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Yandex Announces Third Quarter 2022 Financial Results

EquityStory.RS, LLC-News: Yandex N.V. / Key word(s): Quarter Results/Quarter Results
Yandex Announces Third Quarter 2022 Financial Results
03.11.2022 / 13:00 MSK
The issuer is solely responsible for the content of this announcement.

Yandex Announces Third Quarter 2022 Financial Results

 

MOSCOW and AMSTERDAM, the Netherlands, November 3, 2022 -- Yandex (NASDAQ and MOEX: YNDX), a Dutch public limited company and one of Europe's largest internet businesses, today announced its unaudited financial results for the third quarter ended September 30, 2022.

 

Q3 2022 Financial and Operational Highlights1,2

 

 

 

 

 

 

In RUB millions

 

Three months ended September 30

 

 

2021

2022

Change

 

  Total Revenues

 91,305

 133,163

46%

 

  Total Adjusted EBITDA

 5,622

 20,003

256%

Total Group

Total Adjusted EBITDA margin, %

6.2%

15.0%

8.8 pp

 

  Net income/(loss)

 (3,908)

 45,541

n/m

 

Including one-off non-cash gain as a result of the News and Zen deconsolidation

 -

 38,051

n/m

 

  Adjusted Net Income

 1,340

 5,009

n/m

 

  Share of Russian search market, %

59.3%

62.0%

2.7 pp

 

  Search share on Android, %

58.9%

61.9%

3.1 pp

 

  Search share on iOS, %

42.8%

48.3%

5.5 pp

Search and

  Revenues

 41,951

 60,853

45%

Portal

  Revenues Ex-TAC

 34,313

 50,710

48%

 

  Adjusted EBITDA

 20,995

 33,789

61%

 

Adjusted EBITDA margin, %

50.0%

55.5%

5.5 pp

 

  Revenues

 42,509

 63,348

49%

E-Commerce, Mobility

  GMV of Mobility3

 156,136

 198,041

27%

 and Delivery

  GMV of E-commerce4

 41,825

 72,465

73%

 

  GMV of other O2O services5

 34,063

 46,649

37%

 

  Total Adjusted EBITDA

 (10,647)

 (2,402)

-77%

Plus and Entertainment Services

  Yandex Plus subscribers, MM

 10.3

 15.8

53%

 

(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 57.4130 to $1.00, the official exchange rate quoted as of September 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 and Delivery Club 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 and Yandex Fuel services, the value of orders, delivered through the Yandex and Delivery Club Food Delivery services, Lavka Israel, and several other smaller O2O experiments, including VAT.

 

Financial outlook

 

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 expectations 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

 

  • On September 12, 2022, Yandex’s Russian operating subsidiary completed the sale of its news aggregation platform and Zen infotainment service, together with the acquisition of 100% of the food delivery service Delivery Club. The transaction marked a strategic decision to exit media businesses (other than entertainment streaming). In line with this strategic focus, ya.ru has now become Yandex’s main page and the key entry point into our Search, Mail and other non-media services.

  • As of October 31, 2022, we purchased 99.1% in aggregate principal amount of the $1,250,000,000 0.75% Convertible Notes due 2025. In addition, we have issued 2.5 million Class A shares (2.2 million at the end of Q3 and the remaining in October 2022) as a part of the purchase price under the repurchase agreements, as permitted under General License No. 45 issued by the Office of Foreign Assets Control. The Company remains committed to satisfying its obligations on the remaining Notes (less than 1% of aggregate principal amount) and has available resources to do so.

  • As of the date of this press release, trading in our Class A shares on Nasdaq remains suspended. There is still no clarity on when and whether trading on Nasdaq may be resumed. Trading on the Moscow Exchange continues, however the international settlement systems remain closed for trading in rubles and in securities of Russian businesses. The liquidity of our shares on the Moscow Exchange remains limited to the number of shares held in the Russian National Stock Depository (NSD) system.

