Yandex

Yandex Announces Fourth Quarter and Full-Year 2011 Financial Results

February 22, 2012

MOSCOW and THE HAGUE, Netherlands, Feb. 22, 2012 (GLOBE NEWSWIRE) -- Yandex (Nasdaq:YNDX), the leading internet company in Russia operating the country's most popular search engine and most visited website, today announced its financial results for the fourth quarter and the full year ended December 31, 2011.

Q4 2011 Financial Highlights

  • Revenues of RUR 6.4 billion ($200.0 million1), up 56% compared with Q4 2010
    Ex-TAC revenues2 (excluding traffic acquisition costs) up 50% compared with Q4 2010
  • Income from operations of RUR 2.6 billion ($80.8 million), up 44% compared with Q4 2010
  • Adjusted EBITDA2 of RUR 3.3 billion ($101.5 million), up 48% compared with Q4 2010
  • Operating margin of 40.4%
    Adjusted EBITDA margin2 of 50.8%
    Adjusted ex-TAC EBITDA margin2 of 60.1%
  • Net income of RUR 2.1 billion ($65.9 million), up 51% compared with Q4 2010
  • Adjusted net income2 of RUR 2.2 billion ($68.3 million), up 50% compared with Q4 2010
  • Net income margin of 33.0%
    Adjusted net income margin2 of 34.1%
    Adjusted ex-TAC net income margin2 of 40.4%

FY 2011 Financial Highlights

  • Revenues of RUR 20.0 billion ($622.2 million1), up 60% compared with FY 2010
    Ex-TAC revenues2 (excluding traffic acquisition costs) up 56% compared with FY 2010
  • Income from operations of RUR 7.0 billion ($218.5 million), up 46% compared with FY 2010
  • Adjusted EBITDA2 of RUR 9.2 billion ($286.9 million), up 50% compared with FY 2010
  • Operating margin of 35.1%
    Adjusted EBITDA margin2 of 46.1%
    Adjusted ex-TAC EBITDA margin2 of 54.2%
  • Net income of RUR 5.8 billion ($179.3 million), up 51% compared with FY 2010
    Adjusted net income2 of RUR 6.0 billion ($186.5 million), up 51% compared with FY 2010
  • Net income margin of 28.8%
    Adjusted net income margin2 of 30.0%
    Adjusted ex-TAC net income margin2 of 35.2%

"Yandex demonstrated strong traffic and revenue growth, capping off results for 2011 at the top end of our guidance range and building upon our clear leadership in the Russian search market," said Arkady Volozh, Chief Executive Officer of Yandex. "During the past year we continued to innovate and offer new services that make a difference in the lives of our users, including those in Turkey, our first market outside the CIS. This past year's significant investments in talent and infrastructure, along with our focus on the needs of users, position us well going forward. We will continue to develop a broad range of services that complement our core search platform, including maps and personal services on the desktop and on mobile platforms, emphasizing collaboration with our strategic partners."

The following table provides a summary of key financial results for the three months ended December 31, 2010 and 2011 and fiscal years 2010 and 2011:

In RUR millions Three months
ended December 31,
Twelve months
ended December 31,
  2010 2011 Change 2010 2011 Change
Revenues 4,125 6,439 56% 12,500 20,033 60%
Ex-TAC revenues2 3,618 5,437 50% 10,927 17,035 56%
Income from
operations
1,807 2,603 44% 4,823 7,034 46%
Adjusted EBITDA2 2,206 3,269 48% 6,164 9,237 50%
Net income 1,410 2,123 51% 3,817 5,773 51%
Adjusted net
income2
1,470 2,198 50% 3,968 6,003 51%

1 Pursuant to SEC rules regarding convenience translations, Russian ruble (RUR) amounts have been translated into U.S. dollars at a rate of RUR 32.1961 to $1.00, the official exchange rate quoted as of December 31, 2011 by the Central Bank of the Russian Federation.

2 This is a non-GAAP financial measure. Please see "Use of Non-GAAP Financial Measures" below for a discussion of how we define this non-GAAP financial measure. You will find a reconciliation of this non-GAAP financial measure to the most directly comparable US GAAP measure in the accompanying financial tables at the end of this release.

