Yandex

Yandex Announces Third Quarter 2011 Financial Results

October 27, 2011

MOSCOW and THE HAGUE, Oct. 27, 2011 (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 unaudited financial results for the quarter ended September 30, 2011.

Q3 2011 Financial Highlights

  • Revenues of RUR 5.2 billion ($161.9 million1), up 65% compared with Q3 2010
    Ex-TAC revenues2 (excluding traffic acquisition costs) up 59% compared with Q3 2010
  • Income from operations of RUR 1.8 billion ($55.9 million), up 52% compared with Q3 2010
  • Adjusted EBITDA2of RUR 2.3 billion ($73.3 million), up 54% compared with Q3 2010
  • Operating margin of 34.5% 
    Adjusted EBITDA margin2 of 45.3% 
    Adjusted ex-TAC EBITDA margin2 of 53.8%
  • Net income of RUR 1.7 billion ($53.5 million), up 93% compared with Q3 2010
    Adjusted net income2 of RUR 1.5 billion ($45.8 million), up 49% compared with Q3 2010, growing slower than net income mainly due to adjusting for
    the RUR 383 million foreign exchange gain
  • Net income margin of 33.0% 
    Adjusted net income margin2 of 28.3% 
    Adjusted ex-TAC net income margin2 of 33.6%

"Yandex delivered strong financial results and made significant progress across all areas of our business during the third quarter. We increased the pace of the number of new product and services launched compared to prior quarters, both on the user and advertiser fronts. We also launched services in Turkey, an important milestone in our company's development as it is our first truly international market," said Arkady Volozh, Chief Executive Officer of Yandex. "We continue to see robust growth and usage patterns in our markets and we expect that our investments will position the company for sustained growth and profitability going forward."

The following table provides a summary of key financial results for the three and nine months ended September 30, 2010 and 2011:

In RUR millions Three months
ended September 30,
Nine months
ended September 30,
  2010 2011 Change 2010 2011 Change
  (unaudited)
Revenues 3,131 5,159 65% 8,375 13,594 62%
Ex-TAC revenues2 2,735 4,341 59% 7,309 11,598 59%
Income from operations 1,173 1,781 52% 3,016 4,431 47%
Adjusted EBITDA2 1,519 2,335 54% 3,958 5,968 51%
Net income 883 1,705 93% 2,407 3,650 52%
Adjusted net income2 978 1,459 49% 2,498 3,805 52%

1 Pursuant to SEC rules regarding convenience translations, Russian ruble (RUR) amounts have been translated into U.S. dollars at a rate of RUR 31.8751 to $1.00, the official exchange rate quoted as of September 30, 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.  

Q3 2011 Operational Highlights

  • Share of Russian search market averaged 62.7% in Q3 2011 (according to LiveInternet)
  • SERPs (search engine result pages) grew 42% from Q3 2010
  • Number of advertisers was more than 158,000, up 48% from Q3 2010 and up 10% from Q2 2011
  • Considerable improvements in monetization through affordability of text-based advertising
  • Innovative experimental display advertising formats
    • Socio-demographic targeting (Crypta)
    • Multimedia banner on Yandex.Music
  • Launched search and several related products in Turkey, Yandex's first market outside the CIS
  • Invested $15 million in the U.S. search engine, blekko

Revenues

In RUR millions Three months
ended September 30,
Nine months
ended September 30,
  2010 2011 Change 2010 2011 Change
Advertising revenues:            
Text-based advertising            
Yandex websites 2,403 3,768 57% 6,375 10,185 60%
Ad network 369 827 124% 1,057 1,885 78%
Total text-based advertising 2,772 4,595 66% 7,432 12,070 62%
Display advertising 285 464 63% 728 1,232 69%
Total advertising revenues 3,057 5,059 65% 8,160 13,302 63%
Online payments commissions 64 95 48% 181 268 48%
Other 10 5 (50)% 34 24 (29)%
Total revenues 3,131 5,159 65% 8,375 13,594 62%

Text-based advertising revenues, accounting for 89% of total revenues in Q3 2011, continued to determine overall top-line performance.

