UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

 

October 27, 2015

 

YANDEX N.V.

 

Schiphol Boulevard 165

1118 BG Schiphol

Netherlands

+31 (0)20 206 6970

(Address, Including ZIP Code, and Telephone Number,

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

 

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

 

Form 20-F x

 

Form 40-F o

 

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

 

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

 

 

 



 

Furnished as Exhibit 99.1 to this Report on Form 6-K is a press release of Yandex N.V. dated October 27, 2015, announcing the Company’s results for the third quarter ended September 30, 2015.

 

2



 

SIGNATURES

 

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

 

 

 

YANDEX N.V.

 

 

 

 

 

Date: October 27, 2015

By:

/S/ GREG ABOVSKY

 

Greg Abovsky

 

Chief Financial Officer

 

3



 

INDEX TO EXHIBITS

 

Number

 

Description

99.1

 

Press Release of Yandex N.V. dated October 27, 2015, announcing the Company’s results for the second quarter ended September 30, 2015

 

4


Exhibit 99.1

 

Yandex Announces Third Quarter 2015 Financial Results

 

MOSCOW and AMSTERDAM, Netherlands, October 27, 2015, Yandex (NASDAQ: YNDX), one of Europe’s largest internet companies and the leading search provider in Russia, today announced its unaudited financial results for the third quarter ended September 30, 2015.

 

Q3 2015 Financial Highlights(1)(2)

 

·                  Revenues of RUB 15.4 billion ($233.1 million), up 18% compared with Q3 2014

·                  Ex-TAC revenues (excluding traffic acquisition costs) up 18% compared with Q3 2014

·                  Income from operations of RUB 3.2 billion ($48.1 million), down 29% compared with Q3 2014

·                  Adjusted EBITDA of RUB 6.0 billion ($90.9 million), up 2% compared with Q3 2014

·                  Operating margin of 20.6%

·                  Adjusted EBITDA margin of 39.0%

·                  Adjusted ex-TAC EBITDA margin of 49.5%

·                  Net income of RUB 4.3 billion ($64.6 million), down 2% compared with Q3 2014

·                  Adjusted net income of RUB 3.5 billion ($52.9 million), down 10% compared with Q3 2014

·                  Net income margin of 27.7%

·                  Adjusted net income margin of 22.7%

·                  Adjusted ex-TAC net income margin of 28.8%

·                  Cash, cash equivalents and deposits of RUB 55.1 billion ($831.9 million) as of September 30, 2015

 

“This was an excellent quarter for the company on all fronts,” said Arkady Volozh, Chief Executive Officer of Yandex. “We stabilized our search share in Russia, became the default search engine for Windows 10 in Russia, Turkey, and several other countries, and achieved a historic decision from the Russian antimonopoly service that we hope will return fair competition to the market.”

 

“Our consolidated revenues grew 18% in Q3,” said Alexander Shulgin, Chief Operating Officer of Yandex. “We smoothly transitioned to the VCG auction, leading to lower CPCs for our advertisers, higher quality traffic to their websites and an increase in click through rates on Yandex.Direct.”

 

The following table provides a summary of key financial results for the three months and nine months ended September 30, 2014 and 2015:

 

 

 

Three months

 

Nine months

 

 

 

ended September 30,

 

ended September 30,

 

In RUB millions

 

2014

 

2015

 

Change

 

2014

 

2015

 

Change

 

Revenues

 

13,057

 

15,439

 

18

%

36,100

 

41,698

 

16

%

Ex-TAC revenues(2)

 

10,295

 

12,157

 

18

%

28,119

 

32,677

 

16

%

Income from operations

 

4,496

 

3,183

 

-29

%

10,845

 

6,865

 

-37

%

Adjusted EBITDA(2)

 

5,905

 

6,021

 

2

%

14,974

 

14,409

 

-4

%

Net income

 

4,372

 

4,278

 

-2

%

9,448

 

6,828

 

-28

%

Adjusted net income(2)

 

3,914

 

3,507

 

-10

%

9,784

 

8,547

 

-13

%

 


(1)  Pursuant to SEC rules regarding convenience translations, Russian ruble (RUB) amounts have been translated into U.S. dollars at a rate of RUB 66.2367 to $1.00, the official exchange rate quoted as of September 30, 2015 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.