Q4 2011 Operational Highlights

  • Share of Russian search market averaged 60.8% in Q4 2011 (according to LiveInternet)
  • SERPs (search engine result pages) grew 36% from Q4 2010
  • Number of advertisers was more than 173,000, up 43% from Q4 2010 and up 10% from Q3 2011. For FY 2011, the number of advertisers increased by 44% to more than 270,000
  • Acquisition of the mobile business of SPB Software
  • Important partnerships in mobile: Yandex became the default search engine for the Windows Phone in Russia and on bada phones in the CIS
  • Built upon our launch in Turkey by adding a new map service that includes built-in traffic maps as well as panoramic street images of Istanbul and Ankara

Revenues

In RUR millions Three months
ended December 31,
Twelve months
ended December 31,
  2010 2011 Change 2010 2011 Change
Advertising revenues:            
Text-based advertising            
Yandex websites 3,079 4,405 43% 9,454 14,590 54%
Ad network 449 1,037 131% 1,506 2,922 94%
Total text-based advertising 3,528 5,442 54% 10,960 17,512 60%
Display advertising 501 864 72% 1,229 2,096 71%
Total advertising revenues 4,029 6,306 57% 12,189 19,608 61%
Online payment commissions 82 115 40% 263 383 46%
Other 14 18 29% 48 42 (13%)
Total revenues 4,125 6,439 56% 12,500 20,033 60%

Text-based advertising revenues, accounting for 85% of total revenues in Q4 2011, continued to determine overall top-line performance.

Text-based advertising revenues from Yandex's own websites accounted for 68% of total revenues during Q4 2011, and increased by 43% compared with Q4 2010. Text-based advertising revenues from our ad network increased 131% compared with Q4 2010 and contributed 16% of total revenues during Q4 2011. The enhanced performance of our Yandex ad network reflects the addition of Rambler to our ad network in mid-2011 as well as improved monetization from our contextual partner network sites due to improvements in our advertising technology. 

Paid clicks on Yandex's and its partners' websites, in aggregate, increased 65% in Q4 2011 compared with Q4 2010, while the average cost per click decreased 7% during the same period as a result of our efforts to improve CTR (click through rate) on both our own sites and our ad network, make our platform more attractive to new advertisers primarily from the regions and increase the efficiency of our clients' advertising spend.

Display advertising revenue, accounting for 13% of total revenues during Q4 2011, increased 72% compared with Q4 2010 reflecting the strong commitment of our display advertising clients to maintaining their presence online.

Online payment commissions accounted for 2% of revenue during Q4 2011, and increased 40% compared with Q4 2010.

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, including related share-based compensation expense. Increases across all cost categories, excluding D&A, reflect investments in overall growth, including personnel. In Q4 2011, Yandex added 149 full-time employees, an increase of 5% from September 30, 2011, and up 39% from December 31, 2010. The total number of full-time employees was 3,312 as of December 31, 2011. Total share-based compensation expense increased 50% in Q4 2011.

Costs of revenues, including traffic acquisition costs (TAC)

In RUR millions Three months
ended December 31,
Twelve months
ended December 31,
  2010 2011 Change 2010 2011 Change
TAC:            
Related to the Yandex ad network 277 665 140% 921 1,853 101%
Related to distribution partners 230 337 47% 652 1,145 76%
Total TAC 507 1,002 98% 1,573 2,998 91%
Total TAC as a % of total revenues 12.3% 15.6%   12.6% 15.0%  
Other cost of revenues 288 483 68% 1,012 1,709 69%
Other cost of revenues as a % of revenues 7.0% 7.5%   8.1% 8.5%  
Total cost of revenues 795 1,485 87% 2,585 4,707 82%
Total cost of revenues as a % of revenues 19.3% 23.1%   20.7% 23.5%  

TAC increased from 14.4% of text-based revenues in Q4 2010 to 18.4% in Q4 2011, resulting primarily from growth in the percentage of our text-based revenues generated from our ad network for the period and, in turn, the growth in the share of those revenues paid to our ad network partners.

Other cost of revenues in Q4 2011 increased 68% compared with Q4 2010, reflecting principally an increase in datacenter-related costs and utilities, personnel expenses and content acquisition costs. The number of people employed in the departments allocated to costs of revenues increased 48%, from 219 as of December 31, 2010 to 325 as of December 31, 2011, with 6 employees added since September 30, 2011.

