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

 

July 25, 2013

 

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 July 25, 2013, announcing the Company’s results for the quarter ended June 30, 2013.

 

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: July 25, 2013

 

By:

/S/ ALEXANDER SHULGIN

 

 

Alexander Shulgin

 

 

Chief Financial Officer

 

3



 

INDEX TO EXHIBITS

 

Number

 

Description

 

 

 

99.1

 

Press Release of Yandex N.V. dated July 25, 2013 announcing the results for the quarter ended June 30, 2013

 

4


Exhibit 99.1

 

GRAPHIC

 

Yandex Announces Second Quarter 2013 Financial Results

 

MOSCOW AND THE HAGUE, July 25, 2013, Yandex (NASDAQ: YNDX), one of Europe’s largest internet companies and the leading search provider in Russia, today announced its financial results for the second quarter ended June 30, 2013.

 

Q2 2013 Financial Highlights

 

·                  Revenues of RUR 9.2 billion ($281.2 million(1)), up 35% compared with Q2 2012

·                  Ex-TAC revenues(2) (excluding traffic acquisition costs) up 37% compared with Q2 2012

·                  Income from operations of RUR 3.2 billion ($98.4 million), up 43% compared with Q2 2012

·                  Adjusted EBITDA(3) of RUR 4.3 billion ($131.6 million), up 40% compared with Q2 2012

·                  Operating margin of 35.0%

·                  Adjusted EBITDA margin(2) of 46.8%

·                  Adjusted ex-TAC EBITDA margin(2) of 55.6%

·                  Net income of RUR 2.9 billion ($89.1 million), up 47% compared with Q2 2012

·                  Adjusted net income(3) of RUR 3.1 billion ($93.5 million), up 48% compared with Q2 2012

·                  Net income margin of 31.7%

·                  Adjusted net income margin(2) of 33.2%

·                  Adjusted ex-TAC net income margin(2) of 39.5%

·                  Cash, deposits and investments in debt securities of RUR 30.8 billion ($940.1 million) as of June 30, 2013

 

“Yandex delivered strong financial and operating results. We released the mobile version of our Yandex.Browser and a new, task-oriented version of Yandex.Mail,” said Arkady Volozh, CEO of Yandex.  “We also unveiled Yandex.Islands, a next generation search platform with interactive search results.”

 

The following table provides a summary of key financial results for the three months and six months ended June 30, 2012 and 2013.

 


(1)  Pursuant to SEC rules regarding convenience translations, Russian ruble (RUR) amounts have been translated into U.S. dollars at a rate of RUR 32.7090 to $1.00, the official exchange rate quoted as of June 30, 2013 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.

 

(3) Adjusted EBITDA and adjusted net income are non-GAAP financial measures. Please see “Use of Non-GAAP Financial Measures” below for a discussion of how we define adjusted EBITDA and adjusted net income. You will find a reconciliation of adjusted EBITDA and adjusted net income to GAAP net income, the most directly comparable US GAAP measure for both non-GAAP measures, in the accompanying financial tables at the end of this release.

 

1



 

 

 

Three months

 

Six months

 

 

 

ended June 30,

 

ended June 30,

 

In RUR millions 

 

2012

 

2013

 

Change

 

2012

 

2013

 

Change

 

Revenues

 

6,801

 

9,199

 

35

%

12,675

 

17,198

 

36

%

Ex-TAC revenues(2)

 

5,660

 

7,734

 

37

%

10,542

 

14,428

 

37

%

Income from operations

 

2,245

 

3,218

 

43

%

3,804

 

5,671

 

49

%

Adjusted EBITDA(3)

 

3,070

 

4,303

 

40

%

5,447

 

7,807

 

43

%

Net income

 

1,983

 

2,915

 

47

%

3,241

 

5,161

 

59

%

Adjusted net income(3)

 

2,069

 

3,058

 

48

%

3,574

 

5,468

 

53

%

 

Q2 2013 Operational and Corporate Highlights

 

·                  Share of Russian search market averaged 61.7% in Q2 2013 (according to LiveInternet)

·                  SERPs (search engine result pages) grew 22% from Q2 2012

·                  Number of advertisers grew to more than 239,000, up 24% from Q2 2012 and up 6% from Q1 2013

·                  Introduced a new concept in search engine result pages — interactive blocks, called Islands

·                  Launched two versions of our mobile browser - for Android-based smartphones and for the iPad

·                  Repurchased 4 million shares as of July 24, 2013 as part of the previously announced 12 million share repurchase program

 

Subsequent Events

 

