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 16, 2016

 

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 February 16, 2016, announcing the Company’s fourth quarter and full-year 2015 financial results.

 

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 16, 2016

By:

/S/ GREG ABOVSKY

 

Greg Abovsky

 

Chief Financial Officer

 

3



 

INDEX TO EXHIBITS

 

Number

 

Description

 

 

 

99.1

 

Press release of Yandex N.V. dated February 16, 2016, announcing the Company’s fourth quarter and full-year 2015 financial results

 

4


Exhibit 99.1

 

Yandex Announces Fourth Quarter and Full-Year 2015 Financial Results

 

MOSCOW, Russia, and AMSTERDAM, the Netherlands, February 16, 2016 — 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 fourth quarter and the full year ended December 31, 2015.

 

Q4 2015 Financial Highlights(1)(2)

 

·                  Revenues of RUB 18.1 billion ($248.3 million), up 23% compared with Q4 2014

·                  Ex-TAC revenues (excluding traffic acquisition costs) up 24% compared with Q4 2014

·                  Income from operations of RUB 2.7 billion ($37.5 million), down 39% compared with Q4 2014

·                  Adjusted EBITDA of RUB 6.6 billion ($90.0 million), up 8% compared with Q4 2014

·                  Operating margin of 15.1%

·                  Adjusted EBITDA margin of 36.3%

·                  Adjusted ex-TAC EBITDA margin of 45.6%

·                  Net income of RUB 2.9 billion ($39.1 million), down 62% compared with Q4 2014

·                  Adjusted net income of RUB 3.6 billion ($49.8 million), down 8% compared with Q4 2014

·                  Net income margin of 15.8%

·                  Adjusted net income margin of 20.1%

·                  Adjusted ex-TAC net income margin of 25.3%

·                  Cash, cash equivalents, term deposits and short-term investments in debt securities of RUB 60.7 billion ($832.9 million) as of December 31, 2015

 

FY 2015 Financial Highlights(1)(2)

 

·                  Revenues of RUB 59.8 billion ($820.4 million), up 18% compared with FY 2014

·                  Ex-TAC revenues (excluding traffic acquisition costs) up 19% compared with FY 2014

·                  Income from operations of RUB 9.6 billion ($131.6 million), down 37% compared with FY 2014

·                  Adjusted EBITDA of RUB 21.0 billion ($287.7 million), flat compared with FY 2014

·                  Operating margin of 16.0%

·                  Adjusted EBITDA margin of 35.1%

·                  Adjusted ex-TAC EBITDA margin of 44.6%

·                  Net income of RUB 9.7 billion ($132.8 million), down 43% compared with FY 2014

·                  Adjusted net income of RUB 12.2 billion ($167.1 million), down 11% compared with FY 2014

·                  Net income margin of 16.2%

·                  Adjusted net income margin of 20.4%

·                  Adjusted ex-TAC net income margin of 25.9%

 

“I am very proud of our accomplishments in 2015,” said Arkady Volozh, Chief Executive Officer of Yandex. “In the face of economic headwinds and a highly competitive environment, we managed to stabilize our market share, improve product quality, significantly increase the size of our web index, and introduce a sophisticated new auction model that is already having a material impact on monetization.”

 

“Q4 was an excellent quarter in which we delivered strong top line growth at 23% year-over-year and served a record number of advertisers,” said Alexander Shulgin, Chief Operating Officer of Yandex.  “We

 


(1)  Pursuant to SEC rules regarding convenience translations, Russian ruble (RUB) amounts have been translated into U.S. dollars at a rate of RUB 72.8827 to $1.00, the official exchange rate quoted as of December 31, 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.

 



 

continued to broaden our business beyond search with the creation of three new business units — Yandex.Taxi, Auto.ru, and Yandex.Market — in which we will invest aggressively to accelerate growth in 2016.”