Product development

In RUR millions Three months
ended December 31,
Twelve months
ended December 31,
  2010 2011 Change 2010 2011 Change
Product development 594 853 44% 2,073 3,124 51%
As a % of revenues 14.4% 13.2%   16.6% 15.6%  

The increase in product development expenses in Q4 2011 primarily reflects the increase in personnel-related expenses. Headcount in development staff increased 40% from 1,313 as of December 31, 2010, to 1,842 as of December 31, 2011, with 104 employees added since September 30, 2011.

Selling, general and administrative (SG&A)

In RUR millions Three months
ended December 31,
Twelve months
ended December 31,
  2010 2011 Change 2010 2011 Change
SG&A 586 916 56% 1,838 3,294 79%
As a % of revenues 14.2% 14.2%   14.7% 16.4%  

The increase in SG&A in Q4 2011 was driven primarily by increased personnel-related costs as well as increased advertising and marketing expenses. Headcount in departments whose costs are allocated to SG&A increased 34%, from 853 as of December 31, 2010 to 1,145 as of December 31, 2011, with 39 employees added since September 30, 2011.

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 RUR millions Three months
ended December 31,
Twelve months
ended December 31,
  2010 2011 Change 2010 2011 Change
SBC expense included in cost of revenues 5 7 40% 16 26 63%
SBC expense included in product development 29 42 45% 87 153 76%
SBC expense included in SG&A 22 35 59% 57 150 163%
Total SBC expense 56 84 50% 160 329 106%
As a % of revenues 1.4% 1.3%   1.3% 1.6%  

Total SBC expense increased 50% in Q4 2011 compared with Q4 2010. The increase is primarily related to share-based compensation on options granted to employees in 2010 and 2011, which had fair values significantly higher than previous grants.

Depreciation and amortization (D&A) expense

In RUR millions Three months
ended December 31,
Twelve months
ended December 31,
  2010 2011 Change 2010 2011 Change
D&A expense 343 582 70% 1,181 1,874 59%
As a % of revenues 8.3% 9.0%   9.4% 9.4%  

D&A expense increased 70% in Q4 2011 compared with Q4 2010, primarily reflecting our considerable recent investments in servers and data centers.

As a result of the factors described above, income from operations was RUR 2.6 billion ($80.8 million) in Q4 2011, a 44% increase from Q4 2010, while adjusted EBITDA reached RUR 3.3 billion ($101.5 million) in Q4 2011, up 48% from Q4 2010.

Interest income in Q4 2011 was RUR 105 million, up from RUR 46 million in Q4 2010. We derive a considerable portion of our interest income from ruble term deposits held in major Russian banks. Investments of our cash held in USD in the Netherlands in bank deposits, money market funds and debt securities generally yield considerably lower returns. Interest income increased principally due to investing more of our cash provided by operating activities in Russia, where our investments earn higher returns. Additionally, we earned significantly more interest income in the Netherlands due to the investment of our IPO proceeds. 

Foreign exchange gain in Q4 2011 was RUR 6 million, compared to a foreign exchange loss of RUR 5 million in Q4 2010. Because the functional currency of Yandex's operating subsidiaries in Russia is the Russian ruble, changes in the ruble value of these subsidiaries' monetary assets and liabilities that are denominated in other currencies (primarily U.S. dollar-denominated cash, cash equivalents and term deposits maintained in Russia) due to exchange rate fluctuations are recognized as foreign exchange gains or losses in the income statement. Although the U.S. dollar value of Yandex's U.S. dollar-denominated cash, cash equivalents and term deposits was not impacted by these currency fluctuations, they resulted in upward and downward revaluations, respectively, of the ruble equivalent of these U.S dollar-denominated monetary assets in Q4 2011 and Q4 2010.

Income tax expense for Q4 2011 was RUR 573 million, up from RUR 441 million in Q4 2010. Our effective tax rate decreased from 23.8% in Q4 2010 to 21.3% in Q4 2011, primarily reflecting a change in our treasury policy following the IPO. In recent years, Yandex's principal Russian operating subsidiary had been paying dividends to its Netherlands parent company and incurred a 5% withholding tax in Russia when these dividends were paid. Under the new treasury policy, however, management does not currently expect the company's Russian operating subsidiary to pay dividends to the parent company out of 2011 earnings. Therefore, no accrual for dividend withholding tax was required for 2011.

