Operating Expenses

​

​

Total operating expenses increased 27% in Q2 2022 compared with Q2 2021, decelerating from 45% year-on-year growth in Q1 2022. The increase was mainly due to personnel expenses and headcount growth across most of our business units attributed to the growth of the business, сost of revenues related to E-commerce, Mobility and Delivery businesses and Plus and Entertainment services, partially mitigated by the optimization of advertising and performance marketing activities.

​

TAC grew 18% in Q2 2022 compared with Q2 2021 and represented 6.2% of total revenues, down 142 basis points compared with Q2 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 34% in Q2 2022 compared with Q2 2021. The growth was primarily related to settlement of Business Unit Equity Awards in cash, which led to additional cost recognized immediately in Q2 2022. As disclosed in our Annual Report, in light of the current geopolitical and macroeconomic crisis and suspension of trading in our Class A shares on Nasdaq, our Board of Directors approved an amendment of our outstanding equity incentive awards. Accordingly, during the remainder of 2022 participants will receive cash compensation on the vesting dates of the relevant equity awards, in an amount equal to the target value of each tranche of such awards.

​

Income/(loss) from operations

​

​

Income from operations amounted to RUB 8.7 billion in Q2 2022 compared to loss from operations of RUB 4.7 billion in Q2 2021. The increase of the income reflects the improvement of Adjusted EBITDA to RUB 25.7 billion from RUB 5.8 billion in Q2 2021 on the back of the increased operational efficiency and stricter cost control across the group.

​

Other income/(loss), net for Q2 2022 was loss of RUB 6,105 million, down from income of RUB 230 million in Q2 2021. Other income/(loss), net includes foreign exchange losses in the amount of RUB 5,903 million and RUB 555 million in Q2

​

2022 and Q2 2021 respectively. The increase of foreign exchange losses reflects the appreciation of Russian ruble against to US dollar by 64% and 5% during Q2 2022 and Q2 2021 respectively.

​

Income tax expense for Q2 2022 was RUB 3,732 million, up from RUB 485 million in Q2 2021. Our effective tax rate in Q2 2022 was positive of 31.7% compared to negative tax rate of 11.6% in Q2 2021. If we remove the effects of deferred tax asset valuation allowances, SBC expense, tax on dividends, tax provisions recognized, tax effects on debt relief income exemption and permanent difference both related to restructuring of convertible debt, our effective tax rate for Q2 2022 was 20.5%, compared to 21.3% for Q2 2021 as adjusted for similar effects, except of those related to restructuring of convertible debt. The change in the tax rate without above-mentioned effects was primarily driven by the permanent difference between US GAAP and tax accounting in the books of certain of our subsidiaries and reduced tax rate in certain Russian subsidiaries.

​

Net income was RUB 8.1 billion in Q2 2022, compared with net loss of RUB 4.7 billion in Q2 2021. The changes were mainly attributable to significant growth of operational profitability, as well as a gain on restructuring of our convertible debt in Q2 2022 which were partly offset by growth of foreign exchange losses and income taxes.

​

Net cash flow from operating activities for Q2 2022 was RUB 20.9 billion ($408.1 million) and capital expenditures were RUB 7.7 billion ($150.6 million).

​

The total number of shares issued and outstanding as of June 30, 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, 2.1 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 12.6 million shares, of which RSUs to acquire 6.2 million shares were fully vested; performance share units (PSUs) for 0.3 million shares; synthetic options for 2.0 million, 0.7 million of which were fully vested; Business Unit Equity Awards for 1.9 million, 1.2 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 and suppliers from the Russian market. We provided detailed information on our risk exposure and possible adverse impacts on our businesses 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 the 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 June 30, 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 current geopolitical and macroeconomic developments and of the continuing 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, macroeconomic and geopolitical developments affecting the Russian economy or our business, changes in the political, legal and/or regulatory environment, the impact of the ongoing COVID-19 pandemic and regulatory and business responses to that crisis, 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 July 26, 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 and Adjusted net income. 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:

​

​

​

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 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 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 as it is non-cash in nature and is not indicative of our ongoing operating performance.

​

Expenses related to contingent consideration

​

We may incur expenses in connection with acquisitions that are not indicative of our recurring core operating performance. In particular, we are required under U.S. GAAP to accrue as an expense the contingent compensation that is payable to certain employees in connection with certain business combinations. We eliminate these acquisition-related expenses from adjusted EBITDA and adjusted net income to provide management and investors a tool for comparing on a period-to-period basis our operating performance in the ordinary course of operations.

​

Goodwill and other intangible assets impairment

​

Adjusted net income and adjusted EBITDA for Q2 2022 exclude a loss from intangible assets impairment related to E-commerce, Mobility and Delivery business of RUB 2,740 million (the amount of excess of fair value of intangible assets over its carrying value) and related income tax gain of RUB 548 million.

​

​

Gain on restructuring of convertible debt

​

Adjusted net income, adjusted EBITDA and related margin measures for Q2 2022 exclude gain on restructuring of our convertible debt. Adjusted net income for Q2 2022 and its margin measures also exclude income tax attributable to this gain. In June 2022, Yandex completed the purchase of 93.2% in aggregate principal amount of its $1.25 billion 0.75% Convertible Notes due 2025 and provided with a call option giving a right to redeem all remaining Notes ending on September 12, 2022. As a result of the restructuring, a gain in the amount of RUB 9,305 million and a related income tax expense in the amount of RUB 751 million were recognized.

​

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.

​

*  Derived from audited consolidated financial statements

​

​

​