·                  Signed a cooperation agreement with Mail.ru under which Yandex is the paid search services provider for Mail.ru

·                  Completed the formation of the joint venture between Yandex.Money and Sberbank on July 4, 2013

 

Revenues

 

 

 

Three months

 

Six months

 

 

 

ended June 30,

 

ended June 30,

 

In RUR millions 

 

2012

 

2013

 

Change

 

2012

 

2013

 

Change

 

Advertising revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Text-based advertising

 

 

 

 

 

 

 

 

 

 

 

 

 

Yandex websites

 

4,890

 

6,717

 

37

%

9,174

 

12,567

 

37

%

Ad network

 

1,132

 

1,412

 

25

%

2,152

 

2,716

 

26

%

Total text-based advertising

 

6,022

 

8,129

 

35

%

11,326

 

15,283

 

35

%

Display advertising

 

628

 

822

 

31

%

1,048

 

1,445

 

38

%

Total advertising revenues

 

6,650

 

8,951

 

35

%

12,374

 

16,728

 

35

%

Online payment commissions

 

127

 

200

 

57

%

241

 

387

 

61

%

Other

 

24

 

48

 

100

%

60

 

83

 

38

%

Total revenues

 

6,801

 

9,199

 

35

%

12,675

 

17,198

 

36

%

 

Text-based advertising revenues, accounting for 88% of total revenues in Q2 2013, continued to determine overall top-line performance.

 

Text-based advertising revenues from Yandex’s own websites accounted for 73% of total revenues during Q2 2013, and increased by 37% compared with Q2 2012. Text-based advertising revenues from our

 

2



 

ad network increased 25% compared with Q2 2012 and contributed 15% of total revenues during Q2 2013. Revenues from Yandex websites grew faster than those from our ad network as we implemented changes to our advertising technologies on our owned and operated sites.

 

Paid clicks on Yandex’s and its partners’ websites, in aggregate, increased 29% in Q2 2013 compared with Q2 2012. Our average cost per click in Q2 2013 increased 5% compared with Q2 2012.

 

Display advertising revenue accounted for 9% of total revenues during Q2 2013, and increased 31% compared with Q2 2012.

 

Online payment commissions accounted for 2% of revenues during Q2 2013, and increased 57% compared with Q2 2012. In July 2013, we completed our sale of 75% of Yandex.Money to Sberbank and the formation of our joint venture with Sberbank in respect of this business. From Q3 2013, we will deconsolidate Yandex.Money and no longer recognize its online payment commissions as revenue.

 

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 Q2 2013, Yandex added 326 full-time employees, an increase of 8% from March 31, 2013, and up 24% from June 30, 2012. The total number of full-time employees was 4,298 as of June 30, 2013.

 

Cost of revenues, including traffic acquisition costs (TAC)

 

 

 

Three months

 

Six months

 

 

 

ended June 30,

 

ended June 30,

 

In RUR millions

 

2012

 

2013

 

Change

 

2012

 

2013

 

Change

 

TAC:

 

 

 

 

 

 

 

 

 

 

 

 

 

Related to the Yandex ad network

 

729

 

890

 

22

%

1,386

 

1,710

 

23

%

Related to distribution partners

 

412

 

575

 

40

%

747

 

1,060

 

42

%

Total TAC

 

1,141

 

1,465

 

28

%

2,133

 

2,770

 

30

%

Total TAC as a % of total revenues

 

16.8

%

15.9

%

 

 

16.8

%

16.1

%

 

 

Other cost of revenues

 

608

 

693

 

14

%

1,134

 

1,364

 

20

%

Other cost of revenues as a % of revenues

 

8.9

%

7.5

%

 

 

8.9

%

7.9

%

 

 

Total cost of revenues

 

1,749

 

2,158

 

23

%

3,267

 

4,134

 

27

%

Total cost of revenues as a % of revenues

 

25.7

%

23.5

%

 

 

25.8

%

24.0

%

 

 

 

TAC decreased from 18.9% of text-based revenues in Q2 2012 to 18.0% in Q2 2013, reflecting the larger growth in revenues from our own sites.

 

Other cost of revenues in Q2 2013 increased 14% compared with Q2 2012, reflecting growth in personnel, content acquisition costs and data center-related costs.