Adjusted net income in Q4 2011 was RUR 2.2 billion ($68.2 million), a 50% increase from Q4 2010, broadly in line with the underlying operating results. It was positively impacted by a change in the effective income tax rate resulting from the elimination of the dividend withholding tax accrual. Adjusted net income margin was 34% in Q4 2011, compared to 36% in Q4 2010.

Net income was RUR 2.1 billion ($65.9 million) in Q4 2011, up 51% compared with Q4 2010. The higher growth in net income compared with adjusted net income was primarily the result of SBC expenses representing a smaller portion of other operating costs and expenses when comparing Q4 2011 to Q4 2010.

As of December 31, 2011, Yandex had cash, cash equivalents, term deposits (including long-term deposits) and long-term debt securities of RUR 20.7 billion ($642.3 million).

Net operating cash flow and capital expenditures for Q4 2011 were RUR 2.7 billion ($85.0 million) and RUR 1.8 billion ($54.3 million), respectively.

The total number of shares issued and outstanding as of December 31, 2011 was 323,838,731, including 159,217,348 Class A shares, 164,621,382 Class B shares, and one Priority share and excluding Class C shares outstanding solely as a result of conversion of Class B shares into Class A shares; all such Class C shares will be cancelled. There were also options outstanding to purchase up to an additional 14.3 million shares, at a weighted average exercise price of $4.19 per share, of which options to purchase 9.8 million shares were fully vested; and equity-settled share appreciation rights equal to 0.8 million shares, at a weighted average measurement price of $20.80, none of which were vested.

Outlook for 2012

Yandex expects to report full-year ruble-based revenue growth of 40-45% for the full year 2012.

Conference Call Information

Yandex's management will hold an earnings conference call on February 22, 2012 at 9:00 AM U.S. Eastern Time (6:00 PM Moscow time; 2:00 PM London time).

To access the conference call live, please dial:

US: +1 631 510 7498

UK: +44 (0) 1452 555 566

Russia: 8 10 800 20972044

Passcode: 45285902#

A replay of the call will be available through February 29, 2012. To access the replay, please dial:

US: +1 866 247 4222,

Russia/International: +44 (0) 1452 550 000

Passcode: 45285902#

A live and archived webcast of this conference call will be available at http://investor.shareholder.com/media/Yandex/eventdetail.cfm?eventid=108335

ABOUT YANDEX

Yandex (Nasdaq:YNDX) is the leading internet company in Russia, operating the country's most popular search engine and most visited website. Yandex also operates in Ukraine, Kazakhstan, Belarus and Turkey. Yandex's mission is to answer any question internet users may have.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements that involve risks and uncertainties. These include statements regarding the planned growth of our business and our anticipated revenue for full-year 2012. 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, competitive pressures, changes in advertising patterns, changes in the legal and regulatory environment, technological developments, unforeseen changes in our hiring patterns, 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 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Prospectus dated May 24, 2011, which is on file with the Securities and Exchange Commission and is available on our investor relations website at http://company.yandex.com/investor_relations/sec_filing.xml and on the SEC website at www.sec.gov.  Additional risk factor disclosure and related information will also be set forth in our Annual Report in Form 20-F for the year ended December 31, 2011. All information provided in this release and in the attachments is as of February 22, 2012, and Yandex undertakes no duty to update this information unless required by law.

USE OF NON-GAAP FINANCIAL MEASURES

To supplement our consolidated financial statements, which are prepared and presented in accordance with US GAAP, we present the following non-GAAP financial measures: ex-TAC revenue, adjusted EBITDA, adjusted EBITDA margin, adjusted ex-TAC EBITDA margin, adjusted net income, adjusted net income margin and adjusted ex-TAC net income margin. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with US GAAP. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP financial measures to the nearest comparable US GAAP measures," included following the accompanying financial tables. We define the various non-GAAP financial measures we use as follows:

