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 29, 2014

 

YANDEX N.V.

 

Schiphol Boulevard 165

1118 BG, Schiphol, the Netherlands.

Tel: +31 202 066 970

(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 29, 2014, announcing the Company’s results for the quarter ended June 30, 2014.

 

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 29, 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 July 29, 2014, announcing the Company’s results for the quarter ended June 30, 2014

 

4


Exhibit 99.1

 

Yandex Announces Second Quarter 2014 Financial Results

 

MOSCOW and AMSTERDAM, Netherlands, July 29, 2014 (GLOBE NEWSWIRE), 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, 2014.

 

Q2 2014 Financial Highlights(1)(2)

 

·                  Revenues of RUR 12.2 billion ($361.5 million), up 32% compared with Q2 2013 (and up 35% excluding the impact of Yandex.Money)

·                  Ex-TAC revenues (excluding traffic acquisition costs) up 23% compared with Q2 2013 (and up 26% excluding the impact of Yandex.Money)

·                  Income from operations of RUR 3.6 billion ($108.0 million), up 13% compared with Q2 2013

·                  Adjusted EBITDA of RUR 5.0 billion ($149.5 million), up 17% compared with Q2 2013

·                  Operating margin of 29.9%

·                  Adjusted EBITDA margin of 41.3%

·                  Adjusted ex-TAC EBITDA margin of 52.9%

·                  Net income of RUR 2.4 billion ($71.2 million), down 18% compared with Q2 2013

·                  Adjusted net income of RUR 3.3 billion ($98.7 million), up 9% compared with Q2 2013

·                  Net income margin of 19.7%

·                  Adjusted net income margin of 27.3%

·                  Adjusted ex-TAC net income margin of 34.9%

·                  Cash, cash equivalents and deposits of RUR 47.3 billion ($1,405.4 million) as of June 30, 2014

 

“Our core text-based advertising business drove strong financial results with solid growth in advertisers and paid clicks,” said Arkady Volozh, Chief Executive Officer of Yandex. “The acquisition of Auto.ru, announced earlier this month, is a strong move into classifieds which is one of the fastest growing segments of online advertising, and the admission of our shares for trading on Moscow Exchange will provide trading liquidity in our home market.”

 

The following table provides a summary of key financial results for the three months and six months ended June 30, 2013 and 2014:

 

 

 

Three months

 

Six months

 

 

 

ended June 30,

 

ended June 30,

 

In RUR millions

 

2013

 

2014

 

Change

 

2013

 

2014

 

Change

 

Revenues

 

9,199

 

12,158

 

32

%

17,198

 

23,043

 

34

%

Ex-TAC revenues(2)

 

7,734

 

9,507

 

23

%

14,428

 

17,824

 

24

%

Income from operations

 

3,218

 

3,631

 

13

%

5,671

 

6,349

 

12

%

Adjusted EBITDA(2)

 

4,303

 

5,027

 

17

%

7,807

 

9,069

 

16

%

Net income

 

2,915

 

2,396

 

-18

%

5,161

 

5,076

 

-2

%

Adjusted net income(2)

 

3,058

 

3,318

 

9

%

5,468

 

5,870

 

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 33.6306 to $1.00, the official exchange rate quoted as of June 30, 2014 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.

 



 

Q2 2014 Operational and Corporate Highlights

 

·                  Share of Russian search market (including mobile) averaged 61.6% in Q2 2014 (according to LiveInternet)

·                  Search queries grew 21% from Q2 2013

·                  Number of advertisers grew to more than 295,000, up 25% from Q2 2013 and up 6% from Q1 2014

·                  Announced agreement to acquire Auto.ru, one of the leading online auto classifieds businesses in Russia

·                  Launched Yandex.City, an app and a website that helps users to find local businesses while aggregating user generated reviews

·                  Class A shares of Yandex N.V. were accepted for listing on Moscow Exchange