 

3



 

Product development

 

 

 

Three months

 

Six months

 

 

 

ended June 30,

 

ended June 30,

 

In RUR millions 

 

2012

 

2013

 

Change

 

2012

 

2013

 

Change

 

Product development

 

1,059

 

1,381

 

30

%

2,125

 

2,709

 

27

%

As a % of revenues

 

15.6

%

15.0

%

 

 

16.8

%

15.8

%

 

 

 

The absolute increase in product development expenses in Q2 2013 was in line with increases in product development staff and employee compensation. Product development headcount increased 25% from 1,899 as of June 30, 2012, to 2,365 as of June 30, 2013, with 184 employees added since March 31, 2013.

 

Selling, general and administrative (SG&A)

 

 

 

Three months

 

Six months

 

 

 

ended June 30,

 

ended June 30,

 

In RUR millions 

 

2012

 

2013

 

Change

 

2012

 

2013

 

Change

 

Sales, general and administrative

 

1,052

 

1,530

 

45

%

2,122

 

2,893

 

36

%

As a % of revenues

 

15.5

%

16.6

%

 

 

16.7

%

16.8

%

 

 

 

The absolute increase in SG&A in Q2 2013 was driven primarily by increased advertising and marketing expenses in Russia and Turkey.

 

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

 

Six months

 

 

 

ended June 30,

 

ended June 30,

 

In RUR millions 

 

2012

 

2013

 

Change

 

2012

 

2013

 

Change

 

SBC expense included in cost of revenues

 

6

 

12

 

100

%

12

 

23

 

92

%

SBC expense included in product development

 

53

 

91

 

72

%

92

 

173

 

88

%

SBC expense included in SG&A

 

15

 

48

 

220

%

51

 

106

 

108

%

Total SBC expense

 

74

 

151

 

104

%

155

 

302

 

95

%

As a % of revenues

 

1.1

%

1.6

%

 

 

1.2

%

1.8

%

 

 

 

Total SBC expense increased 104% in Q2 2013 compared with Q2 2012. The increase is primarily related to new equity-based grants issued in 2012.

 

Depreciation and amortization (D&A) expense

 

 

 

Three months

 

Six months

 

 

 

ended June 30,

 

ended June 30,

 

In RUR millions 

 

2012

 

2013

 

Change

 

2012

 

2013

 

Change

 

Depreciation and amortization

 

696

 

912

 

31

%

1,357

 

1,791

 

32

%

As a % of revenues

 

10.2

%

9.9

%

 

 

10.7

%

10.4

%

 

 

 

D&A expense increased 31% in Q2 2013 compared with Q2 2012, primarily reflecting our investments in servers and data centers made last year.

 

4



 

As a result of the factors described above, income from operations was RUR 3.2 billion ($98.4 million) in Q2 2013, a 43% increase from Q2 2012, while adjusted EBITDA reached RUR 4.3 billion ($131.6 million) in Q2 2013, up 40% from Q2 2012.

 

Interest income in Q2 2013 was RUR 452 million, up from RUR 234 million in Q2 2012, principally as a result of investing more of our cash provided by operating activities in Russia, where our investments earn higher returns.

 

Foreign exchange gain in Q2 2013 was RUR 35 million, compared to a foreign exchange gain of RUR 52 million in Q2 2012. The foreign exchange gain is due to the appreciation of the U.S. dollar during Q2 2013 from RUR 31.0834 to $1.00 on March 31, 2013 to RUR 32.7090 to $1.00 on June 30, 2013. Yandex’s Russian operating subsidiaries’ functional currency is the Russian ruble, and therefore changes in the ruble value of these subsidiaries’ monetary assets and liabilities that are denominated in other currencies 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 assets and liabilities were not impacted by these currency fluctuations, they resulted in an upward revaluation of the ruble equivalent of these U.S. dollar-denominated monetary assets and liabilities in Q2 2013.

 

Income tax expense for Q2 2013 was RUR 772 million, up from RUR 549 million in Q2 2012. Our effective tax rate decreased from 21.7% in Q2 2012 to 20.9% in Q2 2013.

 

Adjusted net income in Q2 2013 was RUR 3.1 billion ($93.5 million), a 48% increase from Q2 2012.

 

Adjusted net income margin was 33.2% in Q2 2013, compared to 30.4% in Q2 2012.

 

Net income Net income was RUR 2.9 billion ($89.1 million) in Q2 2013, up 47% compared with Q2 2012. Net income grew slower than adjusted net income due to an increase in SBC expense partially offset by large swings in foreign exchange gains and the associated income tax impact and a decrease in contingent compensation payable the recent period in connection with an acquisition in 2011. We adjust for these expenses in our non-GAAP adjusted net income measure.

 

As of June 30, 2013, Yandex had cash, cash equivalents, term deposits (including long-term deposits) and long-term debt securities of RUR 30.8 billion ($940.1 million).

