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

   

For the month of April, 2020

   

YANDEX N.V.

   

Schiphol Boulevard 165

1118 BG, Schiphol, the Netherlands.

Tel: +31 202 066 970

(Address, Including ZIP Code, and Telephone Number,

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

   

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

   

Form 20-F ☒    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. (the “Company”) dated April 28, 2020, announcing the Company’s results for the first quarter ended March 31, 2020.

   

 

 

    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: April 28, 2020

By:

/s/ Greg Abovsky

   

   

Greg Abovsky

   

   

Chief Financial Officer and
Chief Operating Officer

   

 

INDEX TO EXHIBITS

 

Exhibit No.

Description

99.1

Press release of Yandex N.V. dated April 28, 2020, announcing results for the first quarter ended March 31, 2020.

 

 

 

yndx_Current_Folio_6K_Ex99_1

Exhibit 99.1

Yandex Announces First Quarter 2020 Financial Results

 

MOSCOW and AMSTERDAM, the Netherlands, April 28, 2020 -- Yandex (NASDAQ and MOEX: YNDX), one of Europe's largest internet companies and the leading search provider in Russia, today announced its unaudited financial results for the first quarter ended March 31, 2020.

 

Q1 2020 Financial Highlights(1)(2)

 

Q1 2020 consolidated financial results

 

·

Revenues of RUB 47.0 billion ($604.7 million), up 26% compared with Q1 2019

·

Net income  of RUB 5.5 billion ($70.7 million), up 76% compared with Q1 2019;   net income margin   of 11.7%

·

Adjusted net income  of RUB 5.1 billion ($66.2 million), down 5% compared with Q1 2019;  adjusted net income margin   of 11.0%

·

Adjusted EBITDA   of RUB 12.1 billion ($156.3 million), up 13% compared with Q1 2019;  adjusted EBITDA margin   of 25.8%

Cash, cash equivalents and term deposits as of March 31, 2020:

·

RUB 197.2 billion ($2,536.8 million) on a consolidated basis

·

Of which RUB 30.6 billion ($393.1 million) related to Taxi segment

 

Q1 2020 Operational and Corporate Highlights

 

Search

·

Share of Russian search market, including mobile, averaged 58.1% in Q1 2020, up from 57.0% in Q1 2019 and 57.5% in Q4 2019, according to Yandex.Radar

·

Search share on Android in Russia was 55.5% in Q1 2020, up from 51.2% in Q1 2019 and 54.3% in Q4 2019, according to Yandex.Radar

·

Search queries in Russia grew 7% compared with Q1 2019

·

Paid clicks on Yandex’s and its partners’ websites, in aggregate, increased 23% compared with Q1 2019

·

Average cost per click decreased 9% compared with Q1 2019

 

Business Units and Experiments

·

Number of rides in the Taxi service grew 40% year-on-year compared with Q1 2019

·

Number of Media Services subscribers was 4.3 million as of the end of Q1 2020

·

Zen's daily audience reached 14.6 million users in March 2020, up 57% from March 2019

 

Corporate

·

As part of its response to the coronavirus pandemic, Yandex has launched the “Helping Hand” project to support medical and social services under which we organize transport for doctors and deliveries of medicine, coronavirus testing kits and other essential goods. We have committed approximately 1.5 billion rubles across various initiatives including a support fund for taxi drivers and couriers, advertising credits to small and medium-sized businesses and our education efforts.

·

Yandex has launched Yandex School, a platform combining all key educational projects of Yandex, offering a full-scale online school for grades 5-11 covering 15 subjects with video broadcasting and class chats.

·

Yandex issued $1.25 billion aggregate principal amount of 0.75% convertible senior notes due 2025.

 

·

Yandex repurchased 3.5 million Class A shares in Q1 2020, as part of the share repurchase program announced in November 2019.

 

“The year started off well, but by mid-March our markets began to be impacted by the coronavirus outbreak,” said Arkady Volozh, Chief Executive Officer of Yandex. “I am very proud of how fast we mobilized our resources to support our users, our partners and our communities who use our services during this difficult time. We have become the leading destination for our users where they can receive accurate and reliable information, consume educational content, view streaming videos, and order food delivery. We launched our “Helping Hand” project which provides transportation for medical staff and facilitates the delivery of medicine, the provision of coronavirus testing kits and distribution of essential goods. Along with social responsibility our key priority remains to ensure Yandex emerges from this crisis stronger than before as we continue to manage the company for the long term.”

 

“We delivered 26% year-on-year revenue growth in Q1, or 30% on an Ex-TAC basis,” said Greg Abovsky, Chief Operating Officer and Chief Financial Officer of Yandex. “The second quarter is likely to be more challenging for us, and we are focusing on recalibrating our expenses, our pace of investments and allocation of capital between the businesses to ensure that Yandex is well positioned for the long-term. Our strong balance sheet should help us to withstand the short-term challenges, while providing flexibility to invest in strategic projects.”

