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Yandex Announces First Quarter 2019 Financial Results

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MOSCOW and AMSTERDAM, the Netherlands, April 25, 2019 (GLOBE NEWSWIRE) -- 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 first quarter ended March 31, 2019.

Q1 2019 Financial Highlights(1)(2)(3)

Q1 2019 consolidated financial results

  • Revenues of RUB 37.3 billion ($576.0 million), up 40% compared with Q1 2018

  • Net income of RUB 3.1 billion ($48.3 million), up 69% compared with Q1 2018; net income margin of 8.4%

  • Adjusted net income of RUB 5.4 billion ($84.0 million), up 36% compared with Q1 2018; adjusted net income margin of 14.6%

  • Adjusted EBITDA of RUB 10.8 billion ($166.3 million), up 40% compared with Q1 2018; adjusted EBITDA margin of 28.9%

Q1 2019 financial results excluding Yandex.Market in 2018 and 2019

  • Revenues excluding Yandex.Market of RUB 37.3 billion ($576.0 million), up 45% compared with Q1 2018

  • Net income excluding Yandex.Market of RUB 3.8 billion ($59.4 million), up 92% compared with Q1 2018

  • Adjusted net income excluding Yandex.Market of RUB 6.2 billion ($95.2 million), up 49% compared with Q1 2018; adjusted net income margin excluding Yandex.Market of 16.5%

  • Adjusted EBITDA excluding Yandex.Market of RUB 10.8 billion ($166.3 million), up 37% compared with Q1 2018; adjusted EBITDA margin excluding Yandex.Market of 28.9%

  • Cash, cash equivalents and term deposits as of March 31, 2019:
    º RUB 73.6 billion ($1,137.5 million) on a consolidated basis
    º Of which RUB 26.2 billion ($404.5 million) related to Taxi segment 

Q1 2019 Operational and Corporate Highlights

  • Share of Russian search market, including mobile, averaged 57.0% in Q1 2019, up from 56.5% in Q1 2018 and up from 56.5% in Q4 2018, according to Yandex.Radar

  • Search share on Android in Russia was 51.2% in Q1 2019, up from 49.5% in Q4 2018 and 46.3% in Q1 2018, according to Yandex.Radar

  • Search queries in Russia grew 11% compared with Q1 2018

  • Paid clicks on Yandex's and its partners' websites, in aggregate, increased 11% compared with Q1 2018. Excluding Yandex.Market, paid clicks grew 20% compared to Q1 2018

  • Average cost per click grew 7% compared with Q1 2018. Excluding Yandex.Market, average cost per click increased 4% compared to Q1 2018

  • Number of rides in the Taxi segment grew 64% year-on-year compared with Q1 2018, with Uber rides included from February 7, 2018

"We had an excellent start to 2019 with strong contributions from all our businesses," said Arkady Volozh, Chief Executive Officer of Yandex. "Continued innovations in ad tech and on the product side allowed us to report robust revenue growth in our core business in Q1."

"We delivered 45% revenue growth in Q1, excluding the results of deconsolidated Yandex.Market," said Greg Abovsky, Chief Operating Officer and Chief Financial Officer of Yandex. "The ride-sharing business is demonstrating great results and we continue to see huge promise in a number of our new business initiatives, like Geolocation Services and Zen."

The following table provides a summary of our key consolidated financial results for the three months ended March 31, 2018 and 2019:

       
In RUB millions Three months ended March 31,
  2018 2019 Change
Revenues  26,573  37,284 40 %
Ex-TAC revenues2  22,256  31,942 44 %
Income from operations  3,159  5,385 70 %
Adjusted EBITDA2  7,704  10,768 40 %
Net income  1,851  3,124 69 %
Adjusted net income2  4,009  5,440 36 %

The table below provides a summary of our key financial results excluding Yandex.Market for the three months ended March 31, 2018 and 2019:

       
In RUB millions, excluding Yandex.Market Three months ended March 31,
  2018 2019 Change
Revenues ex. Yandex.Market  25,668  37,284 45 %
Ex-TAC revenues2 ex. Yandex.Market  21,378  31,942 49 %
Income from operations ex. Yandex.Market  3,363  5,385 60 %
Adjusted EBITDA2 ex. Yandex.Market  7,866  10,768 37 %
Net income ex. Yandex.Market  2,002  3,845 92 %
Adjusted net income2 ex. Yandex.Market  4,124  6,161 49 %

(1) Pursuant to SEC rules regarding convenience translations, Russian ruble (RUB) amounts have been translated into U.S. dollars at a rate of RUB 64.7347 to $1.00, the official exchange rate quoted as of March 31, 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.