 

The following table provides a summary of key financial results for the three and twelve months ended December 31, 2014 and 2015:

 

 

 

Three months

 

Twelve months

 

 

 

ended December 31,

 

ended December 31,

 

In RUB millions 

 

2014

 

2015

 

Change

 

2014

 

2015

 

Change

 

Revenues

 

14,667

 

18,094

 

23

%

50,767

 

59,792

 

18

%

Ex-TAC revenues(2)

 

11,572

 

14,374

 

24

%

39,691

 

47,051

 

19

%

Income from operations

 

4,478

 

2,728

 

-39

%

15,323

 

9,593

 

-37

%

Adjusted EBITDA(2)

 

6,078

 

6,560

 

8

%

21,052

 

20,969

 

0

%

Net income

 

7,572

 

2,851

 

-62

%

17,020

 

9,679

 

-43

%

Adjusted net income(2)

 

3,967

 

3,632

 

-8

%

13,751

 

12,179

 

-11

%

 

Q4 2015 Operational and Corporate Highlights

 

·                  Share of Russian search market (including mobile) averaged 57.3% in Q4 2015 compared to 57.1% in Q3 2015 (according to LiveInternet)

·                  Search queries in Russia grew 5% compared with Q4 2014

·                  The number of advertisers increased to 394,000, up 24% from Q4 2014 and up 11% from Q3 2015

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

 

Revenues

 

 

 

Three months

 

Twelve months

 

 

 

ended December 31,

 

ended December 31,

 

In RUB millions

 

2014

 

2015

 

Change

 

2014

 

2015

 

Change

 

Advertising revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Text-based advertising

 

 

 

 

 

 

 

 

 

 

 

 

 

Yandex websites

 

9,965

 

11,925

 

20

%

35,228

 

40,243

 

14

%

Ad network

 

3,270

 

4,411

 

35

%

11,410

 

14,506

 

27

%

Total text-based advertising

 

13,235

 

16,336

 

23

%

46,638

 

54,749

 

17

%

Display advertising

 

 

 

 

 

 

 

 

 

 

 

 

 

Yandex websites

 

997

 

958

 

-4

%

3,034

 

2,856

 

-6

%

Ad network

 

184

 

224

 

22

%

475

 

605

 

27

%

Total display advertising

 

1,181

 

1,182

 

0

%

3,509

 

3,461

 

-1

%

Total advertising revenues

 

14,416

 

17,518

 

22

%

50,147

 

58,210

 

16

%

Other

 

251

 

576

 

129

%

620

 

1,582

 

155

%

Total revenues

 

14,667

 

18,094

 

23

%

50,767

 

59,792

 

18

%

 

Text-based advertising revenues grew 23% compared with Q4 2014 and continued to determine overall top-line performance, contributing 90% of total revenues in Q4 2015.

 

Text-based advertising revenues from Yandex websites increased 20% compared with Q4 2014 and accounted for 66% of total revenues during Q4 2015.

 



 

Text-based advertising revenues from our ad network increased 35% compared with Q4 2014 and contributed 24% of total revenues during Q4 2015, 2 percentage points higher than in Q4 2014.

 

Paid clicks on Yandex’s and its partners’ websites, in aggregate, increased 10% in Q4 2015 compared with Q4 2014. Our average cost per click in Q4 2015 grew 12% compared with Q4 2014.

 

Display advertising revenue, accounting for 7% of total revenues in Q4 2015, was flat compared with Q4 2014.

 

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), depreciation and amortization expenses (D&A) and goodwill impairment. Apart from D&A and goodwill impairment, 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 goodwill impairment, reflect investments in overall growth. In Q4 2015, Yandex added 51 full-time employees, an increase of 1% from September 30, 2015, and down 3% from December 31, 2014. The total number of full-time employees was 5,463 as of December 31, 2015.

 

Costs of revenues, including traffic acquisition costs (TAC)

 

 

 

Three months

 

Twelve months

 

 

 

ended December 31,

 

ended December 31,

 

In RUB millions 

 

2014

 

2015

 

Change

 

2014

 

2015

 

Change

 

TAC:

 

 

 

 

 

 

 

 

 

 

 

 

 

Related to the Yandex ad network

 

2,102

 

2,669

 

27

%

7,520

 

8,981

 

19

%

Related to distribution partners

 

993

 

1,051

 

6

%

3,556

 

3,760

 

6

%

Total TAC

 

3,095

 

3,720

 

20

%

11,076

 

12,741

 

15

%

Total TAC as a % of total revenues

 

21.1

%

20.6

%

 

 

21.8

%

21.3

%

 

 

Other cost of revenues

 

912

 

1,077

 

18

%

3,260

 

4,069

 

25

%

Other cost of revenues as a % of revenues

 

6.2

%

6.0

%

 

 

6.4

%

6.8

%

 

 

Total cost of revenues

 

4,007

 

4,797

 

20

%

14,336

 

16,810

 

17

%

Total cost of revenues as a % of revenues

 

27.3

%

26.5

%

 

 

28.2

%

28.1

%

 

 

 

TAC decreased as a percentage of total revenues from 21.1% in Q4 2014 to 20.6% in Q4 2015 and grew 20% compared with Q4 2014. Our ad network TAC grew 27% in Q4 2015 compared with Q4 2014, slower than revenues from our advertising network, primarily reflecting changes in our partner revenue mix. This partner TAC includes traffic acquisition costs related to both our text-based and our display advertising networks.