 

The following table provides a summary of our key consolidated financial results for the three months ended March 31, 2019 and 2020:

 

 

 

 

 

In RUB millions

Three months ended March 31, 

 

2019

2020

Change

Revenues

37,284

47,003

26%

Ex-TAC revenues 2

31,942

41,555

30%

Income from operations

5,385

5,288

                            -2%

Adjusted EBITDA 2

10,768

12,147

13%

Net income

3,124

5,495

76%

Adjusted net income 2

5,440

5,148

                            -5%

 

 

(1)

Pursuant to SEC rules regarding convenience translations, Russian ruble (RUB) amounts have been translated into U.S. dollars at a rate of RUB 77.7325 to $1.00, the official exchange rate quoted as of March 31, 2020 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.

 

Our segment disclosure is available in the Segment financial results section below Income from operations.

 

Consolidated revenues breakdown

 

 

 

 

 

In RUB millions

Three months ended March 31, 

 

2019

2020

Change

Online advertising revenues:

 

 

 

              Yandex properties

20,912

24,246

16%

              Advertising network

6,128

5,863

                         -4%

Total online advertising revenues

27,040

30,109

11%

Revenues related to Taxi segment

7,624

11,368

49%

Other

2,620

5,526

111%

Total revenues

37,284

47,003

26%

 

 

Online advertising revenues  grew 11% in Q1 2020 compared with Q1 2019 and generated 64% of total revenues. Online advertising revenues include revenues derived from performance and brand advertising on Yandex properties and in our advertising network.

 

Online advertising revenues from Yandex properties  increased 16% in Q1 2020 compared with Q1 2019 and accounted for 52% of total revenues.

 

Online advertising revenues from our advertising network  decreased 4% in Q1 2020 compared with Q1 2019 and accounted for 12% of total revenues.

 

Revenues related to Taxi segment grew 49% in Q1 2020 compared with Q1 2019 and accounted for 24% of total revenues, compared with 20% of total revenues in Q1 2019. This increase was mainly attributed to the growth of our ride-hailing business, driven by an increase in the number of rides, solid performance of our food tech services, including the contributions from Yandex.Lavka and Yandex.Eats, as well as the growth of our corporate Taxi business, the revenues of which we recognize on a gross basis.

 

Other revenues  grew 111% in Q1 2020 compared with Q1 2019 and amounted to 12% of total revenues. The growth was primarily driven by our car-sharing service Yandex.Drive, subscription revenues of Media Services and our initiatives related to IoT (Internet of Things).

 

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 include 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 Q1 2020 Yandex's headcount increased by 333 full-time employees. The total number of full-time employees was 10,425 as of March 31, 2020, up by 3% compared with December 31, 2019, and up 21% from March 31, 2019.

 

Cost of revenues, including traffic acquisition costs (TAC)

 

 

 

 

 

In RUB millions

Three months ended March 31, 

 

2019

2020

Change

TAC:

 

 

 

Related to the Yandex advertising network

3,623

3,708

2%

Related to distribution partners

1,719

1,740

1%

Total TAC

5,342

5,448

2%

Total TAC as a % of total revenues

14.3%
11.6%

 

Costs related to Taxi segment

2,426

3,936

62%

Costs related to Taxi segment as a % of revenues

6.5%
8.4%

 

Other cost of revenues

3,817

6,851

79%

Other cost of revenues as a % of revenues

10.2%
14.6%

 

Total cost of revenues

11,585

16,235

40%

Total cost of revenues as a % of revenues

31.1%
34.5%

 

 

 

TAC grew 2% in Q1 2020 compared with Q1 2019 and represented 11.6% of total revenues, 270 basis points lower than in Q1 2019 and 120 basis points lower than in Q4 2019 as a result of revenue mix effect and optimization of TAC rates.

 

Costs related to Taxi segment increased 62% compared with Q1 2019. The growth was mainly a result of the increase of costs related to our corporate Taxi offering and the increase of the costs of goods sold (COGS) in our food tech services, mainly reflecting growth of Yandex.Lavka, our hyperlocal grocery delivery service. We are the principal in transactions with our Taxi corporate clients, therefore, we recognize both revenues and cost of revenues on a gross basis.

 

 

Other cost of revenues  in Q1 2020 increased 79% compared with Q1 2019 as a result of the growth of costs related to Yandex.Drive, our investments in content within Media Services and Search and Portal, as well as our IoT initiatives.

