by/(used in) financing activities  

 138,601

 

 (68,738)

 

 (944.7)

Effect of exchange rate changes on cash and cash equivalents, and restricted cash and cash equivalents  

 28,888

 

 (849)

 

 (11.8)

Net change in cash, cash equivalents, and restricted cash  

 37,060

 

 (50,959)

 

 (700.4)

Cash and cash equivalents, and restricted cash and cash equivalents, beginning of period  

 56,453

 

 132,446

 

 1,820.3

Cash and cash equivalents, and restricted cash and cash equivalents, end of period  

 93,513

 

 81,487

 

 1,119.9

           

 

Reconciliation of cash and cash equivalents, and restricted cash and cash equivalents:          

 

Cash and cash equivalents, beginning of period  

 56,415

 

 132,398

 

 1,819.6

Restricted cash and cash equivalents, beginning of period  

 38

 

 48

 

 0.7

Cash and cash equivalents, and restricted cash and cash equivalents, beginning of period  

 56,453

 

 132,446

 

 1,820.3

           

 

Cash and cash equivalents, end of period  

 93,463

 

 81,425

 

 1,119.1

Restricted cash and cash equivalents, end of period  

 50

 

 62

 

 0.8

Cash and cash equivalents, and restricted cash and cash equivalents, end of period  

 93,513

 

 81,487

 

 1,119.9


 

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 September 30, 

Nine months ended September 30, 

 

2020

2021

Change

2020

2021

Change

Total revenues

 58,335

 91,305

57%

 146,745

 245,843

68%

Less: traffic acquisition costs (TAC)

 4,516

 6,875

52%

 14,030

 18,507

32%

Ex-TAC revenues

 53,819

 84,430

57%

 132,715

 227,336

71%

Reconciliation of Adjusted EBITDA to U.S. GAAP Net Income

             
In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2020

2021

Change

2020

2021

Change

Net income/(loss)

 21,761

 (3,908)

n/m

 23,445

 (11,792)

n/m

Add: depreciation and amortization

 4,780

 6,135

28%

 12,842

 17,033

33%

Add: SBC expense

 3,953

 5,135

30%

 10,913

 15,801

45%

Add: compensation expense related to contingent consideration

 (9)

 36

n/m

 -

 263

n/m

Add: one-off restructuring expenses

 2

 -

n/m

 262

 -

n/m

Less: interest income

 (1,009)

 (1,146)

14%

 (2,708)

 (3,503)

29%

Add: interest expense

 723

 938

30%

 1,626

 2,592

59%

Add: loss/(income) from equity method investments

 94

 (4)

n/m

 2,177

 2

-100%

Less: other (income)/loss, net

 346

 (2,686)

n/m

 (2,976)

 (3,375)

13%

Less: effect of Yandex.Market consolidation

 (19,230)

 -

n/m

 (19,230)

 -

n/m

Add: income tax expense

 3,573

 1,122

-69%

 9,229

 5,402

-41%

Adjusted EBITDA

 14,984

 5,622

-62%

 35,580

 22,423

-37%

 

Reconciliation of Adjusted Net Income to U.S. GAAP Net Income

             
In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2020

2021

Change

2020

2021

Change

Net income/(loss)

 21,761

 (3,908)

n/m

 23,445

 (11,792)

n/m

Add: SBC expense

 3,953

 5,135

30%

 10,913

 15,801

45%

Less: income tax attributable to SBC expense

 (41)

 -

n/m

 (89)

 -

n/m

Add: compensation expense (reversal 

of expense) related to contingent 

consideration

 (9)

 36

n/m

 -

 263

n/m

Less: foreign exchange gains

 (478)

 (377)

-21%

 (3,632)

 (86)

-98%

Add: increase in income tax attributable to foreign exchange gains

 288

 66

-77%

 1,171

 9

-99%

Add: one-off restructuring expenses

 (1)

 -

n/m

 218

 -

n/m

Add: loss from disposal of investment in Yandex.Money

 900

 -

n/m

 900

 -

n/m

Less: effect of Yandex.Market consolidation

 (19,230)

 -

n/m

 (19,230)

 -

n/m

Add: amortization of debt discount

 504

 518

3%

 1,141

 1,554

36%

Less: reduction in income tax attributable to amortization of debt discount

 (126)

 (130)

