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
April 27, 2022
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 x Form 40-F o
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): o
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): o
Furnished as Exhibit 99.1 to this Report on Form 6-K is a press release of Yandex N.V. (the “Company”) dated April 27, 2022, announcing the Company’s results for the first quarter ended March 31, 2022.
Furnished as Exhibit 99.2 to this Report on Form 6-K is a letter to the shareholders of the Company dated April 27, 2022, to accompany the Company’s press release announcing the results for the first quarter ended March 31, 2022.
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.
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Date: April 27, 2022 | By: | /s/ Svetlana Demyashkevich |
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| Svetlana Demyashkevich |
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| Chief Financial Officer |
INDEX TO EXHIBITS
Exhibit No. | Description |
99.1 | Press release of Yandex N.V. dated April 27, 2022, announcing results for the first quarter ended March 31, 2022. |
99.2 | Letter to the shareholders of the Company dated April 27, 2022, to accompany the Company’s press release announcing the results for the first quarter ended March 31, 2022. |
Exhibit 99.1
Yandex Announces First Quarter 2022 Financial Results
MOSCOW and AMSTERDAM, the Netherlands, April 27, 2022 -- Yandex (NASDAQ and MOEX: YNDX), one of Europe's largest internet companies and the leading search and ride-hailing provider in Russia, today announced its unaudited financial results for the first quarter ended March 31, 2022.
Q1 2022 Financial and Operational Highlights1,2
We experienced continued stable operations and strong growth across most of our businesses through February 23, 2022. In the last five weeks of the first quarter, our operations in certain businesses were adversely affected by the impact of geopolitical developments, which is reflected in our results for the full first quarter.
In RUB millions | | Three months ended March 31 | ||
| | 2021 | 2022 | Change |
| Total Revenues | 73,136 | 106,010 | 45% |
| Online Ad Revenues | 35,996 | 41,658 | 16% |
| Total Adjusted EBITDA | 11,021 | 1,271 | -88% |
| Total Adjusted EBITDA margin, % | 15.1% | 1.2% | -13.9 pp |
Total Group | Total adjusted EBITDA before one-off personnel expenses3 | 11,021 | 7,161 | -35% |
| Total adjusted EBITDA before one-off personnel expenses margin, % | 15.1% | 6.8% | -8.3 pp |
| Net income/(loss) | (3,220) | (13,037) | n/m |
| Adjusted Net Income/(Loss) | 3,008 | (8,124) | n/m |
| Share of Russian search market, % | 60.0% | 61.0% | 1.0 pp |
| Search share on Android, % | 59.3% | 59.9% | 0.6 pp |
| Search share on iOS, % | 41.9% | 46.1% | 4.2 pp |
Search and | Revenues | 34,945 | 43,834 | 25% |
Portal | Revenues Ex-TAC | 28,616 | 37,125 | 30% |
| Adjusted EBITDA | 17,106 | 18,399 | 8% |
| Adjusted EBITDA margin, % | 49.0% | 42.0% | -7.0 pp |
| Revenues | 34,132 | 54,899 | 61% |
| Rides YoY growth in the Mobility services, % | 22.0% | 36.4% | 14.4 pp |
E-Commerce, Mobility | GMV of Mobility4 | 119,402 | 167,418 | 40% |
and Delivery | GMV of E-commerce5 | 24,486 | 64,580 | 164% |
| GMV of other O2O services6 | 12,657 | 24,322 | 92% |
| Total Adjusted EBITDA | (3,161) | (8,203) | n/m |
Media Services | Yandex Plus subscribers, MM | 9.0 | 12.2 | 36% |
(1) Pursuant to SEC rules regarding convenience translations, Russian ruble (RUB) amounts have been translated into U.S. dollars in this release at a rate of RUB 84.0851 to $1.00, the official exchange rate quoted as of March 31, 2022 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 and adjusted net income/(loss). Please see the section “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) In March 2022, Yandex incurred one-off personnel expenses due to additional (13th) salary paid to employees in the amount of RUB 5,890 million in order to support them on the back of macroeconomic instability, including accelerated inflation and currency volatility.
(4) GMV (or gross merchandise value) of Mobility is defined as the total amount paid by customers for ride-hailing, car-sharing and scooters rent services booked through our platform, including VAT.
(5) GMV of E-commerce is defined as the value of all merchandise sold through our Yandex Market marketplace and Yandex Lavka as well as the value of products sold through Yandex Eats grocery service (delivered and paid for) including VAT.
(6) GMV of other O2O (online-to-offline) services includes the total amount paid by customers and partner businesses for Yandex Delivery services, the value of orders, delivered through Yandex Food Delivery service, Lavka Israel, and several other smaller O2O experiments, including VAT.
Financial outlook
Given the significant changes to the external environment and the high degree of uncertainty concerning future geopolitical developments (including risk of further sanctions and their impact on the Russian and global economy), our visibility over the short- and medium-term is limited. Our previous guidance for 2022 should no longer be relied upon and we are not able to provide any forward-looking comments at this stage. We may resume providing our financial outlook for future periods when there is greater clarity over the macro environment in general and the impact on Yandex in particular.
Corporate and Subsequent Events
| ● | On February 28, 2022, Nasdaq and the New York Stock Exchange suspended the trading in securities of a number of companies with material operations in Russia, including Yandex N.V. Class A shares. Trading in the shares on Nasdaq remained halted as of the reporting date and we have no visibility on when and whether trading may be resumed. Trading in Yandex N.V. shares on the Moscow Exchange was suspended on February 28, 2022 and resumed on March 29, 2022. Under recently adopted legislation, however, non-Russian shareholders are not permitted to sell shares on the Moscow Exchange. Moreover, because the international settlement systems remain closed for trading in rubles and in any securities of Russian businesses, it is currently not possible for trades to settle between shareholders that acquired our shares on Nasdaq and investors on the Moscow Exchange, and the volume of our shares available for trading on the Moscow Exchange is limited. We are currently reviewing alternative options in order to provide our shareholders the ability to trade our shares, including considering the possibility of listing on another international stock exchange in due course. |
| ● | On March 7, 2022, Yandex announced that, as a result of the suspension of trading of our Class A shares on Nasdaq for a period of five dealing days or more, the holders of the $1.25 billion 0.75 per cent. convertible notes due 2025 (“Notes”) have the right to require the Company to redeem their Notes at par plus accrued interest. We are engaged in discussions with advisors to an ad hoc committee of noteholders with a view to reaching a fair and sustainable solution for all parties involved. |
| ● | On March 18, 2022, Yandex announced that the company is exploring different strategic options, including divestment, for its news aggregation service and infotainment platform Zen. Going forward, we intend to focus on the continued development of our other technology-related businesses and products, including search, advertising, self-driving vehicles and cloud computing; and our transactional services, including ride-hailing, e-commerce, video/audio services and streaming. |
Consolidated Results
The following table provides a summary of our key consolidated financial results for the three months ended March 31, 2021 and 2022:
In RUB millions | Three months ended March 31, | ||
| 2021 | 2022 | Change |
Revenues | 73,136 | 106,010 | 45% |
Ex-TAC revenues | 67,735 | 99,864 | 47% |
Loss from operations | (267) | (12,434) | n/m |
Adjusted EBITDA | 11,021 | 1,271 | -88% |
Net income/(loss) | (3,220) | (13,037) | n/m |
Adjusted net income/(loss) | 3,008 | (8,124) | n/m |
Our segment disclosure is provided in the Segment financial results section below.