  • Ex-TAC revenue means US GAAP revenues less total traffic acquisition costs (TAC).
  • Adjusted EBITDA means net income plus (1) depreciation and amortization, (2) SBC expense and (3) provision for income taxes, less (A) interest income and (B) other income/(expense).
  • Adjusted EBITDA margin means adjusted EBITDA divided by US GAAP revenues.
  • Adjusted ex-TAC EBITDA margin means adjusted EBITDA divided by ex-TAC revenue.
  • Adjusted net income means US GAAP net income plus (1) SBC expense adjusted for the income tax reduction attributable to SBC expense and (2) foreign exchange losses (less foreign exchange gains) adjusted for the (reduction) increase in income tax attributable to the foreign exchange losses (gains).
  • Adjusted net income margin means adjusted net income divided by US GAAP revenues.
  • Adjusted ex-TAC net income margin means adjusted net income divided by ex-TAC revenues.

These non-GAAP financial measures are used by management for evaluating financial performance as well as decision-making. Management believes that these metrics reflect the organic, core operating performance of the company, and therefore are useful to analysts and investors in providing supplemental information that helps them understand, model and forecast the evolution of our operating business.

In particular, we believe that it may be useful for investors and analysts to review certain measures both in accordance with US GAAP and net of the effect of TAC, which we view as comparable to sales commissions but, unlike sales commissions, are not deducted from US GAAP revenues. By presenting revenue, adjusted EBITDA margin and adjusted net income margin net of TAC, we believe that investors and analysts are able to obtain a clearer picture of our business without the impact of the revenues we share with our partners. In addition, SBC is a significant expense item, and an important part of our compensation and incentive programs. However, as it is a non-cash charge, and highly dependent on our share price at the time of equity award grants, we believe that it is useful for investors and analysts to see certain financial measures excluding the impact of these charges in order to obtain a clear picture of our operating performance. Finally, as we hold significant assets in currencies other than our Russian ruble operating currency, and as 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.

Although our management uses these measures for operational decision making and considers these non-GAAP financial measures to be useful for analysts and investors, we recognize that there are a number of limitations related to such measures. In particular, it should be noted that several of these measures exclude some costs, particularly share-based compensation, that are recurring. In addition, the components of the costs that we exclude in our calculation of the measures described above may differ from the components that our peer companies exclude when they report their results of operations.

The tables at the end of this release provide detailed reconciliations of each non-GAAP financial measure we use to the most directly comparable US GAAP financial measure.

 

YANDEX N.V.

Unaudited Consolidated Balance Sheets

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

  As of December 31,
  2010* 2011 2011
  RUR RUR $
ASSETS      
Current assets:      
Cash and cash equivalents  3,371 6,322 196.4
Term deposits  3,361 5,169 160.6
Accounts receivable, net  798 1,250 38.8
Funds receivable, net  49 174 5.4
Prepaid expenses  393 630 19.5
Deferred tax assets  27 297 9.2
Other current assets  196 663 20.6
Total current assets  8,195 14,505 450.5
Property and equipment, net  2,983 6,973 216.6
Intangible assets, net  129 486 15.1
Goodwill  662 1,132 35.2
Long-term prepaid expenses  275 616 19.1
Restricted cash  454 14.1
Term deposits  213 2,454 76.2
Investments in non-marketable equity securities  92 569 17.7
Investments in debt securities  6,733 209.1
Deferred tax assets  16 11 0.4
Other non-current assets  52 143 4.4
TOTAL ASSETS 12,617 34,076 1,058.4
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current liabilities:      
Accounts payable and accrued liabilities  979 1,722 53.4
Taxes payable  582 916 28.4
Deferred revenue  550 900 28.0
Funds payable and amounts due to customers  826 1,174 36.5
Total current liabilities  2,937 4,712 146.3
Deferred tax liabilities  50 189 5.9
Other accrued liabilities  15 222 6.9
Total liabilities  3,002 5,123 159.1
Commitments and contingencies       
Shareholders' equity:      
Priority share: €1 par value; 1 share authorized, issued and outstanding 
Preference shares: €0.01 par value; nil and 2,000,000,001 shares authorized, nil and nil shares issued and outstanding, respectively 
Ordinary shares: par value (Class A €0.01, Class B €0.10 and Class C €0.09); shares authorized (Class A: 4,539,525,900 and 2,000,000,000, Class B: 302,635,060 and 273,764,304, and Class C: 302,635,060 and 276,063,445); shares issued (Class A: 30,058,214 and 159,217,348, Class B: 273,764,304 and 164,621,382, and Class C: 2,299,141 and 109,142,922 respectively); shares outstanding (Class A: 30,051,214 and 159,217,348, Class B: 273,764,304 and 164,621,382, respectively and Class C: nil)  972 595 18.5
Additional paid-in capital  467 12,729 395.3
Accumulated other comprehensive income  148 1,828 56.8
Retained earnings  8,028 13,801 428.7
Total shareholders' equity  9,615 28,953 899.3
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 12,617 34,076 1,058.4
* Derived from audited financial statements      