 



 

Q3 2015 Operational Highlights

 

·                  Share of Russian search market (including mobile) averaged 57.1% in Q3 2015 (according to LiveInternet)

·                  Search queries in Russia grew 4% compared to Q3 2014

·                  Number of advertisers grew to 354,000, up 18% from Q3 2014 and up 1% from Q2 2015

·                  Switched to the VCG auction in Yandex.Direct and changed the ranking formula

·                  Introduced ‘Protect’ online security technology built directly into Yandex.Browser

 

Subsequent Events

 

·                  Announced cooperation with Microsoft to deliver Windows 10 with Yandex search in Russia, Ukraine, Turkey and several other countries

 

Revenues

 

 

 

Three months

 

Nine months

 

 

 

ended September 30,

 

ended September 30,

 

In RUB millions

 

2014

 

2015

 

Change

 

2014

 

2015

 

Change

 

Advertising revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Text-based advertising

 

 

 

 

 

 

 

 

 

 

 

 

 

Yandex websites

 

9,310

 

10,503

 

13

%

25,263

 

28,318

 

12

%

Ad network

 

2,772

 

3,740

 

35

%

8,140

 

10,095

 

24

%

Total text-based advertising

 

12,082

 

14,243

 

18

%

33,403

 

38,413

 

15

%

Display advertising

 

 

 

 

 

 

 

 

 

 

 

 

 

Yandex websites

 

716

 

634

 

-11

%

2,037

 

1,898

 

-7

%

Ad network

 

114

 

191

 

67

%

291

 

381

 

31

%

Total display advertising

 

830

 

825

 

-1

%

2,328

 

2,279

 

-2

%

Total advertising revenues

 

12,912

 

15,068

 

17

%

35,731

 

40,692

 

14

%

Other

 

145

 

371

 

156

%

369

 

1,006

 

173

%

Total revenues

 

13,057

 

15,439

 

18

%

36,100

 

41,698

 

16

%

 

Text-based advertising revenues increased 18% compared with Q3 2014 and constituted 92% of our total revenues.

 

Text-based advertising revenues from Yandex websites grew 13% compared with Q3 2014 and accounted for 68% of our total revenues in Q3 2015.

 

Text-based advertising revenues from our ad network increased 35% compared with Q3 2014 and contributed 24% of total revenues during Q3 2015, as we added new partners to the network earlier in the year.

 

Paid clicks on Yandex’s and its partners’ websites, in aggregate, increased 15% in Q3 2015 compared with Q3 2014. Our average cost per click in Q3 2015 grew 3% compared with Q3 2014.

 

Display advertising revenue decreased 1% compared to Q3 2014 and contributed 5% to our total revenues.

 



 

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, relevant office space rental, and related share-based compensation expense. Increases across all cost categories, excluding D&A, reflect investments in overall growth. In Q3 2015, our headcount reduced by 46 employees, a decrease of 2% compared to September 30, 2014 and a decrease of 1% compared to June 30, 2015. As of September 30 2015, the total number of Yandex’s full-time employees was 5,412.

 

Costs of revenues, including traffic acquisition costs (TAC)

 

 

 

Three months

 

Nine months

 

 

 

ended September 30,

 

ended September 30,

 

In RUB millions

 

2014

 

2015

 

Change

 

2014

 

2015

 

Change

 

TAC:

 

 

 

 

 

 

 

 

 

 

 

 

 

Related to the Yandex ad network

 

1,825

 

2,333

 

28

%

5,418

 

6,312

 

17

%

Related to distribution partners

 

937

 

949

 

1

%

2,563

 

2,709

 

6

%

Total TAC

 

2,762

 

3,282

 

19

%

7,981

 

9,021

 

13

%

Total TAC as a % of total revenues

 

21.2

%

21.3

%

 

 

22.1

%

21.6

%

 

 

Other cost of revenues

 

808

 

1,036

 

28

%

2,348

 

2,992

 

27

%

Other cost of revenues as a % of revenues

 

6.2

%

6.7

%

 

 

6.5

%

7.2

%

 

 

Total cost of revenues

 

3,570

 

4,318

 

21

%

10,329

 

12,013

 

16

%

Total cost of revenues as a % of revenues

 

27.3

%

28.0

%

 

 

28.6

%

28.8

%

 

 

 

TAC grew 19% compared with Q3 2014 and slightly increased as a percentage of total revenues to 21.3% in Q3 2015. This is compared with 21.2% in Q3 2014 and 21.7% in Q2 2015. Our ad network TAC grew 28% in Q3 2015 compared with Q3 2014, slower than revenues from our advertising network, primarily reflecting changes in our partner revenue mix. Partner TAC includes traffic acquisition costs related to both our text-based and our display advertising networks.