Cash, cash equivalents and term deposits as of March 31, 2022:
| ● | RUB 88.0 billion ($1,047.1 million) on a consolidated basis, of which RUB 39.0 billion was available cash position outside of Russia (including RUB 4.2 billion cash balance of MLU Group). The aggregate cash balance of Yandex legal entities in Russia (excluding MLU Group) was RUB 42.0 billion (including U.S. dollar denominated holdings in the amount of RUB 13.0 billion). |
Segment financial results
Starting in Q1 2022, we introduced the following changes to our segments under which we reported our quarterly financial results previously, in order to better reflect operational structure of our businesses:
| ● | We have introduced a new segment called E-commerce, Mobility and Delivery, which combines our key transactional O2O services; |
| ● | We transferred the MLU (Taxi) and Yandex Market segments to a new segment called E-commerce, Mobility and Delivery. Please see further detail below; |
| ● | We transferred Toloka, our data-centric AI solution that enables clients to generate machine learning data at scale, and RouteQ, our cloud platform using traffic forecasts to optimize last mile delivery (formerly known as Yandex Routing), from Search & Portal to the Other Business Units and Initiatives segment; and |
| ● | We transferred Yandex Uslugi (“Services”) and Edadeal from Other Business Units and Initiatives to the E-commerce, Mobility and Delivery segment. |
These changes have been applied retroactively to all periods presented.
Search & Portal
Our Search and Portal segment includes Search, Geo, Yandex 360, Weather, News, Travel, Alice voice assistant and number of other services offered in Russia, Belarus and Kazakhstan.
Key operational trends:
| ● | Share of Russian search market, including mobile, averaged 61.0% in Q1 2022, up from 60.0% in Q1 2021 and 60.2% in Q4 2021, according to Yandex Radar |
| ● | Search share on Android in Russia was 59.9% in Q1 2022, up from 59.3% in Q1 2021 and 59.2% in Q4 2021, according to Yandex Radar |
| ● | Search share on iOS in Russia was 46.1% in Q1 2022, up from 41.9% in Q1 2021 and 44.0% in Q4 2021, according to Yandex Radar |
| ● | Mobile search traffic was 65.7% of our total search traffic in Q1 2022. Mobile revenues represented 57.4% of our search revenues in Q1 2022 |
| ● | Search queries in Russia grew 8% in Q1 2022 compared with Q1 2021 |
In RUB millions | Three months ended March 31, | ||
| 2021 | 2022 | Change |
Revenues | 34,945 | 43,834 | 25% |
Revenues Ex-TAC | 28,616 | 37,125 | 30% |
Adjusted EBITDA | 17,106 | 18,399 | 8% |
Adjusted EBITDA margin | 49.0% | 42.0% | -7.0 pp |
Revenues increased by 25% and Revenues Ex-TAC grew by 30% year-on-year in Q1 2022. The increase was primarily driven by the growth of the Yandex Ad Network on the back of ad product and tech enhancements and our core search business underpinned by strengthening search positions across all key platforms. In terms of partners, the SMB segment demonstrated better resilience and was the key contributor to the growth achieved in the quarter, while the larger businesses segment was adversely affected in March 2022 by the withdrawal of multinational advertisers from the market and tighter advertising budgets of domestic businesses.
Adjusted EBITDA margin came to 42.0% in Q1 2022 compared with 49.0% in Q1 2021. Excluding the impact of the one-off personnel expenses in March 2022, adjusted EBITDA margin of Search & Portal segment came to 46.4%. Other factors, which contributed to the year-on-year dynamic of profitability were our investments in product and performance marketing to support the growth of search share on mobile platforms, including iOS (where we have achieved a strong 2.9pp market share gains during the quarter).
E-commerce, Mobility and Delivery
The E-commerce, Mobility and Delivery segment includes our transactional online-to-offline (O2O) businesses, which consist of (i) the mobility businesses, including ride-hailing in Russia and other countries across CIS and EMEA and Yandex Drive, scooters and our car-sharing business for both B2C and B2B; (ii) the E-commerce businesses in Russia and CIS, including Yandex Market, our multi-category e-commerce marketplace, Yandex Lavka Russia, our hyperlocal convenience store delivery service, and grocery delivery service of Yandex Eats; and (iii) other O2O businesses, including Yandex Delivery, our last-mile logistics solution for individuals, enterprises and SMB, Yandex Eats Food Delivery, our ready-to-eat delivery service from restaurants, Lavka Israel, our hyperlocal convenience store delivery service, and several smaller experiments.
Key operational trends:
| ● | Total E-Commerce GMV increased by 164% year-on-year in Q1 2022 |
Yandex Market
| ● | The share of GMV sold by third-party sellers on our Yandex Market marketplace reached 81% in Q1 2022 compared to 66% in Q1 2021 |
| ● | Marketplace’s assortment was 26.1 million SKUs as of the end of Q1 2022, up from 3.8 million SKUs as of the end of Q1 2021 and 22.6 million SKUs as of the end of Q4 2021 |
| ● | The number of active buyers7 on Yandex Market marketplace increased by 79% year-on-year and reached 10.8 million as of the end of Q1 2022 |
| ● | The number of active sellers8 on Yandex Market marketplace increased by 230% year-on-year and reached 28.3 thousand as of the end of Q1 2022 |
Mobility
| ● | The number of rides in the Mobility services increased 36% compared to Q1 2021 |
| ● | GMV of the Mobility services grew 40% compared to Q1 2021 |
(7) An active buyer is a buyer who made at least 1 purchase in the last 12 months prior to the reporting date.
(8) An active seller is a seller who made at least 1 sale in the last 1 month prior to the reporting date.
In RUB millions | Three months ended March 31, | ||
| 2021 | 2022 | Change |
GMV: | | | |
Mobility | 119,402 | 167,418 | 40% |
E-Commerce | 24,486 | 64,580 | 164% |
First party (1P) business model | 11,384 | 19,177 | 68% |
Third party (3P) commission business model | 13,102 | 45,403 | 247% |
Other O2O services | 12,657 | 24,322 | 92% |
Revenues: | | | |
Mobility | 18,054 | 26,561 | 47% |
E-Commerce | 12,202 | 20,745 | 70% |
Revenues from sale of goods (1P)9 | 9,396 | 15,560 | 66% |
Commission and other e-commerce revenues10 | 2,806 | 5,185 | 85% |
Other O2O services | 3,951 | 8,796 | 123% |
Eliminations | (75) | (1,203) | n/m |
Total revenues | 34,132 | 54,899 | 61% |
Adjusted EBITDA E-commerce, Mobility and Delivery: | (3,161) | (8,203) | 160% |
(9) Revenues related to sales of goods include revenues from Yandex Market 1P sales, revenues from Yandex Lavka 1P sales in Russia, where we use a first-party (1P) business model and act as a direct retailer, and excludes delivery fee revenues related to these businesses.
(10) Commission and other e-commerce revenues include Yandex Market marketplace (3P) commission, delivery, service fee and advertising revenues of grocery delivery services of Yandex Eats, as well as delivery fee and advertising revenue of Yandex Lavka in Russia and other revenues.
The growth in GMV of Mobility reached 40% year-on-year in Q1 2022, driven by strong demand for shared transportation services, that led to a solid growth in riders and frequency of rides. The growth in GMV of E-commerce reached 164% year-on-year in Q1 2022 mainly driven by 3P Yandex Market GMV on the back of a solid consumer demand for online marketplaces as well as the number of qualitative improvements to our customer value proposition and expansion of the merchants’ base and assortment. The growth in GMV of other O2O services reached 92% year-on-year in Q1 2022, with Yandex Delivery (Logistics), closely followed by Yandex Food Delivery service, being the largest contributors to the GMV growth.
