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

 

February 20, 2014

 

YANDEX N.V.

 

Schiphol Boulevard 165

1118 BG, Schiphol, the Netherlands

Tel: +31 202066970

(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 February 20, 2014, announcing the Company’s results for the quarter and year ended December 31, 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: February 20, 2014

By:

/S/ ALEXANDER SHULGIN

 

Alexander Shulgin

 

Chief Financial Officer

 

3



 

INDEX TO EXHIBITS

 

Number

 

Description

 

 

 

99.1

 

Press Release of Yandex N.V. dated February 20, 2014, announcing the Company’s results for the quarter and year ended December 31, 2013

 

4


Exhibit 99.1

 

Yandex Announces Fourth Quarter and Full-Year 2013 Financial Results

 

MOSCOW and AMSTERDAM, Netherlands, February 20, 2014, Yandex (NASDAQ: YNDX), one of Europe’s largest internet companies and the leading search provider in Russia, today announced its financial results for the fourth quarter and the full year ended December 31, 2013.

 

Q4 2013 Financial Highlights(1)(2)

 

·                  Revenues of RUR 12.1 billion ($369.3 million), up 37% compared with Q4 2012 (and up 40% excluding the impact of Yandex.Money)

·                  Ex-TAC revenues (excluding traffic acquisition costs) up 25% compared with Q4 2012 (and up 28% excluding the impact of Yandex.Money)

·                  Income from operations of RUR 3.9 billion ($119.8 million), up 26% compared with Q4 2012

·                  Adjusted EBITDA of RUR 5.1 billion ($157.3 million), up 21% compared with Q4 2012

·                  Operating margin of 32.4%

·                  Adjusted EBITDA margin of 42.6%

·                  Adjusted ex-TAC EBITDA margin of 55.6%

·                  Net income of RUR 3.3 billion ($102.2 million), up 24% compared with Q4 2012

·                  Adjusted net income of RUR 3.5 billion ($107.5 million), up 19% compared with Q4 2012

·                  Net income margin of 27.7%

·                  Adjusted net income margin of 29.1%

·                  Adjusted ex-TAC net income margin of 38.0%

·                  Cash and deposits of RUR 48.6 billion ($1,484.1 million) as of December 31, 2013

 

FY 2013 Financial Highlights(1)(2)

 

·                  Revenues of RUR 39.5 billion ($1,206.9 million), up 37% compared with FY 2012 (and up 39% excluding the impact of Yandex.Money)

·                  Ex-TAC revenues (excluding traffic acquisition costs) up 32% compared with FY 2012 (and up 35% excluding the impact of Yandex.Money)

·                  Income from operations of RUR 12.8 billion ($392.2 million), up 36% compared with FY 2012

·                  Adjusted EBITDA of RUR 17.4 billion ($530.6 million), up 32% compared with FY 2012

·                  Operating margin of 32.5%

·                  Adjusted EBITDA margin of 44.0%

·                  Adjusted ex-TAC EBITDA margin of 54.9%

·                  Net income of RUR 13.5 billion ($411.7 million), up 64% compared with FY 2012

·                  Adjusted net income of RUR 12.1 billion ($370.9 million), up 38% compared with FY 2012

·                  Net income margin of 34.1%

·                  Adjusted net income margin of 30.7%

 


(1)  Pursuant to SEC rules regarding convenience translations, Russian ruble (RUR) amounts have been translated into U.S. dollars at a rate of RUR 32.7292 to $1.00, the official exchange rate quoted as of December 31, 2013 by the Central Bank of the Russian Federation.

 

(2)  The following measures presented in this release are “non-GAAP financial measures”:  ex-TAC revenues; adjusted EBITDA; adjusted EBITDA margin; adjusted ex-TAC EBITDA margin; adjusted net income; adjusted net income margin and adjusted ex-TAC net income margin. Please see the section headed “Use of Non-GAAP Financial Measures” below for a discussion of how we define these measures, as well as reconciliations at the end of this release of each of these measures to the most directly comparable US GAAP measures.

 



 

·                  Adjusted ex-TAC net income margin of 38.4%

 

“Yandex delivered strong fourth quarter and full year 2013 results,” said Arkady Volozh, Chief Executive Officer of Yandex.  “We continued to grow our search share on desktop and mobile.  We implemented significant changes in our paid search algorithms, substantially grew the number of advertisers on our platform, and broadened the reach of our partner network.  We will continue to create services that benefit our users across the markets in which we operate.”

