yndx_Current_Folio_6K

 

 

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, 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 ☒          Form 40-F ☐

 

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): ☐

 

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): ☐

 

 

 

 

 


 

Furnished as Exhibit 99.1 to this Report on Form 6-K is a press release of Yandex N.V. dated October 27, 2016, announcing the Company’s results for the second quarter ended September 30, 2016.

 

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, 2016

By:

/S/ GREG ABOVSKY

 

Greg Abovsky

 

Chief Financial Officer

 

3


 

INDEX TO EXHIBITS

 

7

 

 

Number

 

Description

 

 

 

99.1

 

Press Release of Yandex N.V. dated October 27, 2016, announcing the Company’s results for the second quarter ended September 30, 2016

 

4


yndx_Ex99_1

Exhibit 99.1

Yandex Announces Third Quarter 2016 Financial Results

 

MOSCOW, Russia and AMSTERDAM, the Netherlands, October 27, 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 third quarter ended September 30, 2016.

 

Q3 2016 Financial Highlights(1)(2)

 

·

Revenues of RUB 19.3 billion ($305.5 million), up 25% compared with Q3 2015

·

Adjusted EBITDA of RUB 6.9 billion ($109.1 million), up 14% compared with Q3 2015; adjusted EBITDA margin of 35.7%

·

Adjusted net income of RUB 3.8 billion ($60.1 million), up 8% compared with Q3 2015; adjusted net income margin of 19.7%

·

Cash, cash equivalents, term deposits and short-term investments in debt securities of RUB 66.2 billion ($1,048.9 million) as of September 30, 2016

 

Q3 2016 Operational and Corporate Highlights

 

·

Share of Russian search market, including mobile, averaged 55.9% in Q3 2016 compared to 57.0% in Q2 2016 (according to LiveInternet)

·

Search queries in Russia grew 5% compared with Q3 2015

·

Yandex.Taxi introduced lower tariffs and rolled out surge pricing in Moscow

·

Yandex announced termination of agreement to acquire its Moscow headquarters 

 

“Revenue and EBITDA continued to grow strongly in Q3, boosted by innovation on our advertising platform,” said Arkady Volozh, Chief Executive Officer of Yandex. “We see new opportunities within our geolocation services to drive revenues from our maps and navigation products.”

 

“In Q3 we delivered 25% top line revenue growth and 36% adjusted EBITDA margins while deploying significant investments to our fast-growing business units,” said Alexander Shulgin, Chief Operating Officer of Yandex.  “We are moving aggressively to expand Taxi’s leading market position and, following encouraging market tests, are accelerating Market’s transition to a CPA model.”

 

The following table provides a summary of our key consolidated financial results for the three months and nine months ended September 30, 2015 and 2016:

 

 

 

 

 

 

 

 

In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2015

2016

Change

2015

2016

Change

Revenues

15,439
19,293
25%
41,698
53,806
29%

Ex-TAC revenues2

12,157
15,561
28%
32,677
43,130
32%

Income from operations

3,183
3,553
12%
6,865
9,510
39%

Adjusted EBITDA2

6,021
6,888
14%
14,409
19,420
35%

Net income

4,278
2,443

-43%

6,828
5,570

-18%

Adjusted net income2

3,507
3,793
8%
8,547
10,867
27%

(1)

Pursuant to SEC rules regarding convenience translations, Russian ruble (RUB) amounts have been translated into U.S. dollars at a rate of RUB 63.1581 to $1.00, the official exchange rate quoted as of September 30, 2016 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 U.S. GAAP measures.

 

 


 

Consolidated revenues breakdown

 

 

 

 

 

 

 

 

In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2015

2016

Change

2015

2016

Change

Online Advertising Revenues:

 

 

 

 

 

 

              Yandex websites

11,137
13,435
21%
30,216
37,401
24%

              Advertising network

3,931
5,005
27%
10,476
14,173
35%

Total online advertising revenues

15,068
18,440
22%
40,692
51,574
27%

Other

371
853
130%
1,006
2,232
122%

Total revenues

15,439
19,293
25%
41,698
53,806
29%

 

Online advertising revenues grew 22% compared with Q3 2015 and continued to determine overall top-line performance, contributing 96% of total revenues in Q3 2016. Online advertising revenues include revenues derived from text-based and display advertising on Yandex websites and in our ad network.