 

Other cost of revenues in Q4 2015 increased 18% compared with Q4 2014.

 

Product development

 

 

 

Three months

 

Twelve months

 

 

 

ended December 31,

 

ended December 31,

 

In RUB millions

 

2014

 

2015

 

Change

 

2014

 

2015

 

Change

 

Product development

 

2,673

 

3,606

 

35

%

8,842

 

13,421

 

52

%

As a % of revenues

 

18.2

%

19.9

%

 

 

17.4

%

22.5

%

 

 

 



 

Growth in product development costs in Q4 2015 primarily relates to salary increases we implemented in early 2015, as well as increases in our rent expenses attributable to the material appreciation of the U.S. dollar in Q4 2015 compared to Q4 2014, since the rent for our Moscow headquarters is U.S. dollar-denominated. In 2015, development headcount decreased 1% from 3,329 as of December 31, 2014, to 3,286 as of December 31, 2015, with 13 employees added since September 30, 2015.

 

Selling, general and administrative (SG&A)

 

 

 

Three months

 

Twelve months

 

 

 

ended December 31,

 

ended December 31,

 

In RUB millions

 

2014

 

2015

 

Change

 

2014

 

2015

 

Change

 

Sales, general and administrative

 

2,303

 

4,112

 

79

%

7,782

 

11,601

 

49

%

As a % of revenues

 

15.7

%

22.7

%

 

 

15.3

%

19.4

%

 

 

 

SG&A costs grew 79% in Q4 2015 compared to Q4 2014. The growth was mainly driven by an increase in advertising and marketing spending aimed to support our core products and our business units.

 

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 RUB millions

 

2014

 

2015

 

Change

 

2014

 

2015

 

Change

 

SBC expense included in cost of revenues

 

32

 

43

 

34

%

101

 

168

 

66

%

SBC expense included in product development

 

254

 

629

 

148

%

780

 

1,860

 

138

%

SBC expense included in SG&A

 

90

 

221

 

146

%

329

 

690

 

110

%

Total SBC expense

 

376

 

893

 

138

%

1,210

 

2,718

 

125

%

As a % of revenues

 

2.6

%

4.9

%

 

 

2.4

%

4.5

%

 

 

 

Total SBC expense increased 138% in Q4 2015 compared with Q4 2014. The increase is primarily related to the material appreciation of the U.S. dollar during Q4 2015 as well as to new equity-based grants made in 2014 and 2015.

 

Depreciation and amortization (D&A) expense

 

 

 

Three months

 

Twelve months

 

 

 

ended December 31,

 

ended December 31,

 

In RUB millions

 

2014

 

2015

 

Change

 

2014

 

2015

 

Change

 

Depreciation and amortization

 

1,206

 

2,275

 

89

%

4,484

 

7,791

 

74

%

As a % of revenues

 

8.2

%

12.6

%

 

 

8.8

%

13.0

%

 

 

 

D&A expense increased 89% in Q4 2015 compared with Q4 2014 and primarily reflected investments in servers and data centers made in 2014 and the first half of 2015.

 

Goodwill impairment

 

 

 

Three months

 

Twelve months

 

 

 

ended December 31,

 

ended December 31,

 

In RUB millions

 

2014

 

2015

 

Change

 

2014

 

2015

 

Change

 

Goodwill impairment

 

 

576

 

n/m

 

 

576

 

n/m

 

As a % of revenues

 

0.0

%

3.2

%

 

 

0.0

%

1.0

%

 

 

 

The goodwill impairment recorded in Q4 2015 of RUB 576 million relates to Kinopoisk acquisition and

 



 

was a result of the Company’s annual goodwill impairment test reflecting more conservative projected free cash flows.

 

As a result of the factors described above, income from operations was RUB 2.7 billion ($37.5 million) in Q4 2015, a 39% decrease from Q4 2014, while adjusted EBITDA reached RUB 6.6 billion ($90.0 million) in Q4 2015, up 8% from Q4 2014.