·                  Repurchased 15 million shares as part of previously announced share repurchase program and increased authorization to repurchase 3 million additional shares

 

Revenues

 

 

 

Three months

 

Six months

 

 

 

ended June 30,

 

ended June 30,

 

In RUR millions 

 

2013

 

2014

 

Change

 

2013

 

2014

 

Change

 

Advertising revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Text-based advertising

 

 

 

 

 

 

 

 

 

 

 

 

 

Yandex websites

 

6,717

 

8,559

 

27

%

12,567

 

15,953

 

27

%

Ad network

 

1,412

 

2,705

 

92

%

2,716

 

5,368

 

98

%

Total text-based advertising

 

8,129

 

11,264

 

39

%

15,283

 

21,321

 

40

%

Display advertising

 

 

 

 

 

 

 

 

 

 

 

 

 

Yandex websites

 

805

 

674

 

-16

%

1,425

 

1,321

 

-7

%

Ad network

 

17

 

101

 

n/m

 

20

 

177

 

n/m

 

Total display advertising

 

822

 

775

 

-6

%

1,445

 

1,498

 

4

%

Total advertising revenues

 

8,951

 

12,039

 

34

%

16,728

 

22,819

 

36

%

Online payment commissions

 

200

 

0

 

-100

%

387

 

0

 

-100

%

Other

 

48

 

119

 

148

%

83

 

224

 

170

%

Total revenues

 

9,199

 

12,158

 

32

%

17,198

 

23,043

 

34

%

 

Total revenues increased 32% compared with Q2 2013 and, on a like-for-like basis (excluding revenues received from Yandex.Money operations in Q2 2013), total revenues increased 35% compared with Q2 2013.

 

Text-based advertising revenues accounted for 93% of total revenues in Q2 2014 and continued to determine overall top-line performance.

 

Text-based advertising revenues from Yandex’s own websites accounted for 70% of total revenues during Q2 2014, and increased 27% compared with Q2 2013.

 

Text-based advertising revenues from our ad network increased 92% compared with Q2 2013 and contributed 22% of total revenues during Q2 2014. Our agreement with Mail.ru to power paid search results is the principal driver of our increase in partner network revenues as well as the increase in the growth rate of the ad network.

 

Paid clicks on Yandex’s and its partners’ websites, in aggregate, increased 36% in Q2 2014 compared with Q2 2013. Our average cost per click in Q2 2014 grew 1% compared with Q2 2013.

 



 

Display advertising revenue, accounting for 6% of total revenues in Q2 2014, was down 6% compared with Q2 2013.

 

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 2014, Yandex added 164 full-time employees, an increase of 3% from March 31, 2014, and up 32% from June 30, 2013. The total number of full-time employees was 5,300 as of June 30, 2014. 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

 

Six months

 

 

 

ended June 30,

 

ended June 30,

 

In RUR millions 

 

2013

 

2014

 

Change

 

2013

 

2014

 

Change

 

TAC:

 

 

 

 

 

 

 

 

 

 

 

 

 

Related to the Yandex ad network

 

890

 

1,804

 

103

%

1,710

 

3,593

 

110

%

Related to distribution partners

 

575

 

847

 

47

%

1,060

 

1,626

 

53

%

Total TAC

 

1,465

 

2,651

 

81

%

2,770

 

5,219

 

88

%

Total TAC as a % of total revenues

 

15.9

%

21.8

%

 

 

16.1

%

22.6

%

 

 

Other cost of revenues

 

693

 

776

 

12

%

1,364

 

1,540

 

13

%

Other cost of revenues as a % of revenues

 

7.5

%

6.4

%

 

 

7.9

%

6.7

%

 

 

Total cost of revenues

 

2,158

 

3,427

 

59

%

4,134

 

6,759

 

63

%

Total cost of revenues as a % of revenues

 

23.5

%

28.2

%

 

 

24.0

%

29.3

%

 

 

 

TAC increased from 15.9% of total revenues in Q2 2013 to 21.8% in Q2 2014, reflecting an increase in our Yandex ad network revenues as a share of total revenues for the period. The principal driver of the TAC increase is our agreement to power paid search on Mail.ru. Partner TAC includes both traffic acquisition costs related to our text-based ad network as well as display ad network.