The E-commerce, Mobility and Delivery segment revenues increased by 61% year-on-year, mainly driven by E-commerce services (where Yandex Market was the largest contributor to growth, followed by the Yandex Lavka business) and Mobility (mostly driven by the strong performance of Ride-hailing). Mobility revenues increased by 47%, primarily driven by solid growth in rides and GMV in ride-hailing, with ride-hailing revenue growth rates slightly offset by slower increase of Drive revenues. E-commerce revenues increased by 70% in Q1 2022 compared to Q1 2021. The slower-than-GMV revenue growth is primarily explained by the changes in 1P/3P revenue mix in Yandex Market (increase in the share of 3P GMV to 81% in Q1 2022 compared with 66% in Q1 2021). 1P revenues grew 66% year-on-year supported by Yandex Market 1P sales as well as the growth of Yandex Lavka (on the back of the controlled expansion in the number of dark stores in selected regions). Commission and other E-Commerce revenues grew by 85% due to GMV growth, an increase in the share of 3P GMV and an improved 3P effective take rate in Yandex Market. Other O2O services revenues delivered solid 123% year-on-year growth primarily driven by the growth of Yandex Delivery (Logistics) and Yandex Food Delivery, with Yandex Lavka Israel being the third largest contributor to revenue growth.
Eliminations related to the E-commerce, Mobility and Delivery segment represent the eliminations of intercompany revenues between different businesses within the segment. The year-on-year dynamic was mainly attributed to a higher volume of E-commerce orders fulfilled by our Yandex Delivery (Logistics) business growing from a low base as well as growing volume of Yandex Market orders delivered using our Yandex Drive fleet.
Negative adjusted EBITDA of E-commerce, Mobility and Delivery was RUB 8,203 million in Q1 2022 compared to a RUB 3,161 million in Q1 2021. Positive adjusted EBITDA of Mobility business was offset by investments in fast-growing E-Commerce and other O2O services, and was impacted by the one-off personnel expenses in March. All of our businesses that are in an investment phase demonstrated an improvement of operational efficiency (even when including the additional personnel expenses). In E-commerce, we significantly improved unit economics in each of the respective businesses, including Yandex Market, Lavka and Eats Grocery. We have also improved relative losses (as a percentage of GMV) in
Yandex Delivery. The absolute losses in all of these businesses are associated only with an expansion of the size of the businesses and their fast growth. In businesses such as Lavka Russia and Food Delivery (Eats Restaurants) we have managed to decrease absolute losses on year-on-year basis despite demonstrating a solid growth in scale.
Media Services
The Media Services segment includes our subscription service Yandex Plus, Yandex Music, Kinopoisk, Yandex Afisha and our production center Yandex Studio.
Key operational trends:
| ● | Number of Yandex Plus subscribers reached 12.2 million as of the end of Q1 2022, up 36% from the end of Q1 2021 |
In RUB millions | Three months ended March 31, | ||
| 2021 | 2022 | Change |
Revenues | 3,486 | 5,831 | 67% |
Adjusted EBITDA | (1,257) | (3,171) | 152% |
Adjusted EBITDA margin | -36.1% | -54.4% | -18.3 pp |
Media Services revenues grew 67% in Q1 2022 compared with Q1 2021. The increase was primarily driven by the growth of subscription revenue, devices revenue, as well as licensing revenue and transactional revenue. Negative adjusted EBITDA of RUB 3.2 billion reflects our investments into our video content catalog, the increase of personnel costs due to the one-off payments made to personnel in March and new hirings to support growth of the business, as well as our prearranged marketing campaigns to underpin the growth of the Yandex Plus subscriber base.
Classifieds
The Classifieds segment includes Auto.ru, Yandex Realty and Yandex Rent.
In RUB millions | Three months ended March 31, | ||
| 2021 | 2022 | Change |
Revenues | 1,783 | 2,172 | 22% |
Adjusted EBITDA | 385 | 277 | -28% |
Adjusted EBITDA margin | 21.6% | 12.8% | -8.8 pp |
Classifieds revenues increased by 22% in Q1 2022 compared with Q1 2021 and was driven mainly by the increase in revenues from auto dealers’ listings, which has grown by more than 1.4x year-on-year due to the continued improvement of our monetization strategies and improvement of product offering. Adjusted EBITDA decreased by 28% in Q1 2022 compared with Q1 2021 mainly due to the impact of one-off personnel expenses and selective headcount growth in a fast growing Yandex Rent service, as well as prearranged marketing expenses.
Other Business Units and Initiatives
The Other Business Units and Initiatives segment includes our self-driving vehicles business (Yandex SDG), Zen, Yandex Cloud, Yandex Education, Devices, FinTech, Toloka, RouteQ and Yandex Lavka experiments in international markets (“Lavka Overseas”).
In RUB millions | Three months ended March 31, | ||
| 2021 | 2022 | Change |
Revenues | 4,812 | 7,265 | 51% |
Adjusted EBITDA | (2,148) | (6,127) | 185% |
Adjusted EBITDA margin | -44.6% | -84.3% | -39.7 pp |
Other Business Units and Initiatives revenues increased 51% year-on-year in Q1 2022, driven mainly by Cloud, Devices and Education. Cloud revenue growth rate was supported by increasing demand for our services on the back of product portfolio expansion, our investments in quality improvement, and our ability us to gain market share in light of the suspension of activities by international competitors, as well as the growth of value-added services. Devices revenue increased 32% year-on-year to RUB 2.2 billion in Q1 2022 driven by solid demand on our smart devices, including the volumes growth of our new launches and TV dongles as well as introduction of revenue sharing model across various video-on-demand services, which was partially offset by logistics and production delays in China due to re-emerged COVID-19 related restrictions.
Negative adjusted EBITDA amounted to RUB 6.1 billion, compared to RUB 2.1 billion in Q1 2021. The loss increase was mainly attributed to investments in Yandex SDG (where negative adjusted EBITDA came to RUB 1.8 billion in Q1 2022), followed by Devices and Zen, mainly driven by an increase in personnel costs (resulting from one-off personnel expenditure in March and selective headcount growth) as well as an increase in prices for the servers hosting and providing capacity for our businesses.
Eliminations
Eliminations related to our revenues represent the elimination of transactions between the reportable segments, including advertising revenues, intercompany revenues related to brand royalties, data centers, devices intercompany sales and others.
In RUB millions | Three months ended March 31, | ||
| 2021 | 2022 | Change |
Revenues: | | | |
Segment revenues | 79,158 | 114,001 | 44% |
Eliminations | (6,022) | (7,991) | 33% |
Total revenues | 73,136 | 106,010 | 45% |
Adjusted EBITDA: | | | |
Segment adjusted EBITDA | 10,925 | 1,175 | -89% |
Eliminations | 96 | 96 | 0% |
Total adjusted EBITDA | 11,021 | 1,271 | -88% |
Eliminations related to our revenues increased 33% in Q1 2022 compared with Q1 2021. The increase was mainly attributed to the intercompany revenue in Search and Portal (related to data centers rent paid by business units, cross service advertising and marketing activities and brand royalties).