  • Neither Yandex N.V. nor any of its group companies is a target of sanctions in the United States, European Union, Switzerland or United Kingdom, and the Yandex group is not owned or controlled by any persons who have been designated under such sanctions. Yandex continues to closely monitor developments in this regard.

 

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, team and shareholders.

 

These developments have adversely impacted (and may in the future materially adversely impact) the macroeconomic climate in Russia, resulting in 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. In addition, laws or regulations may be adopted that may adversely affect our non-Russian shareholders and the value of the shares they hold in our company. 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 on April 20, 2022.

 

We continue to provide services to our users and partners with no interruptions. We are taking appropriate measures to conserve cash and to 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 as well as the macroeconomic climate and consumer sentiment in Russia and we are assessing contingency plans to address potential developments. Our Board and management are focused on the wellbeing of our approximately 20,000 employees in Russia and abroad (in particular in light of the recent mobilization), while doing everything we can to safeguard the interests of our shareholders and other stakeholders.

 

Consolidated Results

 

The following table provides a summary of our key consolidated financial results for the three and nine month periods ended September 30, 2021 and 2022:

 

 

 

 

 

 

 

 

In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2021

2022

Change

2021

2022

Change

Revenues

 91,305

 133,163

46%

 245,843

 356,921

45%

Ex-TAC revenues

 84,430

 123,940

47%

 227,336

 334,216

47%

Income/(loss) from operations

 (5,684)

 10,797

n/m

 (10,674)

 7,109

n/m

Adjusted EBITDA

 5,622

 20,003

256%

 22,423

 46,968

109%

Net income/(loss)

 (3,908)

 45,541

n/m

 (11,792)

 40,560

n/m

Adjusted net income

 1,340

 5,009

n/m

 5,360

 10,019

87%

 

Except for changes to our segments, a summary of which is set out below, starting in Q3 2022 we introduced the following changes which were applied prospectively to the presentation of our segment financial results:

  • Due to settlement of the RSU equity awards of our employees in cash in relation to the remainder of 2022 and the whole of 2023, we include the relevant share-based compensation expense in our calculation of the adjusted EBITDA, our segments’ measure of profit and loss;

  • To obtain a clearer picture of our segment operating performance, we have segregated certain corporate expenses from our segments’ adjusted EBITDA. These corporate expenses include administrative costs, such as finance and legal, as well as other expenses not directly attributable to our segments. Unallocated corporate expenses are now presented within the Other Business Units and Initiatives category;

  • We began consolidating the financial results of Delivery Club from the closing date of September 8, 2022 (which is the date of completion of this part of the transaction); these are now included in the E-commerce, Mobility and Delivery segment;

  • Starting September 12, 2022, we deconsolidated News and Zen from Yandex’s consolidated financial results as a result of completion of the sale. The financial results of News and Zen were previously included in the Search & Portal segment and the Other Business Units and Initiatives category, respectively.

 

Our segment disclosure is provided in the Segment financial results section below.

Cash, cash equivalents and term deposits as of September 30, 2022:

  • RUB 101.1 billion ($1,760.9 million) on a consolidated basis.

 

Segment financial results

 

Starting in Q3 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 transferred Yandex Travel, our travel aggregator service, from Search & Portal to the Classifieds segment; and

  • We transferred Yandex Fuel, our contactless payment service at gas stations, from Search & Portal to our other O2O businesses within 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 (up to September 12, 2022 when the deconsolidation transaction was completed), Alice voice assistant and a number of other services offered in Russia, Belarus and Kazakhstan.