 

Other cost of revenues in Q2 2014 increased 12.0% compared with Q2 2013, reflecting further growth in personnel and data center-related costs, partly offset by the absence of the cost of online payment commissions related to Yandex.Money.

 

Product development

 

 

 

Three months

 

Six months

 

 

 

ended June 30,

 

ended June 30,

 

In RUR millions 

 

2013

 

2014

 

Change

 

2013

 

2014

 

Change

 

Product development

 

1,381

 

2,079

 

51

%

2,709

 

4,083

 

51

%

As a % of revenues

 

15.0

%

17.1

%

 

 

15.8

%

17.7

%

 

 

 

Growth in product development expenses in Q2 2014 primarily reflects increases in the number of developers we’ve hired since Q2 2013. On a like-for like basis, excluding Yandex.Money employees for the respective periods, development headcount increased 36% from 2,280 as of June 30, 2013, to 3,106 as of June 30, 2014, with 85 employees added since March 31, 2014.

 



 

Selling, general and administrative (SG&A)

 

 

 

Three months

 

Six months

 

 

 

ended June 30,

 

ended June 30,

 

In RUR millions

 

2013

 

2014

 

Change

 

2013

 

2014

 

Change

 

Sales, general and administrative

 

1,530

 

1,907

 

25

%

2,893

 

3,669

 

27

%

As a % of revenues

 

16.6

%

15.7

%

 

 

16.8

%

15.9

%

 

 

 

SG&A costs grew broadly in line with our advertising revenues compared to Q2 2013.

 

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 

 

2013

 

2014

 

Change

 

2013

 

2014

 

Change

 

SBC expense included in cost of revenues

 

12

 

23

 

92

%

23

 

42

 

83

%

SBC expense included in product development

 

91

 

165

 

81

%

173

 

335

 

94

%

SBC expense included in SG&A

 

48

 

87

 

81

%

106

 

153

 

44

%

Total SBC expense

 

151

 

275

 

82

%

302

 

530

 

75

%

As a % of revenues

 

1.6

%

2.3

%

 

 

1.8

%

2.3

%

 

 

 

Total SBC expense increased 82% in Q2 2014 compared with Q2 2013. The increase is principally related to new equity-based grants made in 2013 and 2014.

 

Depreciation and amortization (D&A) expense

 

 

 

Three months

 

Six months

 

 

 

ended June 30,

 

ended June 30,

 

In RUR millions 

 

2013

 

2014

 

Change

 

2013

 

2014

 

Change

 

Depreciation and amortization

 

912

 

1,114

 

22

%

1,791

 

2,183

 

22

%

As a % of revenues

 

9.9

%

9.2

%

 

 

10.4

%

9.5

%

 

 

 

D&A expense increased 22% in Q2 2014 compared with Q2 2013, primarily reflecting investments in servers and data centers made in 2013 and early 2014.

 

As a result of the factors described above, income from operations was RUR 3.6 billion ($108.0 million) in Q2 2014, a 13% increase from Q2 2013, while adjusted EBITDA reached RUR 5.0 billion ($149.5 million) in Q2 2014, up 17% from Q2 2013.

 

Interest income, net in Q2 2014 was RUR 203 million, down from RUR 452 million in Q2 2013, mainly due to interest expenses related to our convertible notes issued in December 2013 and January 2014.