Unaudited Condensed Consolidated Statements of Income

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

  Three months ended December 31,
  2010 2011 2011
  RUR RUR $
Revenues  4,125 6,439 200.0
Operating costs and expenses:      
Cost of revenues(1) 795 1,485 46.1
Product development(1) 594 853 26.5
Sales, general and administrative(1) 586 916 28.5
Depreciation and amortization  343 582 18.1
Total operating costs and expenses  2,318 3,836 119.2
Income from operations  1,807 2,603 80.8
Interest income  46 105 3.3
Other expense, net  (2) (12) (0.4)
Net income before income taxes  1,851 2,696 83.7
Provision for income taxes  441 573 17.8
Net income  1,410 2,123 65.9
Net income per Class A and Class B share:      
Basic  4.64 6.57 0.20
Diluted  4.53 6.34 0.20
Weighted average number of Class A and Class B shares outstanding      
Basic  303,815,518 323,241,474 323,241,474
Diluted  311,570,884 334,864,888 334,864,888
(1) These balances exclude depreciation and amortization expenses, which are presented separately, and include share‑based compensation expenses of:
Cost of revenues  5 7 0.2
Product development  29 42 1.3
Sales, general and administrative  22 35 1.1

YANDEX N.V.

Unaudited Consolidated Statements of Income

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

  Year ended December 31,
  2010* 2011 2011
  RUR RUR $
Revenues  12,500 20,033 622.2
Operating costs and expenses:      
Cost of revenues(1) 2,585 4,707 146.2
Product development(1) 2,073 3,124 97.0
Sales, general and administrative(1) 1,838 3,294 102.3
Depreciation and amortization  1,181 1,874 58.2
Total operating costs and expenses  7,677 12,999 403.7
Income from operations  4,823 7,034 218.5
Interest income  156 222 6.9
Other income, net  24 62 1.9
Net income before income taxes  5,003 7,318 227.3
Provision for income taxes  1,186 1,545 48.0
Net income  3,817 5,773 179.3
Net income per Class A and Class B share:      
Basic  12.56 18.30 0.57
Diluted  12.37 17.59 0.55
Weighted average number of Class A and Class B shares outstanding      
Basic  303,817,388 315,541,639 315,541,639
Diluted  308,580,600 328,155,087 328,155,087
       
_____________________________      
(1) These balances exclude depreciation and amortization expenses, which are presented separately, and include share‑based compensation expenses of:      
Cost of revenues  16 26 0.8
Product development  87 153 4.8
Sales, general and administrative  57 150 4.6
* Derived from audited financial statements      

YANDEX N.V.