 

Other cost of revenues in Q3 2015 increased 28% compared with Q3 2014, primarily reflecting an increase in expenses for content and outsource services, personnel expenses and rent expenses attributable to the material appreciation of the U.S. dollar in Q3 2015 compared to Q3 2014, since the rent for our Moscow headquarters is U.S. dollar-denominated.

 

Product development

 

 

 

Three months

 

Nine months

 

 

 

ended September 30,

 

ended September 30,

 

In RUB millions

 

2014

 

2015

 

Change

 

2014

 

2015

 

Change

 

Product development

 

2,086

 

3,168

 

52

%

6,169

 

9,815

 

59

%

As a % of revenues

 

16.0

%

20.5

%

 

 

17.1

%

23.5

%

 

 

 

Growth in product development expenses in Q3 2015 primarily reflects growth of personnel expenses mainly related to salary increases effective in early 2015, as well as increases in our rent expenses described above. As of the end of Q3 2015, our development headcount has grown by one employee to 3,273 employees compared with the end of Q3 2014 and Q2 2015.

 



 

Selling, general and administrative (SG&A)

 

 

 

Three months

 

Nine months

 

 

 

ended September 30,

 

ended September 30,

 

In RUB millions

 

2014

 

2015

 

Change

 

2014

 

2015

 

Change

 

Sales, general and administrative

 

1,810

 

2,618

 

45

%

5,479

 

7,489

 

37

%

As a % of revenues

 

13.9

%

17.0

%

 

 

15.2

%

18.0

%

 

 

 

SG&A costs grew 45% compared with Q3 2014. The growth was driven by several factors, including additional advertising and marketing expenses in Q3 2015, increase in personnel costs (connected with salary increases in the beginning of the year), growth of costs for legal services and increases in rent expenses for our Moscow headquarters related to the SG&A category.

 

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

 

Nine months

 

 

 

ended September 30,

 

ended September 30,

 

In RUB millions

 

2014

 

2015

 

Change

 

2014

 

2015

 

Change

 

SBC expense included in cost of revenues

 

27

 

41

 

52

%

69

 

125

 

81

%

SBC expense included in product development

 

191

 

457

 

139

%

526

 

1,231

 

134

%

SBC expense included in SG&A

 

86

 

173

 

101

%

239

 

469

 

96

%

Total SBC expense

 

304

 

671

 

121

%

834

 

1,825

 

119

%

As a % of revenues

 

2.3

%

4.3

%

 

 

2.3

%

4.4

%

 

 

 

Total SBC expense increased 121% in Q3 2015 compared with Q3 2014. The increase is related to the material appreciation of the U.S. dollar in Q3 2015 versus Q3 2014, new equity-based grants made in 2014 and 2015, as well as the exchange of certain equity awards in Q2 and Q3 2015 (as described below).

 

Depreciation and amortization (D&A) expense

 

 

 

Three months

 

Nine months

 

 

 

ended September 30,

 

ended September 30,

 

In RUB millions

 

2014

 

2015

 

Change

 

2014

 

2015

 

Change

 

Depreciation and amortization

 

1,095

 

2,152

 

97

%

3,278

 

5,516

 

68

%

As a % of revenues

 

8.4

%

13.9

%

 

 

9.1

%

13.2

%

 

 

 

D&A expense increased 97% in Q3 2015 compared with Q3 2014, reflecting investments in servers and data centers made in 2014 and the first half of 2015.

 

As a result of the factors described above, income from operations was RUB 3.2 billion ($48.1 million) in Q3 2015, a 29% decline from Q3 2014, while adjusted EBITDA reached RUB 6.0 billion ($90.9 million) in Q3 2015, up 2% from Q3 2014.

 



 

Interest income, net in Q3 2015 was RUB 415 million, up from RUB 224 million in Q3 2014. The significant growth of interest income was partly offset by an increase in interest expense on our U.S. dollar denominated 1.125% convertible senior notes following the material appreciation of the U.S. dollar against the ruble.