 

Interest income, net in Q4 2015 was RUB 489 million, up from RUB 257 million in Q4 2014.

 

Foreign exchange gain in Q4 2015 was RUB 1,109 million, compared with a foreign exchange gain of RUB 4,707 million in Q4 2014. This gain is due to the material appreciation of the U.S. dollar during Q4 2015 from RUB 66.2367 to $1.00 on September 30, 2015, to RUB 72.8827 to $1.00 on December 31, 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 Q4 2015.

 

Income tax expense for Q4 2015 was RUB 1,503 million, down from RUB 2,338 million in Q4 2014. Our effective tax rate of 34.5% was higher in Q4 2015 than in Q4 2014 due to the effects of goodwill impairment, certain allowances recognized in Q4 2015, as well as an increase in SBC expense which is non-deductible. Adjusted for these effects, our effective tax rate is 25.8%, compared with 23.6% in Q4 2014.

 

Adjusted net income in Q4 2015 was RUB 3.6 billion ($49.8 million), an 8% decrease from Q4 2014.

 

Adjusted net income margin was 20.1% in Q4 2015, compared with 27.0% in Q4 2014.

 

Net income was RUB 2.9 billion ($39.1 million) in Q4 2015, down 62% compared with Q4 2014.

 

As of December 31, 2015, Yandex had cash, cash equivalents, term deposits and short-term investments in debt securities of RUB 60.7 billion ($832.9 million).

 

Net operating cash flow and capital expenditures for Q4 2015 were inflow of RUB 5.5 billion ($75.5 million) and outflow of RUB 1.7 billion ($22.8 million), respectively.

 

During Q4 2015, we repurchased $24.9 million in principal amount of our 1.125% convertible senior notes due 2018 for approximately $21.5 million.

 

The total number of shares issued and outstanding as of December 31, 2015 was 319,252,172, including 271,356,566 Class A shares, 47,895,605 Class B shares, and one Priority share and excluding 10,804,582 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 4.0 million shares, at a weighted average exercise price of $5.94 per share, all of which, excluding approximately 40,000 options, 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 7.4

 



 

million shares, of which RSUs to acquire 1.8 million shares were fully vested.

 



 

Financial outlook

 

We expect our ruble-based revenue to grow in the range of 12% to 18% in the full year 2016 compared with 2015.

 

This outlook reflects our current and preliminary view, based on the trends that we currently see.

 

Conference Call Information

 

Yandex’s management will hold an earnings conference call on February 16, 2016 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: +1 646 254 3365

UK/International: +44 (0) 20 3427 1908

Russia: 8 800 500 9311

 

Passcode: 8412945#

 

A replay of the call will be available until February 22, 2016. 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: 8412945#

 

A live and archived webcast of this conference call will be available at

 

http://edge.media-server.com/m/p/qgc3d7gr

 



 

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 https://yandex.com/company.

 

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 2016. 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, 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 February 16, 2016, 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, (4) goodwill impairment related to Kinopoisk and (5) 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) share-based compensation expense adjusted for the income tax reduction attributable to share-based compensation 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, (4) goodwill impairment related to Kinopoisk and (5) 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.

 

Impairment of investment in equity securities

 

Adjusted net income for Q3 2014 excludes a loss from the impairment of our equity investment in Blekko Inc. We review our investments quarterly for indicators of other-than-temporary impairment. In Q3 2014 our review identified certain adverse external and internal events indicating that the decline in fair value of our investment in Blekko Inc. is other-than-temporary and recorded an impairment charge of RUB 700 million. We believe that it is useful to present adjusted net income and related margin measures excluding impacts not related to our core operations.

 

Goodwill impairment

 

Adjusted net income and adjusted EBITDA for Q4 2015 exclude a loss from goodwill impairment related to Kinopoisk. We test our goodwill annually for impairment. In Q4 2015, we recognized a goodwill impairment charge for RUB 576 million which is the amount by which the carrying value of goodwill exceeds its implied fair value. We believe that it is useful to present adjusted net income and related margin measures excluding impacts not indicative of our ongoing 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 repurchase of $24.9 million in principal of our 1.125%

 



 

convertible senior notes due 2018 for approximately $21.5 million that we recorded in Q4 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,

 

December 31,

 

December 31,

 

 

 

2014*

 

2015

 

2015

 

 

 

RUB

 

RUB

 