Text-based advertising revenues from Yandex's own websites accounted for 73% of total revenues during Q3 2011, and increased 57% compared with Q3 2010. Text-based advertising revenues from our ad network increased 124% compared with Q3 2010 and contributed 16% of total revenues during Q3 2011, with the revenue contribution from our partnership with Rambler accounting for approximately 2 percentage points.

Paid clicks on Yandex's and its partners' websites, in aggregate, increased 68% in Q3 2011 compared with Q3 2010, while the average cost per click decreased 1% during the same period as a result of our efforts to increase availability of text-based advertising.

Display advertising revenue, accounting for 9% of total revenues during Q3 2011, increased 63% compared with Q3 2010.

Online payment commissions, excluding intercompany revenue from commissions charged for payments for advertising on Yandex's sites, accounted for 2% of revenue during Q3 2011, and increased 48% compared with Q3 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 aggressive investments in overall growth, particularly in talent. Full-time employees increased to 3,163 as of September 30, 2011, up 5% from June 30, 2011, and up 46% from September 30, 2010. Total share-based compensation expense increased 69% in Q3 2011, with the most pronounced increase in the product development category, as detailed below.

Costs of revenues, including traffic acquisition costs (TAC)

In RUR millions Three months
ended September 30,
Nine months
ended September 30,
  2010 2011 Change 2010 2011 Change
TAC:            
Related to the Yandex ad network 225 526 134% 644 1,188 84%
Related to distribution partners 171 292 71% 422 808 91%
Total TAC 396 818  107% 1,066 1,996 87%
Total TAC as a % of total revenues 12.6% 15.9%   12.7% 14.7%  
Other cost of revenues  269   476  77%  724   1,226  69%
Other cost of revenues as a % of revenues 8.6% 9.2%   8.6% 9.0%  
Total cost of revenues  665   1,294  95% 1,790 3,222 80%
Total cost of revenues as a % of revenues 21.2% 25.1%   21.4% 23.7%  

TAC increased from 14.3% of text-based revenues in Q3 2010 to 17.8% in Q3 2011, reflecting the addition of Rambler to our ad network, as well as improvements in monetization on contextual partner network sites.

Other cost of revenues in Q3 2011 increased 77% compared with Q3 2010, reflecting an increase in datacenter-related costs and utilities, as well as content acquisition costs. The number of people employed in the departments allocated to costs of revenues increased 51%, from 211 as of September 30, 2010, to 319 as of September 30, 2011 with 31 employees added since June 30, 2011.

Product development

In RUR millions Three months
ended September 30,
Nine months
ended September 30,
  2010 2011 Change 2010 2011 Change
Product development  521   792  52% 1,479 2,271 54%
As a % of revenues 16.6% 15.4%   17.7% 16.7%  

The increase in product development expenses in Q3 2011 primarily reflects the increase in personnel-related expenses. Headcount in development staff increased 48% from 1,173 as of September 30, 2010, to 1,738 as of September 30, 2011, with 112 employees added since June 30, 2011.

Selling, general and administrative (SG&A)

In RUR millions Three months
ended September 30,
Nine months
ended September 30,
  2010 2011 Change 2010 2011 Change
SG&A  465   804  73% 1,252 2,378 90%
As a % of revenues 14.9% 15.6%   14.9% 17.5%  

The increase in SG&A in Q3 2011 was driven primarily by increased personnel-related costs. Headcount in departments whose costs are allocated to SG&A increased 41%, from 784 as of September 30, 2010, to 1,106 as of September 30, 2011, with 19 added since June 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 September 30,
Nine months
ended September 30,
  2010 2011 Change 2010 2011 Change
SBC expense included in cost of revenues 4 7 75% 11 19 73%
SBC expense included in product development 22 41 86% 58 111 91%
SBC expense included in SG&A 13 18 38% 35 115 229%
Total SBC expense 39 66 69% 104 245 136%
As a % of revenues 1.2% 1.3%   1.2% 1.8%  

Total SBC expense increased 69% in Q3 2011 compared with Q3 2010, with the most pronounced increase in the product development category, reflecting amortization of recent share option grants to developers.