 

Product development

 

 

 

 

 

In RUB millions

Three months ended March 31, 

 

2019

2020

Change

Product development

6,706

7,928

18%

As a % of revenues

18.0%
16.9%

 

 

Product development expenses grew 18% in Q1 2020 compared to Q1 2019, primarily reflecting new hires, salary and other personnel-related costs increases, as well as growth of share-based compensation in Q1 2020.

 

Sales, general and administrative (SG&A)

 

 

 

 

 

In RUB millions

Three months ended March 31, 

 

2019

2020

Change

Sales, general and administrative

10,351

13,542

31%

As a % of revenues

27.8%
28.8%

 

 

SG&A expenses grew 31% in Q1 2020 compared to Q1 2019.   The growth was driven by the increase of personnel costs, share-based compensation as well as by higher bank processing fees, mainly reflecting revenue growth in the Taxi segment.

 

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 March 31, 

 

2019

2020

Change

SBC expense included in cost of revenues

68

76

12%

SBC expense included in product development

1,432

1,682

17%

SBC expense included in SG&A

619

993

60%

Total SBC expense

2,119

2,751

30%

As a % of revenues

5.7%
5.9%

 

 

Total SBC expense increased 30% in Q1 2020 compared with Q1 2019. The growth was primarily related to new equity-based grants made in 2019-2020.

 

Depreciation and amortization (D&A) expense

 

 

 

 

 

In RUB millions

Three months ended March 31, 

 

2019

2020

Change

Depreciation and amortization

3,257

4,010

23%

As a % of revenues

8.7%
8.5%

 

 

D&A expense increased 23% in Q1 2020 compared with Q1 2019. The D&A expense increase was mainly driven by our investments in servers and data center equipment, expansion of Yandex.Drive’s car-sharing fleet, as well as by the increase of intangible assets (including office software). We have both operating and finance leases in Yandex.Drive. The majority of Yandex.Drive leases are operating leases. According to the ASC 842 rules, we divide lease payments under finance leases into the interest and amortization components and recognize the latter under D&A expense. During Q1 2020 following an amendment in terms of operating and finance lease agreements the majority of the Yandex.Drive’s car-sharing fleet was excluded from ASC 842 balance sheet accounting rules,

 

resulting in a change of presentation starting from March 2020. In addition, we depreciate the cost of certain equipment that we install on Yandex.Drive’s cars, such as infotainment systems and telematics equipment.

 

Income from operations

 

 

 

 

 

In RUB millions

Three months ended March 31, 

 

2019

2020

Change

Income from operations

5,385

5,288

-2%

 

Income from operations decreased 2% in Q1 2020 compared with Q1 2019. The decrease primarily reflects the changes in segment mix amid the continuing investments in our rapidly growing new businesses.

 

Segment financial results

 

Search & Portal

 

Search and Portal segment offers a broad range of services in Russia, Belarus, Kazakhstan and Uzbekistan.

 

 

 

 

 

In RUB millions

Three months ended March 31, 

 

2019

2020

Change

Revenues:

 

 

 

Search and Portal

27,109
30,126
11%

Search and Portal, excluding IoT*

26,887
29,726
11%

Revenue Ex-TAC:

 

 

 

Search and Portal

21,180
24,058
14%

Search and Portal, excluding IoT*

20,958
23,658
13%

Adjusted EBITDA:

 

 

 

Search and Portal

12,847
14,665
14%

Search and Portal, excluding IoT*

13,017
14,792
14%

Adjusted EBITDA margin:

 

 

 

Search and Portal

47.4%
48.7%
1.3%

Search and Portal, excluding IoT*

48.4%
49.8%
1.4%

 

*IoT stands for Internet of Things

 

The revenue growth of 11% year-on-year in Q1 2020 reflects a high base effect of Q1 2019 as well as the adverse impact from the deterioration of the business activity amid the coronavirus outbreak and the government’s response to it.

The Ex-TAC revenues increased by 14% in Q1 2020 compared to Q1 2019.

 

Taxi

 

The Taxi segment includes our Ride-hailing business (including Yandex.Taxi and Uber in Russia and neighboring countries), FoodTech business (including Yandex.Eats, Yandex.Chef, a meal kit subscription service, and Yandex.Lavka, a hyperlocal grocery delivery service) and our Self-Driving Cars (“SDC”) division.