 

Online advertising revenues from Yandex websites increased 21% compared with Q3 2015 and accounted for 70% of total revenues during Q3 2016.

 

Online advertising revenues from our ad network increased 27% compared with Q3 2015 and contributed 26% of total revenues during Q3 2016, 50 basis points higher than in Q3 2015.

 

Other revenues grew 130% compared with Q3 2015, and were mainly driven by growth in Yandex.Taxi revenues.

 

Paid clicks on Yandex’s and its partners’ websites, in aggregate, increased 12% compared with Q3 2015.

 

Our average cost per click grew 10% compared with Q3 2015.

 

Segment revenues

 

 

 

 

 

 

 

 

In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2015

2016

Change

2015

2016

Change

Revenues:

 

 

 

 

 

 

Search and Portal

14,505
17,482
21%
39,232
49,161
25%

E-commerce

827
1,200
45%
2,228
3,312
49%

Taxi

234
587
151%
589
1,560
165%

Classifieds

243
352
45%
633
906
43%

Experiments

106
210
98%
299
548
83%

Eliminations

(476)
(538)
13%
(1,283)
(1,681)
31%

Total Revenues

15,439
19,293
25%
41,698
53,806
29%

 

Search and Portal segment includes all our services offered in Russia, Ukraine, Belarus and Kazakhstan, other than those described below;

E-commerce segment includes our Yandex.Market service;

Taxi segment includes our Yandex.Taxi service;

Classifieds segment includes Auto.ru, Yandex.Realty, Yandex.Jobs and Yandex.Travel;

Experiments segment includes Media Services (including KinoPoisk, Yandex.Music, Yandex.Radio, Yandex.Tickets, Yandex.Afisha and Yandex TV program), Yandex Data Factory, Discovery services (including Yandex Zen and Yandex Launcher) and Search and Portal in Turkey.

Eliminations represent the elimination of transaction results between the reportable segments, primarily related to advertising.

 

Consolidated 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 reflect investments in overall growth. In Q3 2016, Yandex hired 350 full-time employees. The total number of full-time employees was 5,909 as of September 30, 2016, an increase of 6% from June 30, 2016, and up 9% from September 30, 2015.

 

Costs of revenues, including traffic acquisition costs (TAC)

 

 

 

 

 

 

 

 

In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2015

2016

Change

2015

2016

Change

TAC:

 

 

 

 

 

 

Related to the Yandex ad network

2,333
2,778
19%
6,312
7,914
25%

Related to distribution partners

949
954
1%
2,709
2,762
2%

Total TAC

3,282
3,732
14%
9,021
10,676
18%

Total TAC as a % of total revenues

21.3%
19.3%

 

21.6%
19.8%

 

Other cost of revenues

1,036
1,186
14%
2,992
3,442
15%

Other cost of revenues as a % of revenues

6.7%
6.1%

 

7.2%
6.4%

 

Total cost of revenues

4,318
4,918
14%
12,013
14,118
18%

Total cost of revenues as a % of revenues

28.0%
25.5%

 

28.8%
26.2%

 

 

TAC grew 14% compared with Q3 2015 and represented 19.3% of total revenues in Q3 2016, 200 basis points lower than in Q3 2015 and 40 basis points lower than in Q2 2016.The slowdown in the growth of partner TAC was mostly due to changes in partner revenue mix.

 

Other cost of revenues in Q3 2016 increased 14% compared with Q3 2015.

 

Product development

 

 

 

 

 

 

 

 

In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2015

2016

Change

2015

2016

Change

Product development

3,168
3,858
22%
9,815
11,529
17%

As a % of revenues

20.5%
20.0%

 

23.5%
21.4%

 

 

Growth in product development costs in Q3 2016 primarily reflects salary increases in early 2016 and new hires.