Unaudited Condensed Consolidated Statements of Cash Flows

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

  Three months ended December 31,
  2010 2011 2011
  RUR RUR $
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income  1,410 2,123 65.9
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization of property and equipment  337 553 17.2
Amortization of acquisition‑related intangible assets  6 29 0.9
Share‑based compensation expense  56 70 2.2
Deferred income taxes  21 (7) (0.2)
Foreign exchange losses/(gains)  5 (6) (0.2)
Other  19 0.6
Changes in operating assets and liabilities excluding the effect of acquisitions:      
Accounts receivable, net  (234) (296) (9.2)
Funds receivable  (3) (76) (2.4)
Prepaid expenses and other assets  181 (333) (10.3)
Accounts payable and accrued liabilities  332 274 8.5
Deferred revenue  125 174 5.4
Funds payable and amounts due to customers  119 212 6.6
Net cash provided by operating activities  2,355 2,736 85.0
CASH FLOWS USED IN INVESTING ACTIVITIES:      
Purchase of property and equipment  (712) (1,749) (54.3)
Acquisitions of businesses, net of cash acquired  (1) (735) (22.8)
Investments in non-marketable equity securities  1
Investments in debt securities  (3,429) (106.5)
Investments in term deposits  (1,914) (4,291) (133.3)
Maturities of term deposits  2,307 5,174 160.6
Escrow cash deposit  (433) (13.4)
Net cash used in investing activities  (319) (5,463) (169.7)
CASH FLOWS (USED IN)/PROVIDED BY FINANCING ACTIVITIES:      
Dividends paid 
Ordinary shares issuance costs  (5) (0.2)
Proceeds from issuance of ordinary shares 
Proceeds from exercise of share options  89 2.8
Repurchase of share options 
Net cash (used in)/provided by financing activities  84 2.6
Effect of exchange rate changes on cash and cash equivalents  (20) 312 9.7
Net change in cash and cash equivalents  2,016 (2,331) (72.4)
Cash and cash equivalents at beginning of period  1,355 8,653 268.8
Cash and cash equivalents at end of period  3,371 6,322 196.4

YANDEX N.V.

Unaudited Consolidated Statements of Cash Flows

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

  Years ended December 31,
  2010* 2011 2011
  RUR RUR $
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income  3,817 5,773 179.3
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization of property and equipment  1,147 1,826 56.7
Amortization of acquisition‑related intangible assets  34 48 1.5
Share‑based compensation expense  160 286 8.9
Deferred income taxes  2 (169) (5.3)
Foreign exchange gains  (11) (101) (3.1)
Other  40 1.2
Changes in operating assets and liabilities excluding the effect of acquisitions:      
Accounts receivable, net  (437) (434) (13.5)
Funds receivable  (3) (125) (3.9)
Prepaid expenses and other assets  176 (1,092) (33.9)
Accounts payable and accrued liabilities  641 1,045 32.5
Deferred revenue  166 348 10.8
Funds payable and amounts due to customers  271 349 10.9
Net cash provided by operating activities  5,963 7,794 242.1
CASH FLOWS USED IN INVESTING ACTIVITIES:      
Purchase of property and equipment  (2,199) (5,566) (172.9)
Acquisitions of businesses, net of cash acquired  (143) (735) (22.9)
Investments in non-marketable equity securities  (92) (478) (14.8)
Investments in debt securities  (6,548) (203.4)
Investments in term deposits  (5,248) (13,519) (419.9)
Maturities of term deposits  3,616 9,485 294.6
Escrow cash deposit  (433) (13.4)
Net cash used in investing activities  (4,066) (17,794) (552.7)
CASH FLOWS (USED IN)/PROVIDED BY FINANCING ACTIVITIES:      
Dividends paid  (906)
Ordinary shares issuance costs  (28) (0.9)
Proceeds from issuance of ordinary shares  11,403 354.2
Proceeds from exercise of share options  1 231 7.2
Repurchase of share options  (2) (8) (0.3)
Net cash (used in)/provided by financing activities  (907) 11,598 360.2
Effect of exchange rate changes on cash and cash equivalents  (24) 1,353 42.1
Net change in cash and cash equivalents  966 2,951 91.7
Cash and cash equivalents at beginning of period  2,405 3,371 104.7
Cash and cash equivalents at end of period  3,371 6,322 196.4
       
* Derived from audited financial statements      

YANDEX N.V.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES 
TO THE NEAREST COMPARABLE US GAAP MEASURES

Reconciliation of Ex-TAC Revenues to US GAAP Revenues

In RUR millions Three months
ended December 31, 
Twelve months
ended December 31, 
  2010 2011 Change 2010 2011 Change
Total revenues 4,125 6,439 56% 12,500 20,033 60%
Less: traffic acquisition costs (TAC) 507 1,002 98% 1,573 2,998 91%
Ex-TAC revenues 3,618 5,437 50% 10,927 17,035 56%