 

Foreign exchange gain in Q3 2015 was RUB 1,947 million, up from RUB 1,824 million in Q3 2014. This gain reflects the appreciation of the U.S. dollar during Q3 2015 from RUB 55.5240 to $1.00 on June 30, 2015, to RUB 66.2367 to $1.00 on September 30, 2015. 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 within other income, net in the statements of income. 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 an upward revaluation of the ruble equivalent of these U.S. dollar-denominated monetary assets and liabilities in Q3 2015.

 

Income tax expense for Q3 2015 was RUB 1,396 million, down from RUB 1,418 million in Q3 2014. Our effective tax rate of 24.6% in Q3 2015, generally in line with the effective tax rate in Q3 2014.

 

Adjusted net income in Q3 2015 was RUB 3.5 billion ($52.9 million), a 10% decrease from Q3 2014.

 

Adjusted net income margin was 22.7% in Q3 2015. This is compared with adjusted net income margin of 20.1% in Q2 2015 and 30.0% in Q3 2014.

 

Net income was RUB 4.3 billion ($64.6 million) in Q3 2015, down 2% compared with Q3 2014.

 

As of September 30, 2015, Yandex had cash, cash equivalents and deposits of RUB 55.1 billion ($831.9 million).

 

Net operating cash flow and capital expenditures for Q3 2015 were RUB 6.6 billion ($99.4 million) and RUB 2.5 billion ($38.1 million), respectively.

 

During Q3 2015, we repurchased $42.4 million in aggregate principal amount of our 1.125% convertible senior notes due 2018 for approximately $36.6 million.

 

The total number of shares issued and outstanding as of September 30, 2015 was 318,917,852, including 266,022,246 Class A shares, 52,895,605 Class B shares, and one Priority share and excluding 11,138,902 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 4.1 million shares, at a weighted average exercise price of $5.90 per share, of which options to purchase 4.1 million shares were fully vested; equity-settled share appreciation rights (SARs) equal to 0.3 million shares, at a weighted average measurement price of $27.27, 0.2 million of which were fully vested; and restricted share units (RSUs) covering 6.4 million shares, of which restricted share units to acquire 1.6 million shares were fully vested.

 

In Q3 2015, we completed additional exchanges of outstanding SAR awards for new RSU awards based on an exchange ratio of 2:1. In all but one instance, the exchanges were effected for non-senior employees and the replacement RSUs are subject to the same vesting schedule as was in place for the replaced SARs. An exchange was also offered to and accepted by one senior employee; in this case the replacement RSUs were granted on the condition that vesting be reset to begin as of January 1, 2016.

 

As a result of the exchanges, a total of 42 employees exchanged an aggregate of 256,850 SARs for an

 



 

aggregate of 128,426 RSUs during Q3 2015. These exchanges are reflected in the outstanding equity award numbers as of September 30, 2015 set out above.

 

Outlook for 2015

 

We are increasing our previously announced revenue guidance and now expect our ruble-based revenue to grow in the range of 14% to 16% in the full year 2015 compared with 2014.

 



 

Conference Call Information

 

Yandex’s management will hold an earnings conference call on October 27, 2015 at 8:00 AM U.S. Eastern Time (3:00 PM Moscow time; 12:00 PM London time).

 

To access the conference call live, please dial:

 

US: +1 877 280 2296

UK/International: +44(0)20 3427 1916

Russia: 8 800 500 9311

 

Passcode: 3446284

 

A replay of the call will be available through November 2, 2015. To access the replay, please dial:

 

US: +1 866 932 5017,

UK/International: +44(0)20 3427 0598,

Russia: +8 10 800 2870 1012

 

Passcode: 3446284

 

A live and archived webcast of this conference call will be available at http://edge.media-server.com/m/p/s88txo8a

 



 

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 2015. 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, macroeconomic and geopolitical developments affecting the Russian economy, fluctuations in the value of the Russian ruble, 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, 2014, 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 October 27, 2015, 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 may be payable to employees in connection with certain business combinations and (4) provision for income taxes, less (A) interest income and (B) other income, net

·                  Adjusted EBITDA margin means adjusted EBITDA divided by US GAAP revenues

·                  Adjusted ex-TAC EBITDA margin means adjusted EBITDA divided by ex-TAC revenues

·                  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 certain business combinations, (3) impairment of investment in equity securities recorded in Q3 2014 adjusted for reduction in income tax attributable to impairment of investment in such securities and (4) amortization of debt discount related to our convertible debt adjusted for the related reduction in income tax; less (A) foreign exchange gains adjusted for the increase in income tax attributable to the foreign exchange gains and (B) gain from repurchases of our convertible notes adjusted for the related increase in income tax

·                  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 are required under US GAAP to accrue as expense the contingent compensation that is payable to certain employees in connection with certain business combinations. We eliminate 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.