$

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

17,645

 

24,238

 

332.6

 

Term deposits

 

5,863

 

15,150

 

207.9

 

Investments in debt securities

 

3,124

 

2,915

 

40.0

 

Accounts receivable, net

 

3,703

 

5,586

 

76.6

 

Prepaid expenses

 

1,508

 

1,505

 

20.6

 

Other current assets

 

3,736

 

3,835

 

52.6

 

Total current assets

 

35,579

 

53,229

 

730.3

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

17,107

 

24,337

 

333.9

 

Intangible assets, net

 

2,425

 

2,511

 

34.5

 

Goodwill

 

8,920

 

8,581

 

117.7

 

Long-term prepaid expenses

 

1,436

 

1,488

 

20.5

 

Restricted cash

 

932

 

533

 

7.3

 

Term deposits

 

25,663

 

18,399

 

252.4

 

Investments in non-marketable equity securities

 

871

 

1,122

 

15.4

 

Deferred tax assets

 

56

 

226

 

3.1

 

Other non-current assets

 

1,605

 

1,392

 

19.1

 

TOTAL ASSETS

 

94,594

 

111,818

 

1,534.2

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

5,053

 

6,994

 

96.0

 

Taxes payable

 

2,930

 

2,800

 

38.4

 

Deferred revenue

 

1,808

 

1,875

 

25.7

 

Total current liabilities

 

9,791

 

11,669

 

160.1

 

Convertible debt

 

26,123

 

27,374

 

375.6

 

Deferred tax liabilities

 

1,464

 

1,552

 

21.3

 

Other accrued liabilities

 

1,480

 

1,126

 

15.4

 

Total liabilities

 

38,858

 

41,721

 

572.4

 

 

 

 

 

 

 

 

 

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 282,161,148, Class B: 62,051,348 and 47,895,605, and Class C: 8,919,063 and 12,000,000, respectively); shares outstanding (Class A: 255,592,322 and 271,356,566, Class B: 62,051,348 and 47,895,605, and Class C: nil)

 

182

 

75

 

1.0

 

Treasury shares at cost (Class A: 12,378,083 and 10,804,582)

 

(14,179

)

(12,531

)

(171.9

)

Additional paid-in capital

 

16,192

 

17,257

 

236.8

 

Accumulated other comprehensive income

 

1,023

 

3,099

 

42.5

 

Retained earnings

 

52,518

 

62,197

 

853.4

 

Total shareholders’ equity

 

55,736

 

70,097

 

961.8

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

94,594

 

111,818

 

1,534.2

 

 


* In Q4 2015, Yandex elected to early adopt Accounting Standards Update (“ASU”) No. 2015-03—Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires the presentation of debt issuance costs as a direct deduction from the related debt liability rather than an asset, on a retrospective basis. In Q4 2015, Yandex also elected to early adopt ASU No. 2015-17—Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which requires the classification of deferred tax liabilities and assets as non-current, on a retrospective basis. Prior period amounts have been adjusted accordingly

 



 

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,

 

 

 

2014

 

2015

 

2015

 

 

 

RUB

 

RUB

 

$

 

 

 

 

 

 

 

 

 

Revenues

 

14,667

 

18,094

 

248.3

 

Operating costs and expenses:

 

 

 

 

 

 

 

Cost of revenues(1)

 

4,007

 

4,797

 

65.8

 

Product development(1) 

 

2,673

 

3,606

 

49.5

 

Sales, general and administrative(1)

 

2,303

 

4,112

 

56.4

 

Depreciation and amortization

 

1,206

 

2,275

 

31.2

 

Goodwill impairment

 

 

576

 

7.9

 

Total operating costs and expenses

 

10,189

 

15,366

 

210.8

 

Income from operations

 

4,478

 

2,728

 

37.5

 

Interest income, net

 

257

 

489

 

6.7

 

Other income, net

 

5,175

 

1,137

 

15.5

 

Net income before income taxes

 

9,910

 

4,354

 

59.7

 

Provision for income taxes

 

2,338

 

1,503

 

20.6

 

Net income

 

7,572

 

2,851

 

39.1

 

Net income per Class A and Class B share:

 

 

 

 

 

 

 

Basic

 

23.83

 

8.93

 

0.12

 

Diluted

 

23.44

 

8.82

 

0.12

 

Weighted average number of Class A and Class B shares outstanding

 

 

 

 

 

 

 

Basic

 

317,775,863

 

319,101,598

 

319,101,598

 

Diluted

 

323,082,053

 

323,077,175

 

323,077,175

 

 


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

 

Cost of revenues

 

32

 

43

 

0.6

 

Product development

 

254

 

629

 

8.6

 

Sales, general and administrative

 

90

 

221

 

3.1

 

 



 

YANDEX N.V.