3%

 (285)

 (389)

36%

Adjusted net income

 7,521

 1,340

-82%

 14,552

 5,360

-63%

 

Reconciliation of Adjusted EBITDA Margin U.S. GAAP Net Loss Margin

             
In RUB millions             
 

U.S. GAAP Actual Net Loss

Net Loss Margin (1)

Adjustment (2)

Adjusted EBITDA

Adjusted EBITDA Margin (3)

Three months ended September 30, 2021

 (3,908)

-4.3%

 9,530

 5,622

6.2%

Nine months ended September 30, 2021

 (11,792)

-4.8%

 34,215

 22,423

9.1%

(1) Net loss margin is defined as net loss divided by total revenues.

(2) Adjusted to eliminate depreciation and amortization expense, SBC expense, one-off restructuring expenses, accrual of expense related to contingent consideration, interest income, interest expense, loss/income from equity method investments, other income, net and income tax expense. For a reconciliation of adjusted EBITDA to net loss, please see the table above.

(3) Adjusted EBITDA margin is defined as adjusted EBITDA divided by total revenues.

 

Reconciliation of Adjusted Net Income Margin to U.S. GAAP Net Loss Margin

 

             
In RUB millions             
 

U.S. GAAP Actual Net Loss

Net Loss Margin (1)

Adjustment (2)

Adjusted Net Income

Adjusted Net Income Margin (3)

Three months ended September 30, 2021

 (3,908)

-4.3%

 5,248

 1,340

1.5%

Nine months ended September 30, 2021

 (11,792)

-4.8%

 17,152

 5,360

2.2%

(1) Net loss margin is defined as net income divided by total revenues.

(2) Adjusted to eliminate SBC expense (as adjusted for the income tax attributable to SBC expense), accrual of expense related to contingent consideration, foreign exchange losses/(gains) as adjusted for the reduction/(increase) in income tax attributable to the losses/(gains), one-off restructuring expenses and amortization of debt discount (as adjusted for the related reduction in income tax). For a reconciliation of adjusted net income to net loss, please see the table above.

(3) Adjusted net income margin is defined as adjusted net income divided by total revenues.

 

Reconciliation of financial results on a like-for-like basis including Yandex.Market to U.S. GAAP financial results

             
In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2020

2021

Change

2020

2021

Change

Revenues

 58,335

 91,305

57%

 146,745

 245,843

68%

Add: revenues of Yandex.Market, net of intercompany eliminations

 1,547

 -

n/m

 13,481

 -

n/m

Revenues, including Yandex.Market

 59,882

 91,305

52%

 160,226

 245,843

53%

Ex-TAC revenues

 53,819

 84,430

57%

 132,715

 227,336

71%

Add: Ex-TAC revenues related to Yandex.Market, net of intercompany eliminations

 1,508

 -

n/m

 13,049

 -

n/m

Ex-TAC revenues, including Yandex.Market

 55,327

 84,430

53%

 145,764

 227,336

56%

Online advertising revenue

 33,179

 42,605

28%

 88,048

 118,187

34%

Add: Online advertising revenue, related to Yandex.Market

 419

 -

n/m

 4,538

 -

n/m

Online advertising revenue, including Yandex.Market

 33,598

 42,605

27%

 92,586

 118,187

28%

Income/(loss) from operations

 6,258

 (5,684)

n/m

 11,563

 (10,674)

n/m

Less: depreciation and amortization of assets identified in a business combinations

 (110)

 -

n/m

 (554)

 -

n/m

Less: loss from operations of Yandex.Market, net of intercompany eliminations

 (228)

 -

n/m

 (5,575)

 -

n/m

Income/(loss) from operations, including Yandex.Market

 5,920

 (5,684)

n/m

 5,434

 (10,674)

n/m

Net income/(loss)

 21,761

 (3,908)

n/m

 23,445

 (11,792)

n/m

Less: depreciation and amortization of assets identified in a business combinations and related income tax effect

 (99)

 -

n/m

 (1,007)

 -

n/m

Less: (income)/loss of Yandex.Market

 26

 -

n/m

 (2,034)

 -

n/m

Net income/(loss), including Yandex.Market

 21,688

 (3,908)

n/m

 20,404

 (11,792)

n/m




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E-mail: pr@yandex-team.ru

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Headquarters
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