 

Gain from repurchases of convertible debt

 

Adjusted net income also excludes a gain from the repurchase of $42.4 million in principal amount of our 1.125% convertible senior notes due 2018 for approximately $36.6 million that we recorded in the quarter ended September 30, 2015. We have eliminated this gain from adjusted net income as it 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,

 

September 30,

 

September 30,

 

 

 

2014*

 

2015

 

2015

 

 

 

RUB

 

RUB

 

$

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

17,645

 

18,039

 

272.3

 

Term deposits

 

5,863

 

20,163

 

304.4

 

Investments in debt securities

 

3,124

 

 

 

Accounts receivable, net

 

3,703

 

4,641

 

70.1

 

Prepaid expenses

 

1,556

 

1,398

 

21.2

 

Deferred tax assets

 

180

 

82

 

1.2

 

Other current assets

 

3,736

 

4,015

 

60.6

 

Total current assets

 

35,807

 

48,338

 

729.8

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

17,107

 

24,208

 

365.5

 

Intangible assets, net

 

2,425

 

2,568

 

38.8

 

Goodwill

 

8,920

 

9,004

 

135.9

 

Long-term prepaid expenses

 

1,590

 

1,520

 

22.9

 

Restricted cash

 

932

 

484

 

7.3

 

Term deposits

 

25,663

 

16,903

 

255.2

 

Investments in non-marketable equity securities

 

871

 

1,051

 

15.9

 

Other non-current assets

 

1,609

 

1,625

 

24.5

 

TOTAL ASSETS

 

94,924

 

105,701

 

1,595.8

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

5,058

 

6,853

 

103.4

 

Taxes payable

 

2,930

 

2,588

 

39.1

 

Deferred revenue

 

1,808

 

1,646

 

24.9

 

Total current liabilities

 

9,796

 

11,087

 

167.4

 

Convertible debt

 

26,325

 

26,260

 

396.5

 

Deferred tax liabilities

 

1,587

 

1,416

 

21.4

 

Other accrued liabilities

 

1,480

 

1,255

 

18.9

 

Total liabilities

 

39,188

 

40,018

 

604.2

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

Priority share: €1.00 par value; 1 share authorized, issued and outstanding

 

 

 

 

Preference shares: € 0.01 par value; 1,000,000,001 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: 1,000,000,000, Class B: 71,870,411 and 61,295,523, and Class C: 71,870,411 and 61,295,523); shares issued (Class A: 267,970,405 and 277,161,148, Class B: 62,051,348 and 52,895,605, and Class C: 8,919,063 and 7,000,000, respectively); shares outstanding (Class A: 255,592,322 and 266,022,246, Class B: 62,051,348 and 52,895,605, and Class C: nil)

 

182

 

116

 

1.8

 

Treasury shares at cost (Class A: 12,378,083 and 11,138,902)

 

(14,179

)

(12,893

)

(194.7

)

Additional paid-in capital

 

16,192

 

16,663

 

251.6

 

Accumulated other comprehensive income

 

1,023

 

2,451

 

36.9

 

Retained earnings

 

52,518

 

59,346

 

896.0

 

Total shareholders’ equity

 

55,736

 

65,683

 

991.6

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

94,924

 

105,701

 

1,595.8

 

 


* 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 September 30,

 

 

 

2014

 

2015

 

2015

 

 

 

RUB

 

RUB

 

$

 

 

 

 

 

 

 

 

 

Revenues

 

13,057

 

15,439

 

233.1

 

Operating costs and expenses:

 

 

 

 

 

 

 

Cost of revenues(1)

 

3,570

 

4,318

 

65.2

 

Product development(1) 

 

2,086

 

3,168

 

47.8

 

Sales, general and administrative(1)

 

1,810

 

2,618

 

39.5

 

Depreciation and amortization

 

1,095

 

2,152

 

32.5

 

Total operating costs and expenses

 

8,561

 

12,256

 

185.0

 

Income from operations

 

4,496

 

3,183

 

48.1

 

Interest income, net

 

224

 

415

 

6.3

 

Other income, net

 

1,070

 

2,076

 