 

Sales, general and administrative (SG&A)

 

 

 

 

 

 

 

 

In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2015

2016

Change

2015

2016

Change

Sales, general and administrative

2,618
4,475
71%
7,489
11,450
53%

As a % of revenues

17.0%
23.2%

 

18.0%
21.3%

 

 

SG&A costs grew faster than revenue, increasing by 71% in Q3 2016 compared to Q3 2015 as a result of growth in advertising and marketing expenses which were aimed at supporting our core products, including search and Yandex.Browser, as well as our business units, including Taxi, E-Commerce and Classifieds.

 

Share-based compensation (SBC) expense

 

SBC expense is included in each of the cost of revenues, product development, and SG&A categories discussed above.

 

 

 

 

 

 

 

 

In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2015

2016

Change

2015

2016

Change

SBC expense included in cost of revenues

41
50
22%
125
145
16%

SBC expense included in product development

457
532
16%
1,231
1,672
36%

SBC expense included in SG&A

173
203
17%
469
740
58%

Total SBC expense

671
785
17%
1,825
2,557
40%

As a % of revenues

4.3%
4.1%

 

4.4%
4.8%

 

 


 

 

Total SBC expense increased 17% in Q3 2016 compared with Q3 2015. The increase is primarily related to new equity-based grants made in 2015-2016.

 

Depreciation and amortization (D&A) expense

 

 

 

 

 

 

 

 

In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2015

2016

Change

2015

2016

Change

Depreciation and amortization

2,152
2,489
16%
5,516
7,199
31%

As a % of revenues

13.9%
12.9%

 

13.2%
13.4%

 

 

D&A expense increased 16% in Q3 2016 compared with Q3 2015 and primarily reflected investments in servers and data centers made in 2015 and 2016.

 

As a result of the factors described above, income from operations was RUB 3.6 billion ($56.3 million) in Q3 2016, a 12% increase from Q3 2015, while adjusted EBITDA reached RUB 6.9 billion ($109.1 million) in Q3 2016, up 14% from Q3 2015.

 

Adjusted EBITDA

 

Consolidated adjusted EBITDA

 

 

 

 

 

 

 

 

In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2015

2016

Change

2015

2016

Change

Adjusted EBITDA

6,021
6,888
14%
14,409
19,420
35%

 

 

Adjusted EBITDA by segments

 

 

 

 

 

 

 

 

In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2015

2016

Change

2015

2016

Change

Adjusted EBITDA:

 

 

 

 

 

 

Search and Portal

6,041
7,484
24%
14,523
20,322
40%

E-commerce

436
386

-11%

1,240
1,091

-12%

Taxi

44
(633)

n/m

181
(786)

n/m

Classifieds

83
26

-69%

160
43

-73%

Experiments

(583)
(375)

-36%

(1,695)
(1,250)

-26%

Total adjusted EBITDA

6,021
6,888
14%
14,409
19,420
35%

 

Interest income, net in Q3 2016 was RUB 351 million, down from RUB 415 million in Q3 2015.

 

Foreign exchange loss in Q3 2016 was RUB 432 million, compared with a foreign exchange gain of RUB 1,947 million in Q3 2015. This loss reflects the appreciation of the Russian ruble during Q3 2016 from RUB 64.2575 to $1.00 on June 30, 2016, to RUB 63.1581 to $1.00 on September 30, 2016. 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/(loss), net line in the condensed consolidated 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 a downward revaluation of the ruble equivalent of these U.S. dollar-denominated monetary assets and liabilities in Q3 2016.

 

Income tax expense for Q3 2016 was RUB 1,243 million, down from RUB 1,396 million in Q3 2015. Our effective tax rate of 33.7% in Q3 2016 was higher than in Q3 2015. Adjusted for SBC expense, our effective tax rate for Q3 2016 was 27.8%, compared to 22.7% in 2015 as adjusted for SBC expense and one-off effects in 2015. The increase in the adjusted effective tax rate was primarily driven by additional provisions we have taken in Q3 2016 related to certain past tax audits.