 

Net operating cash flow and capital expenditures for Q2 2013 were RUR 4.0 billion ($122.2 million) and RUR 0.7 billion ($20.9 million), respectively.

 

The total number of shares issued and outstanding as of June 30, 2013 was 326,409,208, including 231,020,637 Class A shares, 95,388,570 Class B shares, and one Priority share and excluding 3,512,546 Class A shares held in treasury and all 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 employee share options outstanding to purchase up to an additional 8.1 million shares, at a weighted average exercise price of $4.58 per share, of which options to purchase 6.5 million shares were fully vested; equity-settled share appreciation rights equal to 0.9 million shares, at a weighted average measurement price of $20.36, 0.1 million of which were fully vested; and restricted share units covering  2.6 million shares, of which restricted share units to acquire 0.1 million shares were fully vested.

 

Outlook for 2013

 

We are raising our revenue guidance for the full-year 2013, and we now expect year-on-year ruble-based revenue growth of 34-38%.(1)

 


(1 )The guidance is provided on a like-for-like basis, excluding the revenue associated with Yandex.Money from both 2012 and 2013 results. In 2012, Yandex recognized total revenue of RUR 28,767 million,

 

5



 

including RUR 552 million in payment commissions related to Yandex.Money and RUR 28,215 million in advertising revenue and other revenue. On July 4, 2013, Yandex and Sberbank announced the completion of the formation of their joint venture in respect of the Yandex.Money business. Accordingly, we will deconsolidate Yandex.Money in Q3 2013.

 

Conference Call Information

 

Yandex’s management will hold an earnings conference call on July 25, 2013 at 8:00 AM U.S. Eastern Time (4:00 PM Moscow time; 1:00 PM London time).

 

To access the conference call live, please dial:

 

US: +1 631 621 5256

UK: +44 (0) 1452 560 304

Russia: 8 10 800 23942044

 

Passcode: 1407-1186#

 

A replay of the call will be available until August 1, 2013. To access the replay, please dial:

 

US: +1 866 247 4222

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

 

Passcode: 1407-1186#

 

A live and archived webcast of this conference call will be available at http://ir.yandex.com/eventdetail.cfm?eventid=127979

 

6



 

ABOUT YANDEX

 

Yandex (NASDAQ:YNDX) is one of the largest European internet companies, providing the world with search and online services one market at a time. Yandex’s mission is to help users solve their everyday problems by building people-centric products and services. Based on innovative technologies, the company provides the most relevant, locally tailored experience on all digital platforms and devices. Yandex is the leading search service in Russia and also serves Turkey, Ukraine, Belarus and Kazakhstan. More information on Yandex can be found at http://company.yandex.com.

 

FORWARD-LOOKING STATEMENTS

 

This press release contains forward-looking statements that involve risks and uncertainties. These include statements regarding our anticipated revenues for full-year 2013. 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 user preferences, changes in the legal and regulatory environment, technological developments, and our need to expend capital to accommodate the growth of the business, as well as those risks and uncertainties included under the captions “Risk Factors” and “Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2012, which is on file with the Securities and Exchange Commission and is available on our investor relations website at http://ir.yandex.com/sec.cfm and on the SEC website at www.sec.gov. All information in this release and in the attachments is as of July 25, 2013, and Yandex undertakes no duty to update this information unless required by law.

 

Contacts:

 

Investor Relations

Greg Abovsky, Katya Zhukova

Phone: +7 495 974-35-38

E-mail: askIR@yandex-team.ru

 

Media Relations

Ochir Mandzhikov, Tatiana Komarova

Phone: +7 495 739-70-00

E-mail: pr@yandex-team.ru

 

7



 

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, (3) accrual of expense related to the contingent compensation that may be payable to employees in connection with our acquisition of the mobile software business of SPB Software and (4) 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, (2) accrual of expense related to the contingent compensation that may be payable to certain employees in connection with our acquisition of the mobile software business of SPB Software, and (3) foreign exchange losses (less foreign exchange gains) adjusted for the (reduction) increase in income tax attributable to the foreign exchange losses (gains); less gain from the sale of equity investments.

·                  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.

 

Although our management uses these non-GAAP financial measures for operational decision making and considers these financial measures to be useful for analysts and investors, we recognize that there are a number of limitations related to such measures. In particular, it should be noted that several of these measures exclude some 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.

 

Below, we describe why we make particular adjustments to certain US GAAP financial measures:

 

TAC

 

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

 

8



 

able to obtain a clearer picture of our business without the impact of the revenues we share with our partners.