 

The following table provides a summary of key financial results for the three and twelve months ended December 31, 2012 and 2013:

 

 

 

Three months

 

Twelve months

 

 

 

ended December 31,

 

ended December 31,

 

In RUR millions

 

2012

 

2013

 

Change

 

2012

 

2013

 

Change

 

Revenues

 

8,819

 

12,086

 

37

%

28,767

 

39,502

 

37

%

Ex-TAC revenues(2)

 

7,403

 

9,258

 

25

%

23,987

 

31,652

 

32

%

Income from operations

 

3,107

 

3,921

 

26

%

9,454

 

12,837

 

36

%

Adjusted EBITDA(2)

 

4,255

 

5,148

 

21

%

13,142

 

17,367

 

32

%

Net income

 

2,691

 

3,346

 

24

%

8,223

 

13,474

 

64

%

Adjusted net income(2)

 

2,965

 

3,519

 

19

%

8,768

 

12,140

 

38

%

 

Q4 2013 Operational and Corporate Highlights

 

·                  Share of Russian search market (including mobile) averaged 61.9% in Q4 2013 (according to LiveInternet)

·                  SERPs (search engine result pages) grew 19% from Q4 2012

·                  Number of advertisers grew to more than 270,000, up 30% from Q4 2012 and up 10% from Q3 2013

·                  Acquisition of KinoPoisk, the largest and most comprehensive Russian-language website dedicated to movies, television shows and celebrities

·                  Enhanced the functionality of Yandex.Market with Cost Per Action advertising

·                  Yandex.Maps moved to a new unified platform and now provide detailed maps and routing features globally

·                  Placed $600 Million of 1.125% Convertible Senior Notes Due 2018 in December 2013 and additional $90 million in January 2014

·                  Repurchased 10 million shares as of February 18, 2014, as part of the previously announced share repurchase program, and increased authorization to repurchase a total of up to 15 million shares

 

Subsequent Events

 

·                  Cooperation agreement with MultiShip, a logistics service aggregator

·                  Partnership with Facebook - access to a “firehose” of public data in Russia, CIS and Turkey

 



 

Revenues

 

 

 

Three months

 

Twelve months

 

 

 

ended December 31,

 

ended December 31,

 

In RUR millions 

 

2012

 

2013

 

Change

 

2012

 

2013

 

Change

 

Advertising revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Text-based advertising

 

 

 

 

 

 

 

 

 

 

 

 

 

Yandex websites

 

6,181

 

8,006

 

30

%

20,610

 

27,584

 

34

%

Ad network

 

1,462

 

2,830

 

94

%

4,898

 

7,885

 

61

%

Total text-based advertising

 

7,643

 

10,836

 

42

%

25,508

 

35,469

 

39

%

Display advertising

 

964

 

1,152

 

20

%

2,592

 

3,379

 

30

%

Total advertising revenues

 

8,607

 

11,988

 

39

%

28,100

 

38,848

 

38

%

Online payment commissions

 

178

 

 

-100

%

552

 

394

 

-29

%

Other

 

34

 

98

 

188

%

115

 

260

 

126

%

Total revenues

 

8,819

 

12,086

 

37

%

28,767

 

39,502

 

37

%

 

Total revenues increased 37% compared with Q4 2012, and on a like-for-like basis (excluding revenues received from Yandex.Money operations in Q4 2012), total revenues increased 40% compared with Q4 2012.

 

Text-based advertising revenues, accounting for 90% of total revenues in Q4 2013, continued to determine overall top-line performance.

 

Text-based advertising revenues from Yandex’s own websites accounted for 66% of total revenues during Q4 2013, and increased 30% compared with Q4 2012.

 

Text-based advertising revenues from our ad network increased 94% compared with Q4 2012 and contributed 23% of total revenues during Q4 2013. The increase of partner network revenues as a share of total revenues, together with an increase in the growth rate of  the ad network, reflect our agreement with Mail.ru to power paid search results on Mail.ru properties.

 

Paid clicks on Yandex’s and its partners’ websites, in aggregate, increased 52% in Q4 2013 compared with Q4 2012 and grew 22% sequentially. Our average cost per click in Q4 2013 decreased 7% compared with Q4 2012.

 

Display advertising revenue, accounting for 10% of total revenues in Q4 2013, increased 20% compared with Q4 2012.