31.3

 

Net income before income taxes

 

5,790

 

5,674

 

85.7

 

Provision for income taxes

 

1,418

 

1,396

 

21.1

 

Net income

 

4,372

 

4,278

 

64.6

 

Net income per Class A and Class B share:

 

 

 

 

 

 

 

Basic

 

13.74

 

13.42

 

0.20

 

Diluted

 

13.49

 

13.28

 

0.20

 

Weighted average number of Class A and Class B shares outstanding

 

 

 

 

 

 

 

Basic

 

318,081,690

 

318,800,527

 

318,800,527

 

Diluted

 

324,094,946

 

322,118,209

 

322,118,209

 

 


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

 

Cost of revenues

 

27

 

41

 

0.6

 

Product development

 

191

 

457

 

6.9

 

Sales, general and administrative

 

86

 

173

 

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)

 

 

 

Nine months ended September 30,

 

 

 

2014

 

2015

 

2015

 

 

 

RUB

 

RUB

 

$

 

 

 

 

 

 

 

 

 

Revenues

 

36,100

 

41,698

 

629.5

 

Operating costs and expenses:

 

 

 

 

 

 

 

Cost of revenues(1)

 

10,329

 

12,013

 

181.4

 

Product development(1) 

 

6,169

 

9,815

 

148.2

 

Sales, general and administrative(1)

 

5,479

 

7,489

 

113.0

 

Depreciation and amortization

 

3,278

 

5,516

 

83.3

 

Total operating costs and expenses

 

25,255

 

34,833

 

525.9

 

Income from operations

 

10,845

 

6,865

 

103.6

 

Interest income, net

 

599

 

1,255

 

18.9

 

Other income, net

 

1,121

 

1,122

 

17.0

 

Net income before income taxes

 

12,565

 

9,242

 

139.5

 

Provision for income taxes

 

3,117

 

2,414

 

36.4

 

Net income

 

9,448

 

6,828

 

103.1

 

Net income per Class A and Class B share:

 

 

 

 

 

 

 

Basic

 

29.54

 

21.45

 

0.32

 

Diluted

 

28.95

 

21.15

 

0.32

 

Weighted average number of Class A and Class B shares outstanding

 

 

 

 

 

 

 

Basic

 

319,862,807

 

318,353,267

 

318,353,267

 

Diluted

 

326,344,768

 

322,791,055

 

322,791,055

 

 


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

 

Cost of revenues

 

69

 

125

 

1.9

 

Product development

 

526

 

1,231

 

18.6

 

Sales, general and administrative

 

239

 

469

 

7.1

 

 



 

YANDEX N.V.

 

Unaudited Condensed Consolidated Statements of Cash Flows

 

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

 

 

 

Three months ended September 30,

 

 

 

2014

 

2015

 

2015

 

 

 

RUB

 

RUB

 

$

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income

 

4,372

 

4,278

 

64.6

 

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

 

 

 

 

 

 

 

Depreciation and amortization of property and equipment

 

1,042

 

2,034

 

30.7

 

Amortization of acquisition-related intangible assets

 

53

 

118

 

1.8

 

Amortization of debt discount and issuance costs

 

198

 

241

 

3.6

 

Share-based compensation expense

 

304

 

671

 

10.1

 

Deferred income taxes

 

28

 

4

 

0.1

 

Foreign exchange gains

 

(1,824

)

(1,947

)

(29.4

)

Impairment of investment in equity securities

 

700

 

 

 

Gain from repurchases of convertible debt

 

 

(93

)

(1.4

)

Other

 

31

 

(31

)

(0.5

)

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

 

 

 

 

 

 

 

Accounts receivable, net

 

(256

)

(80

)

(1.2

)

Prepaid expenses and other assets

 

(639

)

121

 

1.8

 

Accounts payable and accrued liabilities

 

983

 

1,394

 

21.1

 

Deferred revenue

 

207

 

(127

)

(1.9

)

Net cash provided by operating activities

 

5,199

 

6,583

 

99.4

 

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

 

 

 

 

 

 

 

Purchase of property and equipment

 

(2,470

)

(2,524

)

(38.1

)

Proceeds from sale of property and equipment

 

36

 

8

 

0.1

 

Acquisitions of businesses, net of cash acquired

 

(5,683

)

 

 

Investments in non-marketable equity securities

 

(9

)

(21

)

(0.3

)