 

 

 

 

 

In RUB millions

Three months ended March 31, 

 

2019

2020

Change

Revenues:

 

 

 

Ride-hailing & FoodTech

7,639
11,422
50%

SDC

 -

 -

n/m

Total revenues

7,639
11,422
50%

Adjusted EBITDA:

 

 

 

 

Ride-hailing & FoodTech

111
869
683%

SDC

(227)
(754)
232%

Total Adjusted EBITDA

(116)
115

n/m

Adjusted EBITDA margin:

 

 

 

Ride-hailing & FoodTech

1.5%
7.6%
6.1%

SDC

n/m

n/m

n/m

Total Adjusted EBITDA margin

-1.5%

1.0%
2.5%

 

 

Adjusted EBITDA of Taxi was RUB 115 million in Q1 2020, up from negative RUB 116 million in Q1 2019. The increase of adjusted EBITDA was driven by the improving profitability of our ride-hailing business, partially offset by investments in autonomous vehicles and food tech initiatives as we increased our AV (autonomous vehicles) fleet and expanded the Yandex.Lavka footprint.

 

Classifieds

 

The Classifieds segment includes Auto.ru, Yandex.Realty and Yandex.Jobs.

 

 

 

 

 

In RUB millions

Three months ended March 31, 

 

2019

2020

Change

Revenues

1,106
1,488
35%

Adjusted EBITDA:

(328)
(104)

-68%

Adjusted EBITDA margin:

-29.7%

-7.0%

22.7%

 

Classifieds revenues grew 35% in Q1 2020 compared with Q1 2019. The increase was primarily driven by growth of listing fees and VAS (value-added services) revenue in Auto.ru.

 

Media Services

 

The Media Services segment includes KinoPoisk, Yandex.Music, Yandex.Afisha, our production center Yandex.Studio and our subscription service Yandex.Plus.

 

 

 

 

 

In RUB millions

Three months ended March 31, 

 

2019

2020

Change

Revenues

734
1,433
95%

Adjusted EBITDA:

(440)
(711)
62%

Adjusted EBITDA margin:

-59.9%

-49.6%

10.3%

 

Media Services revenues grew 95% in Q1 2020 compared with Q1 2019. The increase was primarily driven by growth of subscription revenues in Yandex.Music and KinoPoisk.

 

Other Bets and Experiments

 

The Other Bets and Experiments category includes Yandex.Drive, Zen, Geolocation Services, Yandex.Cloud and Yandex.Education.

 

 

 

 

 

In RUB millions

Three months ended March 31, 

 

2019

2020

Change

Revenues

2,478
4,911
98%

Adjusted EBITDA:

(1,239)
(1,917)
55%

Adjusted EBITDA margin:

-50.0%

-39.0%

11.0%

 

Other Bets and Experiments revenues grew 98% in Q1 2020 compared with Q1 2019. The increase was primarily driven by our car-sharing service Yandex.Drive, as well as the growth of Geo Services and Zen.

 

 

Eliminations

 

Eliminations related to our revenues represent the elimination of transactions between the reportable segments, primarily related to advertising. Eliminations related to our adjusted EBITDA mainly reflect reallocation of a portion of Search and Portal D&A expenses related to leasehold improvements to office rent expenses of our business units.

 

 

 

 

 

In RUB millions

Three months ended March 31, 

 

2019

2020

Change

Revenues:

 

 

 

Segment revenues

39,066
49,380
26%

Eliminations

(1,782)
(2,377)
33%

Total revenues

37,284
47,003
26%

Adjusted EBITDA:

 

 

 

Segment Adjusted EBITDA

10,724
12,048
12%

Eliminations

44
99
125%

Total adjusted EBITDA

10,768
12,147
13%

 

 

Adjusted EBITDA   increased 13% in Q1 2020 compared with Q1 2019. The growth was mainly driven by the solid performance of the Search and Portal segment and year-on-year improvement in the profitability of our Taxi and Classifieds segments, which were slightly offset by our investments in Yandex.Drive and Media Services.

 

Interest income  in Q1 2020 was RUB 728 million, compared with RUB 827 million in Q1 2019.

 

Interest expense  in Q1 2020 was RUB 225 million, up from RUB 1 million in Q1 2019.

 

Foreign exchange gain in Q1 2020 was RUB 4,439 million, compared with a foreign exchange loss of RUB 279 million in Q1 2019. This gain reflects the depreciation of the Russian ruble during Q1 2020 from RUB 61.9057 to $1.00 on December 31, 2019, to RUB 77.7325 to $1.00 on March 31, 2020. 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 the other (loss)/income, 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 an upward revaluation of the ruble equivalent of these U.S. dollar-denominated monetary assets and liabilities in Q1 2020.

 

Income tax expense   for Q1 2020 was RUB 3,711 million, up from RUB 2,214 million in Q1 2019. Our effective tax rate of 40.3% in Q1 2020 was in line with Q1 2019. Adjusted for SBC expense, certain losses from the share of Yandex.Market’s financial results which are non-deductible and certain tax provisions recognized, our effective tax rate for Q1 2020 was 28.0%, compared with 26.8% for Q1 2019 as adjusted for SBC expense and similar effects in that year.