Consolidated Operating Costs and Expenses
Our 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 expenses. Increases across all cost categories reflect investments in overall growth. In Q1 2022, our headcount increased by 1,057 full-time employees. The total number of full-time employees was 19,061 as of March 31, 2022, up by 6% compared with December 31, 2021, and up 47% from March 31, 2021, which was primarily driven by the expansion of our teams in (i) Search and Portal (mainly sales, project and product managers, devops engineers and developers), (ii) in the E-commerce businesses (including Yandex Market, Yandex Lavka and Yandex Eats) to support the rapid growth of their operations and scale, and (iii) to support the fast growth of Ride-hailing, FinTech, Yandex Cloud and other businesses.
Operating Expenses
In RUB millions | Three months ended March 31, | ||
| 2021 | 2022 | Change |
Cost of revenues | 34,042 | 51,011 | 50% |
Cost of revenues as a % of revenues | 46.5% | 48.1% | 1.6 pp |
including TAC | 5,401 | 6,146 | 14% |
TAC as a % of revenues | 7.4% | 5.8% | -1.6 pp |
Product development | 11,009 | 19,161 | 74% |
As a % of revenues | 15.1% | 18.1% | 3.0 pp |
Sales, general and administrative | 23,095 | 40,805 | 77% |
As a % of revenues | 31.6% | 38.5% | 6.9 pp |
Depreciation and amortization | 5,257 | 7,467 | 42% |
As a % of revenues | 7.2% | 7.0% | -0.2 pp |
Total operating expenses | 73,403 | 118,444 | 61% |
As a % of revenues | 100.4% | 111.7% | 11.3 pp |
Total operating expenses increased 61% in Q1 2022 compared with Q1 2021. The increase was mainly due to personnel expenses, including one-off personnel expenditure in March 2022 to support our employees during a period of macroeconomic uncertainty, and headcount growth across most of our business units to support business growth, advertising and performance marketing activities to endorse our market share gains, and the expansion of our customer base in a number of services (primarily E-commerce, Mobility and Delivery businesses, Search and Portal and our Yandex Plus subscription program), as well as due to сost of revenues related to E-commerce, Mobility and Delivery businesses and Media Services.
TAC grew 14% in Q1 2022 compared with Q1 2021 and represented 5.8% of total revenues, down 158 basis points compared with Q1 2021. The year-on-year dynamic of TAC as a share of revenue was primarily driven by a decrease in the share of advertising revenues as a percentage of total revenues as well as the optimization of TAC rates.
Total SBC expenses increased 8% in Q1 2022 compared with Q1 2021. The increase primarily reflects new equity-based grants made in 2021 and 2022 (including RSUs and PSUs, Business Unit Equity Awards and Synthetic Options in respect of the Company’s business units) and material appreciation of the U.S. dollar against the ruble.
Income/(loss) from operations
In RUB millions | Three months ended March 31, | ||
| 2021 | 2022 | Change |
Income/(loss) from operations | (267) | (12,434) | n/m |
Loss from operations amounted to RUB 12.4 billion in Q1 2022 compared to loss from operations of RUB 0.3 billion in Q1 2021. The increase of the loss reflects the changes in segment mix amid the continuing investments in our rapidly growing businesses (primarily E-commerce, Mobility and Delivery, Other Business Units and Initiatives and Media Services) as well as additional salary payments made in March to support our employees on the back of the macroeconomic instability.
Adjusted EBITDA decreased 88% in Q1 2022 compared with Q1 2021. The decline was mainly driven by re-investments of strong adjusted EBITDA generated by the Search and Portal into a number of fast-growing attractive opportunities including E-commerce, Mobility and Delivery, Other Business Units and Initiatives (including Yandex SDG, Devices, Zen and other experiments) and Media Services as well as the one-off personnel expenses in March.
Income tax expense for Q1 2022 was RUB 2,518 million, down from RUB 3,795 million in Q1 2021. If we remove the effects of deferred tax asset valuation allowances, SBC expense, tax on dividends, tax provisions recognized, the permanent differences between US GAAP and tax accounting, our effective tax rate for Q1 2022 was 22.4%, compared to 21.2% for Q1 2021 as adjusted for similar effects.
Net loss was RUB 13.0 billion in Q1 2022, compared with net loss of RUB 3.2 billion in Q1 2021. Apart from the drivers described above that affected the results of operations and income taxes, the change in net loss was driven by one-off recognition of loss from impairment of our construction in progress amounted of RUB 0.9 billion in Q1 2022. This impairment relates to previously recognized costs of warehouse automation complex, in relation to which management does not have sufficient certainty of future completion by the vendors.
Net cash flow used in operating activities for Q1 2022 was RUB 4.0 billion ($48.2 million) and capital expenditures were RUB 18.0 billion ($213.9 million).
The total number of shares issued and outstanding as of March 31, 2022 was 358,940,491, including 323,241,816 Class A shares, 35,698,674 Class B shares, and one Priority share and excluding 558,663 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 2.9 million shares, at a weighted average exercise price of $44.32 per share, 2.0 million of which were fully vested; equity-settled share appreciation rights (SARs) for 0.1 million shares, at a weighted average measurement price of $32.85, all of which were fully vested; restricted share units (RSUs) covering 12.8 million shares, of which RSUs to acquire 6.2 million shares were fully vested; performance share units (PSUs) for 0.5 million shares and synthetic options for 2.1 million, 0.5 million of which were fully vested.
Impact of the current geopolitical crisis
Current geopolitical tensions and their impact on the Russian and global economy have created an exceptionally challenging environment for our business and our team.
These developments have adversely impacted (and may in the future materially adversely impact) the macroeconomic climate in Russia, resulting in significant volatility of the ruble, currency controls, materially increased interest rates and inflation and a potential contraction in consumer spending, as well as the withdrawal of foreign businesses from the Russian market. We provided detailed information on our risk exposure in our Annual Report on Form 20 F for the year ended December 31, 2021, which was filed April 20, 2022.
We continue to provide services to our users and partners as usual. We are taking appropriate measures to conserve cash, consider our capital allocation and budget appropriately during this period of uncertainty, while remaining committed to continue investing in development of our key businesses and services. We are closely monitoring sanctions and export control developments and the macroeconomic climate in Russia and we are assessing contingency plans to address potential developments. Our Board and management are focused on the wellbeing of our approximately 19,000 employees in Russia and abroad, while doing everything we can to safeguard the interests of our shareholders and other stakeholders.
With regards to our financial position as of the end of March 31, 2022, our analysis of the effect from the current geopolitical crisis on goodwill and non-current assets shows no material impact.
ABOUT YANDEX
Yandex (NASDAQ and MOEX: YNDX) is a technology company registered in the Netherlands 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 navigation products, while also expanding into e-commerce, online entertainment, cloud computing and other markets to assist millions of consumers in Russia and a number of international markets. More information on Yandex can be found at https://ir.yandex/.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements that involve risks and uncertainties. All statements contained in this press release other than statements of historical facts, including, without limitation, statements regarding our future financial and business performance, our business and strategy and the impact of the COVID-19 pandemic on our industry, business and financial results, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “guide,” “intend,” “likely,” “may,” “will” and similar expressions and their negatives are intended to identify forward-looking statements. 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, the impact of the ongoing COVID-19 pandemic and regulatory and business responses to that crisis, 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, 2021 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 20, 2022 and November 18, 2019, respectively, and are available on our investor relations website at https://ir.yandex/sec-filings and on the SEC website at https://www.sec.gov/. All information in this release and in the attachments is as of April 27, 2022, and Yandex undertakes no duty to update this information unless required by law.