 


 

 

Net income was RUB 2.4 billion ($38.7 million) in Q3 2016, down 43% compared with Q3 2015, mainly due to foreign exchange loss and an increase in SG&A, which grew faster than total revenue.

 

Adjusted net income in Q3 2016 was RUB 3.8 billion ($60.1 million), a 8% increase from Q3 2015.

 

Adjusted net income margin was 19.7% in Q3 2016, compared with 22.7% in Q3 2015.

 

As of September 30, 2016, Yandex had cash, cash equivalents, term deposits and short-term investments in debt securities of RUB 66.2 billion ($1,048.9 million).

 

Net operating cash flow for Q3 2016 was RUB 6.2 billion ($98.1 million) and capital expenditures were RUB 2.8 billion ($43.7 million), respectively.

 

During Q3 2016, we repurchased $4.6 million in principal of our 1.125% convertible senior notes due 2018 for approximately $4.5 million.

 

Redeemable noncontrolling interests presented in our consolidated balance sheets relate to the equity incentive program to the employees of the E-Commerce, Taxi and Classifieds segments.

 

The total number of shares issued and outstanding as of September 30, 2016 was 321,798,510 including 276,248,540 Class A shares, 45,549,969 Class B shares, and one Priority share and excluding 8,258,244 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 2.6 million shares, at a weighted average exercise price of $5.25 per share, all of which, excluding options for approximately 2,000 shares, were fully vested; equity-settled share appreciation rights (SARs) for 0.2 million shares, at a weighted average measurement price of $29.87, all of which, excluding SARs for approximately 1,000 shares, were fully vested; and restricted share units (RSUs) covering 7.7 million shares, of which RSUs to acquire 2.0 million shares were fully vested.

 

Please note, that historical information on revenues and adjusted EBITDA of our segments is provided in the supplementary slides accompanying our Q3 2016 earnings release, including quarterly data for the seven quarters from Q1 2015 through Q3 2016 and annual data for the three years from 2013 through 2015.

 

Financial outlook

 

Based on our current outlook, we are raising revenue growth outlook for the calendar year 2016. We now expect our revenue to grow in the range of 22% to 24% in 2016 compared with 2015.

 

This outlook reflects our current view, based on the trends that we see at this time, and may change in light of market and economic developments in the business sectors and jurisdictions in which we operate.

 

Conference Call Information

 

Yandex’s management will hold an earnings conference call on October 27, 2016 at 8:00 AM U.S. Eastern Time (3:00 PM Moscow time; 1:00 PM London time).

 

To access the conference call live, please dial:

 

US: +1 877 280 2296

UK/International: +44 20 3427 1905

Russia: 8 800 500 9311

Passcode: 3577902#

 

 


 

A replay of the call will be available until November 2, 2016. To access the replay, please dial:

 

US: +1 866 932 5017

UK/International: +44 20 3427 0598

Russia: 810 800 2870 1012

Passcode: 3577902#

 

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

 

http://edge.media-server.com/m/p/hiwq9at6 

 

Contacts:

 

Investor Relations

Katya Zhukova

Phone: +7 495 974-35-38

E-mail: askIR@yandex-team.ru

 

Media Relations

Ochir Mandzhikov, Asya Melkumova

Phone: +7 495 739-70-00

E-mail: pr@yandex-team.ru

 

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 user-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, 2015, which is on file with the U.S. Securities and Exchange Commission (SEC) 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, 2016, and Yandex undertakes no duty to update this information unless required by law.

 

 


 

USE OF NON-GAAP FINANCIAL MEASURES

 

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, we present the following 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. 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 U.S. 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 U.S. GAAP measures”, included following the accompanying financial tables. We define the various non-GAAP financial measures we use as follows:

 

·

Ex-TAC revenues means U.S. GAAP revenues less total traffic acquisition costs (TAC)

·

Adjusted EBITDA means U.S. GAAP net income plus (1) depreciation and amortization, (2) SBC 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, net and (B) other income/(loss), net