 

Net income   was RUB 5.5 billion ($70.7 million) in Q1 2020, up 76% compared with Q1 2019.

 

Adjusted net income   in Q1 2020 was RUB 5.1 billion ($66.2 million), a 5% decrease from Q1 2019. 

 

Adjusted net income margin  was 11.0% in Q1 2020, compared with 14.6% in Q1 2019.

 

In March 2020, Yandex issued $1.25 billion aggregate principal amount of 0.75% convertible senior notes due 2025, for aggregate net proceeds of $1.237 billion, after deducting the initial purchasers’ discount and estimated offering expenses.

 

As of March 31, 2020, Yandex had   cash, cash equivalents and term deposits of RUB 197.2 billion ($2,536.8 million), including cash, cash equivalents and term deposits of Yandex.Taxi in total amount of RUB 30.6 billion ($393.1 million).

 

 

Net cash flow provided by operating activities   for Q1 2020 was RUB 7.7 billion ($99.0 million) and   capital expenditures   were RUB 2.4 billion ($30.9 million).

 

Redeemable noncontrolling interests presented in our condensed consolidated balance sheets relate to the equity incentive arrangements we have made available to the senior employees of the Taxi and Classifieds segments, pursuant to which such persons are eligible to acquire depositary receipts, or receive options to acquire depositary receipts, which entitles them to economic interests in the respective business unit subsidiaries.   Based on our estimates of Taxi and Classifieds business units fair value we concluded that it is appropriate to recognize the redeemable noncontrolling interests as of March 31, 2020 based on fair values of respective business units as of December 31, 2019.

 

The total number of shares issued and outstanding   as of March 31, 2020 was 327,682,222 including 290,544,563 Class A shares, 37,137,658 Class B shares, and one Priority share and excluding 3,934,092 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. Any such Class C shares will be cancelled.

 

There were also employee share options outstanding to purchase up to an additional 3.3 million shares, at a weighted average exercise price of $37.51 per share, 1.6 million of which were fully vested; equity-settled share appreciation rights (SARs) for 0.1 million shares, at a weighted average measurement price of $32.75, all of which were fully vested; and restricted share units (RSUs) covering 12.0 million shares, of which RSUs to acquire 3.1 million shares were fully vested. Equity awards in respect of business unit subsidiaries are described under Redeemable noncontrolling interests above.

 

Impact of COVID-19 Pandemic

The impact of COVID-19 on our financial results and operations in Q1 2020 was limited to the last two weeks of March, when we began to see a slowdown of growth in our advertising and ride-hailing businesses, and acceleration in FoodTech and Media Services. With regards to our financial position as of the end of March 31, 2020, our analysis of the effect from COVID-19 on goodwill, non-current assets and redeemable non-controlling interests shows no measurable impact. At the same time, the full impact of COVID-19 is still unknown and rapidly evolving. The extent to which the COVID-19 crisis impacts the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain the virus or treat its impact, among others. The development of the situation with respect to COVID-19 may also lead to change in estimates and assumptions that affect the reported amounts of assets and liabilities. Actual results could differ from those estimates.

 

Financial outlook

 

Given the difficulty in predicting how long the pandemic will persist and uncertainty about its effects on the economy and businesses, we are unable at this time to reliably quantify the impact of the coronavirus outbreak on our future financial results. As such, we are withdrawing our 2020 guidance, which we provided on February 14, 2020. As and when there is greater clarity regarding the impact of the current crisis on the business environment generally and on Yandex in particular, we may provide further guidance regarding 2020.

 

Conference Call Information

 

Yandex’s management will hold an earnings conference call on April 28, 2020 at 8:00 AM U.S. Eastern Time (3:00 PM Moscow time; 1:00 PM London time).

 

We recommend using the dial-in option only if you plan to ask questions. In this case please connect at least 10 minutes prior to the call start time (using dial-in number and passcode specified below) and clearly state the information requested after the tone.

 

To access the conference call live, please dial:

 

US: +1 646 741 3167

 

UK/International: +44 (0) 207 192 8338

Russia: 8 10 800 2114 4011

Passcode: 3484232

 

A replay of the call will be available until May 5, 2020. To access the replay, please dial:

 

US: +1 917 677 7532

UK/International: +44 (0) 844 571 8951

Russia: +7 495 249 9138

Passcode: 3484232

 

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

 

https://edge.media-server.com/mmc/p/nh557czy

 

 

ABOUT YANDEX

 

Yandex (NASDAQ and MOEX:YNDX) is a technology company that builds intelligent products and services powered by machine learning. Our goal is to help consumers and businesses better navigate the online and offline world. Since 1997, we have delivered world-class, locally relevant search and information services. Additionally, we have developed market-leading on-demand transportation services, navigation products and other mobile applications for millions of consumers across the globe. Yandex, which has 36 offices worldwide, has been listed on the NASDAQ since 2011.