Depreciation and amortization (D&A) expense

In RUR millions Three months
ended September 30,
Nine months
ended September 30,
  2010 2011 Change 2010 2011 Change
D&A expense  307   488  59% 838 1,292 54%
As a % of revenues 9.8% 9.5%   10.0% 9.5%  

D&A expense increased 59% in Q3 2011 compared with Q3 2010, primarily reflecting previous-period investments in servers and data centers.

As a result of the movements described above, income from operations was RUR 1.8 billion ($55.9 million) in Q3 2011, a 52% increase from Q3 2010, while adjusted EBITDA reached RUR 2.3 billion ($73.3 million) in Q3 2011, up 54% from Q3 2010.

Interest income in Q3 2011 was RUR 47 million, up from RUR 43 million in Q3 2010. This modest increase, notwithstanding the receipt of the IPO proceeds, reflects lower effective interest rates.

Foreign exchange gain in Q3 2011 was RUR 383 million. This gain is due to the appreciation of the U.S. dollar during Q3 2011 from RUR 28.0758 to $1.00 on June 30, 2011 to RUR 31.8751 to $1.00 on September 30, 2011. This compares to a foreign exchange loss of RUR 70 million in Q3 2010, as the U.S. dollar depreciated from RUR 31.1954 to $1.00 on June 30, 2010 to RUR 30.403 to $1.00 on September 30, 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 Q3 2011 and Q3 2010.

Income tax expense for Q3 2011 was RUR 484 million, up from RUR 273 million in Q3 2010. Our effective tax rate decreased from 23.6% in Q3 2010 to 22.1% in Q3 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. However, under the new treasury policy, 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 is required for 2011.

Adjusted net income in Q3 2011 was RUR 1.5 billion ($45.8 million), a 49% increase from Q3 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, offset by lower effective interest rates impacting interest income.  Adjusted net income margin was 28.3% in Q3 2011, compared to 31.2% in Q3 2010.

Net income was RUR 1.7 billion ($53.5 million) in Q3 2011, up 93% compared with Q3 2010. The higher growth in net income compared with adjusted net income was primarily the result of a RUR 383 million foreign exchange gain in Q3 2011 compared to a RUR 70 million foreign exchange loss in Q3 2010.

As of September 30, 2011, Yandex had cash, cash equivalents, term deposits (including long-term deposits) and debt securities of RUR 20.7 billion ($650.5 million).

Net operating cash flow and capital expenditures for Q3 2011 were RUR 2,129 billion ($66.8 million) and RUR 1,711 billion ($53.7 million), respectively.

The total number of shares issued and outstanding on September 30, 2011 was 322,995,027, including 141,789,734 Class A shares, 181,205,292 Class B shares, and one Priority share. There were also options outstanding to purchase up to an additional 15.7 million shares, at a weighted average exercise price of $4.20 per share, of which options to purchase 9.7 million shares were fully vested.

Outlook for the Full Year 2011

Yandex expects to report revenue at the high end of its previously announced range, representing ruble-based year-on-year revenue growth of 58%-60% for the full year 2011. The company reconfirmed that capital expenditures in 2011 should approach RUR 6.3 billion.

Conference Call Information

Yandex's management will hold an earnings conference call at 9:00 AM on October 27, 2011 U.S. Eastern Daylight Time (5:00 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: 12895460#

A replay of the call will be available through November 3, 2011. To access the replay, please dial:

US: +1 866 247 4222, 
Russia/International: +44 (0) 1452 550 000 
Passcode: 12895460#

A live and archived webcast of this conference call will be available at http://investor.shareholder.com/media/Yandex/eventdetail.cfm?eventid=103159

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.

