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Yandex Announces First Quarter 2016 Financial Results

MOSCOW, Russia, and AMSTERDAM, the Netherlands, Apr 28, 2016 (GLOBE NEWSWIRE via COMTEX) --

Yandex YNDX, +2.32% 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, 2016.

Q1 2016 Consolidated Financial Highlights(1)(2)

  • Revenues of RUB 16.5 billion ($243.7 million), up 34% compared with Q1 2015
  • Adjusted EBITDA of RUB 5.8 billion ($85.3 million), up 62% compared with Q1 2015, adjusted EBITDA margin of 35.0%
  • Adjusted net income of RUB 3.2 billion ($46.9 million), up 41% compared with Q1 2015, adjusted net income margin of 19.2%
  • Cash, cash equivalents, term deposits and short-term investments in debt securities of RUB 60.5 billion ($895.1 million) as of March 31, 2016

Q1 2016 Operational and Corporate Highlights

  • Share of Russian search market (including mobile) averaged 57.6% in Q1 2016 compared to 57.3% in Q4 2015 (according to LiveInternet)
  • Search queries in Russia grew 7% compared with Q1 2015
  • Yandex announced its intention to acquire its Moscow headquarters

"Yandex is off to a solid start in 2016 and we are starting to see signs of stabilization in the overall economic environment," said Arkady Volozh, Chief Executive Officer of Yandex. "Based on the current conditions, we are raising our revenue outlook for the year from a range of 12% to 18% to a revised range of 15% to 19%."

"We continue to invest aggressively in our three business units - Yandex.Taxi, Classifieds and Yandex.Market - to accelerate their growth in 2016," said Alexander Shulgin, Chief Operating Officer of Yandex. "Going forward, we will share more financial information on these units to provide shareholders with greater visibility into their performance."

The following table provides a summary of our key consolidated financial results for the three months ended March 31, 2015 and 2016:

In RUB millions Three months
ended March 31,
2015 2016 Change
Revenues 12,339 16,473 34 %
Ex-TAC revenues [2] 9,622 13,083 36 %
Income from operations 1,486 2,440 64 %
Adjusted EBITDA [2] 3,571 5,770 62 %
Net income 2,127 1,069 -50 %
Adjusted net income [2 ] 2,249 3,168 41 %

[1] Pursuant to SEC rules regarding convenience translations, Russian ruble (RUB) amounts have been translated into U.S. dollars at a rate of RUB 67.6076 to $1.00, the official exchange rate quoted as of March 31, 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 US GAAP measures.

There have been no changes to our consolidated reporting, other than to the presentation of the breakdown of our online advertising. As online advertising formats continue to converge, we are no longer providing a breakdown of our online ad revenues into text-based and display revenues. We continue to separately present revenues from Yandex websites and revenues from our ad network.

Following the revision of our organizational structure, we now report the results of the following operating segments:

  • Search and Portal, which includes all our services offered in Russia, Ukraine, Belarus and Kazakhstan, other than those, described below;
  • E-commerce, which includes our Yandex.Market service;
  • Taxi, which includes our Yandex.Taxi service;
  • Classifieds, which includes Auto.ru, Yandex.Realty, Yandex.Jobs and Yandex.Travel;
  • Experimental businesses, which 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.

Historical information on revenues and adjusted EBITDA of our segments is provided at the end of this financial release and contains quarterly data for the five quarters from Q1 2015 through Q1 2016 and annual data for the three years from 2013 through 2015. Further this information will be available in the supplementary slides accompanying our financial releases.

Consolidated revenue breakdown

In RUB millions Three months
ended March 31,
2015 2016 Change
Online Advertising Revenues:
Yandex websites 8,969 11,404 27 %
Advertising network 3,094 4,428 43 %
Total online advertising revenues 12,063 15,832 31 %
Other 276 641 132 %
Total revenues 12,339 16,473 34 %

Online advertising revenues grew 31% compared with Q1 2015 and continued to drive overall top-line performance, contributing 96% of total revenues in Q1 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 27% compared with Q1 2015 and accounted for 69% of total revenues during Q1 2016.

Online advertising revenues from our ad network increased 43% compared with Q1 2015 and contributed 27% of total revenues during Q1 2016, 2 percentage points higher than in Q1 2015.