USE OF NON-GAAP FINANCIAL MEASURES
To supplement the financial information 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 net income/(loss) and financial results on a like-for-like basis including Yandex Market. 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/(loss) plus (1) depreciation and amortization, (2) SBC expense, (3) interest expense, (4) income tax expense, (5) expenses related to the contingent compensation payable to employees in connection with certain business combinations, (6) income/(loss) from equity method investments, less (1) interest income and (2) other income/(loss), net |
| ● | Adjusted net income/(loss) means U.S. GAAP net income/(loss) plus (1) SBC expense, (2) expenses related to the contingent compensation payable to certain employees in connection with certain business combinations, (3) amortization of debt discount and issuance costs related to our convertible debt adjusted for the related income tax effect, less (1) foreign exchange losses/(gains) adjusted for the related income tax effect |
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 bonuses but, unlike sales bonuses, are not deducted from U.S. GAAP revenues. By presenting revenue, 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.
Foreign exchange gains/(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/(loss) and related margin measures excluding these effects, in order to provide greater clarity regarding our operating performance.
Amortization of debt discount and issuance costs
We also adjust net income/(loss) 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/(loss) 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, |
| | 2021* | | 2022 | | 2022 |
| | RUB | | RUB | | $ |
ASSETS | | | | | | |
Cash and cash equivalents | | 79,275 | | 86,047 | | 1,023.3 |
Term deposits | | 23,415 | | 1,999 | | 23.8 |
Investments in marketable equity securities | | 4,049 | | - | | - |
Accounts receivable, net | | 43,568 | | 39,443 | | 469.1 |
Prepaid expenses | | 12,663 | | 14,429 | | 171.7 |
Inventory | | 9,587 | | 13,494 | | 160.5 |
Funds receivable, net | | 6,180 | | 3,298 | | 39.2 |
Investments in debt securities | | 452 | | 154 | | 1.8 |
VAT reclaimable | | 13,498 | | 13,927 | | 165.6 |
Other current assets | | 7,288 | | 7,005 | | 83.3 |
Total current assets | | 199,975 | | 179,796 | | 2,138.3 |
Property and equipment, net | | 98,325 | | 110,750 | | 1,317.1 |
Operating lease right-of-use assets | | 36,245 | | 34,788 | | 413.7 |
Intangible assets, net | | 22,359 | | 23,562 | | 280.2 |
Content assets, net | | 13,767 | | 14,647 | | 174.2 |
Goodwill | | 117,864 | | 118,965 | | 1,414.8 |
Long-term prepaid expenses | | 3,278 | | 3,382 | | 40.3 |
Equity method investments | | 9,425 | | 10,547 | | 125.4 |
Investments in non-marketable equity securities | | 790 | | 917 | | 10.9 |
Deferred tax assets | | 5,625 | | 5,871 | | 69.8 |
Other non-current assets | | 7,843 | | 7,945 | | 94.5 |
Total non-current assets | | 315,521 | | 331,374 | | 3,940.9 |
TOTAL ASSETS | | 515,496 | | 511,170 | | 6,079.2 |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | |
Accounts payable, accrued and other liabilities | | 84,495 | | 85,739 | | 1,019.7 |
Income and non-income taxes payable | | 16,196 | | 14,673 | | 174.5 |
Deferred revenue | | 10,415 | | 10,256 | | 122.0 |
Convertible debt | | — | | 104,460 | | 1,242.3 |
Total current liabilities | | 111,106 | | 215,128 | | 2,558.5 |
Convertible debt | | 85,835 | | - | | - |
Deferred tax liabilities | | 2,989 | | 2,714 | | 32.3 |
Operating lease liabilities | | 24,642 | | 23,544 | | 280.0 |
Finance lease liabilities | | 15,350 | | 16,148 | | 192.0 |
Other accrued liabilities | | 2,649 | | 3,497 | | 41.5 |
Total non-current liabilities | | 131,465 | | 45,903 | | 545.8 |
Total liabilities | | 242,571 | | 261,031 | | 3,104.3 |
Redeemable noncontrolling interests | | 869 | | 435 | | 5.2 |
Shareholders’ equity: | | | | | | |
Priority share: €1 par value; 1 share 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: 323,800,479, Class B: 35,698,674, and Class C: 10,000); shares outstanding (Class A: 323,004,678 and 323,241,816, Class B: 35,698,674, and Class C: nil) | | 281 | | 281 | | 3.3 |
Treasury shares at cost (Class A: 795,801 and 558,663, respectively) | | (2,728) | | (1,393) | | (16.6) |
Additional paid-in capital | | 112,942 | | 105,600 | | 1,255.9 |
Accumulated other comprehensive income | | 16,193 | | 10,413 | | 123.9 |
Retained earnings | | 131,488 | | 119,486 | | 1,421.0 |
Total equity attributable to Yandex N.V. | | 258,176 | | 234,387 | | 2,787.5 |
Noncontrolling interests | | 13,880 | | 15,317 | | 182.2 |
Total shareholders’ equity | | 272,056 | | 249,704 | | 2,969.7 |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | 515,496 | | 511,170 | | 6,079.2 |
* Derived from audited consolidated financial statements
YANDEX N.V.
Unaudited Condensed Consolidated Statements of Operations
(in millions of Russian rubles and U.S. dollars, except share and per share data)
YANDEX N.V.
Unaudited Condensed Consolidated Statements of Cash Flows
(in millions of Russian rubles and U.S. dollars)
| | Three months ended March 31, | ||||
| | 2021 | | 2022 | | 2022 |
| | RUB | | RUB | | $ |
CASH FLOWS PROVIDED BY/(USED IN) OPERATING ACTIVITIES: | | | | | | |
Net income/(loss) | | (3,220) | | (13,037) | | (155.0) |
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities: | | | | | | |
Depreciation of property and equipment | | 3,776 | | 5,791 | | 68.9 |
Amortization of intangible assets | | 1,481 | | 1,676 | | 19.9 |
Amortization of content assets | | 1,390 | | 2,302 | | 27.4 |
Operating lease right-of-use assets amortization and the lease liability accretion | | 2,399 | | 4,226 | | 50.3 |
Amortization of debt discount and issuance costs | | 517 | | 53 | | 0.6 |
Share-based compensation expense | | 5,804 | | 6,265 | | 74.5 |
Deferred income tax expense/(benefit) | | (403) | | (38) | | (0.5) |
Foreign exchange gains/(losses) | | (264) | | (1,672) | | (19.9) |
Loss/(income) from equity method investments | | 1 | | 365 | | 4.3 |
Provision for expected credit losses | | 282 | | 637 | | 7.6 |
Other | | (51) | | 1,145 | | 13.7 |
Changes in operating assets and liabilities excluding the effect of acquisitions: | | | | | | |
Accounts receivable, net | | (1,848) | | 4,257 | | 50.6 |
Prepaid expenses and other assets | | (5,070) | | 1,334 | | 15.8 |
Inventory | | (1,606) | | (3,664) | | (43.6) |
Accounts payable, accrued and other liabilities and non-income taxes payable | | 6,941 | | (10,462) | | (124.4) |
Deferred revenue | | (175) | | (216) | | (2.6) |
Content assets | | (4,659) | | (3,182) | | (37.8) |
Content liabilities | | 3,266 | | 171 | | 2.0 |
Net cash provided by/(used in) operating activities | | 8,561 | | (4,049) | | (48.2) |
CASH FLOWS PROVIDED BY/(USED IN) INVESTING ACTIVITIES: | | | | | | |
Purchases of property and equipment and intangible assets | | (3,559) | | (17,983) | | (213.9) |
Proceeds from sale of property and equipment | | 23 | | 13 | | 0.2 |
Acquisitions of businesses, net of cash acquired | | (7,228) | | (820) | | (9.8) |
Investments in non-marketable equity securities | | (110) | | (251) | | (3.0) |
Investments in marketable equity securities | | (8,447) | | - | | - |
Proceeds from sale of marketable equity securities | | 157 | | 5,859 | | 69.7 |
Investments in debt securities | | - | | 100 | | 1.2 |
Investments in term deposits | | (130,310) | | (2,000) | | (23.8) |
Maturities of term deposits | | 100,171 | | 23,769 | | 282.7 |
Loans granted | | (86) | | (12) | | (0.1) |
Proceeds from repayments of loans | | - | | 439 | | 5.2 |
Net cash provided by/(used in) investing activities | | (49,389) | | 9,114 | | 108.4 |
CASH FLOWS USED IN FINANCING ACTIVITIES: | | | | | | |
Proceeds from exercise of share options | | 620 | | - | | - |
Repurchases of share options | | (42) | | - | | - |
Payment of overdraft borrowings | | - | | (2,940) | | (35.0) |
Payment of contingent consideration and holdback amount | | (10) | | (29) | | (0.3) |
Payment for finance leases | | (74) | | (347) | | (4.1) |
Purchase of redeemable noncontrolling interests | | (637) | | (499) | | (5.9) |
Other financing activities | | (71) | | 284 | | 3.3 |
Net cash used in financing activities | | (214) | | (3,532) | | (42.0) |