Investments in debt securities

 

(2,546

)

 

 

Proceeds from maturity of debt securities

 

 

582

 

8.7

 

Investments in term deposits

 

(4,296

)

(4,700

)

(71.0

)

Maturities of term deposits

 

1,716

 

7,263

 

109.7

 

Loans granted

 

 

(22

)

(0.3

)

Escrow cash deposit

 

(519

)

 

 

Net cash (used in)/provided by investing activities

 

(13,771

)

586

 

8.8

 

CASH FLOWS USED IN FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from exercise of share options

 

37

 

48

 

0.7

 

Repurchases of convertible debt

 

(1,739

)

(2,192

)

(33.1

)

Repurchases of ordinary shares

 

(23

)

 

 

Payment for contingent consideration

 

 

(89

)

(1.3

)

Net cash used in financing activities

 

(1,725

)

(2,233

)

(33.7

)

Effect of exchange rate changes on cash and cash equivalents

 

2,380

 

3,673

 

55.5

 

Net change in cash and cash equivalents

 

(7,917

)

8,609

 

130.0

 

Cash and cash equivalents at beginning of period

 

20,836

 

9,430

 

142.3

 

Cash and cash equivalents at end of period

 

12,919

 

18,039

 

272.3

 

 



 

YANDEX N.V.

 

Unaudited Condensed Consolidated Statements of Cash Flows

 

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

 

 

 

Nine months ended September 30,

 

 

 

2014

 

2015

 

2015

 

 

 

RUB

 

RUB

 

$

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income

 

9,448

 

6,828

 

103.1

 

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

 

 

 

 

 

 

 

Depreciation and amortization of property and equipment

 

3,151

 

5,177

 

78.2

 

Amortization of acquisition-related intangible assets

 

127

 

339

 

5.1

 

Amortization of debt discount and issuance costs

 

571

 

732

 

11.1

 

Share-based compensation expense

 

834

 

1,825

 

27.6

 

Deferred income taxes

 

(21

)

(101

)

(1.5

)

Foreign exchange gains

 

(1,846

)

(794

)

(12.0

)

Impairment of investment in equity securities

 

700

 

 

 

Gain from repurchases of convertible debt

 

 

(243

)

(3.7

)

Other

 

5

 

(96

)

(1.4

)

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

 

 

 

 

 

 

 

Accounts receivable, net

 

(362

)

(863

)

(13.0

)

Prepaid expenses and other assets

 

(2,128

)

782

 

11.7

 

Accounts payable and accrued liabilities

 

1,319

 

661

 

9.9

 

Deferred revenue

 

23

 

(171

)

(2.6

)

Net cash provided by operating activities

 

11,821

 

14,076

 

212.5

 

CASH FLOWS USED IN INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Purchase of property and equipment

 

(6,681

)

(11,386

)

(171.9

)

Proceeds from sale of property and equipment

 

36

 

35

 

0.5

 

Acquisitions of businesses, net of cash acquired

 

(5,829

)

(186

)

(2.8

)

Investments in non-marketable equity securities

 

(45

)

(75

)

(1.1

)

Proceeds from sale of equity securities

 

120

 

 

 

Investments in debt securities

 

(2,546

)

 

 

Proceeds from maturity of debt securities

 

 

3,426

 

51.6

 

Investments in term deposits

 

(16,222

)

(26,610

)

(401.7

)

Maturities of term deposits

 

1,716

 

22,638

 

341.8

 

Loans granted

 

(209

)

(22

)

(0.3

)

Escrow cash deposit

 

(656

)

58

 

0.9

 

Net cash used in investing activities

 

(30,316

)

(12,122

)

(183.0

)

CASH FLOWS USED IN FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from exercise of share options

 

123

 

139

 

2.1

 

Proceeds from issuance of convertible debt

 

2,981

 

 

 

Repurchases of convertible debt

 

(1,739

)

(4,909

)

(74.2

)

Payment of debt issuance costs

 

(42

)

 

 

Repurchases of ordinary shares

 

(7,357

)

 

 

Payment for contingent consideration

 

 

(89

)

(1.3

)

Net cash used in financing activities

 

(6,034

)

(4,859

)

(73.4

)

Effect of exchange rate changes on cash and cash equivalents

 

4,054

 

3,299

 

49.8

 

Net change in cash and cash equivalents

 

(20,475

)

394

 

5.9

 