·

Adjusted EBITDA margin means adjusted EBITDA divided by U.S. GAAP revenues

·

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

·

Adjusted net income means U.S. 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 and (3) amortization of debt discount related to our convertible debt adjusted for the related reduction in income tax;  less (A) foreign exchange gains (plus foreign exchange losses) adjusted for the increase (reduction) in income tax attributable to the foreign exchange gains (losses) 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 U.S. 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 recurring costs, particularly share-based compensation. 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 U.S. GAAP financial measures:

 

TAC

 

We believe that it may be useful for investors and analysts to review certain measures both in accordance with U.S. GAAP and net of the effect of TAC, which we view as comparable to sales commissions but, unlike sales commissions, are not deducted from U.S. 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 clearer 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 U.S. 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 and liabilities 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 $4.6 million in principal of our 1.125% convertible senior notes due 2018 for approximately $4.5 million that we recorded in Q3 2016. 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 U.S. 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, 

 

 

2015*

 

2016

 

2016

 

 

RUB

 

RUB

 

$

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

24,238

 

51,695

 

818.5

Term deposits

 

15,150

 

12,654

 

200.4

Investments in debt securities

 

2,915

 

1,895

 

30.0

Accounts receivable, net

 

5,586

 

6,293

 

99.6

Prepaid expenses

 

1,505

 

1,298

 

20.6

Other current assets

 

3,835

 

2,863

 

45.3

Total current assets

 

53,229

 

76,698

 

1,214.4

 

 

 

 

 

 

 

Property and equipment, net

 

20,860

 

18,844

 

298.4

Intangible assets, net

 

5,988

 

5,975

 

94.6

Goodwill

 

8,581

 

8,466

 

134.0

Long-term prepaid expenses

 

1,488

 

1,422

 

22.5

Restricted cash, non-current

 

533

 

462

 

7.3

Term deposits, non-current

 

18,399

 

 -

 

 -

Investments in non-marketable equity securities

 

1,122

 

1,343

 

21.3

Deferred tax assets

 

226

 

367

 

5.8

Other non-current assets

 

1,392

 

1,864

 

29.5

TOTAL ASSETS

 

111,818

 

115,441

 

1,827.8

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

6,994

 

7,917

 

125.4

Taxes payable

 

2,800

 

3,003

 

47.5

Deferred revenue

 

1,875

 

1,840

 

29.1

Total current liabilities

 

11,669

 

12,760

 

202.0

Convertible debt

 

27,374

 

22,799

 

361.0

Deferred tax liabilities

 

1,552

 

1,445

 

22.9

Other accrued liabilities

 

1,126

 

971

 

15.4

Total liabilities

 

41,721

 

37,975

 

601.3

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

Redeemable noncontrolling interests

 

 -

 

789

 

12.5

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: 61,295,523 and 46,997,887 and Class C: 61,295,523 and 46,997,887); shares issued (Class A: 282,161,148 and 284,506,784, Class B: 47,895,605 and 45,549,969, and Class C: 12,000,000 and 48,000, respectively); shares outstanding (Class A: 271,356,566 and 276,248,540, Class B: 47,895,605 and 45,549,969, and Class C: nil)

 

75

 

286

 

4.5

Treasury shares at cost (Class A: 10,804,582 and 8,258,244, respectively)

 

(12,531)

 

(9,446)

 

(149.6)

Additional paid-in capital

 

17,257

 

16,803

 

266.0

Accumulated other comprehensive income

 

3,099

 

2,056

 

32.6

Retained earnings

 

62,197

 

66,978

 

1,060.5

Total shareholders’ equity

 

70,097

 

76,677

 

1,214.0

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

111,818

 

115,441

 

1,827.8

*     Derived from audited consolidated 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, 

 

 

2015

 

2016

 

2016

 

 

RUB

 

RUB

 

$

 

 

 

 

 

 

 

Revenues

 

15,439

 

19,293

 

305.5

Operating costs and expenses:

 

 

 

 

 

 

Cost of revenues(1)

 

4,318

 

4,918

 

77.9

Product development(1)

 

3,168

 

3,858

 

61.1

Sales, general and administrative(1)

 

2,618

 

4,475

 

70.8

Depreciation and amortization

 