 



 

Foreign exchange loss in Q2 2014 was RUR 625 million, compared with a foreign exchange gain of RUR 35 million in Q2 2013. This loss is due to the depreciation of the U.S. dollar during Q2 2014 from RUR 35.6871 to $1.00 on March 31, 2014, to RUR 33.6306 to $1.00 on June 30, 2014. Yandex’s Russian operating subsidiaries’ functional currency is the Russian ruble, and therefore changes due to exchange rate fluctuations in the ruble value of these subsidiaries’ monetary assets and liabilities that are denominated in other currencies 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 was not impacted by these currency fluctuations, they resulted in a downward revaluation of the ruble equivalent of these U.S. dollar-denominated monetary assets and liabilities in Q2 2014.

 

Income tax expense for Q2 2014 was RUR 821 million, up from RUR 772 million in Q2 2013. Our effective tax rate of 25.5% in Q2 2014 was higher than in Q1 2014 due to the one-time effect of certain reserves and allowances we provided for in Q2’2014. Adjusted for these reserves and allowances, our effective tax rate is 24.6%. Our effective tax rate was also higher than in 2013 quarters principally because in the six months ended June 30, 2014 we accrued for the 5% dividend withholding tax on the portion of the current year profit of our principal Russian operating subsidiary, that we considered not permanently reinvested in Russia.

 

Adjusted net income in Q2 2014 was RUR 3.3 billion ($98.7 million), a 9% increase from Q2 2013.

 

Adjusted net income margin was 27.3% in Q2 2014, compared with 33.2% in Q2 2013.

 

Net income was RUR 2.4 billion ($71.2 million) in Q2 2014, down 18% compared with Q2 2013. The primary reason for negative growth rate of net income in Q2 2014 was due to foreign exchange loss recorded on the depreciation of the U.S. dollar during Q2 2014.

 

As of June 30, 2014, Yandex had cash, cash equivalents and deposits of RUR 47.3 billion ($1,405.4 million).

 

Net operating cash flow and capital expenditures for Q2 2014 were RUR 4.0 billion ($119.6 million) and RUR 2.1 billion ($63.7 million), respectively.

 

The total number of shares issued and outstanding as of June 30, 2014 was 317,925,242, including 247,054,830 Class A shares, 70,870,411 Class B shares, and one Priority share and excluding 12,096,512 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 5.5 million shares, at a weighted average exercise price of $5.36 per share, of which options to purchase 5.1 million shares were fully vested; equity-settled share appreciation rights equal to 1.7 million shares, at a weighted average measurement price of $27.46, 0.3 million of which were fully vested; and restricted share units covering 3.4 million shares, of which restricted share units to acquire 0.7 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).

 

Conference Call Information

 

Yandex’s management will hold an earnings conference call on July 29, 2014 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: +1 212 999 6659

UK: +44 (0) 20 3003 2666

Russia: 8 10 800 24902044

 

Passcode: Yandex

 

A replay of the call will be available through August 5, 2014. To access the replay, please dial:

 

US: +1 866 583 1039,

Russia/International: +44 (0) 20 8196 1998

 

Passcode: 6513417#

 

A live and archived webcast of this conference call will be available at http://www.media-server.com/m/p/ugcgw58j

 


(1)  In 2013, Yandex recognized total revenue of RUR 39,502 million, including RUR 394 million in payment 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.

 



 

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 political, legal and/or 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, 2013, 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 29, 2014, and Yandex undertakes no duty to update this information unless required by law.

 



 

USE OF NON-GAAP FINANCIAL MEASURES

 

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

 

·                  Ex-TAC revenue means US GAAP revenues less total traffic acquisition costs (TAC)

·                  Adjusted EBITDA means net income plus (1) depreciation and amortization, (2) share-based compensation expense, (3) accrual of expense related to the contingent compensation that was 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 and our acquisition of KitLocate (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 and our acquisition of KitLocate, the developer of an energy efficient geolocation technology for mobile devices, in March 2014. The aggregate amount of such contingent compensation paid in connection with SPB Software acquisition was $14.1 million, $7.1 million of which was paid in November 2012, $4.1 million of was paid in February 2013, and $2.9 million of which was paid in November 2013. The maximum aggregate amount of contingent compensation to be paid in connection with KitLocate acquisition is $3.9 million payable upon the continued employment of the sellers. We have eliminated these acquisition-related expenses 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 the debt discount related to our convertible notes issued in Q4 2013 and Q1 2014.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.