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. 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 or our business, changes in the political, legal and/or regulatory environment, competitive pressures, changes in advertising patterns, changes in user preferences, 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, 2019 and “Risk Factors” in the Shareholder Circular filed as Exhibit 99.2 to our Current Report on Form 6-K, which were filed with the U.S. Securities and Exchange Commission (SEC) on April 2, 2020 and November 18, 2019, respectively, and are 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 April 28, 2020, 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 effective tax rate, 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 payable to employees in connection with certain business combinations, (4) one-off restructuring expenses, (5) interest expense, (6) loss from equity method investments, (7) other loss/(income), net and (8) income tax expense, less interest income

·

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 payable to certain employees in connection with certain business combinations, (3) foreign exchange losses/(gains) adjusted for (reduction)/increase in income tax attributable to foreign exchange losses/(gains), (4) one-off restructuring expenses and (5) amortization of debt discount related to our convertible debt adjusted for the related reduction 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 and bonuses but, unlike sales commissions and bonuses, 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 EBITDA, adjusted net income and related margin measures excluding these effects, in order to provide greater clarity regarding our operating performance.

 

One-off restructuring expenses

 

Adjusted net income and adjusted EBITDA for Q1 2020 exclude expenses related to the restructuring of our corporate governance structure, which was approved by our shareholders in December 2019. We believe that it is useful to present adjusted net income, adjusted EBITDA and related margin measures excluding impacts not related to our operating activities.

 

Amortization of debt discount

 

We also adjust net income for interest expense representing amortization of the debt discount related to our convertible senior notes due 2025 issued in Q1 2020. We have eliminated this expense from adjusted net income as it is non-cash in nature and is not indicative of our ongoing operating performance.

 

 

The tables at the end of this release provide detailed reconciliations of each non-GAAP financial measure we use from 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,

 

March 31, 

 

March 31, 

 

 

2019*

 

2020

 

2020

 

 

RUB

 

RUB

 

$

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

56,415

 

125,142

 

1,609.9

Term deposits

 

31,891

 

72,050

 

926.9

Accounts receivable, net

 

17,832

 

16,842

 

216.7

Prepaid expenses

 

3,315

 

4,755

 

61.1

Funds receivable, net

 

1,226

 

793

 

10.2

Other current assets

 

9,605

 

8,527

 

109.7

Total current assets

 

120,284

 

228,109

 

2,934.5

 

 

 

 

 

 

 

Property and equipment, net

 

47,856

 

48,721

 

626.8

Operating lease right-of-use assets

 

21,218

 

12,686

 

163.2

Intangible assets, net

 

10,365

 

10,151

 

130.6

Non-current content assets, net

 

3,295

 

3,604

 

46.4

Goodwill

 

52,205

 

52,205

 

671.6

Long-term prepaid expenses

 

2,289

 

2,259

 

29.0

Investments in non-marketable equity securities

 

28,073

 

27,173

 

349.6

Deferred tax assets

 

1,847

 

2,020

 

26.0

Other non-current assets

 

3,694

 

4,020

 

51.7

TOTAL ASSETS

 

291,126

 

390,948

 

5,029.4

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

34,978

 

35,662

 

458.8

Income and non-income taxes payable

 

8,020

 

8,413

 

108.2

Deferred revenue

 

3,542

 

3,624

 

46.6

Total current liabilities

 

46,540

 

47,699

 

613.6

Convertible debt

 

 -

 

86,029

 

1,106.7

Deferred tax liabilities

 

1,951

 

2,874

 

37.0

Operating lease liabilities

 

10,841

 

7,514

 

96.7

Other accrued liabilities

 

2,359

 

1,401

 

18.0

Total liabilities

 

61,691

 

145,517

 

1,872.0

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

Redeemable noncontrolling interests

 

14,246

 

14,235

 

183.1

Shareholders’ equity:

 

 

 

 

 

 

Priority share: €1.00 par value; shares authorized (1 and 1), shares issued (1 and 1) and outstanding (nil and 1)

 

 

 

Preference shares: €0.01 par value; nil shares authorized, issued and outstanding

 

 

 

Ordinary shares: par value (Class A €0.01, Class B €0.10 and Class C €0.09); shares authorized (Class A: 500,000,000, Class B: 37,138,658 and Class C: 37,748,658); shares issued (Class A: 293,527,655 and 294,478,655, Class B: 37,138,658 and 37,137,658, and Class C: 610,000 and 1,000, respectively); shares outstanding (Class A: 292,719,508 and 290,544,563, Class B: 37,138,658 and 37,137,658, and Class C: nil)

 

261

 

262

 

3.4

Treasury shares at cost (Class A: 808,147 and 3,934,092, Priority share: 1 and nil, respectively)

 

(411)

 

(5,730)

 

(73.7)

Additional paid-in capital

 

68,050

 

74,074

 

952.9

Accumulated other comprehensive income

 

4,841

 

13,155

 

169.2

Retained earnings

 

122,187

 

127,697

 

1,642.8

Total equity attributable to Yandex N.V.