2,152

 

2,489

 

39.4

Total operating costs and expenses

 

12,256

 

15,740

 

249.2

Income from operations

 

3,183

 

3,553

 

56.3

Interest income, net

 

415

 

351

 

5.6

Other income/(loss), net

 

2,076

 

(218)

 

(3.5)

Net income before income taxes

 

5,674

 

3,686

 

58.4

Provision for income taxes

 

1,396

 

1,243

 

19.7

Net income

 

4,278

 

2,443

 

38.7

Net income per Class A and Class B share:

 

 

 

 

 

 

Basic

 

13.42

 

7.60

 

0.12

Diluted

 

13.28

 

7.47

 

0.12

Weighted average number of Class A and Class B shares outstanding

 

 

 

 

 

 

Basic

 

318,800,527

 

321,342,428

 

321,342,428

Diluted

 

322,118,209

 

326,825,443

 

326,825,443

(1)

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

(2)

 

(3)

 

(4)

 

(5)

 

(6)

 

(7)

 

 

 

 

 

 

 

 

 

Cost of revenues

 

41

 

50

 

0.8

 

Product development

 

457

 

532

 

8.4

 

Sales, general and administrative

 

173

 

203

 

3.2

 

 

 


 

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, 

 

 

 

2015

 

2016

 

2016

 

 

 

RUB

 

RUB

 

$

 

 

 

 

 

 

 

 

 

Revenues

 

41,698

 

53,806

 

851.9

 

Operating costs and expenses:

 

 

 

 

 

 

 

Cost of revenues(1)

 

12,013

 

14,118

 

223.5

 

Product development(1)

 

9,815

 

11,529

 

182.5

 

Sales, general and administrative(1)

 

7,489

 

11,450

 

181.4

 

Depreciation and amortization

 

5,516

 

7,199

 

114.0

 

Total operating costs and expenses

 

34,833

 

44,296

 

701.4

 

Income from operations

 

6,865

 

9,510

 

150.5

 

Interest income, net

 

1,255

 

1,311

 

20.8

 

Other income/(loss), net

 

1,122

 

(2,241)

 

(35.5)

 

Net income before income taxes

 

9,242

 

8,580

 

135.8

 

Provision for income taxes

 

2,414

 

3,010

 

47.6

 

Net income

 

6,828

 

5,570

 

88.2

 

Net income per Class A and Class B share:

 

 

 

 

 

 

 

Basic

 

21.45

 

17.39

 

0.28

 

Diluted

 

21.15

 

17.11

 

0.27

 

Weighted average number of Class A and Class B shares outstanding

 

 

 

 

 

 

 

Basic

 

318,353,267

 

320,370,040

 

320,370,040

 

Diluted

 

322,791,055

 

325,618,354

 

325,618,354

 


(1)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

125

 

145

 

2.3

Product development

 

1,231

 

1,672

 

26.5

Sales, general and administrative

 

469

 

740

 

11.7

 

 


 

YANDEX N.V.

 

Unaudited Condensed Consolidated Statements of Cash Flows

 

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

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 

 

 

2015

 

2016

 

2016

 

 

RUB

 

RUB

 

$

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

4,278

 

2,443

 

38.7

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

 

 

 

 

 

 

Depreciation of property and equipment

 

1,749

 

1,972

 

31.2

Amortization of intangible assets

 

403

 

517

 

8.2

Amortization of debt discount and issuance costs

 

241

 

223

 

3.5

Share-based compensation expense

 

671

 

785

 

12.4

Deferred income taxes

 

4

 

23

 

0.4

Foreign exchange (gains)/losses

 

(1,947)

 

432

 

6.8

Gain from sale of equity securities

 

 -

 

(157)

 

(2.5)

Gain from repurchases of convertible debt

 

(93)

 

 -

 

 -

Other

 

(31)

 

1

 

0.1

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

 

 

 

 

 

 

Accounts receivable, net

 

(80)

 

(669)

 

(10.6)

Prepaid expenses and other assets

 

121

 

(379)

 

(6.0)

Accounts payable and accrued liabilities

 