(3) On April 27, 2018, Yandex and Sberbank formed a joint venture based on the Yandex.Market platform. Since that date, each of Yandex and Sberbank hold an equal number of the outstanding shares in Yandex.Market, with 10% of outstanding shares allocated to management and an equity incentive pool. Accordingly, starting April 27, 2018, we deconsolidated Yandex.Market from Yandex's consolidated financial results and, under the equity method of accounting, we record our share of Yandex.Market's financial results within the income/(loss) from equity method investments line in the consolidated statements of income. Financial results excluding Yandex.Market exclude the results of Yandex.Market and Yandex's share of Yandex.Market's net loss after the deconsolidation from the three months periods ended March 31, 2018 and 2019.

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

Consolidated revenues breakdown

       
In RUB millions Three months ended March 31,
  2018 2019 Change
Online advertising revenues:      
  Yandex properties  17,475  20,912 20 %
  Advertising network  5,365  6,128 14 %
Total online advertising revenues  22,840  27,040 18 %
Revenues related to Taxi segment  3,116  7,624 145 %
Other  617  2,620 325 %
Total revenues  26,573  37,284 40 %


       
In RUB millions, excluding Yandex.Market Three months ended March 31,
  2018 2019 Change
Online advertising revenues      
  Yandex properties  16,289  20,912 28 %
  Advertising network  5,312  6,128 15 %
Total online advertising revenues  21,601  27,040 25 %
Revenues related to Taxi segment  3,116  7,624 145 %
Other  951  2,620 175 %
Total revenues  25,668  37,284 45 %

Online advertising revenues grew 18% in Q1 2019 compared with Q1 2018 and generated 73% of total revenues. Online advertising revenues include revenues derived from performance and brand advertising on Yandex properties and in our advertising network. Excluding revenues of Yandex.Market from Q1 2018, online advertising revenues grew 25% in Q1 2019 compared with Q1 2018.

Online advertising revenues from Yandex properties increased 20% in Q1 2019 compared with Q1 2018 and accounted for 56% of total revenues. Excluding revenues of Yandex.Market from Q1 2018, online advertising revenues from Yandex properties increased 28% in Q1 2019 compared with Q1 2018.

Online advertising revenues from our advertising network increased 14% in Q1 2019 compared with Q1 2018 and accounted for 16% of total revenues.The increase was primarily driven by the continuing growth of contribution from medium and small partners.

Revenues related to Taxi segment grew 145% in Q1 2019 compared with Q1 2018 and accounted for 20% of total revenues. This increase was mainly due to the growth of our ridesharing business driven by the increase in the number of rides, commission rates and incentives optimization, as well as due to the rapid growth of our corporate Taxi, which we recognize on a gross basis, and food delivery businesses.

Other revenues grew 325% in Q1 2019 compared with Q1 2018 and amounted to 7% of total revenues. The growth was primarily driven by our car-sharing service Yandex.Drive, music service Yandex.Music and to a lesser extent by our initiatives related to IoT (stands for 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 2019 Yandex's headcount decreased by 138 full-time employees, mainly due to headcount reclassification, which we continued to implement to ensure consistency in internal reporting for positions that we treat as outsource labor. The total number of full-time employees was 8,629 as of March 31, 2019, down by 2% compared with December 31, 2018, and up 6% from March 31, 2018.

Cost of revenues, including traffic acquisition costs (TAC)

       
In RUB millions Three months ended March 31,
  2018   2019   Change
TAC:      
Related to the Yandex advertising network  3,168    3,623   14 %
Related to distribution partners  1,149    1,719   50 %
Total TAC  4,317  
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