UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

 

October 27, 2011

 

YANDEX N.V.

 

Laan Copes van Cattenburch 52

The Hague, the Netherlands, 2585 GB. Tel: +31-70-3454700

(Address, Including ZIP Code, and Telephone Number,

Including Area Code, of Registrant’s Principal Executive Offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F  x  Form 40-F  o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o

 

 

 



 

Furnished as Exhibit 99.1 to this Report on Form 6-K is a press release of Yandex N.V. dated October 27, 2011, announcing the Company’s results for the quarter ended September 30, 2011.

 

2



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

YANDEX N.V.

 

 

 

 

 

 

Date: October 27, 2011

By:

/S/ ARKADY VOLOZH

 

 

Arkady Volozh

 

 

Chief Executive Officer

 

 

 

 

 

 

 

By:

/S/ ALEXANDER SHULGIN

 

 

Alexander Shulgin

 

 

Chief Financial Officer

 

3



 

INDEX TO EXHIBITS

 

Number

 

Description

 

 

 

99.1

 

Press Release of Yandex N.V. dated October 27, 2011 announcing the results for the quarter ended September 30, 2011

 

4


Exhibit 99.1

 

Yandex Announces Third Quarter 2011 Financial Results

 

MOSCOW AND THE HAGUE, October 27, 2011, 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 million(1)), up 65% compared with Q3 2010
Ex-TAC revenues(2) (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 EBITDA(2) of RUR 2.3 billion ($73.3 million), up 54% compared with Q3 2010

 

·                  Operating margin of 34.5%
Adjusted EBITDA margin(2) of 45.3%
Adjusted ex-TAC EBITDA margin(2) of 53.8%

 

·                  Net income of RUR 1.7 billion ($53.5 million), up 93% compared with Q3 2010

Adjusted net income(2) 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 margin(2) 
of 28.3%
Adjusted ex-TAC net income margin(2) 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:

 

 

 

Three months
ended September 30,

 

Nine months
ended September 30,

 

In RUR millions

 

2010

 

2011

 

Change

 

2010

 

2011

 

Change

 

 

 

(unaudited)

 

Revenues

 

3,131

 

5,159

 

65

%

8,375

 

13,594

 

62

%

Ex-TAC revenues(2)

 

2,735

 

4,341

 

59

%

7,309

 

11,598

 

59

%

Income from operations

 

1,173

 

1,781

 

52

%

3,016

 

4,431

 

47

%

Adjusted EBITDA(2)

 

1,519

 

2,335

 

54

%

3,958

 

5,968

 

51

%

Net income

 

883

 

1,705

 

93

%

2,407

 

3,650

 

52

%

Adjusted net income(2)

 

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 US search engine, blekko.com

 

Revenues

 

 

 

Three months
ended September 30,

 

Nine months
ended September 30,

 

In RUR millions

 

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)

 

 

 

Three months
ended September 30,

 

Nine months
ended September 30,

 

In RUR millions

 

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

 

 

 

Three months
ended September 30,

 

Nine months
ended September 30,

 

In RUR millions

 

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)

 

 

 

Three months
ended September 30,

 

Nine months
ended September 30,

 

In RUR millions

 

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.

 

 

 

Three months
ended September 30,

 

Nine months
ended September 30,

 

In RUR millions

 

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

 

 

 

Three months
ended September 30,

 

Nine months
ended September 30,

 

In RUR millions

 

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.

 

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.

 

Contacts:

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

 



 

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) 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 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 increase (reduction) in income tax attributable to the foreign exchange gain (loss).

·                  Adjusted net income margin means adjusted net income divided by US 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 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 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 US GAAP financial measure.

 



 

Yandex N.V.

Unaudited Condensed Consolidated Balance Sheets

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

 

 

 

As of

 

 

 

December 31,
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 US GAAP MEASURES

 

Reconciliation of Ex-TAC Revenues to US GAAP Revenues

 

 

 

Three months
ended September 30,

 

Nine months
ended September 30,

 

In RUR millions

 

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 US GAAP Net Income

 

 

 

Three months
ended September 30,

 

Nine months
ended September 30,

 

In RUR millions

 

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 US GAAP Net Income

 

 

 

Three months
ended September 30,

 

Nine months
ended September 30,

 

In RUR millions

 

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

 

3

 

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 US 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 US 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.