 

SBC

 

SBC is a significant expense item, and an important part of our compensation and incentive programs. As it is a non-cash charge, however, and highly dependent on our share price at the time of equity award grants, we believe that it is useful for investors and analysts to see certain financial measures excluding the impact of these charges in order to obtain a clear picture of our operating performance.

 

Acquisition-related costs

 

We may incur expenses in connection with acquisitions that are not indicative of our recurring core operating performance. In particular, we are required under US GAAP to accrue as expense the contingent compensation that may be payable to certain employees in connection with our acquisition of the mobile software business of SPB Software in November 2011. The maximum aggregate amount of such contingent compensation is $14.1 million, payable on the achievement of certain milestones and the continued employment of the sellers, $7.1 million of which was paid in November 2012 and $4.1 million of which was paid in February 2013; the remaining $2.9 million is payable in November 2013 upon the satisfaction of defined milestones. We have eliminated this acquisition-related expense from adjusted EBITDA and adjusted net income to provide management and investors a tool for comparing on a period-to-period basis our operating performance in the ordinary course of operations.

 

Foreign exchange gains and losses

 

Because we hold significant assets in currencies other than our Russian ruble operating currency, and because foreign exchange fluctuations are outside of our operational control, we believe that it is useful to present adjusted net income and related margin measures excluding these effects, in order to provide greater clarity regarding our operating performance.

 

Gain from the sale of equity investments

 

Adjusted net income also excludes a gain in the year ended December 31, 2012 from our sale of our minority interest in face.com in connection with the sale of that company. We believe that it is useful to present adjusted net income and related margin measures excluding the effect of this significant one-off item in order to provide a clearer picture of our operating performance.

 

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.

 

9



 

YANDEX N.V.

 

Unaudited Condensed Consolidated Balance Sheets

 

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

 

 

 

As of

 

 

 

December 31,

 

June 30,

 

June 30,

 

 

 

2012*

 

2013

 

2013

 

 

 

RUR

 

RUR

 

$

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

7,425

 

6,161

 

188.4

 

Marketable securities

 

76

 

116

 

3.5

 

Term deposits

 

4,629

 

820

 

25.1

 

Accounts receivable, net

 

1,767

 

2,127

 

65.0

 

Prepaid expenses

 

597

 

607

 

18.5

 

Assets held for sale

 

2,024

 

2,165

 

66.2

 

Deferred tax assets

 

456

 

578

 

17.7

 

Other current assets

 

1,217

 

946

 

28.9

 

Total current assets

 

18,191

 

13,520

 

413.3

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

8,095

 

7,955

 

243.2

 

Intangible assets, net

 

323

 

299

 

9.1

 

Goodwill

 

750

 

775

 

23.7

 

Long-term prepaid expenses

 

695

 

720

 

22.1

 

Restricted cash

 

214

 

94

 

2.9

 

Term deposits

 

10,330

 

18,580

 

568.0

 

Investments in non-marketable equity securities

 

500

 

651

 

19.9

 

Investments in debt securities

 

4,810

 

5,189

 

158.6

 

Deferred tax assets

 

35

 

110

 

3.4

 

Other non-current assets

 

342

 

922

 

28.2

 

TOTAL ASSETS

 

44,285

 

48,815

 

1,492.4

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

2,513

 

2,863

 

87.5

 

Taxes payable

 

1,455

 

1,570

 

48.0

 

Deferred revenue

 

1,092

 

1,143

 

34.9

 

Liabilities related to assets held for sale

 

1,619

 

1,704

 

52.1

 

Deferred tax liabilities

 

3

 

22

 

0.7

 

Total current liabilities

 

6,682

 

7,302

 

223.2

 

Deferred tax liabilities

 

448

 

420

 

12.8

 

Other accrued liabilities

 

108

 

80

 

2.5

 

Total liabilities

 

7,238

 

7,802

 

238.5

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

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

 

 

 

 

Preference shares: €0.01 par value; 2,000,000,001 shares authorized, nil shares issued and outstanding

 

 

 

 

Ordinary shares: par value (Class A €0.01, Class B €0.10 and Class C €0.09); shares authorized (Class A: 2,000,000,000 and 2,000,000,000, Class B: 159,494,722 and 102,115,140, and Class C: 159,494,722 and 102,115,140); shares issued (Class A: 202,318,864 and 234,533,183, Class B: 125,441,218 and 95,388,570, and Class C: 27,972,630 and 58,025,278, respectively); shares outstanding (Class A: 202,318,864 and 231,020,637, Class B: 125,441,218 and 95,388,570, and Class C: nil)