 

Unaudited Condensed Consolidated Statements of Income

 

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

 

 

 

Twelve months ended December 31,

 

 

 

2014*

 

2015

 

2015

 

 

 

RUB

 

RUB

 

$

 

 

 

 

 

 

 

 

 

Revenues

 

50,767

 

59,792

 

820.4

 

Operating costs and expenses:

 

 

 

 

 

 

 

Cost of revenues(1)

 

14,336

 

16,810

 

230.6

 

Product development(1) 

 

8,842

 

13,421

 

184.1

 

Sales, general and administrative(1)

 

7,782

 

11,601

 

159.3

 

Depreciation and amortization

 

4,484

 

7,791

 

106.9

 

Goodwill impairment

 

 

576

 

7.9

 

Total operating costs and expenses

 

35,444

 

50,199

 

688.8

 

Income from operations

 

15,323

 

9,593

 

131.6

 

Interest income, net

 

856

 

1,744

 

23.9

 

Other income, net

 

6,296

 

2,259

 

31.0

 

Net income before income taxes

 

22,475

 

13,596

 

186.5

 

Provision for income taxes

 

5,455

 

3,917

 

53.7

 

Net income

 

17,020

 

9,679

 

132.8

 

Net income per Class A and Class B share:

 

 

 

 

 

 

 

Basic

 

53.30

 

30.39

 

0.42

 

Diluted

 

52.27

 

29.90

 

0.41

 

Weighted average number of Class A and Class B shares outstanding

 

 

 

 

 

 

 

Basic

 

319,336,782

 

318,541,887

 

318,541,887

 

Diluted

 

325,610,277

 

323,713,437

 

323,713,437

 

 


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

 

Cost of revenues

 

101

 

168

 

2.3

 

Product development

 

780

 

1,860

 

25.5

 

Sales, general and administrative

 

329

 

690

 

9.5

 

 

* 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,

 

 

 

2014

 

2015

 

2015

 

 

 

RUB

 

RUB

 

$

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income

 

7,572

 

2,851

 

39.1

 

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

 

 

 

 

 

 

 

Depreciation and amortization of property and equipment

 

1,091

 

2,112

 

29.0

 

Amortization of intangible assets

 

115

 

163

 

2.2

 

Amortization of debt discount and issuance costs

 

240

 

235

 

3.2

 

Share-based compensation expense

 

376

 

893

 

12.3

 

Deferred income taxes

 

136

 

(87

)

(1.2

)

Foreign exchange gains

 

(4,707

)

(1,109

)

(15.2

)

Goodwill impairment

 

 

576

 

7.9

 

Gain from repurchases of convertible debt

 

(548

)

(67

)

(0.9

)

Other

 

33

 

13

 

0.2

 

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

 

 

 

 

 

 

 

Accounts receivable, net

 

(352

)

(900

)

(12.3

)

Prepaid expenses and other assets

 

(941

)

106

 

1.5

 

Accounts payable and accrued liabilities

 

498

 

499

 

6.8

 

Deferred revenue

 

212

 

215

 

2.9

 

Net cash provided by operating activities

 

3,725

 

5,500

 

75.5

 

CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Purchase of property and equipment

 

(2,998

)

(1,659

)

(22.8

)

Proceeds from sale of property and equipment

 

96

 

60

 

0.8

 

Acquisitions of businesses, net of cash acquired

 

(531

)

(212

)

(2.9

)

Investments in non-marketable equity securities

 

 

(35

)

(0.5

)

Investments in debt securities

 

 

(2,564

)

(35.2

)

Proceeds from maturity of debt securities

 

575

 

 

 

Investments in term deposits

 

(935

)

(15,150

)

(207.9

)

Maturities of term deposits

 

5,518

 

20,044

 

275.0

 

Loans granted

 

2

 

(38

)

(0.4

)

Net cash provided by investing activities

 

1,727

 

446

 

6.1

 

CASH FLOWS USED IN FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from exercise of share options

 

68

 

29

 

0.4

 

Repurchases of convertible debt

 

(4,675

)