 

Operating Costs and Expenses

 

Yandex’s operating costs and expenses consist of cost of revenues, product development expenses, sales, general and administrative expenses (SG&A), and depreciation and amortization expenses (D&A). Apart from D&A, each of the above expense categories includes personnel-related costs and expenses, including related share-based compensation expense. Increases across all cost categories, excluding D&A, reflect investments in overall growth, including personnel. In Q4 2013, Yandex added 493 full-time employees, an increase of 11% from September 30, 2013, and up 41% from December 31, 2012. The total number of full-time employees was 4,902 as of December 31, 2013.  The employee numbers and growth rates are provided on a like-for-like basis, excluding Yandex.Money employees for the previous periods.

 



 

Costs of revenues, including traffic acquisition costs (TAC)

 

 

 

Three months

 

Twelve months

 

 

 

ended December 31,

 

ended December 31,

 

In RUR millions 

 

2012

 

2013

 

Change

 

2012

 

2013

 

Change

 

TAC:

 

 

 

 

 

 

 

 

 

 

 

 

 

Related to the Yandex ad network

 

928

 

2,023

 

118

%

3,128

 

5,377

 

72

%

Related to distribution partners

 

488

 

805

 

65

%

1,652

 

2,473

 

50

%

Total TAC

 

1,416

 

2,828

 

100

%

4,780

 

7,850

 

64

%

Total TAC as a % of total revenues

 

16.1

%

23.4

%

 

 

16.6

%

19.9

%

 

 

Other cost of revenues

 

660

 

713

 

8

%

2,408

 

2,756

 

14

%

Other cost of revenues as a % of revenues

 

7.5

%

5.9

%

 

 

8.4

%

7.0

%

 

 

Total cost of revenues

 

2,076

 

3,541

 

71

%

7,188

 

10,606

 

48

%

Total cost of revenues as a % of revenues

 

23.5

%

29.3

%

 

 

25.0

%

26.8

%

 

 

 

TAC increased from 18.5% of text-based revenues in Q4 2012 to 26.1% in Q4 2013, representing the increase in our Yandex ad network revenues as a share of total revenues for the period. The principal driver of the TAC increase was our agreement to power paid search on Mail.ru.

 

Other cost of revenues in Q4 2013 increased 8% compared with Q4 2012, reflecting further growth in personnel and data center-related costs partly offset by absence of the cost of online payment commissions related to Yandex.Money.

 

Product development

 

 

 

Three months

 

Twelve months

 

 

 

ended December 31,

 

ended December 31,

 

In RUR millions 

 

2012

 

2013

 

Change

 

2012

 

2013

 

Change

 

Product development

 

1,115

 

1,651

 

48

%

4,274

 

5,827

 

36

%

As a % of revenues

 

12.6

%

13.7

%

 

 

14.9

%

14.8

%

 

 

 

Growth in product development expenses in Q4 2013 primarily reflects increases in the number of developers. Development headcount increased 49% from 1,956 as of December 31, 2012, to 2,924 as of December 31, 2013, with 375 employees added since September 30, 2013, on a like-for-like basis, excluding Yandex.Money employees for the prior period.

 

Selling, general and administrative (SG&A)

 

 

 

Three months

 

Twelve months

 

 

 

ended December 31,

 

ended December 31,

 

In RUR millions

 

2012

 

2013

 

Change

 

2012

 

2013

 

Change

 

Sales, general and administrative

 

1,661

 

1,983

 

19

%

4,900

 

6,537

 

33

%

As a % of revenues

 

18.8

%

16.4

%

 

 

17.0

%

16.5

%

 

 

 

SG&A costs grew more slowly than revenues compared to Q4 2012, reflecting a more linear allocation of marketing spend through 2013 compared with 2012.

 



 

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

 

Twelve months

 

 

 

ended December 31,

 

ended December 31,

 

In RUR millions

 

2012

 

2013

 

Change

 

2012

 

2013

 

Change

 

SBC expense included in cost of revenues

 

14

 

18

 

29

%

33

 

61

 

85

%

SBC expense included in product development

 

70

 

128

 

83

%

221

 

435

 

97

%

SBC expense included in SG&A

 

31

 

77

 

148

%

122

 

258

 

111

%

Total SBC expense

 

115

 

223

 

94

%

376

 

754

 

101

%

As a % of revenues

 

1.3

%

1.8

%

 

 

1.3

%

1.9

%

 

 

 

Total SBC expense increased 94% in Q4 2013 compared with Q4 2012. The increase is principally related to new equity-based grants made in 2012-2013.

