EquityStory.RS, LLC-News: Yandex N.V. / Key word(s): Quarter Results/Quarter Results
Yandex Announces Second Quarter 2022 Financial Results
MOSCOW and AMSTERDAM, the Netherlands, July 26, 2022 -- Yandex (NASDAQ and MOEX: YNDX), one of Europe's largest internet companies, today announced its unaudited financial results for the second quarter ended June 30, 2022.
Q2 2022 Financial and Operational Highlights1,2
(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 51.1580 to $1.00, the official exchange rate quoted as of June 30, 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. 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) 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.
(4) 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.
(5) 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.
Given that uncertainty concerning future geopolitical developments and the macro environment remains high, our visibility over the short- and medium-term is limited and we remain unable to provide any forward-looking outlook at this stage. We aim to remain transparent about the performance and key trends across our businesses with our quarterly Letter to Shareholders.
Corporate and Subsequent Events
The following table provides a summary of our key consolidated financial results for the three and six month periods ended June 30, 2021 and 2022:
Our segment disclosure is provided in the Segment financial results section below.
Cash, cash equivalents and term deposits as of June 30, 2022:
Segment financial results
Starting in Q2 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:
Search & Portal
Our Search and Portal segment includes Search, Geo, Yandex 360, Weather, News, Travel, Alice voice assistant and a number of other services offered in Russia, Belarus and Kazakhstan.
Key operational trends:
Revenues increased by 31% and Revenues Ex-TAC grew by 34% year-on-year in Q2 2022. The growth was driven by solid trends in both the Yandex Advertising Network and our core search business (supported by further improvement of our search share, especially on iOS) with SMB (small and medium business) clients leading the growth. This solid performance was underpinned by the ongoing improvement in ad technologies and products (including for SMB) as well as market share gains resulting from the reallocation of advertising budgets on the back of the changes in competitive landscape.
Adjusted EBITDA margin came to 55.6% in Q2 2022 significantly improving compared with 47.3% in Q2 2021. The key drivers behind the margin expansion were rigorous cost control and optimization of the volume and timing of certain operational expenses (in light of the overall group’s focus on cash preservation and stricter capital allocation) as well as a positive operating leverage effect driven by strong advertising revenue growth.
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, our car-sharing business for both B2C and B2B and scooters; (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 the 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:
(6) An active buyer is a buyer who made at least 1 purchase in the last 12 months prior to the reporting date.
(7) An active seller is a seller who made at least 1 sale in the last 1 month prior to the reporting date.
(8) 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.
(9) 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 29% year-on-year in Q2 2022, driven by the similar increase in number of rides, driven by growth of rider base and their frequency. The growth in GMV of E-commerce reached 67% year-on-year in Q2 2022 affected by the higher focus on cash preservation this quarter as well as the normalization of the overall e-commerce market growth post peak demand in March 2022. The growth in GMV of other O2O services reached 56% year-on-year in Q2 2022, with Yandex Delivery, closely followed by Yandex Food Delivery service, being the largest contributors.
The E-commerce, Mobility and Delivery segment revenues increased by 53% year-on-year, mainly driven by Mobility and E-commerce services (where Yandex Lavka was the largest contributor to growth, followed by Yandex Market). Mobility revenues increased by 62%, driven by solid growth in rides and GMV in ride-hailing as well as by improvement in marketplace efficiency and driver supply. E-commerce revenues increased by 36% in Q2 2022 compared to Q2 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 84% in Q2 2022 compared with 70% in Q2 2021). 1P revenues grew 20% year-on-year supported by the growth of Yandex Lavka (on the back of the controlled expansion in the number of dark stores in selected regions) and partly offset by a decrease in Yandex Market 1P sales (mostly as a result of planned strategy to preserve stock aimed at reduction of shortages in light of the increased complexity of the supply chain). Commission and other E-Commerce revenues grew by 109% due to 3P GMV growth and an improved effective take rate in Yandex Market. Other O2O services revenues delivered solid 80% year-on-year growth primarily driven by the growth of Yandex Delivery and Yandex Food Delivery, with Yandex Lavka Israel being the third largest contributor to the 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 business growing from a low base as well as the growing volume of Yandex Market orders delivered using our Yandex Drive fleet.
Adjusted EBITDA of E-commerce, Mobility and Delivery was RUB 2,139 million in Q2 2022 compared to an adjusted EBITDA loss of RUB 9,062 million in Q2 2021. This significant increase in profitability was driven primarily by improvements in operational efficiency across most of the key businesses included in the segment, as well as a group-wide focus on cash generation and stricter cost control, which included a hiring freeze, optimization of marketing expenses and other overheads, among others.
Plus and Entertainment Services
The Plus and Entertainment Services segment includes our subscription service Yandex Plus, Yandex Music, Kinopoisk, Yandex Afisha and our production center Yandex Studio.
Key operational trends:
Plus and Entertainment Services revenues grew 50% in Q2 2022 compared with Q2 2021. The increase was primarily driven by the growth of subscription revenue on the back of the expanding base of paid subscribers and changes in tariff mix, as well as good performance in other revenue streams (including licensing and Afisha). Adjusted EBITDA loss of RUB 2.6 billion reflects the increase of the business growth to underpin expansion of the Yandex Plus subscriber base.
The Classifieds segment includes Auto.ru, Yandex Realty and Yandex Rent.
Classifieds revenues increased by 5% in Q2 2022 compared with Q2 2021. The positive growth was supported by improvements in our monetization strategies and value-added services, increased dealers’ retention as well as strong performance of Yandex Realty, which offset the adverse impact of the significant downturn on a new car market. Adjusted EBITDA amounted to RUB 0.5 billion in Q2 2022 compared with RUB 0.7 billion in Q2 2021 with margin decreasing 11 pp year-on-year as a result of the revenue growth deterioration, partially offset by the group-wide cost optimization.
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 number of other experiments.
Other Business Units and Initiatives revenues increased 107% year-on-year in Q2 2022, driven mainly by Devices, Cloud and Education. Devices revenue increased 165% year-on-year to RUB 4.3 billion in Q2 2022 driven by solid demand for our smart devices, including the recently launched second generation of the flagship Yandex Station, supported by the gradual recovery of logistics and production in China after COVID-related lockdowns. Cloud revenue grew 207% year-on-year, which was driven by the increasing demand for Cloud services and solid improvement in our market share on the back of the product portfolio expansion and changing competitive landscape on the domestic market.
The adjusted EBITDA loss amounted to RUB 2.9 billion (including RUB 1.5 billion investments on SDG), compared to RUB 2.8 billion in Q2 2021. The segment demonstrated a material improvement of relative losses as a percentage of revenue primarily driven by solid performance in Cloud and Devices, which have now both reached positive Adjusted EBITDA for the first time.
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.