 

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,

 

June 30,

 

June 30,

 

 

 

2013*

 

2014

 

2014

 

 

 

RUR

 

RUR

 

$

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

33,394

 

20,836

 

619.6

 

Marketable securities

 

87

 

 

 

Term deposits

 

 

1,682

 

50.0

 

Accounts receivable, net

 

2,785

 

2,872

 

85.4

 

Prepaid expenses

 

689

 

1,047

 

31.1

 

Assets held for sale

 

 

75

 

2.2

 

Deferred tax assets

 

596

 

488

 

14.5

 

Other current assets

 

1,332

 

3,016

 

89.7

 

Total current assets

 

38,883

 

30,016

 

892.5

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

9,729

 

11,631

 

345.8

 

Intangible assets, net

 

633

 

659

 

19.6

 

Goodwill

 

2,946

 

3,001

 

89.2

 

Long-term prepaid expenses

 

1,042

 

1,278

 

38.1

 

Restricted cash

 

104

 

244

 

7.3

 

Term deposits

 

15,180

 

24,747

 

735.8

 

Investments in non-marketable equity securities

 

1,250

 

1,350

 

40.1

 

Investments in debt securities

 

2

 

2

 

0.1

 

Deferred tax assets

 

3

 

3

 

0.1

 

Other non-current assets

 

1,539

 

972

 

28.9

 

TOTAL ASSETS

 

71,311

 

73,903

 

2,197.5

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

3,710

 

4,181

 

124.4

 

Taxes payable

 

1,688

 

1,432

 

42.6

 

Deferred revenue

 

1,501

 

1,306

 

38.8

 

Deferred tax liabilities

 

16

 

21

 

0.6

 

Total current liabilities

 

6,915

 

6,940

 

206.4

 

Convertible debt

 

16,429

 

19,757

 

587.5

 

Deferred tax liabilities

 

1,245

 

1,235

 

36.7

 

Other accrued liabilities

 

125

 

241

 

7.1

 

Total liabilities

 

24,714

 

28,173

 

837.7

 

 

 

 

 

 

 

 

 

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 1,000,000,000, Class B: 102,115,140 and 71,870,411, and Class C: 102,115,140 and 71,870,411); shares issued (Class A: 256,998,306 and 259,151,342, Class B: 72,923,447 and 70,870,411, and Class C: 23,110,819 and 25,263,855, respectively); shares outstanding (Class A: 250,732,061 and 247,054,830, Class B: 72,923,447 and 70,870,411, and Class C: nil)

 

242

 

233

 

6.9

 

 

 

 

 

 

 

 

 

Treasury shares at cost (Class A: 6,266,245 and 12,096,512)

 

(6,886

)

(13,695

)

(407.2

)

Additional paid-in capital

 

15,701

 

16,243

 

483.0

 

Accumulated other comprehensive income

 

2,042

 

2,375

 

70.6

 

Retained earnings

 

35,498

 

40,574

 

1,206.5

 

Total shareholders’ equity

 

46,597

 

45,730

 

1,359.8

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

71,311

 

73,903

 

2,197.5

 

 


* 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 June 30,

 

 

 

2013

 

2014

 

2014

 

 

 

RUR

 

RUR

 

$

 

 

 

 

 

 

 

 

 

Revenues

 

9,199

 

12,158

 

361.5

 

Operating costs and expenses:

 

 

 

 

 

 

 

Cost of revenues(1)

 

2,158

 

3,427

 

101.9

 

Product development(1) 

 

1,381

 

2,079

 

61.8

 

Sales, general and administrative(1)

 

1,530

 

1,907

 

56.7

 

Depreciation and amortization

 