 

Depreciation and amortization (D&A) expense

 

 

 

Three months

 

Twelve months

 

 

 

ended December 31,

 

ended December 31,

 

In RUR millions 

 

2012

 

2013

 

Change

 

2012

 

2013

 

Change

 

Depreciation and amortization

 

860

 

990

 

15

%

2,951

 

3,695

 

25

%

As a % of revenues

 

9.8

%

8.2

%

 

 

10.3

%

9.4

%

 

 

 

D&A expense increased 15% in Q4 2013 compared with Q4 2012, primarily reflecting further investments in servers and data centers made this year.

 

As a result of the factors described above, income from operations was RUR 3.9 billion ($119.8 million) in Q4 2013, a 26% increase from Q4 2012, while adjusted EBITDA reached RUR 5.1 billion ($157.3 million) in Q4 2013, up 21% from Q4 2012.

 



 

Interest income in Q4 2013 was RUR 414 million, up from RUR 333 million in Q4 2012, principally as a result of investing our cash provided by operating activities in Russia, where our investments earn higher returns partly offset by interest expenses related to our convertible debt.

 

Foreign exchange gain in Q4 2013 was RUR 99 million, compared with a foreign exchange gain of RUR 17 million in Q4 2012. This gain is due to the appreciation of the U.S. dollar during Q4 2013 from RUR 32.3451 to $1.00 on September 30, 2013 to RUR 32.7292 to $1.00 on December 31, 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 Q4 2013.

 

Income tax expense for Q4 2013 was RUR 1,083 million, up from RUR 791 million in Q4 2012. Our effective tax rate of 24.5% in Q4 2013 was significantly higher than in previous quarters due to one-time effect of certain reserves and allowances we have provided for in Q4 2013. Adjusted for these reserves and allowances, our effective tax rate is 21.6%. This compares with an effective tax rate of 21.1% in Q3 2013, adjusted for a non-taxable gain on the sale of a 75% interest in Yandex.Money in Q3 2013.

 

Adjusted net income in Q4 2013 was RUR 3.5 billion ($107.5 million), a 19% increase from Q4 2012.

 

Adjusted net income margin was 29.1 % in Q4 2013, compared with 33.6% in Q4 2012.

 

Net income was RUR 3.3 billion ($102.2 million) in Q4 2013, up 24% compared with Q4 2012.

 

As of December 31, 2013, Yandex had cash, cash equivalents and long-term deposits of RUR 48.6 billion ($1,484.1 million).

 

Net operating cash flow and capital expenditures for Q4 2013 were RUR 4.8 billion ($146.3 million) and RUR 1.7 billion ($50.8 million), respectively.

 

The total number of shares issued and outstanding as of December 31, 2013 was 323,655,509, including 250,732,061 Class A shares, 72,923,447 Class B shares, and one Priority share and excluding 6,266,245 Class A shares held in treasury and all Class C shares outstanding solely as a result of the conversion of Class B shares into Class A shares; all such Class C shares will be cancelled. There were also employee share options outstanding to purchase up to an additional 6.0 million shares, at a weighted average exercise price of $5.11 per share, of which options to purchase 5.2 million shares were fully vested; equity-settled share appreciation rights equal to 1.6 million shares, at a weighted average measurement price of $26.75, 0.2 million of which were fully vested; and restricted share units covering  2.9 million shares, of which restricted share units to acquire 0.4 million shares were fully vested.

 

Outlook for 2014

 

On a like-for-like basis, excluding the revenue associated with Yandex.Money from 2013 results, Yandex expects to achieve full year ruble-based revenue growth of 25% to 30% in 2014(1).

 


(1)  In 2013, Yandex recognized total revenue of RUR 39,502 million, including RUR 394 million in payments commissions related to Yandex.Money and RUR 39,108 million in advertising and other revenues. Starting July 4, 2013, when the sale of a 75% interest in Yandex.Money was completed, Yandex stopped recognizing revenue related to Yandex.Money in its consolidated revenues.

 



 

Conference Call Information

 

Yandex’s management will hold an earnings conference call on February 20, 2014 at 8:00 AM U.S. Eastern Time (5:00 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: 34382878#

 

A replay of the call will be available through February 27, 2014. To access the replay, please dial:

 

US: +1 866 247 4222,

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

 

Passcode: 34382878#

 

A live and archived webcast of this conference call will be available at http://www.media-server.com/m/p/n7yp629i

 



 

ABOUT YANDEX

 

Yandex (NASDAQ:YNDX) is one of the largest European internet companies, providing a wide variety of search and other online services. 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 operates Russia’s most popular search engine and also serves Ukraine, Belarus, Kazakhstan and Turkey. 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 2014. 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 February 20, 2014, 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, Vladimir Isaev