Effect of exchange rate changes on cash and cash equivalents, and restricted cash and cash equivalents | | 1,521 | | 5,381 | | 64.0 |
Net change in cash and cash equivalents, and restricted cash and cash equivalents | | (39,521) | | 6,914 | | 82.2 |
Cash and cash equivalents, and restricted cash and cash equivalents, beginning of period | | 132,446 | | 79,398 | | 944.3 |
Cash and cash equivalents, and restricted cash and cash equivalents, end of period | | 92,925 | | 86,312 | | 1,026.5 |
| | | | | | |
Reconciliation of cash and cash equivalents, and restricted cash and cash equivalents: | | | | | | |
Cash and cash equivalents, beginning of period | | 132,398 | | 79,274 | | 942.8 |
Restricted cash and cash equivalents, beginning of period | | 48 | | 124 | | 1.5 |
Cash and cash equivalents, and restricted cash and cash equivalents, beginning of period | | 132,446 | | 79,398 | | 944.3 |
| | | | | | |
Cash and cash equivalents, end of period | | 92,878 | | 86,047 | | 1,023.3 |
Restricted cash and cash equivalents, end of period | | 47 | | 265 | | 3.2 |
Cash and cash equivalents, and restricted cash and cash equivalents, end of period | | 92,925 | | 86,312 | | 1,026.5 |
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, | ||
| 2021 | 2022 | Change |
Total revenues | 73,136 | 106,010 | 45% |
Less: traffic acquisition costs (TAC) | 5,401 | 6,146 | 14% |
Ex-TAC revenues | 67,735 | 99,864 | 47% |
Reconciliation of Adjusted EBITDA to U.S. GAAP Net Income/(loss)
In RUB millions | Three months ended | ||
| 2021 | 2022 | Change |
Net income/(loss) | (3,220) | (13,037) | 305% |
Add: depreciation and amortization | 5,257 | 7,467 | 42% |
Add: SBC expense | 5,804 | 6,265 | 8% |
Add: compensation expense related to contingent consideration | 227 | (27) | n/m |
Less: interest income | (1,177) | (1,362) | 16% |
Add: interest expense | 793 | 620 | -22% |
Add: loss/(income) from equity method investments | 1 | 365 | n/m |
Less: other income/(loss) | (459) | (1,538) | 235% |
Add: income tax expense | 3,795 | 2,518 | -34% |
Adjusted EBITDA | 11,021 | 1,271 | -88% |
Reconciliation of Adjusted Net Income/(loss) to U.S. GAAP Net Income/(loss)
In RUB millions | Three months ended March 31, | ||
| 2021 | 2022 | Change |
Net income/(loss) | (3,220) | (13,037) | 305% |
Add: SBC expense | 5,804 | 6,265 | 8% |
Add: compensation expense related to contingent consideration | 227 | (27) | n/m |
Less: foreign exchange gains/(losses) | (264) | (1,672) | n/m |
Add: income tax attributable to foreign exchange gains/(losses) | 73 | 308 | 322% |
Add: amortization of debt discount and issuance costs | 517 | 53 | -90% |
Less: income tax attributable to amortization of debt discount and issuance costs | (129) | (14) | -89% |
Adjusted net income/(loss) | 3,008 | (8,124) | n/m |
Reconciliation of Adjusted EBITDA Margin U.S. GAAP Net Loss Margin
In RUB millions | | | | | | |
| U.S. GAAP Actual Net Loss | Net Loss Margin (1) | Adjustment (2) | Adjusted EBITDA | Adjusted EBITDA Margin (3) | |
Three months ended March 31, 2022 | (13,037) | -12.3% | 14,308 | 1,271 | 1.2% | |
| (1) | Net income/(loss) margin is defined as net income/(loss) divided by total revenues. |
| (2) | Adjusted to eliminate depreciation and amortization expense, SBC expense, accrual of expense related to contingent consideration, interest income, interest expense, income/(loss) from equity method investments, other income(loss), net, and income tax expense. For a reconciliation of adjusted EBITDA to net loss, please see the table above. |
| (3) | Adjusted EBITDA margin is defined as adjusted EBITDA divided by total revenues. |
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
Exhibit 99.2
April 27, 2022
Yandex Q1 2022 Earnings: Letter to Shareholders
1. Introduction and Overview
| ● | Current geopolitical tensions and their impact on the Russian and global economy have created an exceptionally challenging environment for our businesses, as we navigate through extreme political volatility, the continued threat of new sanctions and export controls on different economic sectors, as well as rapidly evolving legislation in Russia. We provided detailed information on our risk exposure and the possible adverse impacts on our businesses in our Annual Report on Form 20-F dated April 20, 2022. |
| ● | Given significant changes to the external environment and the high degree of uncertainty about future geopolitical developments, our visibility over the short- and medium-term is limited. In these circumstances our previous guidance for 2022 should no longer be relied upon and we are not able to provide any forward-looking comments at this stage. We may resume providing our financial outlook for future periods when there is greater clarity over the macro environment in general and the impact on Yandex in particular. |
| ● | On February 28, 2022, Nasdaq and the New York Stock Exchange suspended the trading in securities of a number of companies with material operations in Russia, including our Class A shares. Trading in our shares on Nasdaq remained halted as of the date of this Letter to Shareholders and we have no visibility on when and whether trading may be resumed. Since early March we have received no information requests from Nasdaq and our understanding is that Nasdaq continues to review our case along with the cases of other companies whose shares were also suspended from trading. In the event that we do receive written notice from Nasdaq to formally delist our Class A shares, we may appeal against such action. We are currently reviewing alternative options in order to provide our shareholders an ability to trade our shares, including considering the possibility of listing on another international stock exchange in due course. |
| ● | In addition, trading in our shares on Moscow Exchange (MOEX) was suspended on February 28, 2022, and resumed on March 29, 2022. Despite our secondary listing on this market, our shares are currently subject to limited liquidity due to recently adopted legislation which prohibits non-Russian shareholders from selling shares on MOEX. Moreover, given that the international settlement systems have remained closed for trading in rubles and in any securities of Russian businesses, it is currently not possible for trades to settle between shareholders that acquired our shares on Nasdaq and investors on MOEX. We are monitoring this situation and exploring alternative options to address the interests of all our shareholders. |
| ● | We note that the recently passed law that would require Russian entities to delist their depositary receipts from stock exchanges outside Russia does not affect our company. Yandex N.V. is a Netherlands registered company, which has ordinary shares listed on Nasdaq (not depositary receipts). |
| ● | As a result of the Nasdaq trading suspension, the holders of our USD 1.25 billion convertible notes due in 2025 currently have the right to require us to redeem their notes at par plus accrued interest. As we have already announced in March, we do not currently have sufficient funds to redeem the notes in full. At this stage, we are engaged in active discussions with a committee of noteholders to restructure these obligations and we continue to do everything we can to find a fair and reasonable solution for all parties. |
| ● | We have taken certain measures to conserve cash, and are considering our capital allocation and budget in light of this period of uncertainty as we seek to safeguard the interests of our shareholders and other stakeholders. That said, we remain committed to continue investing in the development of our key businesses and services, including advertising, mobility, e-commerce, streaming, cloud and many others. |
| ● | We are also focused on the wellbeing of our more than 19 thousand employees, who are mostly located in Russia. During the first quarter of 2022 the number of our employees increased by 6% (or by 47% compared to Q1 2021); our staff turnover remained at its usual level. We do not plan any widescale relocation of our employees from Russia. In March 2022, we incurred one-off personnel expenses due to additional one-off salary payments to employees in order to support them on the back of macroeconomic instability, including currency volatility and accelerated inflation. These |