 

445

 

333

 

10.2

 

Treasury shares at cost (Class A: nil and 3,512,546, and Class B: nil and nil)

 

 

(2,636

)

(80.6

)

Additional paid-in capital

 

13,617

 

14,162

 

433.0

 

Accumulated other comprehensive income

 

961

 

1,969

 

60.2

 

Retained earnings

 

22,024

 

27,185

 

831.1

 

Total shareholders’ equity

 

37,047

 

41,013

 

1,253.9

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

44,285

 

48,815

 

1,492.4

 

 


* Derived from the audited financial statements

 

10



 

Unaudited Condensed Consolidated Statements of Income

 

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

 

 

 

Three months ended June 30,

 

 

 

2012

 

2013

 

2013

 

 

 

RUR

 

RUR

 

$

 

 

 

 

 

 

 

 

 

Revenues

 

6,801

 

9,199

 

281.2

 

Operating costs and expenses:

 

 

 

 

 

 

 

Cost of revenues(1) 

 

1,749

 

2,158

 

66.0

 

Product development(1) 

 

1,059

 

1,381

 

42.2

 

Sales, general and administrative(1) 

 

1,052

 

1,530

 

46.8

 

Depreciation and amortization

 

696

 

912

 

27.9

 

Total operating costs and expenses

 

4,556

 

5,981

 

182.9

 

Income from operations

 

2,245

 

3,218

 

98.3

 

Interest income

 

234

 

452

 

13.8

 

Other income, net

 

53

 

17

 

0.6

 

Net income before income taxes

 

2,532

 

3,687

 

112.7

 

Provision for income taxes

 

549

 

772

 

23.6

 

Net income

 

1,983

 

2,915

 

89.1

 

Net income per Class A and Class B share:

 

 

 

 

 

 

 

Basic

 

6.08

 

8.91

 

0.27

 

Diluted

 

5.92

 

8.70

 

0.27

 

Weighted average number of Class A and Class B shares outstanding

 

 

 

 

 

 

 

Basic

 

326,161,539

 

327,270,521

 

327,270,521

 

Diluted

 

335,245,767

 

335,106,587

 

335,106,587

 

 


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

 

Cost of revenues

 

6

 

12

 

0.4

 

Product development

 

53

 

91

 

2.8

 

Sales, general and administrative

 

15

 

48

 

1.4

 

 

11



 

Unaudited Condensed Consolidated Statements of Income

 

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

 

 

 

Six months ended June 30,

 

 

 

2012

 

2013

 

2013

 

 

 

RUR

 

RUR

 

$

 

 

 

 

 

 

 

 

 

Revenues

 

12,675

 

17,198

 

525.8

 

Operating costs and expenses:

 

 

 

 

 

 

 

Cost of revenues(1) 

 

3,267

 

4,134

 

126.4

 

Product development(1) 

 

2,125

 

2,709

 

82.8

 

Sales, general and administrative(1) 

 

2,122

 

2,893

 

88.4

 

Depreciation and amortization

 

1,357

 

1,791

 

54.8

 

Total operating costs and expenses

 

8,871

 

11,527

 

352.4

 

Income from operations

 

3,804

 

5,671

 

173.4

 

Interest income

 

401

 

820

 

25.1

 

Other (expense)/ income, net

 

(71

)

43

 

1.3

 

Net income before income taxes

 

4,134

 

6,534

 

199.8

 

Provision for income taxes

 

893

 

1,373

 

42.0

 

Net income

 

3,241

 

5,161

 

157.8

 

Net income per Class A and Class B share:

 

 

 

 

 

 

 

Basic

 

9.96

 

15.74

 

0.48

 

Diluted

 

9.67

 

15.38

 

0.47

 

Weighted average number of Class A and Class B shares outstanding

 

 

 

 

 

 

 

Basic

 

325,303,178

 

327,820,231

 

327,820,231

 

Diluted

 

335,107,446

 

335,669,392

 

335,669,392

 

 


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

 

Cost of revenues

 

12

 

23

 

0.7

 

Product development

 

92

 

173

 

5.3

 

Sales, general and administrative

 

51

 

106

 

3.2

 

 

12



 

YANDEX N.V.