912

 

1,114

 

33.1

 

Total operating costs and expenses

 

5,981

 

8,527

 

253.5

 

Income from operations

 

3,218

 

3,631

 

108.0

 

Interest income, net

 

452

 

203

 

6.0

 

Other income, net

 

17

 

(617

)

(18.3

)

Net income before income taxes

 

3,687

 

3,217

 

95.7

 

Provision for income taxes

 

772

 

821

 

24.5

 

Net income

 

2,915

 

2,396

 

71.2

 

Net income per Class A and Class B share:

 

 

 

 

 

 

 

Basic

 

8.91

 

7.51

 

0.22

 

Diluted

 

8.70

 

7.37

 

0.22

 

Weighted average number of Class A and Class B shares outstanding

 

 

 

 

 

 

 

Basic

 

327,270,521

 

319,072,616

 

319,072,616

 

Diluted

 

335,106,587

 

325,231,096

 

325,231,096

 

 


(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

 

91

 

165

 

4.9

 

Sales, general and administrative

 

48

 

87

 

2.6

 

 



 

YANDEX N.V.

 

Unaudited Condensed Consolidated Statements of Income

 

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

 

 

 

Six months ended June 30,

 

 

 

2013

 

2014

 

2014

 

 

 

RUR

 

RUR

 

$

 

 

 

 

 

 

 

 

 

Revenues

 

17,198

 

23,043

 

685.2

 

Operating costs and expenses:

 

 

 

 

 

 

 

Cost of revenues(1)

 

4,134

 

6,759

 

201.0

 

Product development(1) 

 

2,709

 

4,083

 

121.4

 

Sales, general and administrative(1)

 

2,893

 

3,669

 

109.1

 

Depreciation and amortization

 

1,791

 

2,183

 

64.9

 

Total operating costs and expenses

 

11,527

 

16,694

 

496.4

 

Income from operations

 

5,671

 

6,349

 

188.8

 

Interest income, net

 

820

 

375

 

11.2

 

Other income, net

 

43

 

51

 

1.5

 

Net income before income taxes

 

6,534

 

6,775

 

201.5

 

Provision for income taxes

 

1,373

 

1,699

 

50.6

 

Net income

 

5,161

 

5,076

 

150.9

 

Net income per Class A and Class B share:

 

 

 

 

 

 

 

Basic

 

15.74

 

15.82

 

0.47

 

Diluted

 

15.38

 

15.51

 

0.46

 

Weighted average number of Class A and Class B shares outstanding

 

 

 

 

 

 

 

Basic

 

327,820,231

 

320,768,126

 

320,768,126

 

Diluted

 

335,669,392

 

327,326,564

 

327,326,564

 

 


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

 

Cost of revenues

 

23

 

42

 

1.2

 

Product development

 

173

 

335

 

10.0

 

Sales, general and administrative

 

106

 

153

 

4.5

 

 



 

YANDEX N.V.

 

Unaudited Condensed Consolidated Statements of Cash Flows

 

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

 

 

 

Three months ended June 30,

 

 

 

2013

 

2014

 

2014

 

 

 

RUR

 

RUR

 

$

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income

 

2,915

 

2,396

 

71.2

 

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

 

 

 

 

 

 

 

Depreciation and amortization of property and equipment

 

890

 

1,076

 

32.0

 

Amortization of acquisition-related intangible assets

 

22

 

38

 

1.1

 

Amortization of debt discount and issuance costs

 

 

190

 

5.6

 

Share-based compensation expense

 

151

 

275

 

8.2

 

Deferred income taxes

 

(161

)

(72

)

(2.1

)

Foreign exchange (gains)/losses

 

(35

)

625

 

18.6

 

Other

 

17

 

 

 

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

 

 

 

 

 

 

 

Accounts receivable, net

 

(274

)

(169

)

(5.0

)

Prepaid expenses and other assets

 

(412

)

(984

)

(29.3

)