Cash and cash equivalents at beginning of period

 

33,394

 

17,645

 

266.4

 

Cash and cash equivalents at end of period

 

12,919

 

18,039

 

272.3

 

 



 

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

 

Nine months

 

 

 

ended September 30,

 

ended September 30,

 

In RUB millions

 

2014

 

2015

 

Change

 

2014

 

2015

 

Change

 

Total revenues

 

13,057

 

15,439

 

18

%

36,100

 

41,698

 

16

%

Less: traffic acquisition costs (TAC)

 

2,762

 

3,282

 

19

%

7,981

 

9,021

 

13

%

Ex-TAC revenues

 

10,295

 

12,157

 

18

%

28,119

 

32,677

 

16

%

 

Reconciliation of Adjusted EBITDA to US GAAP Net Income

 

 

 

Three months

 

Nine months

 

 

 

ended September 30,

 

ended September 30,

 

In RUB millions

 

2014

 

2015

 

Change

 

2014

 

2015

 

Change

 

Net income

 

4,372

 

4,278

 

-2

%

9,448

 

6,828

 

-28

%

Add: depreciation and amortization

 

1,095

 

2,152

 

97

%

3,278

 

5,516

 

68

%

Add: share-based compensation expense

 

304

 

671

 

121

%

834

 

1,825

 

119

%

Add: compensation expense related to contingent consideration

 

10

 

15

 

50

%

17

 

203

 

n/m

 

Less: interest income, net

 

(224

)

(415

)

85

%

(599

)

(1,255

)

110

%

Less: other income, net

 

(1,070

)

(2,076

)

94

%

(1,121

)

(1,122

)

0

%

Add: provision for income taxes

 

1,418

 

1,396

 

-2

%

3,117

 

2,414

 

-23

%

Adjusted EBITDA

 

5,905

 

6,021

 

2

%

14,974

 

14,409

 

-4

%

 

Reconciliation of Adjusted Net Income to US GAAP Net Income

 

 

 

Three months

 

Nine months

 

 

 

ended September 30,

 

ended September 30,

 

In RUB millions

 

2014

 

2015

 

Change

 

2014

 

2015

 

Change

 

Net income

 

4,372

 

4,278

 

-2

%

9,448

 

6,828

 

-28

%

Add: SBC expense

 

304

 

671

 

121

%

834

 

1,825

 

119

%

Less: reduction in income tax attributable to SBC expense

 

(5

)

(10

)

100

%

(15

)

(30

)

100

%

Add: compensation expense related to contingent consideration

 

10

 

15

 

50

%

17

 

203

 

n/m

 

Less: foreign exchange gain

 

(1,824

)

(1,947

)

7

%

(1,846

)

(794

)

-57

%

Add: increase in income tax attributable to foreign exchange gain

 

383

 

386

 

1

%

387

 

139

 

-64

%

Add: impairment of investment in equity securities

 

700

 

 

-100

%

700

 

 

-100

%

Less: reduction in income tax attributable to impairment of investment in equity securities

 

(175

)

 

-100

%

(175

)

 

-100

%

Less: gain from repurchases of convertible debt

 

 

(93

)

n/m

 

 

(243

)

n/m

 

Add: increase in income tax attributable to gain from repurchases of convertible debt

 

 

23

 

n/m

 

 

61

 

n/m

 

Add: amortization of debt discount

 

195

 

241

 

24

%

568

 

732

 

29

%

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

 

(46

)

(57

)

24

%

(134

)

(174

)

30

%

Adjusted net income

 

3,914

 

3,507

 

-10

%

9,784

 

8,547

 

-13

%

 



 

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

 

In RUB 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 September 30, 2015

 

4,278

 

27.7

%

1,743

 

6,021

 

39.0

%

49.5

%

Nine months ended September 30, 2015

 

6,828

 

16.4

%

7,581

 

14,409

 

34.6

%

44.1

%

 


(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 contingent compensation, interest income, net, other 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 RUB 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 September 30, 2015

 

4,278

 

27.7

%

(771

)

3,507

 

22.7

%

28.8

%

Nine months ended September 30, 2015

 

6,828

 

16.4

%

1,719

 

8,547

 

20.5

%

26.2

%

 


(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 contingent compensation, foreign exchange gain (as adjusted for the increase in income tax attributable to the gain), gain from repurchases of convertible debt (as adjusted for the increase in income tax attributable to the gain) 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

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