Reconciliation of Adjusted EBITDA to US GAAP Net Income

In RUR millions Three months
ended December 31, 
Twelve months
ended December 31,
  2010 2011 Change 2010 2011 Change
Net income 1,410 2,123 51% 3,817 5,773 51%
Add: depreciation and amortization 343 582 70% 1,181 1,874 59%
Add: share-based compensation (SBC) expense 56 84 50% 160 329 106%
Less: interest income (46) (105) 128% (156) (222) 42%
Add: other expense / (income), net 2 12 n/m (24) (62) n/m
Add: provision for income taxes 441 573 30% 1,186 1,545 30%
Adjusted EBITDA 2,206 3,269 48% 6,164 9,237 50%

Reconciliation of Adjusted Net Income to US GAAP Net Income

In RUR millions Three months
ended December 31, 
Twelve months
ended December 31,
  2010 2011 Change 2010 2011 Change
Net income 1,410 2,123 51% 3,817 5,773 51%
Add: SBC expense 56 84 50% 160 329 106%
Less: reduction in income tax attributable to SBC expense (4) n/m (13) n/m
Add: foreign exchange loss /(gain) 5 (6) n/m (11) (101) 818%
Less: reduction / (increase) in income tax attributable to foreign exchange loss /(gain) (1) 1 n/m 15 n/m
Adjusted net income 1,470 2,198 50% 3,968 6,003 51%

Reconciliation of Adjusted EBITDA Margin and Adjusted Ex-TAC EBITDA Margin to US GAAP Net Income Margin for the Three Months and Twelve Months Ended December 31, 2011

In RUR millions   
  US
GAAP
Actual
Net
Income
Margin (1)
Adjustment
(2)
Adjusted
EBITDA
Adjusted
EBITDA
Margin (3)
Adjusted
Ex-TAC
EBITDA
Margin (4)
Three months ended December 31, 2011 Net income  2,123 33.0% 1,146 3,269 50.8% 60.1%
Twelve months ended December 31, 2011 Net income 5,773 28.8% 3,464 9,237 46.1% 54.2%
(1)  Net income margin is defined as net income divided by total revenues.
(2)  Adjusted to eliminate depreciation and amortization expense, SBC expense, interest income, other income/(expense), net, and provision for income taxes. For a reconciliation of adjusted EBITDA to net income, please see the table above.
(3)  Adjusted EBITDA margin is defined as adjusted EBITDA divided by total revenues.
(4)  Adjusted ex-TAC EBITDA margin is defined as adjusted EBITDA divided by ex-TAC revenues. For a reconciliation of ex-TAC revenues to US GAAP revenues, please see the table above. 

 

Reconciliation of Adjusted Net Income Margin and Adjusted Ex-TAC Net Income Margin to US GAAP Net Income Margin for the Three Months and Twelve Months Ended December 31, 2011

In RUR millions  
  US
GAAP
Actual
Net
Income
Margin (1)
Adjustment
(2)
Adjusted
Net Income
Adjusted
Net
Income
Margin (3)
Adjusted
Ex-TAC
Net
Income
Margin (4)
Three months ended December 31, 2011 Net income  2,123 33.0% 75 2,198 34.1% 40.4%
Twelve months ended December 31, 2011 Net income 5,773 28.8% 230 6,003 30.0% 35.2%
(1)  Net income margin is defined as net income divided by total revenues.
(2)  Adjusted to eliminate SBC expense (as adjusted for the income tax reduction attributable to SBC expense) and foreign exchange losses (less foreign exchange gains) (as adjusted for the (reduction) increase in income tax attributable to the loss (gain)). For a reconciliation of adjusted net income to net income, please see the table above.
(3)  Adjusted net income margin is defined as adjusted net income divided by total revenues.
(4)  Adjusted ex-TAC net income margin is defined as adjusted net income divided by ex-TAC revenues. For a reconciliation of ex-TAC revenues to US GAAP revenues, please see the table above.&nbsp

 

Investor Relations
Dmitry Barsukov, Katya Zhukova
Phone: +7 495 739-70-00
E-mail: askIR@yandex-team.ru

US Investor Contact
The Blueshirt Group, for Yandex
Alex Wellins
Phone: +1 415 217-5861
E-mail: alex@blueshirtgroup.com

Media Relations
Ochir Mandzhikov, Dina Litvinova
Phone: +7 495 739-70-00
E-mail: pr@yandex-team.ru

Contact Us

Yandex N.V.

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