| extra expenditures amounting to RUB 5.9 billion adversely affected our adjusted EBITDA and adjusted Net income in Q1 2022. |
| ● | We experienced continued stable operations and strong growth across most of our businesses through February 23, 2022. In the last five weeks of the first quarter, our operations in certain businesses were adversely affected, which is reflected in our results for the full first quarter. |
| ● | Total group revenue increased by 45% year-on-year in Q1 2022 and reached RUB 106.0 billion, with the share of non-advertising businesses growing to 61%. The revenue growth was driven mainly by our E-commerce, Mobility and Advertising businesses. Our adjusted EBITDA (excluding the impact of one-off personnel expenses) came to RUB 7.2 billion. |
| ● | Below are additional comments on our Q1 2022 results by key businesses, including Search & Portal, our new segment E-commerce, Mobility and Delivery, as well as other businesses, including Media Services and Cloud. |
2. Search & Portal and Advertising
| ● | In Q1 Search & Portal revenues increased by 25.4% year-on-year, supported by further improvements in our advertising products and technologies, including for SMB clients, as well as leading search share positions (with the largest share gains on iOS, which provides access to a more affluent customer base). |
| ● | During January and the first half of February our Search & Portal advertising revenues performed ahead of our expectations in the high-twenties. Since late February we began to see an impact on our advertising revenue on the back of the postponed marketing budgets of some of our clients, including multinational companies, many of which decided to suspend or unwind their operations and investments in Russia. These trends were particularly visible in categories such as Auto, Consumer Electronics, FMCG, Home Appliances, Finance and Insurance. Among the best performing sectors since late February were Home and Garden, Building & Repair, Real Estate, Education and Employment. The sector trends in April remain largely similar. |
| ● | In terms of partners, our SMB segment demonstrated better resilience and was the key contributor to the growth we achieved in the quarter, while the segment of large clients was more significantly affected in March by the withdrawal of multinational advertisers from the market and the suspension of advertising budgets by domestic businesses. |
| ● | Our search share continued gaining traction across all platforms. In Q1 we have seen especially strong momentum in our iOS search share, which increased to 46.1%, up 4.2 pp year-on-year, and hit 47.9% in the last week of March, up 5.4 pp year-on-year. Our search share on Android also continued to grow and reached 59.9% as of Q1 2022. Demonstrating solid performance on both iOS and Android, our total search share increased to 61.0%, 0.8 pp higher compared to the previous quarter and 1.0 pp higher year-on-year. |
| ● | Our clients continue benefiting from our conversion-based proposition. In Q1 2022 conversion-oriented strategies contributed over 1/3 to Search & Portal ad revenue and over a half to Yandex’s ad network revenue. These strategies allow advertisers to spend their budgets more efficiently and receive better returns, which becomes even more important during periods of macro uncertainty. |
| ● | In order to further support our SMB clients through these difficult times, we launched campaigns aimed at helping new SMB clients efficiently target their audience through Yandex Direct and Yandex Business. In April, new users of Yandex Direct could get 100% cash back on advertising expenditures. In addition, we doubled ad budgets for new clients of Yandex Business. Thousands of our SMB partners have already benefited from these support measures (with up to RUB 100 000 to their ad budgets). |
| ● | Given limited visibility on future economic performance in Russia it is difficult for us to provide guidance for our advertising business at this stage. However, our fundamentals remain solid, we see further opportunities to gain share in search and also in online advertising markets, and we intend to seize these opportunities. The growth of our Search & Portal ad revenues in April remains in positive double-digit territory, which we consider healthy under current circumstances. |
3. Mobility
| ● | In Q1 2022 our mobility business demonstrated strong performance, with ride-hailing having exceeded our internal expectations, including in March. Our Mobility orders increased 36%, driven by ride-hailing, as we continued seeing |
| strong demand for shared transportation services in our core geographies. We ended the quarter with over 34.4 million active riders in our Yandex Go app, which grew 23% year-over-year, with 97% of them using ride-hailing services. Although the number of active monthly users in ride-hailing increased more slowly than rides, growth in trips in Q1 2022 was fueled by a further continuous increase in user frequency. In March 2022 an average active rider took 7.9 trips per month, up from what was already 7.6 trips in December 2021, which is typically a seasonally strong month. |
| ● | Our Mobility GMV increased 40% year-on-year. In Q1 2022 the gap between growth rates in rides and GMV narrowed compared to Q4 2021 as a result of typical seasonality, exacerbated by a number of factors: the growing number of drivers on the platform, resulting in lower surge coefficients, and narrowing share of premium tariffs and airport rides towards the end of the quarter. GMV growth of ride-hailing was also offset by the dynamics of our car-sharing business Drive, which demonstrated slower year-on-year growth in GMV, compared to ride-hailing, on the back of a slight decrease in the size of fleet and lower B2C utilization, which was partially mitigated by the faster than expected growth of our long-term subscription service and B2B car-sharing, which is our primary focus. |
| ● | Our Mobility revenues increased 47% year-on-year in Q1 2022, with solid ride-hailing revenue growth being offset by a slower increase of Drive revenues. Although mobility revenue growth rates accelerated in March compared to year-on-year growth rates in February. |
| ● | While the performance of our Mobility business continues demonstrating solid growth in rides and GMV, and our key metrics for April-to-date are in line or slightly above our initially budgeted expectations in the beginning of the year, we decided to withdraw our 2022 growth outlook for our Mobility business in line with our overall guidance as a result of the unstable macroeconomic situation and limited visibility for the market performance and consumer spending. |
| ● | We continued to focus on the wellbeing of our partners. In early 2022, we expanded our voluntary social program to support drivers and couriers on our platform. Approximately 500 thousand drivers and couriers are now able to receive compensation in the event of an accident or sick leave. During the quarter, we cooperated closely with Fleet Management Companies (FMC’s) to help support their continuous operations on the back of a sharp rise in financial lease rates due to a significant increase of the key interest rate in Russia. |
4. E-commerce
| ● | In Q1 2022 our total E-commerce GMV grew 2.6 times year-on-year and amounted to RUB 64.6 billion; Yandex Market separately delivered 2.8 times year-on-year growth in the quarter and reached GMV of RUB 49.3 billion. In late February and early March we saw a surge in consumer demand amid expectations of inflation and depreciation of the local currency, especially for durable goods. By the end of the quarter, growth rates and GMV category structure had normalized in accordance with usual seasonality. The normalization of growth rates after peak demand in February-March has continued in April. |
| ● | In Q1 2022, the share of 3P Yandex Market GMV was 81%, reaching as high as 90% in the peak time in February and March 2022, underpinning resilience and vibrancy of our marketplace. We were balancing our 1P/3P assortment to ensure business stability and provide our customers with a full range of SKUs both during the quarter and for the foreseeable future. |
