MOSCOW and AMSTERDAM, the Netherlands, October 25, 2019 -- 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 third quarter ended September 30, 2019.
Q3 2019 Financial Highlights(1)(2)(3)
Q3 2019 consolidated financial results
- Revenues of RUB 45 billion ($698.8 million), up 38% compared with Q3 2018
- Net income of RUB 4.4 billion ($68.0 million), down 1% compared with Q3 2018; net income margin of 9.7%
- Adjusted net income of RUB 6.9 billion ($106.7 million), up 12% compared with Q3 2018; adjusted net income margin of 15.3%
- Adjusted EBITDA of RUB 13.9 billion ($216.1 million), up 29% compared with Q3 2018; adjusted EBITDA margin of 30.9%
Cash, cash equivalents and term deposits as of September 30, 2019:
- RUB 85.4 billion ($1,326.4 million) on a consolidated basis
- Of which RUB 25.7 billion ($399.3 million) related to Taxi segment
Q3 2019 Operational and Corporate Highlights
- Share of Russian search market, including mobile, averaged 56.6% in Q3 2019, up from 55.9% in Q3 2018 and down from 56.9% in Q2 2019, according to Yandex.Radar
- Search share on Android in Russia was 52.8% in Q3 2019, up from 49.1% in Q3 2018 and 52.3% in Q2 2019, according to Yandex.Radar
- Search queries in Russia grew 9% compared with Q3 2018
- Paid clicks on Yandex’s and its partners’ websites, in aggregate, increased 22% compared with Q3 2018
- Average cost per click decreased 2% compared with Q3 2018
- Number of rides in the Taxi segment grew 59% year-on-year compared with Q3 2018
- MLU B.V., Yandex’s ride-sharing and food delivery joint venture with Uber, announced an agreement to acquire the IP and call-centers of the Vezet group of companies in Russia
“I am delighted with another excellent set of results,” said Arkady Volozh, Chief Executive Officer of Yandex. “In Q3, our ride-sharing business delivered sequential acceleration in ride growth, while Zen continued to grow its user engagement, and Yandex.Drive became the second largest car-sharing service in the world. Our strong IT expertise allows us to develop new business models, and we aim to continue preserving and growing the IT talent pool both for Yandex and the country as a whole.”
“We delivered 38% year-on-year revenue growth in Q3 with great contributions from Search and Portal, Taxi and Drive,” said Greg Abovsky, Chief Operating Officer and Chief Financial Officer of Yandex. “Our core business continued delivering strong results and demonstrated solid margins, while our business units and experiments maintained triple digit revenue growth, and now represent 36% of consolidated revenues.”
The following table provides a summary of our key consolidated financial results for the three and nine months ended September 30, 2018 and 2019, which includes Yandex.Market financial results through April 27, 2018, the date as of which that business was deconsolidated:
In RUB millions |
Three months ended September 30, |
Nine months ended September 30, |
||||
2018 |
2019 |
Change |
2018 |
2019 |
Change |
|
Revenues |
32,570 |
45,014 |
38% |
88,815 |
123,695 |
39% |
Ex-TAC revenues2 |
27,277 |
39,257 |
44% |
74,481 |
107,002 |
44% |
Income from operations |
5,959 |
7,437 |
25% |
13,380 |
19,809 |
48% |
Adjusted EBITDA2 |
10,801 |
13,919 |
29% |
27,261 |
37,784 |
39% |
Net income |
4,434 |
4,378 |
-1% |
38,860 |
10,918 |
-72% |
Adjusted net income2 |
6,162 |
6,876 |
12% |
15,183 |
18,141 |
19% |
(1) Pursuant to SEC rules regarding convenience translations, Russian ruble
(RUB) amounts have been translated into U.S. dollars at a rate of RUB 64.4156
to $1.00, the official exchange rate quoted as of September 30, 2019 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 table below Income from operations.
Consolidated revenues breakdown
In RUB millions |
Three months ended September 30, |
Nine months ended September 30, | ||||
2018 |
2019 |
Change |
2018 |
2019 |
Change |
|
Online advertising revenues: |
||||||
Yandex properties3 |
19,965 |
24,903 |
25% |
56,303 |
68,669 |
22% |
Advertising network |
5,952 |
6,329 |
6% |
16,936 |
18,744 |
11% |
Total online advertising revenues3 |
25,917 |
31,232 |
21% |
73,239 |
87,413 |
19% |
Revenues related to Taxi segment |
5,109 |
9,636 |
89% |
12,289 |
26,058 |
112% |
Other |
1,544 |
4,146 |
169% |
3,287 |
10,224 |
211% |
Total revenues3 |
32,570 |
45,014 |
38% |
88,815 |
123,695 |
39% |
(3) Excluding Yandex.Market from financial results for the nine months ended September 30, 2018:
- Online advertising revenues related to Yandex properties grew 25% year-on-year
- Total online advertising revenues grew 22% year-on-year
- Total revenues grew 41% year-on-year
Online advertising revenues grew 21% in Q3 2019 compared with Q3 2018 and generated 69% 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 25% in Q3 2019 compared with Q3 2018 and accounted for 55% of total revenues.