The Yandex logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=10933

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 and capital expenditures for full-year 2011. 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. All information provided in this release and in the attachments is as of October 27, 2011, 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 U.S. 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 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 revenue means U.S. GAAP revenues less total traffic acquisition costs (TAC).
  • Adjusted EBITDA means net income plus (1) depreciation and amortization, (2) share-based compensation expense and (3) provision for income taxes, less (A) interest income and (B) other income/(expense).
  • Adjusted EBITDA margin means adjusted EBITDA divided by U.S. GAAP revenues.
  • Adjusted ex-TAC EBITDA margin means adjusted EBITDA divided by ex-TAC revenue.
  • Adjusted net income means U.S. 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 increase (reduction) in income tax attributable to the foreign exchange gain (loss).
  • Adjusted net income margin means adjusted net income divided by U.S. GAAP revenues.
  • Adjusted ex-TAC net income margin means adjusted net income margin 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 U.S. GAAP and net of the effect of TAC, which we view as comparable to sales commissions but, unlike sales commissions, are not deducted from U.S. GAAP revenues. By presenting revenue, adjusted EBITDA margin and adjusted net income margin net of TAC, we believe that investors and analysts are able to obtain a clearer picture of our business without the impact of the revenues we share with our partners. 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 option 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 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,
2010*
September 30,
2011
September 30,
2011
  RUR RUR $
ASSETS      
Current assets:      
Cash and cash equivalents 3,371 8,653 271.5
Term deposits 3,361 5,286 165.8
Accounts receivable, net of allowance of RUR 64 and RUR 83 ($2.6) 798 938 29.4
Funds receivable, net of allowance of RUR 27 and RUR 21 ($0.7) 49 99 3.1
Prepaid expenses 393 614 19.3
Deferred tax assets 27 268 8.4
Other current assets 196 442 13.9
Total current assets 8,195 16,300 511.4
       
Property and equipment, net 2,983 5,713 179.2
Intangible assets, net 129 106 3.3
Goodwill 662 662 20.8
Long-term prepaid expenses 275 534 16.7
Term deposits 213 3,457 108.5
Investments in non-marketable equity securities 92 563 17.7
Investments in debt securities -- 3,335 104.6
Deferred tax assets 16 13 0.4
Other non-current assets 52 115 3.6
       
TOTAL ASSETS 12,617 30,798 966.2
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
       
Current liabilities:      
Accounts payable and accrued liabilities 979 1,638 51.4
Taxes payable 582 688 21.6
Deferred revenue 550 725 22.7
Funds payable and amounts due to customers 826 962 30.2
Total current liabilities 2,937 4,013 125.9
       
Deferred tax liabilities 50 119 3.7
Other accrued liabilities 15 124 3.9
       
Total liabilities 3,002 4,256 133.5
       
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 30,058,714 and 141,789,734, Class B 273,764,304 and 181,205,292, and Class C 2,299,141 and 92,559,012, respectively); shares outstanding (Class A 30,051,214 and 141,789,734, Class B 273,764,304 and 181,205,292, and Class C nil and nil, respectively) 972 658 20.6
Additional paid-in capital 467 12,507 392.4
Accumulated other comprehensive income 148 1,698 53.3
Retained earnings 8,028 11,679 366.4
Total shareholders' equity 9,615 26,542 832.7
       
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 12,617 30,798 966.2
       
*derived from the audited financial statements    

YANDEX N.V.

Unaudited Condensed Consolidated Statements of Income
(In millions of Russian rubles and U.S. dollars, except share and per share data)

  Three Months Ended September 30,
  2010 2011 2011
  RUR RUR $
       
       
Revenues 3,131 5,159 161.9
       
Operating costs and expenses:      
Cost of revenues (1) 665 1,294 40.6
Product development (1) 521 792 24.9
Sales, general and administrative (1) 465 804 25.2
Depreciation and amortization 307 488 15.3
Total operating costs and expenses 1,958 3,378 106.0
       
Income from operations 1,173 1,781 55.9
       
Interest income 43 47 1.5
Other (expense)/ income, net (60) 361 11.3
       
Net income before income taxes 1,156 2,189 68.7
       
Provision for income taxes 273 484 15.2
       
Net income 883 1,705 53.5
       
Net income per Class A and Class B share:      
Basic 2.91 5.28 0.17
Diluted 2.87 5.08 0.16
       
Weighted average number of ordinary shares outstanding      
Basic 303,819,350 322,991,507 322,991,507
Diluted 308,003,926 335,758,197 335,758,197
       
(1) These balances exclude depreciation and amortization expenses, which are presented separately, and include share-based compensation expenses of:
       
Cost of revenues 4 7 0.2
Product development 22 41 1.3
Sales, general and administrative 13 18 0.6

YANDEX N.V.