| ● | The number of SKUs reached 26.1 million by the end of the quarter and has further increased to over 30 million as of April 25th. Despite certain challenges with supply chain and the reduced presence of multinational brands in Russia, we believe we will still be able to provide a large selection of goods on our marketplace. In April we pioneered a re-sale initiative among the largest online marketplaces starting from the consumer electronics category; we plan to expand our offer of second-hand goods to the DIY and Kids categories in the near-term. |
| ● | Yandex Market was the first among Russian marketplaces to offer support to merchants since the beginning of the current geopolitical crisis, which helped to ensure availability of a wide range of goods on our marketplace. In March, the number of active sellers (who made at least 1 sale in the last 1 month prior to the reporting date) reached 28.3 thousand, while the number of total unique sellers listed on our platform reached 42 thousand. During periods of increased consumer demand in February-March, sellers on the marketplace received daily payments, helping them navigate challenging funding environment. We have also introduced additional support measures (depending on the category), including reduced commissions for express delivery, free advertising and free of charge storage at our warehouses. |
| ● | As we said on our Q4 2021 earnings call, improvement of unit economics is our top priority for 2022 and this has not changed. The optimization of cash burn has become even more important in the current environment, and we have managed to materially reduce losses to GMV ratio in Q1 2022 compared to Q1 2021 (by 10 pp both for total E-commerce as well as for Yandex Market separately). Among the key drivers of our improved unit economics were optimization of promo and marketing activities, changes in our 1P pricing strategy (which allowed us to visibly improve our 1P gross margin), and finetuning investments in logistics infrastructure with the main focus on improving utilization of our existing warehouses. To further improve efficiency of our fulfillment operations, we launched our Fulfillment-as-a-Service offer for merchants that are not presented on our marketplace. We keep fine-tuning our 3P tariffs to ensure adequacy of value provided by the platform while keeping them at the most competitive level on the market. We continue to observe rational behavior of large e-commerce players both on end consumer pricing and take rates. |
| ● | Yandex Eats Grocery continued delivering triple-digit growth each month – orders grew 3.2 times and GMV rose 3.9 times year-on-year. The average check was positively affected by the CPI increase and a change in the mix of retail chains towards upper pricing segments. Solid demand and an increase in the number of items per order, as well as our targeted focus on unit economics throughout Q1 2022, allowed us to improve the efficiency of our operations, including logistics, and to decrease loss per order by 37% year-on-year in Q1 2022 and 50% year-on-year in March 2022 (adjusted for one-off personnel costs). April-to-date continues to demonstrate solid growth rates across orders and GMV, however we expect a normalization of growth on the back of the higher comparison base of 2021. The number of grocery stores on the platform was 3.2 thousand in March. |
| ● | Yandex Lavka operated 431 darkstores in Russia as of the end of March 2022, including the darkstores that we launched in collaboration with Yandex Market in the Russian regions to attract users and boost user frequency of our e-commerce outside the capitals. In March 2022 Lavka demonstrated a record number of orders, above seasonally strong December 2021. Lavka GMV in Russia increased 1.8 times year-on-year and demonstrated an acceleration of GMV growth compared to Q4 2021 year-on-year growth rate, while unit economics per order continued to improve. Loss per order in our core Lavka business decreased by 72% in March 2022 compared to March 2021 (excluding one-off personnel cost effect). Throughout Q1 we saw a solid increase in ‘on-demand’ Yandex Market orders delivered through Lavka. In March 2022, the share of such orders was up 6 pp year-on-year and reached 10% of total orders in Russia, while in Moscow it gained 10 pp year-on-year and is approaching one fifth of all Market orders in Moscow. We see strong synergies between the instant grocery delivery business model and our e-commerce business and will continue to develop these value-added synergies further. |
5. Additional comments on fast-growing businesses
| ● | In Q1 2022 our Food Delivery orders were up 42% year-on-year, while GMV increased 61% year-on-year. This solid performance was achieved despite the high base effect of last year and the sizable effect of the suspension of McDonalds services in Russia starting from mid-March. We finished March with 36.2 thousand restaurants on the platform, up 1.8 thousand from December, excluding the closed McDonalds stores from both periods. Throughout Q1 2022 we were focused on the further improvement of unit economics. Our Food Delivery service significantly decreased losses in absolute terms in Q1 2022 compared to Q1 2021 and Q4 2021, and improved its adjusted EBITDA margin from negative mid-single digits to negative low-single digits as a percentage of GMV, despite additional one-off personnel costs incurred in March 2022. |
| ● | Delivery (Logistics) continued to demonstrate high growth rates despite a solid base effect in Q1 2021. GMV and deliveries of the business were up 2.2 times year-on-year each in Q1 2022. Our B2B partner base expanded to 32 thousand businesses. The Delivery business also demonstrated a significant improvement in unit economics: excluding one-off personnel costs incurred in March 2022, absolute losses of the business in Q1 2022 were broadly unchanged vs. losses in Q1 2021, despite the fact that the business grew two times year-on-year. |
| ● | Media services finished Q1 2022 with 12.2 million Yandex Plus subscribers (up 36% year-on-year), which supported the solid 67% year-on-year growth of the segment’s revenue. KinoPoisk has further strengthened its number one position on the video-on-demand market, based on a GfK report for Q1 2022, with 5.8 million viewing subscribers. |
| ● | Cloud revenue grew by a strong 159% year-on-year in Q1 2022. The growth rate was supported by a higher share of value-added services in the mix as well as by an increasing demand for our services on the back of product portfolio expansion, and our investments in quality improvement, which enabled us to gain market share in light of the suspension of activities by international competitors. These solid trends continued in April. |
FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts, including, without limitation, statements regarding our future financial and business performance, our business and strategy and the impact of the COVID-19 pandemic on our industry, business and financial results, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “guide,” “intend,” “likely,” “may,” “will” and similar expressions and their negatives are intended to identify forward-looking statements. 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, the impact of the ongoing COVID-19 pandemic and regulatory and business responses to that crisis, 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, 2021 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 20, 2022 and November 18, 2019, respectively, and are available on our investor relations website at https://ir.yandex/sec-filings and on the SEC website at https://www.sec.gov/. All information in this document is as of April 27, 2022, and Yandex undertakes no duty to update this information unless required by law.
USE OF NON-GAAP FINANCIAL MEASURES
To supplement the financial information prepared and presented in accordance with U.S. GAAP, we present the following non-GAAP financial measures: adjusted EBITDA and adjusted EBITDA 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. 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. 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 in Yandex’s press release dated April 27, 2022.