 

Key operational trends:

  • Share of Russian search market, including mobile, averaged 62.0% in Q3 2022, up from 59.3% in Q3 2021 and essentially flat from 62.1% in Q2 2022, according to Yandex Radar

  • Search share on Android in Russia was 61.9% in Q3 2022, up 3.1 pp from 58.9% in Q3 2021 and flat compared to 61.9% in Q2 2022, according to Yandex Radar

  • Search share on iOS in Russia was 48.3% in Q3 2022, up 5.5 pp from 42.8% in Q3 2021 and relatively stable compared to 48.4% in Q2 2022, according to Yandex Radar

  • Mobile search traffic was 69.3% of our total search traffic in Q3 2022. Mobile revenues represented 59.6% of our search revenues in Q3 2022

  • Search queries in Russia grew 4% in Q3 2022 compared with Q3 2021

 

 

 

 

 

 

 

In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2021

2022

Change

2021

2022

Change

Revenues

41,951

60,853

45%

115,457

154,989

34%

Revenues Ex-TAC

34,313

50,710

48%

94,429

130,101

38%

Adjusted EBITDA

20,995

33,789

61%

56,814

80,829

42%

Adjusted EBITDA margin

50.0%

55.5%

5.5 pp

49.2%

52.2%

3 pp

 

Revenues increased by 45% and Revenues Ex-TAC grew by 48% year-on-year in Q3 2022. The growth was mainly driven by the Yandex Advertising Network followed by Search on the back of continuing improvements in our ad technologies and products (especially focused on the e-commerce sector and SMB clients) as well as changes in competitive landscape, which led to an increase of our market share compared to last year. SMB remained the key contributor to the revenue growth, though large clients began to demonstrate a slight recovery as they usually tend to increase their advertising budgets towards the end of the year.

Adjusted EBITDA margin came to 55.5% in Q3 2022 compared with 50.0% in Q3 2021. The profitability was supported by savings related to advertising and marketing expenses (including the postponement of expenses to future periods), positive impact of the segregation of corporate overheads as well as the effect of positive operating leverage on the back of solid revenue growth. These factors helped to offset the moderate adverse effect from the divestment of News and Zen (given that the deconsolidation only took place towards the end of the quarter) as well as a decrease in margin due to the inclusion in adjusted EBITDA of stock-based compensation expenses related to RSU equity awards of our employees.

 

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, 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 services of Yandex Eats and Delivery Club (since September 8, 2022, when the deal was completed); and (iii) our other O2O businesses, including Yandex Delivery, our last-mile logistics solution for individuals, enterprises and SMB (small and medium business); Yandex Eats and Delivery Club Food Delivery, our ready-to-eat delivery services from restaurants; Lavka Israel, our hyperlocal convenience store delivery service; Yandex Fuel, our contactless payment service at gas stations, which prior to Q3 2022 was developed within Search and Portal, and several smaller experiments.

 

Key operational trends:

  • Total E-Commerce GMV increased by 73% year-on-year in Q3 2022

Yandex Market

  • The share of GMV sold by third-party sellers on our Yandex Market marketplace reached 83% in Q3 2022 compared to 78% in Q3 2021

  • Marketplace’s assortment was 49.3 million SKUs as of the end of Q3 2022, up from 20.9 million SKUs as of the end of Q3 2021 and 39.9 million SKUs as of the end of Q2 2022

  • The number of active buyers6 on the Yandex Market marketplace increased by 49% year-on-year and reached 12.5 million as of the end of Q3 2022

  • The number of active sellers7 on Yandex Market marketplace increased by 98% year-on-year and reached 35,000 as of the end of Q3 2022

Mobility

  • The number of rides in the Mobility services increased 24% compared to Q3 2021

  • GMV of the Mobility services grew 27% compared to Q3 2021

 

(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.