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, (3) accrual of expense related to the contingent compensation that is payable through November 2013 to employees in connection with our acquisition of the mobile software business of SPB Software (described below) 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 was payable to certain employees in connection with our acquisition of the mobile software business of SPB Software (described below), (3) foreign exchange losses (less foreign exchange gains) adjusted for the (reduction) increase in income tax attributable to the foreign exchange losses (gains) and (4) amortization of debt discount related to our convertible debt adjusted for the reduction in income taxes attributable to the amortization of debt discount; less gain from the sale and deconsolidation 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

 



 

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 were required under US GAAP to accrue as expense the contingent compensation that was 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, $4.1 million of which was paid in February 2013, and $2.9 million of which was paid in November 2013. 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.

 

Amortization of debt discount

 

We also adjust net income for interest expense representing amortization of debt discount related to our convertible debt issued in Q4 2013.We have eliminated this expense from adjusted net income as it is non-cash in nature and is not indicative of our ongoing operating performance.

 

Gain from the sale of equity investments

 

Adjusted net income also excludes (1) a gain in the year ended December 31, 2013 from the sale of our minority interest in face.com in connection with the sale of that company, (2) a gain in the quarter ended September 30, 2013 from deconsolidation of Yandex.Money following the sale of a 75% interest in Yandex.Money to Sberbank on July 4, 2013, and (3) the sale of marketable securities held on our balance sheet.  We believe that it is useful to present adjusted net income and related margin measures excluding the effect of these significant items 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.

 



 

YANDEX N.V.

 

Unaudited Consolidated Balance Sheets

 

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

 

 

 

As of

 

 

 

December 31,

 

December 31,

 

December 31,

 

 

 

2012*

 

2013

 

2013

 

 

 

RUR

 

RUR

 

$

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

7,425

 

33,394

 

1,020.3

 

Marketable securities

 

76

 

87

 

2.7

 

Term deposits

 

4,629

 

 

 

Accounts receivable, net

 

1,767

 

2,785

 

85.1

 

Prepaid expenses

 

597

 

689

 

21.0

 

Assets held for sale

 

2,024

 

 

 

Deferred tax assets

 

456

 

596

 

18.2

 

Other current assets

 

1,217

 

1,332

 

40.7

 

Total current assets

 

18,191

 

38,883

 

1,188.0

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

8,095

 

9,729

 

297.3

 

Intangible assets, net

 

323

 

633

 

19.3

 

Goodwill

 

750

 

2,946

 

90.0

 

Long-term prepaid expenses

 

695

 

1,042

 

31.8

 

Restricted cash

 

214

 

104

 

3.2

 

Term deposits

 

10,330

 

15,180

 

463.8

 

Investments in non-marketable equity securities

 

500

 

1,250

 

38.2

 

Investments in debt securities

 

4,810

 

2

 

0.1

 

Deferred tax assets

 

35

 

3

 

0.1

 

Other non-current assets

 

342

 

1,539

 

47.0

 

TOTAL ASSETS

 

44,285

 

71,311

 

2,178.8

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

2,513

 

3,710

 

113.3

 

Taxes payable

 

1,455

 

1,688

 

51.6

 

Deferred revenue

 

1,092

 

1,501

 

45.9

 

Liabilities related to assets held for sale

 

1,619

 

 

 

Deferred tax liabilities

 

3

 

16

 

0.5

 

Total current liabilities

 

6,682

 

6,915

 

211.3

 

Convertible debt

 

 

16,429

 

502.0

 

Deferred tax liabilities

 

448

 

1,245

 

38.0

 

Other accrued liabilities

 

108

 

125

 

3.8

 

Total liabilities

 

7,238

 

24,714

 

755.1

 

 

 

 

 

 

 

 

 

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 256,998,306, Class B: 125,441,218 and 72,923,447, and Class C: 27,972,630 and 23,110,819, respectively); shares outstanding (Class A: 202,318,864 and 250,732,061, Class B: 125,441,218 and 72,923,447, and Class C: nil)

 

445

 

242

 

7.4

 

Treasury shares at cost (Class A: nil and 6,266,245)

 

 

(6,886

)

(210.4

)

Additional paid-in capital

 

13,617

 

15,701

 

479.7

 

Accumulated other comprehensive income

 

961

 

2,042

 

62.4

 

Retained earnings

 

22,024

 

35,498

 

1,084.6

 

Total shareholders’ equity

 

37,047

 

46,597

 

1,423.7

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

44,285

 

71,311

 

2,178.8

 

 


* Derived from 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 December 31,