Online advertising revenues from our advertising network increased 6% in Q3 2019 compared with Q3 2018 and accounted for 14% of total revenues.
Revenues related to Taxi segment grew 89% in Q3 2019 compared with Q3 2018 and accounted for 21% of total revenues. This increase mainly reflected the solid performance of our ride-sharing business driven by increase in the number of rides and incentives optimization, the strong growth of our corporate Taxi offering, which we recognize on a gross basis, as well as the growing contribution of our food delivery businesses.
Other revenues grew 169% in Q3 2019 compared with Q3 2018 and amounted to 9% 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 Q3 2019 Yandex's headcount increased by 583 full-time employees. The total number of full-time employees was 9,588 as of September 30, 2019, up by 6% compared with June 30, 2019, and up 8% from September 30, 2018.
Cost of revenues, including traffic acquisition costs (TAC)
In RUB millions |
Three months ended September 30, |
Nine months ended September 30, | ||||
2018 |
2019 |
Change |
2018 |
2019 |
Change |
|
TAC: |
||||||
Related to the Yandex advertising network |
3,772 |
3,848 |
2% |
10,379 |
11,273 |
9% |
Related to distribution partners |
1,521 |
1,909 |
26% |
3,955 |
5,420 |
37% |
Total TAC |
5,293 |
5,757 |
9% |
14,334 |
16,693 |
16% |
Total TAC as a % of total revenues |
16.3% |
12.8% |
16.1% |
13.5% |
||
Costs related to Taxi segment |
1,282 |
3,029 |
136% |
3,459 |
8,155 |
136% |
Costs related to Taxi segment as a % of revenues |
3.9% |
6.7% |
3.9% |
6.6% |
||
Other cost of revenues |
2,489 |
5,175 |
108% |
6,243 |
13,275 |
113% |
Other cost of revenues as a % of revenues |
7.6% |
11.5% |
7.0% |
10.7% |
||
Total cost of revenues |
9,064 |
13,961 |
54% |
24,036 |
38,123 |
59% |
Total cost of revenues as a % of revenues |
27.8% |
31.0% |
27.1% |
30.8% |
TAC grew 9% in Q3 2019 compared with Q3 2018 and represented 12.8% of total revenues, 350 basis points lower than in Q3 2018 and 70 basis points lower compared with Q2 2019 as a result of revenue mix effect.
Costs related to Taxi segment increased 136% compared with Q3 2018. The growth was mainly a result of an increase of costs related to our corporate Taxi offering and the logistics costs related to food delivery. 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 Q3 2019 increased 108% compared with Q3 2018, mainly reflecting the growth of costs related to Yandex.Drive, our investments in content within Media Services, as well as our IoT initiatives.
Product development
In RUB millions |
Three months ended September 30, |
Nine months ended September 30, | ||||
2018 |
2019 |
Change |
2018 |
2019 |
Change |
|
Product development |
5,534 |
7,407 |
34% |
16,723 |
21,108 |
26% |
As a % of revenues |
17.0% |
16.5% |
18.7% |
17.1% |
Product development expenses grew 34% in Q3 2019 compared to Q3 2018, primarily reflecting salary and other personnel-related costs increases, growth of share-based compensation and new hires in Q3 2019.
Sales, general and administrative (SG&A)
In RUB millions |
Three months ended |
Nine months ended September 30, |
||||
2018 |
2019 |
Change |
2018 |
2019 |
Change |
|
Sales, general and administrative |
8,895 |
12,421 |
40% |
25,742 |
33,854 |
32% |
As a % of revenues |
27.3% |
27.6% |
29.0% |
27.4% |
SG&A expenses grew 40% in Q3 2019 compared to Q3 2018.The growth was mainly driven by the increase of personnel costs as a result of salary and other personnel expenses growth as well as new hires, and due to the increase of advertising and marketing expenses to support growth of our business units.
Share-based compensation (SBC) expense
SBC expense is included in each of the cost of revenues, product development, and SG&A categories discussed above.
In RUB millions |
Three months ended September 30, |
Nine months ended September 30, | ||||
2018 |
2019 |
Change |
2018 |
2019 |
Change |
|
SBC expense included in cost of revenues |
47 |
72 |
53% |
126 |
204 |
62% |
SBC expense included in product development |
1,139 |
1,663 |
46% |
3,343 |
4,674 |
40% |
SBC expense included in SG&A |
530 |
935 |
76% |
1,441 |
2,258 |
57% |
Total SBC expense |
1,716 |
2,670 |
56% |
4,910 |
7,136 |
45% |
As a % of revenues |
5.3% |
5.9% |
5.5% |
5.8% |
Total SBC expense increased 56% in Q3 2019 compared with Q3 2018. The growth was primarily related to new equity-based grants made in 2018-2019.
Depreciation and amortization (D&A) expense
In RUB millions |
Three months ended September 30, |
Nine months ended September 30, | ||||
2018 |
2019 |
Change |
2018 |
2019 |
Change |
|
Depreciation and amortization |
3,118 |
3,788 |
21% |
8,934 |
10,801 |
21% |
As a % of revenues |
9.6% |
8.4% |
10.1% |
8.7% |
D&A expense increased 21% in Q3 2019 compared with Q3 2018. The D&A expense increase was mainly driven by our investments in servers and data center equipment as well as by costs related to purchases of office and other equipment.