1,394

 

973

 

15.4

Deferred revenue

 

(127)

 

29

 

0.5

Net cash provided by operating activities

 

6,583

 

6,193

 

98.1

CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of property and equipment and intangible assets

 

(2,524)

 

(2,761)

 

(43.7)

Proceeds from sale of property and equipment

 

8

 

93

 

1.5

Investments in non-marketable equity securities

 

(21)

 

(119)

 

(1.9)

Investments in debt securities

 

 -

 

(1,906)

 

(30.2)

Proceeds from maturity of debt securities

 

582

 

2,525

 

40.0

Investments in term deposits

 

(4,700)

 

(3,554)

 

(56.3)

Maturities of term deposits

 

7,263

 

22,836

 

361.6

Loans granted

 

(22)

 

(167)

 

(2.7)

Net cash provided by investing activities

 

586

 

16,947

 

268.3

CASH FLOWS USED IN FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from exercise of share options

 

48

 

121

 

1.9

Repurchases of convertible debt

 

(2,192)

 

(589)

 

(9.3)

Payments of contingent consideration

 

(89)

 

 -

 

 -

Other financing activities

 

 -

 

(17)

 

(0.3)

Net cash used in financing activities

 

(2,233)

 

(485)

 

(7.7)

Effect of exchange rate changes on cash and cash equivalents

 

3,673

 

(466)

 

(7.4)

Net change in cash and cash equivalents

 

8,609

 

22,189

 

351.3

Cash and cash equivalents at beginning of period

 

9,430

 

29,506

 

467.2

Cash and cash equivalents at end of period

 

18,039

 

51,695

 

818.5

 

 


 

YANDEX N.V.

 

Unaudited Condensed Consolidated Statements of Cash Flows

 

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

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30, 

 

 

2015

 

2016

 

2016

 

 

RUB

 

RUB

 

$

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

6,828

 

5,570

 

88.2

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

 

 

 

 

 

 

Depreciation of property and equipment

 

4,397

 

5,742

 

90.9

Amortization of intangible assets

 

1,119

 

1,457

 

23.1

Amortization of debt discount and issuance costs

 

732

 

710

 

11.2

Share-based compensation expense

 

1,825

 

2,557

 

40.5

Deferred income taxes

 

(101)

 

(191)

 

(3.0)

Foreign exchange (gains)/losses

 

(794)

 

2,671

 

42.3

Gain from sale of equity securities

 

 -

 

(157)

 

(2.5)

Gain from repurchases of convertible debt

 

(243)

 

(53)

 

(0.8)

Other

 

(96)

 

(147)

 

(2.5)

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

 

 

 

 

 

 

Accounts receivable, net

 

(863)

 

(872)

 

(13.8)

Prepaid expenses and other assets

 

782

 

821

 

13.0

Accounts payable and accrued liabilities

 

661

 

2,019

 

32.0

Deferred revenue

 

(171)

 

(8)

 

(0.1)

Net cash provided by operating activities

 

14,076

 

20,119

 

318.5

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

 

 

 

 

 

 

Purchases of property and equipment and intangible assets

 

(11,386)

 

(6,702)

 

(106.1)

Proceeds from sale of property and equipment

 

35

 

158

 

2.5

Acquisitions of businesses, net of cash acquired

 

(186)

 

 -

 

 -

Investments in non-marketable equity securities

 

(75)

 

(361)

 

(5.7)

Investments in debt securities

 

 -

 

(1,906)

 

(30.2)

Proceeds from maturity of debt securities

 

3,426

 

2,525

 

40.0

Investments in term deposits

 

(26,610)

 

(37,396)

 

(592.1)

Maturities of term deposits

 

22,638

 

55,815

 

883.7

Loans granted

 

(22)

 

(273)

 

(4.3)

Escrow cash deposit

 

58

 

 -

 

 -

Net cash (used in)/provided by investing activities

 

(12,122)

 

11,860

 

187.8

CASH FLOWS USED IN FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from exercise of share options

 

139

 

331

 

5.2

Repurchases of convertible debt

 