Accounts payable and accrued liabilities

 

756

 

650

 

19.4

 

Deferred revenue

 

163

 

(4

)

(0.1

)

Assets held for sale

 

(96

)

 

 

Liabilities related to assets held for sale

 

59

 

 

 

Net cash provided by operating activities

 

3,995

 

4,021

 

119.6

 

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

 

 

 

 

 

 

 

Purchase of property and equipment

 

(685

)

(2,146

)

(63.7

)

Investments in non-marketable equity securities

 

 

(36

)

(1.1

)

Investments in term deposits

 

(6,230

)

(1,717

)

(51.1

)

Maturities of term deposits

 

3,470

 

 

 

Loans granted

 

(35

)

(178

)

(5.3

)

Net cash used in investing activities

 

(3,480

)

(4,077

)

(121.2

)

CASH FLOWS USED IN FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from exercise of share options

 

123

 

38

 

1.1

 

Repurchases of ordinary shares

 

(2,521

)

(3,576

)

(106.3

)

Net cash used in financing activities

 

(2,398

)

(3,538

)

(105.2

)

Effect of exchange rate changes on cash and cash equivalents

 

287

 

(1,321

)

(39.3

)

Net change in cash and cash equivalents

 

(1,596

)

(4,915

)

(146.1

)

Cash and cash equivalents at beginning of period

 

7,757

 

25,751

 

765.7

 

Cash and cash equivalents at end of period

 

6,161

 

20,836

 

619.6

 

 



 

YANDEX N.V.

 

Unaudited Condensed Consolidated Statements of Cash Flows

 

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

 

 

 

Six months ended June 30,

 

 

 

2013

 

2014

 

2014

 

 

 

RUR

 

RUR

 

$

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income

 

5,161

 

5,076

 

150.9

 

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

 

 

 

 

 

 

 

Depreciation and amortization of property and equipment

 

1,746

 

2,109

 

62.7

 

Amortization of acquisition-related intangible assets

 

45

 

74

 

2.2

 

Amortization of debt discount and issuance costs

 

 

373

 

11.1

 

Share-based compensation expense

 

302

 

530

 

15.7

 

Deferred income taxes

 

(214

)

(49

)

(1.5

)

Foreign exchange (gains)/losses

 

(42

)

(22

)

(0.7

)

Other

 

(8

)

(26

)

(0.8

)

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

 

 

 

 

 

 

 

Accounts receivable, net

 

(356

)

(106

)

(3.2

)

Prepaid expenses and other assets

 

(412

)

(1,489

)

(44.3

)

Accounts payable and accrued liabilities

 

431

 

336

 

10.3

 

Deferred revenue

 

41

 

(184

)

(5.5

)

Assets held for sale

 

(155

)

 

 

Liabilities related to assets held for sale

 

86

 

 

 

Net cash provided by operating activities

 

6,625

 

6,622

 

196.9

 

CASH FLOWS USED IN INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Purchase of property and equipment

 

(1,544

)

(4,211

)

(125.2

)

Acquisitions of businesses, net of cash acquired

 

 

(146

)

(4.3

)

Investments in non-marketable equity securities

 

 

(36

)

(1.2

)

Proceeds from sale of equity securities

 

 

120

 

3.6

 

Investments in term deposits

 

(11,450

)

(11,926

)

(354.6

)

Maturities of term deposits

 

7,070

 

 

 

Loans granted

 

(35

)

(209

)

(6.2

)

Escrow cash deposit

 

130

 

(137

)

(4.1

)

Net cash used in investing activities

 

(5,829

)

(16,545

)

(492.0

)

CASH FLOWS USED IN FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from exercise of share options

 

255

 

86

 

2.6

 

Proceeds from issuance of convertible debt

 

 

2,981

 

88.6

 

Payment of debt discount and issuance costs

 

 

(42

)

(1.2

)

Repurchases of ordinary shares

 

(2,764

)