 

194,928

 

209,458

 

2,694.6

Noncontrolling interests

 

20,261

 

21,738

 

279.7

Total shareholders’ equity

 

215,189

 

231,196

 

2,974.3

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

291,126

 

390,948

 

5,029.4

 

    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 March 31, 

 

 

2019

 

2020

 

2020

 

 

RUB

 

RUB

 

$

 

 

 

 

 

 

 

Revenues

 

37,284

 

47,003

 

604.7

Operating costs and expenses:

 

 

 

 

 

 

Cost of revenues(1)

 

11,585

 

16,235

 

208.9

Product development(1)

 

6,706

 

7,928

 

102.0

Sales, general and administrative(1)

 

10,351

 

13,542

 

174.1

Depreciation and amortization

 

3,257

 

4,010

 

51.6

Total operating costs and expenses

 

31,899

 

41,715

 

536.6

Income from operations

 

5,385

 

5,288

 

68.1

Interest income

 

827

 

728

 

9.4

Interest expense

 

(1)

 

(225)

 

(2.9)

Loss from equity method investments

 

(638)

 

(1,106)

 

(14.2)

Other (loss)/income, net

 

(235)

 

4,521

 

58.0

Net income before income taxes

 

5,338

 

9,206

 

118.4

Income tax expense

 

2,214

 

3,711

 

47.7

Net income

 

3,124

 

5,495

 

70.7

Net loss attributable to noncontrolling interests

 

398

 

366

 

4.7

Net income attributable to Yandex N.V.

 

3,522

 

5,861

 

75.4

Net income per Class A and Class B share:

 

 

 

 

 

 

Basic

 

10.83

 

17.76

 

0.23

Diluted

 

10.59

 

17.33

 

0.22

Weighted average number of Class A and Class B shares outstanding

 

 

 

 

 

 

Basic

 

325,140,744

 

330,099,251

 

330,099,251

Diluted

 

332,713,737

 

337,591,226

 

337,591,226

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Cost of revenues

 

68

 

76

 

1.0

Product development

 

1,432

 

1,682

 

21.6

Sales, general and administrative

 

619

 

993

 

12.8

 

 

 

 

 

 

 

 

 

 

 

 

YANDEX N.V.

 

Unaudited Condensed Consolidated Statements of Cash Flows

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

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 

 

 

2019

 

2020

 

2020

 

 

RUB

 

RUB

 

$

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

3,124

 

5,495

 

70.7

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

 

 

 

 

 

 

Depreciation of property and equipment

 

2,640

 

3,333

 

42.9

Amortization of intangible assets

 

617

 

677

 

8.7

Amortization of contents assets

 

164

 

587

 

7.6

Operating lease right-of-use assets amortization

 

1,912

 

2,642

 

34.0

Amortization of debt discount and issuance costs

 

 -

 

144

 

1.9

Share-based compensation expense

 

2,119

 

2,751

 

35.4

Deferred income tax expense/(benefit)

 

988

 

(427)

 

(5.5)

Foreign exchange losses/(gains)

 

279

 

(4,439)

 

(57.1)

Loss from equity method investments

 

638

 

1,106

 

14.2

Other

 

 4

 

93

 

1.2

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

 

 

 

 

 

 

Accounts receivable, net

 

(668)

 

1,027

 

13.2

Prepaid expenses and other assets

 

(2,370)

 

(708)

 

(9.1)

Accounts payable and accrued liabilities

 

1,551

 

(2,828)

 

(36.4)

Deferred revenue

 

(222)

 

40

 

0.5

Change in content assets

 

(932)

 

(1,086)

 

(14.0)

Change in content liabilities

 

683

 

(713)

 

(9.2)

Net cash provided by operating activities

 

10,527

 

7,694

 

99.0

CASH FLOWS USED IN INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of property and equipment and intangible assets

 

(1,981)

 

(2,405)

 

(30.9)

Proceeds from sale of property and equipment

 

 7

 

 9

 

0.1

Acquisitions of businesses, net of cash acquired

 

(347)

 

 -

 

 -

Investments in non-marketable equity securities

 

 -

 

(15)

 

(0.3)

Investments in term deposits

 

(20,000)

 

(61,745)

 