 

 

 

2012

 

2013

 

2013

 

 

 

RUR

 

RUR

 

$

 

 

 

 

 

 

 

 

 

Revenues

 

8,819

 

12,086

 

369.3

 

Operating costs and expenses:

 

 

 

 

 

 

 

Cost of revenues(1)

 

2,076

 

3,541

 

108.2

 

Product development(1) 

 

1,115

 

1,651

 

50.4

 

Sales, general and administrative(1)

 

1,661

 

1,983

 

60.7

 

Depreciation and amortization

 

860

 

990

 

30.2

 

Total operating costs and expenses

 

5,712

 

8,165

 

249.5

 

Income from operations

 

3,107

 

3,921

 

119.8

 

Interest income, net

 

333

 

414

 

12.6

 

Other income, net

 

42

 

94

 

2.9

 

Net income before income taxes

 

3,482

 

4,429

 

135.3

 

Provision for income taxes

 

791

 

1,083

 

33.1

 

Net income

 

2,691

 

3,346

 

102.2

 

Net income per Class A and Class B share:

 

 

 

 

 

 

 

Basic

 

8.22

 

10.30

 

0.31

 

Diluted

 

8.00

 

10.08

 

0.31

 

Weighted average number of Class A and Class B shares outstanding

 

 

 

 

 

 

 

Basic

 

327,511,749

 

324,736,336

 

324,736,336

 

Diluted

 

336,211,460

 

331,906,108

 

331,906,108

 

 


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

 

Cost of revenues

 

14

 

18

 

0.5

 

Product development

 

70

 

128

 

3.9

 

Sales, general and administrative

 

31

 

77

 

2.4

 

 



 

YANDEX N.V.

 

Unaudited Consolidated Statements of Income

 

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

 

 

 

Twelve months ended December 31,

 

 

 

2012*

 

2013

 

2013

 

 

 

RUR

 

RUR

 

$

 

 

 

 

 

 

 

 

 

Revenues

 

28,767

 

39,502

 

1,206.9

 

Operating costs and expenses:

 

 

 

 

 

 

 

Cost of revenues(1)

 

7,188

 

10,606

 

324.1

 

Product development(1) 

 

4,274

 

5,827

 

178.0

 

Sales, general and administrative(1)

 

4,900

 

6,537

 

199.7

 

Depreciation and amortization

 

2,951

 

3,695

 

112.9

 

Total operating costs and expenses

 

19,313

 

26,665

 

814.7

 

Income from operations

 

9,454

 

12,837

 

392.2

 

Interest income, net

 

1,002

 

1,717

 

52.5

 

Other income, net

 

118

 

2,159

 

65.9

 

Net income before income taxes

 

10,574

 

16,713

 

510.6

 

Provision for income taxes

 

2,351

 

3,239

 

98.9

 

Net income

 

8,223

 

13,474

 

411.7

 

Net income per Class A and Class B share:

 

 

 

 

 

 

 

Basic

 

25.21

 

41.25

 

1.26

 

Diluted

 

24.50

 

40.27

 

1.23

 

Weighted average number of Class A and Class B shares outstanding

 

 

 

 

 

 

 

Basic

 

326,210,948

 

326,657,778

 

326,657,778

 

Diluted

 

335,690,596

 

334,571,212

 

334,571,212

 

 


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

 

Cost of revenues

 

33

 

61

 

1.9

 

Product development

 

221

 

435

 

13.3

 

Sales, general and administrative

 

122

 

258

 

7.9

 

 

* Derived from audited financial statements

 



 

YANDEX N.V.

 

Unaudited Condensed Consolidated Statements of Cash Flows

 

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

 

 

 

Three months ended December 31,

 

 

 

2012

 

2013

 

2013

 

 

 

RUR

 

RUR

 

$

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income

 

2,691

 

3,346

 

102.2

 

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

 

 

 

 

 

 

 

Depreciation and amortization of property and equipment

 

790

 

945

 

28.8

 

Amortization of acquisition-related intangible assets

 

70

 

45

 

1.4

 

Amortization of debt discount and issuance costs

 

 

24

 

0.7

 

Share-based compensation expense

 

115

 

223

 

6.8

 

Deferred income taxes

 

(39

)

58

 

1.8

 

Foreign exchange gains

 

(17

)

(99

)

(3.0

)

Other

 

(24

)

(6

)

(0.1

)

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

 

 

 

 

 

 

 

Accounts receivable, net

 

(331

)

(450

)

(13.7

)

Prepaid expenses and other assets

 

(84

)