Unaudited Condensed Consolidated Statements of Income
(In millions of Russian rubles and U.S. dollars, except share and per share data)

  Nine Months Ended September 30,
  2010 2011 2011
  RUR RUR $
       
       
Revenues 8,375 13,594 426.5
       
Operating costs and expenses:      
Cost of revenues (1) 1,790 3,222 101.1
Product development (1) 1,479 2,271 71.2
Sales, general and administrative (1) 1,252 2,378 74.6
Depreciation and amortization 838 1,292 40.5
Total operating costs and expenses 5,359 9,163 287.4
       
Income from operations 3,016 4,431 139.1
       
Interest income 110 117 3.7
Other income, net 26 74 2.3
       
Net income before income taxes 3,152 4,622 145.1
       
Provision for income taxes 745 972 30.5
       
Net income 2,407 3,650 114.6
       
Net income per Class A and Class B share:      
Basic 7.93 11.66 0.37
Diluted 7.83 11.20 0.35
       
Weighted average number of ordinary shares outstanding      
Basic 303,818,018 312,946,822 312,946,822
Diluted 307,493,743 325,941,238 325,941,238
       
(1) These balances exclude depreciation and amortization expenses, which are presented separately, and include share-based compensation expenses of:
       
Cost of revenues 11 19 0.6
Product development 58 111 3.5
Sales, general and administrative 35 115 3.6

YANDEX N.V.

Unaudited Condensed Consolidated Statements of Cash Flows
(In millions of Russian rubles and U.S. dollars)

  Three Months Ended September 30,
  2010 2011 2011
  RUR RUR $
       
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income 883 1,705 53.5
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization of property and equipment 295 481 15.1
Amortization of acquisition-related intangible assets 12 7 0.2
Share-based compensation expense 39 50 1.5
Deferred income taxes (8) 8 0.3
Foreign exchange losses/ (gains) 70 (383) (12.0)
Other -- 21 0.7
       
Changes in operating assets and liabilities excluding the effect of acquisitions:      
Accounts receivable, net (40) (122) (3.8)
Funds receivable (4) 14 0.5
Prepaid expenses and other assets (37) (140) (4.4)
Accounts payable and accrued liabilities 62 328 10.3
Deferred revenue 31 84 2.6
Funds payable and amounts due to customers 55 76 2.4
       
Net cash provided by operating activities 1,358 2,129 66.9
       
CASH FLOWS USED IN INVESTING ACTIVITIES:      
Purchase of property and equipment (521) (1,711) (53.7)
Acquisition of business, net of cash acquired (142) -- --
Investments in non-marketable equity securities (93) (478) (15.0)
Investments in debt securities -- (3,119) (97.9)
Investments in term deposits (1,419) (7,338) (230.2)
Maturities of term deposits 949 2,042 64.1
       
Net cash used in investing activities (1,226) (10,604) (332.7)
       
CASH FLOWS USED IN FINANCING ACTIVITIES:      
Dividends paid (906) -- --
Repurchase of share options (1) -- --
Net cash used in financing activities (907) -- --
       
Effect of exchange rate changes on cash and cash equivalents (25) 1,323 41.5
       
Net change in cash and cash equivalents (800) (7,152) (2,243)
       
Cash and cash equivalents at beginning of period  2,155 15,805 495.8
       
Cash and cash equivalents at end of period 1,355 8,653 271.5

YANDEX N.V.

Unaudited Condensed Consolidated Statements of Cash Flows
(In millions of Russian rubles and U.S. dollars)

  Nine Months Ended September 30,
  2010 2011 2011
  RUR RUR $
       
       
       
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income 2,407 3,650 114.5
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization of property and equipment 810 1,273 39.9
Amortization of acquisition-related intangible assets 28 19 0.6
Share-based compensation expense 104 216 6.8
Deferred income taxes (19) (162) (5.1)
Foreign exchange gains (16) (95) (3.0)
Other -- 21 0.7
       