(1,187

)

(16.3

)

Repurchases of ordinary shares

 

(1,066

)

 

 

Payment for contingent consideration

 

 

(35

)

(0.5

)

Dividends received from equity securities

 

 

29

 

0.4

 

Net cash used in financing activities

 

(5,673

)

(1,164

)

(16.0

)

Effect of exchange rate changes on cash and cash equivalents

 

4,947

 

1,417

 

19.5

 

Net change in cash and cash equivalents

 

4,726

 

6,199

 

85.1

 

Cash and cash equivalents at beginning of period

 

12,919

 

18,039

 

247.5

 

Cash and cash equivalents at end of period

 

17,645

 

24,238

 

332.6

 

 



 

YANDEX N.V.

 

Unaudited Condensed Consolidated Statements of Cash Flows

 

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

 

 

 

Twelve months ended December 31,

 

 

 

2014*

 

2015

 

2015

 

 

 

RUB

 

RUB

 

$

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income

 

17,020

 

9,679

 

132.8

 

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

 

 

 

 

 

 

 

Depreciation and amortization of property and equipment

 

4,242

 

7,289

 

100.0

 

Amortization of intangible assets

 

242

 

502

 

6.9

 

Amortization of debt discount and issuance costs

 

811

 

967

 

13.3

 

Share-based compensation expense

 

1,210

 

2,718

 

37.3

 

Deferred income taxes

 

115

 

(188

)

(2.6

)

Foreign exchange gains

 

(6,553

)

(1,903

)

(26.1

)

Impairment of investment in equity securities

 

700

 

 

 

Goodwill impairment

 

 

576

 

7.9

 

Gain from repurchases of convertible debt

 

(548

)

(310

)

(4.3

)

Other

 

38

 

(83

)

(1.1

)

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

 

 

 

 

 

 

 

Accounts receivable, net

 

(714

)

(1,763

)

(24.2

)

Prepaid expenses and other assets

 

(3,069

)

888

 

12.2

 

Accounts payable and accrued liabilities

 

1,817

 

1,160

 

15.9

 

Deferred revenue

 

235

 

44

 

0.6

 

Net cash provided by operating activities

 

15,546

 

19,576

 

268.6

 

CASH FLOWS USED IN INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Purchase of property and equipment

 

(9,679

)

(13,045

)

(179.0

)

Proceeds from sale of property and equipment

 

132

 

95

 

1.3

 

Acquisitions of businesses, net of cash acquired

 

(6,360

)

(398

)

(5.5

)

Investments in non-marketable equity securities

 

(45

)

(110

)

(1.5

)

Proceeds from sale of equity securities

 

120

 

 

 

Investments in debt securities

 

(2,546

)

(2,564

)

(35.2

)

Proceeds from maturity of debt securities

 

575

 

3,426

 

47.0

 

Investments in term deposits

 

(17,157

)

(41,760

)

(573.0

)

Maturities of term deposits

 

7,234

 

42,682

 

585.6

 

Loans granted

 

(207

)

(60

)

(0.7

)

Escrow cash deposit

 

(656

)

58

 

0.8

 

Net cash used in investing activities

 

(28,589

)

(11,676

)

(160.2

)

CASH FLOWS USED IN FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from exercise of share options

 

191

 

168

 

2.3

 

Proceeds from issuance of convertible debt

 

2,981

 

 

 

Repurchases of convertible debt

 

(6,414

)

(6,096

)

(83.6

)

Payment of debt issuance costs

 

(42

)

 

 

Repurchases of ordinary shares

 

(8,423

)

 

 

Payment for contingent consideration

 

 

(124

)

(1.7

)

Dividends received from equity securities

 

 

29

 

0.4

 

Net cash used in financing activities

 

(11,707

)

(6,023

)

(82.6

)

Effect of exchange rate changes on cash and cash equivalents

 

9,001

 

4,716

 

64.7

 

Net change in cash and cash equivalents

 

(15,749

)

6,593

 

90.5

 

Cash and cash equivalents at beginning of period

 

33,394

 

17,645

 

242.1

 

Cash and cash equivalents at end of period

 

17,645

 

24,238

 

332.6

 

 


* Derived from audited financial statements

 



 

Reconciliation of Ex-TAC Revenues to US GAAP Revenues

 

 

 

Three months

 

Twelve months

 

 

 

ended December 31,

 

ended December 31,

 

In RUB millions

 