(424

)

(13.0

)

Accounts payable and accrued liabilities

 

522

 

920

 

28.1

 

Deferred revenue

 

167

 

206

 

6.3

 

Assets held for sale

 

(306

)

 

 

Liabilities related to assets held for sale

 

299

 

 

 

Net cash provided by operating activities

 

3,853

 

4,788

 

146.3

 

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

 

 

 

 

 

 

 

Purchase of property and equipment

 

(1,000

)

(1,665

)

(50.8

)

Acquisitions of businesses, net of cash acquired

 

 

(2,438

)

(74.5

)

Investments in non-marketable equity securities

 

 

(12

)

(0.4

)

Proceeds from maturity of debt securities

 

759

 

2,668

 

81.5

 

Investments in term deposits

 

(6,350

)

 

 

Maturities of term deposits

 

4,788

 

2,620

 

80.1

 

Loans granted

 

 

(109

)

(3.3

)

Escrow cash deposit

 

219

 

(5

)

(0.2

)

Net cash used in investing activities

 

(1,584

)

1,059

 

32.4

 

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from exercise of share options

 

56

 

61

 

1.8

 

Proceeds from issuance of convertible debt

 

 

19,719

 

602.5

 

Payment of debt discount and issuance costs

 

 

(179

)

(5.4

)

Repurchases of ordinary shares

 

 

(3,368

)

(102.9

)

Net cash provided by financing activities

 

56

 

16,233

 

496.0

 

Effect of exchange rate changes on cash and cash equivalents

 

(96

)

(68

)

(2.2

)

Net change in cash and cash equivalents

 

2,229

 

22,012

 

672.5

 

Cash and cash equivalents at beginning of period

 

5,196

 

11,382

 

347.8

 

Cash and cash equivalents at end of period

 

7,425

 

33,394

 

1,020.3

 

 



 

YANDEX N.V.

 

Unaudited Consolidated Statements of Cash Flows

 

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

 

 

 

Twelve months ended December 31, 2013

 

 

 

2012*

 

2013

 

2013

 

 

 

RUR

 

RUR

 

$

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income

 

8,223

 

13,474

 

411.7

 

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

 

 

 

 

 

 

 

Depreciation and amortization of property and equipment

 

2,812

 

3,584

 

109.5

 

Amortization of acquisition-related intangible assets

 

139

 

111

 

3.4

 

Amortization of debt discount and issuance costs

 

 

24

 

0.7

 

Share-based compensation expense

 

376

 

754

 

23.1

 

Deferred income taxes

 

72

 

(197

)

(6.0

)

Foreign exchange (gains)/losses

 

57

 

(139

)

(4.2

)

Gain from sale of equity securities

 

(234

)

(2,137

)

(65.3

)

Other

 

51

 

(28

)

(0.9

)

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

 

 

 

 

 

 

 

Accounts receivable, net

 

(526

)

(966

)

(29.5

)

Prepaid expenses and other assets

 

(923

)

(1,301

)

(39.8

)

Accounts payable and accrued liabilities

 

1,277

 

1,195

 

36.5

 

Deferred revenue

 

195

 

401

 

12.3

 

Assets held for sale

 

(411

)

(156

)

(4.8

)

Liabilities related to assets held for sale

 

421

 

86

 

2.6

 

Net cash provided by operating activities

 

11,529

 

14,705

 

449.3

 

CASH FLOWS USED IN INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Purchase of property and equipment

 

(3,984

)

(4,936

)

(150.8

)

Acquisitions of businesses, net of cash acquired

 

 

(2,438

)

(74.5

)

Investments in non-marketable equity securities

 

(47

)

(14

)

(0.5

)

Proceeds from sale of equity securities

 

174

 

2,023

 

61.8

 

Proceeds from maturity of debt securities

 

1,521

 

4,969

 

151.8

 

Investments in term deposits

 

(16,585

)

(11,450

)

(349.8

)

Maturities of term deposits

 

8,512

 

11,290

 

345.0

 

Loans granted

 

 

(279

)

(8.5

)

Escrow cash deposit

 

219

 

125

 

3.8

 

Net cash used in investing activities

 

(10,190

)

(710

)

(21.7

)

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from exercise of share options

 

361

 

439

 

13.4

 

Proceeds from issuance of convertible debt

 

 

19,719

 

602.5

 

Payment of debt discount and issuance costs

 

 

(179

)

(5.4

)

Repurchases of ordinary shares

 

 

(8,518

)

(260.3

)

Net cash provided by financing activities

 

361

 

11,461

 

350.2

 

Effect of exchange rate changes on cash and cash equivalents

 

(205

)

513

 

15.6

 

Net change in cash and cash equivalents

 

1,495

 

25,969

 

793.4

 

Cash and cash equivalents at beginning of period

 

5,930

 

7,425

 

226.9

 

Cash and cash equivalents at end of period

 

7,425

 

33,394

 

1,020.3

 

 


* Derived from audited financial statements

 



 

YANDEX N.V.