(7,334

)

(218.1

)

Net cash used in financing activities

 

(2,509

)

(4,309

)

(128.1

)

Effect of exchange rate changes on cash and cash equivalents

 

449

 

1,674

 

49.8

 

Net change in cash and cash equivalents

 

(1,264

)

(12,558

)

(373.4

)

Cash and cash equivalents at beginning of period

 

7,425

 

33,394

 

993.0

 

Cash and cash equivalents at end of period

 

6,161

 

20,836

 

619.6

 

 



 

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 

 

2013

 

2014

 

Change

 

2013

 

2014

 

Change

 

Total revenues

 

9,199

 

12,158

 

32

%

17,198

 

23,043

 

34

%

Less: traffic acquisition costs (TAC)

 

1,465

 

2,651

 

81

%

2,770

 

5,219

 

88

%

Ex-TAC revenues

 

7,734

 

9,507

 

23

%

14,428

 

17,824

 

24

%

 

Reconciliation of Adjusted EBITDA to US GAAP Net Income

 

 

 

Three months

 

Six months

 

 

 

ended June 30,

 

ended June 30,

 

In RUR millions 

 

2013

 

2014

 

Change

 

2013

 

2014

 

Change

 

Net income

 

2,915

 

2,396

 

-18

%

5,161

 

5,076

 

-2

%

Add: depreciation and amortization

 

912

 

1,114

 

22

%

1,791

 

2,183

 

22

%

Add: share-based compensation expense

 

151

 

275

 

82

%

302

 

530

 

75

%

Add: compensation expense related to contingent consideration

 

22

 

7

 

n/m

 

43

 

7

 

n/m

 

Less: interest income, net

 

(452

)

(203

)

-55

%

(820

)

(375

)

-54

%

Less: other income, net

 

(17

)

617

 

n/m

 

(43

)

(51

)

n/m

 

Add: provision for income taxes

 

772

 

821

 

6

%

1,373

 

1,699

 

24

%

Adjusted EBITDA

 

4,303

 

5,027

 

17

%

7,807

 

9,069

 

16

%

 

Reconciliation of Adjusted Net Income to US GAAP Net Income

 

 

 

Three months

 

Six months

 

 

 

ended June 30,

 

ended June 30,

 

In RUR millions 

 

2013

 

2014

 

Change

 

2013

 

2014

 

Change

 

Net income

 

2,915

 

2,396

 

-18

%

5,161

 

5,076

 

-2

%

Add: SBC expense

 

151

 

275

 

82

%

302

 

530

 

75

%

Less: reduction in income tax attributable to SBC expense

 

(2

)

(5

)

n/m

 

(4

)

(10

)

n/m

 

Add: compensation expense related to contingent consideration

 

22

 

7

 

n/m

 

43

 

7

 

n/m

 

Less: foreign exchange (gain)/loss

 

(35

)

625

 

n/m

 

(42

)

(22

)

n/m

 

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

 

7

 

(125

)

n/m

 

8

 

4

 

n/m

 

Add: amortization of debt discount

 

 

190

 

n/m

 

 

373

 

n/m

 

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

 

 

(45

)

n/m

 

 

(88

)

n/m

 

Adjusted net income

 

3,058

 

3,318

 

9

%

5,468

 

5,870

 

7

%

 



 

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 June 30, 2014

 

2,396

 

19.7

%

2,631

 

5,027

 

41.3

%

52.9

%

Six months ended June 30, 2014

 

5,076

 

22.0

%

3,993

 

9,069

 

39.4

%

50.9

%

 


(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, net, 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 June 30, 2014

 

2,396

 

19.7

%

922

 

3,318

 

27.3

%

34.9

%

Six months ended June 30, 2014

 

5,076

 

22.0

%

794

 

5,870

 

25.5

%

32.9

%

 


(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), foreign exchange (gain)/loss (as adjusted for the reduction in income tax attributable to the (gain)/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.

 

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