 

 

 

 

 

 

 

 

In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2021

2022

Change

2021

2022

Change

GMV:

 

 

 

 

 

 

Mobility

 156,136

 198,041

27%

 414,118

 544,422

31%

E-Commerce

 41,825

 72,465

73%

 101,318

 195,614

93%

First party (1P) business model

 14,247

 19,835

39%

 39,859

 56,431

42%

Third party (3P) commission business model

 27,578

 52,630

91%

 61,459

 139,183

126%

Other O2O services8

 34,063

 46,649

37%

 84,534

 124,588

47%

Revenues:

 

 

 

 

 

 

Mobility

 22,082

 31,015

40%

 58,632

 87,514

49%

E-Commerce

 15,355

 23,520

53%

 41,986

 63,918

52%

Revenues from sale of goods (1P)9

 11,724

 15,944

36%

 32,911

 45,643

39%

Commission and other e-commerce revenues10

 3,631

 7,576

109%

 9,075

 18,275

101%

Other O2O services

 5,821

 10,344

78%

 14,525

 27,593

90%

Eliminations

 (749)

 (1,531)

104%

 (1,274)

 (3,970)

212%

Total revenues

 42,509

 63,348

49%

 113,869

 175,055

54%

Adjusted EBITDA E-commerce, Mobility and Delivery:

 (10,647)

 (2,402)

-77%

 (22,906)

 (8,502)

-63%

 

(8) Yandex Fuel was included in Other O2O services in Q3 2022 and was presented retroactively in all previous periods.

(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 exclude 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 and Delivery Club, as well as delivery fee and advertising revenue of Yandex Lavka in Russia and other revenues.

 

The growth in GMV of Mobility reached 27% year-on-year in Q3 2022, driven by the increase in the number of rides on the back of growth of our rider base and order frequency. The growth in GMV of E-commerce reached 73% year-on-year in Q3 2022 (including 78% year-on-year growth in Yandex Market GMV) supported by an acceleration of growth in July, August and the first two weeks of September, followed by a negative weekly GMV dynamic in the second half of the month. The growth in GMV of other O2O services reached 37% year-on-year in Q3 2022, with Yandex Delivery, closely followed by the Yandex Food Delivery service and the newly acquired Delivery Club, being the largest contributors. Excluding the newly joined Yandex Fuel service, GMV of other O2O services increased 59%, demonstrating acceleration of year-on-year growth in Q3 2022 compared to Q2 2022.

 

E-commerce, Mobility and Delivery segment revenues increased by 49% year-on-year in Q3 2022, mainly driven by Mobility and E-commerce services (where Yandex Market was the largest contributor to growth, followed by Yandex Lavka). Mobility revenues increased by 40%, driven by solid growth in rides and GMV in ride-hailing. E-commerce revenues increased by 53%. The slower-than-GMV revenue growth is primarily explained by the changes in the 1P/3P revenue mix in Yandex Market (increase in the share of 3P GMV to 83% in Q3 2022 compared with 78% in Q3 2021). 1P revenues grew 36% year-on-year in Q3 2022 supported by the growth of Yandex Lavka (Yandex Lavka year-on-year growth was primarily driven by a significant increase in items per order, positively affecting average check) and Yandex Market 1P sales (as a result of a growth of GMV and the business as a whole). 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 78% year-on-year growth primarily driven by the growth of Yandex Delivery, Yandex Food Delivery and our acquisition of Delivery Club.

 

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 loss of E-commerce, Mobility and Delivery was RUB 2,402 million in Q3 2022 compared to an adjusted EBITDA loss of RUB 10,647 million in Q3 2021. This reduction in losses was driven primarily by improvements in operational efficiency across most of the key businesses included in the segment (in particular our Ride-hailing and E-commerce businesses), as well as an optimization of marketing expenses by concentrating budgets in the most profitable channels.

 

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:

  • Number of Yandex Plus subscribers reached 15.8 million as of the end of Q3 2022, up 53% from the end of Q3 2021

 

 

 

 

 

 

 

 

In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2021

2022

Change

2021

2022

Change

Revenues

4,311

7,817

81%

11,891

19,798

66%

Adjusted EBITDA

(1,589)

(1,498)

-6%

(4,578)

(7,264)

59%

Adjusted EBITDA margin

-36.9%

-19.2%

17.7 pp

-38.5%

-36.7%

1.8 pp

 

Plus and Entertainment Services revenues grew 81% in Q3 2022 compared with Q3 2021. The increase was primarily driven by the growth of subscription revenue on the back of the expanding base of paid subscribers and growing revenue per subscriber, as well as solid performance in other revenue streams, including licensing. Adjusted EBITDA loss of RUB 1.5 billion, which was an improvement against Q3 2021 in absolute terms, reflected the positive leverage effect on the back of the subscription revenue and licensing revenue growth due to increasing our focus on original content, offset mainly by the investments in content and marketing and the growth of personnel expenses to support the expansion of the business.