2014

 

2015

 

Change

 

2014

 

2015

 

Change

 

Total revenues

 

14,667

 

18,094

 

23

%

50,767

 

59,792

 

18

%

Less: traffic acquisition costs (TAC)

 

3,095

 

3,720

 

20

%

11,076

 

12,741

 

15

%

Ex-TAC revenues

 

11,572

 

14,374

 

24

%

39,691

 

47,051

 

19

%

 

Reconciliation of Adjusted EBITDA to US GAAP Net Income

 

 

 

Three months

 

Twelve months

 

 

 

ended December 31,

 

ended December 31,

 

In RUB millions

 

2014

 

2015

 

Change

 

2014

 

2015

 

Change

 

Net income

 

7,572

 

2,851

 

-62

%

17,020

 

9,679

 

-43

%

Add: depreciation and amortization

 

1,206

 

2,275

 

89

%

4,484

 

7,791

 

74

%

Add: share-based compensation expense

 

376

 

893

 

138

%

1,210

 

2,718

 

125

%

Add: compensation expense related to contingent consideration

 

18

 

88

 

n/m

 

35

 

291

 

n/m

 

Add: goodwill impairment

 

 

576

 

n/m

 

 

576

 

n/m

 

Less: interest income, net

 

(257

)

(489

)

90

%

(856

)

(1,744

)

104

%

Less: other income, net

 

(5,175

)

(1,137

)

-78

%

(6,296

)

(2,259

)

-64

%

Add: provision for income taxes

 

2,338

 

1,503

 

-36

%

5,455

 

3,917

 

-28

%

Adjusted EBITDA

 

6,078

 

6,560

 

8

%

21,052

 

20,969

 

0

%

 

Reconciliation of Adjusted Net Income to US GAAP Net Income

 

 

 

Three months

 

Twelve months

 

 

 

ended December 31,

 

ended December 31,

 

In RUB millions

 

2014

 

2015

 

Change

 

2014

 

2015

 

Change

 

Net income

 

7,572

 

2,851

 

-62

%

17,020

 

9,679

 

-43

%

Add: SBC expense

 

376

 

893

 

138

%

1,210

 

2,718

 

125

%

Less: reduction in income tax attributable to SBC expense

 

(5

)

(11

)

120

%

(20

)

(41

)

105

%

Add: compensation expense related to contingent consideration

 

18

 

88

 

n/m

 

35

 

291

 

n/m

 

Less: foreign exchange gain

 

(4,707

)

(1,109

)

-76

%

(6,553

)

(1,903

)

-71

%

Add: increase in income tax attributable to foreign exchange gain

 

937

 

216

 

-77

%

1,324

 

355

 

-73

%

Add: impairment of investment in equity securities

 

 

 

n/m

 

700

 

 

-100

%

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

 

 

 

n/m

 

(175

)

 

-100

%

Add: goodwill impairment

 

 

576

 

n/m

 

 

576

 

n/m

 

Less: gain from repurchases of convertible debt

 

(548

)

(67

)

-88

%

(548

)

(310

)

-43

%

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

 

137

 

16

 

-88

%

137

 

77

 

-44

%

Add: amortization of debt discount

 

243

 

235

 

-3

%

811

 

967

 

19

%

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

 

(56

)

(56

)

0

%

(190

)

(230

)

21

%

Adjusted net income

 

3,967

 

3,632

 

-8

%

13,751

 

12,179

 

-11

%

 



 

YANDEX N.V.

 

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

TO THE NEAREST COMPARABLE US GAAP MEASURES

 

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 December 31, 2015

 

2,851

 

15.8

%

3,709

 

6,560

 

36.3

%

45.6

%

Twelve months ended December 31, 2015

 

9,679

 

16.2

%

11,290

 

20,969

 

35.1

%

44.6

%

 


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

(2)     Adjusted to eliminate depreciation and amortization expense, SBC expense, expense related to contingent compensation, goodwill impairment, 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 December 31, 2015

 

2,851

 

15.8

%

781

 

3,632

 

20.1

%

25.3

%

Twelve months ended December 31, 2015

 

9,679

 

16.2

%

2,500

 

12,179

 

20.4

%

25.9

%

 


(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), expense related to contingent compensation, foreign exchange gain (as adjusted for the increase in income tax attributable to the gain), impairment of investment in equity securities (as adjusted for the income tax reduction attributable to the expense), goodwill impairment, 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