(4,909)

 

(2,079)

 

(32.9)

Payments of contingent consideration

 

(89)

 

(65)

 

(1.0)

Other financing activities

 

 -

 

(17)

 

(0.3)

Net cash used in financing activities

 

(4,859)

 

(1,830)

 

(29.0)

Effect of exchange rate changes on cash and cash equivalents

 

3,299

 

(2,692)

 

(42.6)

Net change in cash and cash equivalents

 

394

 

27,457

 

434.7

Cash and cash equivalents at beginning of period

 

17,645

 

24,238

 

383.8

Cash and cash equivalents at end of period

 

18,039

 

51,695

 

818.5

 


 

Reconciliation of Ex-TAC Revenues to U.S. GAAP Revenues

 

 

 

 

 

 

 

 

In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2015

2016

Change

2015

2016

Change

Total revenues

15,439
19,293
25%
41,698
53,806
29%

Less: traffic acquisition costs (TAC)

3,282
3,732
14%
9,021
10,676
18%

Ex-TAC revenues

12,157
15,561
28%
32,677
43,130
32%

 

Reconciliation of Adjusted EBITDA to U.S. GAAP Net Income

 

 

 

 

 

 

 

 

In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2015

2016

Change

2015

2016

Change

Net income

4,278
2,443

-43%

6,828
5,570

-18%

Add: depreciation and amortization

2,152
2,489
16%
5,516
7,199
31%

Add: share-based compensation expense

671
785
17%
1,825
2,557
40%

Add: compensation expense related to contingent consideration

15
61

n/m

203
154

-24%

Less: interest income, net

(415)
(351)

-15%

(1,255)
(1,311)
4%

Less: other (income)/loss, net

(2,076)
218

-111%

(1,122)
2,241

n/m

Add: provision for income taxes

1,396
1,243

-11%

2,414
3,010
25%

Adjusted EBITDA

6,021
6,888
14%
14,409
19,420
35%

 

Reconciliation of Adjusted Net Income to U.S. GAAP Net Income

 

 

 

 

 

 

 

 

In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2015

2016

Change

2015

2016

Change

Net income

4,278
2,443

-43%

6,828
5,570

-18%

Add: SBC expense

671
785
17%
1,825
2,557
40%

Less: reduction in income tax attributable to SBC expense

(10)
(12)
20%
(30)
(36)
20%

Add: compensation expense related to contingent consideration

15
61

n/m

203
154

-24%

Less: foreign exchange (gains)/losses

(1,947)
432

-122%

(794)
2,671

n/m

Add: increase/(decrease) in income tax attributable to foreign exchange gains/(losses)

386
(83)

-122%

139
(541)

n/m

Less: gain from repurchases of convertible debt

(93)

 -

-100%

(243)
(53)

-78%

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

23

 -

-100%

61
13

-79%

Add: amortization of debt discount

241
223

-7%

732
710

-3%

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

(57)
(56)

-2%

(174)
(178)
2%

Adjusted net income

3,507
3,793
8%
8,547
10,867
27%

 

 


 

YANDEX N.V.

 

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

TO THE NEAREST COMPARABLE U.S. GAAP MEASURES

 

Reconciliation of Adjusted EBITDA Margin and Adjusted Ex-TAC EBITDA Margin to U.S. GAAP Net Income Margin

 

 

 

 

 

 

 

In RUB millions

 

 

 

 

 

 

U.S. 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, 2016

2,443
12.7%
4,445
6,888
35.7%
44.3%

Nine months ended September 30, 2016

5,570
10.4%
13,850
19,420
36.1%
45.0%

(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 loss, 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 U.S. GAAP Net Income Margin

 

 

 

 

 

 

 

 

In RUB millions

 

 

 

 

 

 

U.S. 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, 2016

2,443
12.7%
1,350
3,793
19.7%
24.4%

Nine months ended September 30, 2016

5,570
10.4%
5,297
10,867
20.2%
25.2%

(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 losses (as adjusted for the decrease in income tax attributable to the losses),   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 U.S. GAAP revenues, please see the table above.