(794.3)

Maturities of term deposits

 

 -

 

27,299

 

351.2

Net cash used in investing activities

 

(22,321)

 

(36,857)

 

(474.2)

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

 

 

 

 

 

 

Proceeds from exercise of share options

 

31

 

14

 

0.2

Proceeds from issuance of convertible debt

 

 -

 

82,909

 

1,066.6

Payment of debt issuance costs

 

 -

 

(863)

 

(11.1)

Repurchases of ordinary shares

 

 -

 

(8,446)

 

(108.7)

Payment for contingent consideration

 

(33)

 

(10)

 

(0.1)

Proceeds from sale of noncontrolling interests

 

20

 

 -

 

 -

Payment for finance leases

 

 -

 

(114)

 

(1.5)

Other financing activities

 

(32)

 

(33)

 

(0.4)

Purchase of redeemable noncontrolling interests

 

(25)

 

 -

 

 -

Net cash (used in)/provided by financing activities

 

(39)

 

73,457

 

945.0

Effect of exchange rate changes on cash and cash balances

 

(3,184)

 

24,442

 

314.5

Net change in cash and cash equivalents

 

(15,017)

 

68,736

 

884.3

Cash and cash equivalents at beginning of period

 

68,886

 

56,453

 

726.2

Cash and cash equivalents at end of period

 

53,869

 

125,189

 

1,610.5

 

 

 

 

 

 

 

Reconciliation of cash and cash balances:

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

68,798

 

56,415

 

725.8

Restricted cash, beginning of period

 

88

 

38

 

0.4

Cash and cash balances, beginning of period

 

68,886

 

56,453

 

726.2

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

53,825

 

125,142

 

1,609.9

Restricted cash, end of period

 

44

 

47

 

0.6

Cash and cash balances, end of period

 

53,869

 

125,189

 

1,610.5

   

 

 

 

YANDEX N.V.

 

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

TO THE NEAREST COMPARABLE U.S. GAAP MEASURES

 

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

 

 

 

 

 

In RUB millions

Three months ended March 31, 

 

2019

2020

Change

Total revenues

37,284

47,003

26%

Less: traffic acquisition costs (TAC)

5,342

5,448

2%

Ex-TAC revenues

31,942

41,555

30%

 

 

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

 

 

 

 

 

In RUB millions

Three months ended March 31, 

 

2019

2020

Change

Net income

3,124

5,495

76%

Add: depreciation and amortization

3,257

4,010

23%

Add: share-based compensation expense

2,119

2,751

30%

Add: compensation expense related to contingent consideration

 7

 -

n/m

Add: one-off restructuring expenses

 -

98

n/m

Less: interest income

(827)

(728)

                   -12%

Add: interest expense

 1

225

n/m

Add: loss from equity method investments

638

1,106

73%

Add: other loss/(income), net

235

(4,521)

n/m

Add: income tax expense

2,214

3,711

68%

Adjusted EBITDA

10,768

12,147

13%

 

 

 

 

 

 

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

 

 

 

 

 

 

In RUB millions

Three months ended March 31, 

 

2019

2020

Change

Net income

3,124

5,495

76%

Add: SBC expense

2,119

2,751

30%

Less: reduction in income tax attributable to SBC expense

(18)

(16)

                   -11%

Add: compensation expense related to contingent consideration

 7

 -

n/m

Add: foreign exchange losses/(gains)

279

(4,439)

n/m

Less: (reduction)/increase in income tax attributable to foreign exchange losses/(gains)

(71)

1,151

n/m

Add: one-off restructuring expenses

 -

98

n/m

Add: amortization of debt discount

 -

144

n/m

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

 -

(36)

n/m

Adjusted net income

5,440

5,148

                     -5%

 

 

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 March 31, 2020

5,495

11.7%

6,652

12,147

25.8%
29.2%

 


 

(1)

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

(2)

Adjusted to eliminate depreciation and amortization expense, SBC expense, one-off restructuring expenses, interest income, interest expense, loss from equity method investments, other income, net and income tax expense. 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 U.S. 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 March 31, 2020

5,495

11.7%

(347)

5,148

11.0%
12.4%

 


 

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

(2) Adjusted to eliminate SBC expense (as adjusted for the income tax reduction attributable to SBC expense), foreign exchange gains as adjusted for the increase in income tax attributable to the gains, one-off restructuring expenses and amortization of debt discount (as adjusted for the related reduction in income tax). 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.

 

 

Contacts:

 

Investor Relations

Yulia Gerasimova

Phone: +7 495 974-35-38

E-mail: askIR@yandex-team.ru

 

Media Relations

Ilya Grabovskiy

Phone: +7 495 739-70-00

E-mail: pr@yandex-team.ru