 

Classifieds

 

The Classifieds segment includes Auto.ru, Yandex Realty, Yandex Rent and Yandex Travel.

 

 

 

 

 

 

 

 

In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2021

2022

Change

2021

2022

Change

Revenues

2,421

3,371

39%

6,664

8,350

25%

Adjusted EBITDA

450

237

-47%

1,424

903

-37%

Adjusted EBITDA margin

18.6%

7.0%

-11.6 pp

21.4%

10.8%

-10.6 pp

 

Classifieds revenues increased by 39% in Q3 2022 compared with Q3 2021. The revenue growth was supported by improvements in our monetization strategies and value-added services, as well as strong performance of Yandex Realty and Yandex Travel on the back of increased demand for our services and changing competitive landscape on the domestic market since Q2 2022; although solid growth was offset by the adverse impact in service revenue on our auto classifieds business due to the ongoing significant downturn affecting the new car market. Adjusted EBITDA amounted to RUB 0.2 billion in Q3 2022 compared with RUB 0.4 billion in Q3 2021 with margin decreasing by 12 pp as a result of the growth of advertising and marketing expenses, investments in our new businesses such as Yandex Rent as well as personnel costs to support the services development.

 

Other Business Units and Initiatives

 

The Other Business Units and Initiatives category includes our self-driving vehicles business (Yandex SDG), Zen (up to September 12, 2022 when the deconsolidation transaction was completed), Yandex Cloud, Yandex Education, Devices, FinTech, Toloka, RouteQ and number of other experiments as well as unallocated corporate expenses.

 

 

 

 

 

 

 

 

In RUB millions

Three months ended September 30, 

Nine months ended September 30, 

 

2021

2022

Change

2021

2022

Change

Revenues

6,006

10,194

70%

15,747

27,644

76%

Adjusted EBITDA

(3,671)

(10,207)

178%

(8,598)

(19,230)

124%

Adjusted EBITDA margin

-61.1%

-100.1%

-39 pp

-54.6%

-69.6%

-15 pp

 

Other Business Units and Initiatives revenues increased 70% year-on-year in Q3 2022, driven mainly by Devices, Yandex Cloud and Yandex Education. Devices revenue increased 74% year-on-year to RUB 3.7 billion in Q3 2022, reflecting some slowdown compared to robust financial performance in Q2 2022 on the back of consumer demand decrease caused by macroeconomic weakness as well temporary supply chain difficulties. Yandex Cloud revenue grew 175% year-on-year, supported by product portfolio expansion as well as improvement in our market share on the back of increasing demand for our services and changing competitive landscape on the domestic market since Q2 2022.

 

The adjusted EBITDA loss amounted to RUB 10.2 billion (including RUB 1.6 billion of investments into Yandex SDG), compared to RUB 3.7 billion in Q3 2021. Our key businesses have demonstrated improvements in performance compared to Q3 2021: Devices and Cloud both remained profitable for the second quarter in a row and there has been a positive effect of the closure of Lavka Overseas, which was offset by changes in the segment structure, as a result of the segregation of unallocated corporate expenses from reportable segments’ adjusted EBITDA to Other Business Units and Initiatives category.

 

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 September 30, 

Nine months ended September 30, 

 

2021

2022

Change

2021

2022

Change

Revenues:

 

 

 

 

 

 

Segment revenues

97,198

145,583

50%

263,628

385,836

46%

Eliminations

(5,893)

(12,420)

111%

...