Changes in operating assets and liabilities excluding the effect of acquisitions:      
Accounts receivable, net (203) (138) (4.3)
Funds receivable -- (49) (1.5)
Prepaid expenses and other assets (5) (759) (23.9)
Accounts payable and accrued liabilities 309 771 24.2
Deferred revenue 41 174 5.5
Funds payable and amounts due to customers 152 137 4.3
       
Net cash provided by operating activities 3,608 5,058 158.7
       
CASH FLOWS USED IN INVESTING ACTIVITIES:      
Purchase of property and equipment (1,487) (3,817) (119.7)
Acquisition of business, net of cash acquired (142) -- --
Investments in non-marketable equity securities (93) (478) (15.0)
Investments in debt securities -- (3,119) (97.9)
Investments in term deposits (3,334) (9,228) (289.5)
Maturities of term deposits 1,309 4,311 135.2
       
Net cash used in investing activities (3,747) (12,331) (386.9)
       
CASH FLOWS USED IN FINANCING ACTIVITIES:      
Dividends paid (906) --  
Repurchase of share options (2) (8) (0.3)
Ordinary share issuance costs -- (23) (0.7)
Proceeds from issuance of ordinary shares -- 11,403 357.7
Proceeds from exercise of share options 1 142 4.5
       
Net cash used in financing activities (907) 11,514 361.2
       
Effect of exchange rate changes on cash and cash equivalents (4) 1,041 32.7
       
Net change in cash and cash equivalents (1,050) 5,282 165.7
       
Cash and cash equivalents at beginning of period 2,405 3,371 105.8
       
Cash and cash equivalents at end of period 1,355 8,653 271.5

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 RUR millions Three months ended September 30, Nine months ended September 30,
  2010 2011 Change 2010 2011 Change
Total revenues 3,131 5,159 65% 8,375 13,594 62%
Less: traffic acquisition costs (TAC) 396 818 107% 1,066 1,996 87%
Ex-TAC revenue 2,735 4,341 59% 7,309 11,598 59%

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

In RUR millions Three months ended September 30, Nine months ended September 30,
  2010 2011 Change 2010 2011 Change
Net income 883 1,705 93% 2,407 3,650 52%
Add: depreciation and amortization 307 488 59% 838 1,292 54%
Add: share-based compensation (SBC) expense 39 66 69% 104 245 136%
Less: interest income (43) (47) 9% (110) (117) 6%
Less: other (income) / expense, net 60 (361) n/m (26) (74) 185%
Add: provision for income taxes 273 484 77% 745 972 30%
Adjusted EBITDA 1,519 2,335 54% 3,958 5,968 51%

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

In RUR millions Three months ended September 30, Nine months ended September 30,
  2010 2011 Change 2010 2011 Change
Net income 883 1,705 93% 2,407 3,650 52%
Add: SBC expense 39 66 69% 104 245 136%
Less: reduction in income tax attributable to SBC expense -- (6) n/m --  (9) n/m
Add: foreign exchange loss /(gain) 70 (383) n/m (16) (95)  494%
Add: (reduction) / increase in income tax attributable to foreign exchange (loss) /gain (14)  77 n/m 14 367%
Adjusted net income 978 1,459 49% 2,498 3,805 52%

Reconciliation of Adjusted EBITDA Margin and Adjusted Ex-TAC EBITDA Margin to U.S. GAAP Net Income Margin for the Three Months Ended September 30, 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)
Net income  1,705 33.0% 630 2,335 45.3% 53.8%
(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 (expense)/income, net, and provision for income taxes. For a reconciliation of adjusted EBITDA to net income, please see the table above.
(3) Adjusted EBITDA margin is defined as adjusted EBITDA divided by total revenues.
(4) Adjusted ex-TAC EBITDA margin is defined as adjusted EBITDA divided by ex-TAC revenues. For a reconciliation of ex-TAC revenues to GAAP revenues, please see the table above.

 

Reconciliation of Adjusted Net Income Margin and Adjusted Ex-TAC Net Income Margin to U.S. GAAP Net Income Margin for the Three Months Ended September 30, 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)
Net income  1,705 33.0% (246) 1,459 28.3% 33.6%
(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 increase (reduction) in income tax attributable to the gain (loss)).  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.

 

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

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

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