 

Unaudited Condensed Consolidated Statements of Cash Flows

 

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

 

 

 

Three months ended June 30,

 

 

 

2012*

 

2013

 

2013

 

 

 

RUR

 

RUR

 

$

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income

 

1,983

 

2,915

 

89.1

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization of property and equipment

 

670

 

890

 

27.2

 

Amortization of acquisition-related intangible assets

 

26

 

22

 

0.7

 

Share-based compensation expense

 

74

 

151

 

4.6

 

Deferred income taxes

 

17

 

(161

)

(4.9

)

Foreign exchange gains

 

(52

)

(35

)

(1.1

)

Other

 

(3

)

17

 

0.5

 

Changes in operating assets and liabilities excluding the effect of acquisitions:

 

 

 

 

 

 

 

Accounts receivable, net

 

(306

)

(274

)

(8.4

)

Prepaid expenses and other assets

 

(169

)

(412

)

(12.6

)

Accounts payable and accrued liabilities

 

562

 

756

 

23.2

 

Deferred revenue

 

52

 

163

 

5.0

 

Assets held for sale

 

(103

)

(96

)

(2.9

)

Liabilities related to assets held for sale

 

91

 

59

 

1.8

 

Net cash provided by operating activities

 

2,842

 

3,995

 

122.2

 

CASH FLOWS USED IN INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Purchase of property and equipment

 

(690

)

(685

)

(20.9

)

Investments in non-marketable equity securities

 

(47

)

 

 

Investments in term deposits

 

(4,685

)

(6,230

)

(190.5

)

Maturities of term deposits

 

711

 

3,470

 

106.1

 

Loans granted

 

 

(35

)

(1.1

)

Net cash used in investing activities

 

(4,711

)

(3,480

)

(106.4

)

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

 

 

 

 

 

 

 

Proceeds from exercise of share options

 

116

 

123

 

3.8

 

Repurchases of ordinary shares

 

 

(2,521

)

(77.1

)

Net cash provided by/(used in) financing activities

 

116

 

(2,398

)

(73.3

)

Effect of exchange rate changes on cash and cash equivalents

 

506

 

287

 

8.7

 

Net change in cash and cash equivalents

 

(1,247

)

(1,596

)

(48.8

)

Cash and cash equivalents at beginning of period

 

5,376

 

7,757

 

237.2

 

Cash and cash equivalents at end of period

 

4,129

 

6,161

 

188.4

 

 


* Cash flows related to Yandex.Money are reclassified from their historical presentation to cash flows related to changes in assets held for sale and liabilities related to assets held for sale

 

13



 

YANDEX N.V.

 

Unaudited Condensed Consolidated Statements of Cash Flows

 

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

 

 

 

Six months ended June 30,

 

 

 

2012*

 

2013

 

2013

 

 

 

RUR

 

RUR

 

$

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income

 

3,241

 

5,161

 

157.8

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization of property and equipment

 

1,313

 

1,746

 

53.4

 

Amortization of acquisition-related intangible assets

 

44

 

45

 

1.4

 

Share-based compensation expense

 

155

 

302

 

9.2

 

Deferred income taxes

 

(81

)

(214

)

(6.5

)

Foreign exchange losses/(gains)

 

62

 

(42

)

(1.3

)

Other

 

10

 

(8

)

(0.2

)

Changes in operating assets and liabilities excluding the effect of acquisitions:

 

 

 

 

 

 

 

Accounts receivable, net

 

(216

)

(356

)

(10.9

)

Prepaid expenses and other assets

 

(487

)

(412

)

(12.6

)

Accounts payable and accrued liabilities

 

544

 

431

 

13.2

 

Deferred revenue

 

(33

)

41

 

1.2

 

Assets held for sale

 

(50

)

(155

)

(4.7

)

Liabilities related to assets held for sale

 

97

 

86

 

2.6

 

Net cash provided by operating activities

 

4,599

 

6,625

 

202.6

 

CASH FLOWS USED IN INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Purchase of property and equipment

 

(1,454

)

(1,544

)

(47.2

)

Investments in non-marketable equity securities

 

(47

)

 

 

Investments in term deposits

 

(8,635

)

(11,450

)

(350.0

)

Maturities of term deposits

 

3,374

 

7,070

 

216.1

 

Escrow cash deposit

 

 

130

 

4.0

 

Loans granted

 

 

(35

)

(1.1

)

Net cash used in investing activities

 

(6,762

)

(5,829

)

(178.2

)

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

 

 

 

 

 

 

 

Proceeds from exercise of share options

 

235

 

255

 

7.8

 

Repurchases of ordinary shares

 

 

(2,764

)

(84.5

)

Net cash provided by/(used in) financing activities

 

235

 

(2,509

)

(76.7

)

Effect of exchange rate changes on cash and cash equivalents

 

127

 

449

 

13.7

 