 

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

TO THE NEAREST COMPARABLE US GAAP MEASURES

 

Reconciliation of Ex-TAC Revenues to US GAAP Revenues

 

 

 

Three months
ended December 31,

 

Twelve months
ended December 31,

 

In RUR millions

 

2012

 

2013

 

Change

 

2012

 

2013

 

Change

 

Total revenues

 

8,819

 

12,086

 

37

%

28,767

 

39,502

 

37

%

Less: traffic acquisition costs (TAC)

 

1,416

 

2,828

 

100

%

4,780

 

7,850

 

64

%

Ex-TAC revenues

 

7,403

 

9,258

 

25

%

23,987

 

31,652

 

32

%

 

Reconciliation of Adjusted EBITDA to US GAAP Net Income

 

 

 

Three months
ended December 31,

 

Twelve months
ended December 31,

 

In RUR millions

 

2012

 

2013

 

Change

 

2012

 

2013

 

Change

 

Net income

 

2,691

 

3,346

 

24

%

8,223

 

13,474

 

64

%

Add: depreciation and amortization

 

860

 

990

 

15

%

2,951

 

3,695

 

25

%

Add: share-based compensation (SBC) expense

 

115

 

223

 

94

%

376

 

754

 

101

%

Add: compensation expense related to contingent consideration

 

173

 

14

 

-92

%

361

 

81

 

-78

%

Less: interest income, net

 

(333

)

(414

)

24

%

(1,002

)

(1,717

)

71

%

Less: other income, net

 

(42

)

(94

)

n/m

 

(118

)

(2,159

)

n/m

 

Add: provision for income taxes

 

791

 

1,083

 

37

%

2,351

 

3,239

 

38

%

Adjusted EBITDA

 

4,255

 

5,148

 

21

%

13,142

 

17,367

 

32

%

 

Reconciliation of Adjusted Net Income to US GAAP Net Income

 

 

 

Three months
ended December 31,

 

Twelve months
ended December 31,

 

In RUR millions

 

2012

 

2013

 

Change

 

2012

 

2013

 

Change

 

Net income

 

2,691

 

3,346

 

24

%

8,223

 

13,474

 

64

%

Add: SBC expense

 

115

 

223

 

94

%

376

 

754

 

101

%

Less: reduction in income tax attributable to SBC expense

 

(1

)

(3

)

n/m

 

(4

)

(9

)

n/m

 

Add: compensation expense related to contingent consideration

 

173

 

14

 

-92

%

361

 

81

 

-78

%

Less: foreign exchange (gain)/loss

 

(17

)

(99

)

n/m

 

57

 

(139

)

n/m

 

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

 

4

 

20

 

n/m

 

(11

)

28

 

n/m

 

Less: gain from sale of equity investments and deconsolidation

 

 

 

n/m

 

(234

)

(2,067

)

783

%

Add: amortization of debt discount

 

 

24

 

n/m

 

 

24

 

n/m

 

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

 

 

(6

)

n/m

 

 

(6

)

n/m

 

Adjusted net income

 

2,965

 

3,519

 

19

%

8,768

 

12,140

 

38

%

 



 

Reconciliation of Adjusted EBITDA Margin and Adjusted Ex-TAC EBITDA Margin to US GAAP Net Income Margin

 

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 December 31, 2013

 

3,346

 

27.7

%

1,802

 

5,148

 

42.6

%

55.6

%

Twelve months ended December 31, 2013

 

13,474

 

34.1

%

3,893

 

17,367

 

44.0

%

54.9

%

 


(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

 

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 December 31, 2013

 

3,346

 

27.7

%

173

 

3,519

 

29.1

%

38.0

%

Twelve months ended December 31, 2013

 

13,474

 

34.1

%

(1,334

)

12,140

 

30.7

%

38.4

%

 


(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), expense related to SPB Software contingent compensation, gain from sale and deconsolidation of equity investments, foreign exchange losses (as adjusted for the reduction in income tax attributable to the loss) and amortization of debt discount (as adjusted for the reduction in income tax attributable to the expense). 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.