Other revenues grew 132% compared with Q1 2015, and were mainly driven by growth of Yandex.Taxi revenues.

Paid clicks on Yandex's and its partners' websites, in aggregate, increased 18% compared with Q1 2015.

Our average cost per click grew 12% compared with Q1 2015.

Segment revenues:

In RUB millions Three months ended March 31,
2015 2016 Change
Revenues:
Search and Portal 11,620 15,147 30 %
E-commerce 671 1,043 55 %
Taxi 161 445 176 %
Classifieds 179 241 35 %
Experiments 99 185 87 %
Eliminations* (391 ) (588 ) 50 %
Total revenues 12,339 16,473 34 %

*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 Q1 2016, Yandex's headcount remained nearly flat compared with December 31, 2015, and was down 2% from March 31, 2015. The total number of full-time employees was 5,464 as of March 31, 2016.

Costs of revenues, including traffic acquisition costs (TAC)

In RUB millions Three months
ended March 31,
2015 2016 Change
TAC:
Related to the Yandex ad network 1,866 2,495 34 %
Related to distribution partners 851 895 5 %
Total TAC 2,717 3,390 25 %
Total TAC as a % of total revenues 22.0 % 20.6 %
Other cost of revenues 996 1,114 12 %
Other cost of revenues as a % of revenues 8.1 % 6.8 %
Total cost of revenues 3,713 4,504 21 %
Total cost of revenues as a % of revenues 30.1 % 27.3 %

TAC decreased as a percentage of total revenues from 22.0% in Q1 2015 to 20.6% in Q1 2016 and grew 25% compared with Q1 2015. Our ad network TAC grew 34% in Q1 2016 compared with Q1 2015, slower than revenues from our advertising network, primarily reflecting changes in our partner revenue mix. Our distribution TAC increased 5% in Q1 2016 compared with Q1 2015.

Other cost of revenues in Q1 2016 increased 12% compared with Q1 2015.

Product development

In RUB millions Three months
ended March 31,
2015 2016 Change
Product development 3,347 3,877 16 %
As a % of revenues 27.1 % 23.6 %

Growth in product development costs in Q1 2016 primarily related to salary increases in early 2016.

Selling, general and administrative (SG&A)

In RUB millions Three months
ended March 31,
2015 2016 Change
Sales, general and administrative 2,303 3,258 41 %
As a % of revenues 18.7 % 19.8 %

SG&A costs increased 41% compared to Q1 2015 as a result of growth in advertising and marketing spend, aimed to support our emerging businesses, such as Yandex.Market, Yandex.Taxi and Classifieds, as well as our Yandex Browser.

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,
2015 2016 Change
SBC expense included in cost of revenues 43 49 14 %
SBC expense included in product development 379 595 57 %
SBC expense included in SG&A 138 247 79 %
Total SBC expense 560 891 59 %
As a % of revenues 4.5 % 5.4 %

Total SBC expense increased 59% in Q1 2016 compared with Q1 2015. The increase primarily related to new equity-based grants made in 2015 and 2016, as well as to the equity award exchange programs we completed in April and July 2015.

Depreciation and amortization (D&A) expense

In RUB millions Three months
ended March 31,
2015 2016 Change
Depreciation and amortization 1,490 2,394 61 %
As a % of revenues 12.1 % 14.5 %

D&A expense increased 61% in Q1 2016 compared with Q1 2015 and primarily reflected investments in servers and data centers made in 2015.

As a result of the factors described above, income from operations was RUB 2.4 billion ($36.1 million) in Q1 2016, a 64% increase from Q1 2015.

Adjusted EBITDA

Consolidated adjusted EBITDA

Adjusted EBITDA by segments

In RUB millions Three months ended March 31,
2015 2016 Change
Adjusted EBITDA:
Search and Portal 3,585 5,911 65 %
E-commerce 393 380 -3 %
Taxi 87 - -100 %
Classifieds 10 (6 ) -160 %
Experiments (504 ) (515 ) -2 %
Total adjusted EBITDA 3,571 5,770 62 %

Interest income, net in Q1 2016 was RUB 523 million, up from RUB 484 million in Q1 2015.

Foreign exchange loss in Q1 2016 was RUB 1,281 million, compared with a foreign exchange gain of RUB 716 million in Q1 2015. This loss reflects the appreciation...


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