Net change in cash and cash equivalents

 

(1,801

)

(1,264

)

(38.6

)

Cash and cash equivalents at beginning of period

 

5,930

 

7,425

 

227.0

 

Cash and cash equivalents at end of period

 

4,129

 

6,161

 

188.4

 

 


* Cash flows related to Yandex.Money are reclassified from their historical presentation to cash flows related to changes in assets held for sale and liabilities related to assets held for sale

 

14



 

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

 

Six months

 

 

 

ended June 30,

 

ended June 30,

 

In RUR millions

 

2012

 

2013

 

Change

 

2012

 

2013

 

Change

 

Total revenues

 

6,801

 

9,199

 

35

%

12,675

 

17,198

 

36

%

Less: traffic acquisition costs (TAC)

 

1,141

 

1,465

 

28

%

2,133

 

2,770

 

30

%

Ex-TAC revenues

 

5,660

 

7,734

 

37

%

10,542

 

14,428

 

37

%

 

Reconciliation of Adjusted EBITDA to US GAAP Net Income

 

 

 

Three months

 

Six months

 

 

 

ended June 30,

 

ended June 30,

 

In RUR millions

 

2012

 

2013

 

Change

 

2012

 

2013

 

Change

 

Net income

 

1,983

 

2,915

 

47

%

3,241

 

5,161

 

59

%

Add: depreciation and amortization

 

696

 

912

 

31

%

1,357

 

1,791

 

32

%

Add: share-based compensation (SBC) expense

 

74

 

151

 

104

%

155

 

302

 

95

%

Add: compensation expense related to contingent consideration

 

55

 

22

 

-60

%

131

 

43

 

-67

%

Less: interest income

 

(234

)

(452

)

93

%

(401

)

(820

)

104

%

Add: other income, net

 

(53

)

(17

)

n/m

 

71

 

(43

)

n/m

 

Add: provision for income taxes

 

549

 

772

 

41

%

893

 

1,373

 

54

%

Adjusted EBITDA

 

3,070

 

4,303

 

40

%

5,447

 

7,807

 

43

%

 

Reconciliation of Adjusted Net Income to US GAAP Net Income

 

 

 

Three months

 

Six months

 

 

 

ended June 30,

 

ended June 30,

 

In RUR millions

 

2012

 

2013

 

Change

 

2012

 

2013

 

Change

 

Net income

 

1,983

 

2,915

 

47

%

3,241

 

5,161

 

59

%

Add: SBC expense

 

74

 

151

 

104

%

155

 

302

 

95

%

Less: reduction in income tax attributable to SBC expense

 

(1

)

(2

)

n/m

 

(2

)

(4

)

n/m

 

Add: compensation expense related to contingent consideration

 

55

 

22

 

-60

%

131

 

43

 

-67

%

Less: foreign exchange (gain)/loss

 

(52

)

(35

)

n/m

 

62

 

(42

)

n/m

 

Add: increase/(reduction) in income tax attributable to foreign exchange (gain)/loss

 

10

 

7

 

n/m

 

(13

)

8

 

n/m

 

Adjusted net income

 

2,069

 

3,058

 

48

%

3,574

 

5,468

 

53

%

 

15



 

Reconciliation of Adjusted EBITDA Margin and Adjusted Ex-TAC EBITDA Margin to US GAAP Net Income Margin for the Three months ended June 30, 2013

 

In RUR millions 

 

US GAAP
Actual Net
Income

 

Net Income
Margin (1)

 

Adjustment (2)

 

Adjusted
EBITDA

 

Adjusted
EBITDA
Margin (3)

 

Adjusted
Ex-TAC
EBITDA
Margin (4)

 

Three months ended June 30, 2013

 

2,915

 

31.7

%

1,388

 

4,303

 

46.8

%

55.6

%

 


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

 

(2)     Adjusted to eliminate depreciation and amortization expense, SBC expense, expense related to SPB Software contingent compensation, 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 June 30, 2013

 

In RUR millions 

 

US GAAP
Actual Net
Income

 

Net Income
Margin (1)

 

Adjustment (2)

 

Adjusted
Net Income

 

Adjusted
Net Income
Margin (3)

 

Adjusted
Ex-TAC
Net Income
Margin (4)

 

Three months ended June 30, 2013

 

2,915

 

31.7

%

143

 

3,058

 

33.2

%

39.5

%

 


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

 

(2)     Adjusted to eliminate depreciation and amortization expense, SBC expense, expense related to SPB Software contingent compensation, interest income, other (expense)/income, net, and provision for income taxes. 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.

 

16