Income from operations
In RUB millions |
Three months ended September 30, |
Nine months ended September 30, | ||||
2018 |
2019 |
Change |
2018 |
2019 |
Change |
|
Income from operations |
5,959 |
7,437 |
25% |
13,380 |
19,809 |
48% |
Income from operations increased 25% in Q3 2019 compared with Q3 2018.
Segment financial results
In RUB millions |
Three months ended September 30, |
Nine months ended September 30, | ||||
2018 |
2019 |
Change |
2018 |
2019 |
Change |
|
Revenues: | ||||||
Search and Portal |
25,816 |
31,172 |
21% |
71,350 |
87,371 |
22% |
Search and Portal, excluding IoT* |
25,801 |
30,894 |
20% |
71,335 |
86,680 |
22% |
E-commerce** |
- |
- |
- |
1,697 |
- |
-100% |
Taxi |
5,109 |
9,654 |
89% |
12,289 |
26,103 |
112% |
Classifieds |
988 |
1,371 |
39% |
2,609 |
3,779 |
45% |
Media Services |
414 |
924 |
123% |
1,230 |
2,534 |
106% |
Other Bets and Experiments |
1,480 |
4,088 |
176% |
3,389 |
9,986 |
195% |
Eliminations |
(1,237) |
(2,195) |
77% |
(3,749) |
(6,078) |
62% |
Total revenues |
32,570 |
45,014 |
38% |
88,815 |
123,695 |
39% |
Adjusted EBITDA: | ||||||
Search and Portal |
12,593 |
15,467 |
23% |
34,808 |
42,061 |
21% |
Search and Portal, excluding IoT* |
12,666 |
15,669 |
24% |
34,956 |
42,556 |
22% |
E-commerce** |
- |
- |
- |
(263) |
- |
-100% |
Taxi |
(711) |
170 |
n/m |
(4,305) |
477 |
n/m |
Classifieds |
78 |
43 |
-45% |
(165) |
(20) |
-88% |
Media Services |
(238) |
(636) |
167% |
(595) |
(1,514) |
154% |
Other Bets and Experiments |
(962) |
(1,180) |
23% |
(2,318) |
(3,366) |
45% |
Eliminations |
41 |
55 |
34% |
99 |
146 |
47% |
Total adjusted EBITDA |
10,801 |
13,919 |
29% |
27,261 |
37,784 |
39% |
Adjusted EBITDA margin: | ||||||
Search and Portal |
48.8% |
49.6% |
0.8% |
48.8% |
48.1% |
-0.7% |
Search and Portal, excluding IoT* |
49.1% |
50.7% |
1.6% |
49.0% |
49.1% |
0.1% |
E-commerce** |
- |
- |
- |
-15.5% |
- |
- |
Taxi |
-13.9% |
1.8% |
15.7% |
-35.0% |
1.8% |
36.8% |
Classifieds |
7.9% |
3.1% |
-4.8% |
-6.3% |
-0.5% |
5.8% |
Media Services |
-57.5% |
-68.8% |
-11.3% |
-48.4% |
-59.7% |
-11.3% |
Other Bets and Experiments |
-65.0% |
-28.9% |
36.1% |
-68.4% |
-33.7% |
34.7% |
Total adjusted EBITDA margin |
33.2% |
30.9% |
-2.3% |
30.7% |
30.5% |
-0.2% |
Financial results of segments are presented in the new segment structure that we introduced in Q1 2019. The historical data is provided in the supplementary slides.
*IoT stands for Internet of Things
**Our E-commerce segment revenues include revenues of Yandex.Market through April 27, 2018. As a result of deconsolidation, we record our share of Yandex.Market’s financial results within the loss/(income) from equity method investments line in the consolidated statements of income.
- Search and Portal segment offers a broad range of services in Russia, Belarus, Kazakhstan, Uzbekistan and Turkey, other than those described below. Since Q1 2019 our Search and Portal segment also includes Yandex.Health, previously reported in Other Bets and Experiments;
- E-commerce segment includes Yandex.Market for the period prior to April 27, 2018, the date of the completion of the Yandex.Market joint venture between Yandex and Sberbank;
- Taxi segment includes our Taxi business (including Yandex.Taxi and Uber in Russia and neighboring countries), Food Delivery business (including Yandex.EATs, UberEATs and Yandex.Chef, a meal kit subscription service) and Self-Driving Cars division;
- Classifieds segment includes Auto.ru, Yandex.Realty and Yandex.Jobs;
- Media Services segment includes KinoPoisk, Yandex.Music, Yandex.Afisha, Yandex.TV program, our production center Yandex.Studio and our subscription service Yandex.Plus;
- Other Bets and Experiments category includes Zen, Yandex.Cloud, Yandex.Drive, Geolocation Services and Yandex.Education. Geolocation Services and Yandex.Education previously were a part of our Search and Portal segment;
- Eliminations in 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 unites.