February 20, 2014

Yandex Announces Fourth Quarter and Full-Year 2013 Financial Results

Webcast

Earnings slides

MOSCOW and AMSTERDAM, Netherlands, Feb. 20, 2014 (GLOBE NEWSWIRE) -- Yandex (Nasdaq:YNDX), one of Europe's largest internet companies and the leading search provider in Russia, today announced its financial results for the fourth quarter and the full year ended December 31, 2013.

Q4 2013 Financial Highlights(1)(2)

  • Revenues of RUR 12.1 billion ($369.3 million), up 37% compared with Q4 2012 (and up 40% excluding the impact of Yandex.Money)
  • Ex-TAC revenues (excluding traffic acquisition costs) up 25% compared with Q4 2012 (and up 28% excluding the impact of Yandex.Money)
  • Income from operations of RUR 3.9 billion ($119.8 million), up 26% compared with Q4 2012
  • Adjusted EBITDA of RUR 5.1 billion ($157.3 million), up 21% compared with Q4 2012
  • Operating margin of 32.4%
  • Adjusted EBITDA margin of 42.6%
  • Adjustedex-TAC EBITDA margin of 55.6%
  • Net income of RUR 3.3 billion ($102.2 million), up 24% compared with Q4 2012
  • Adjusted net income of RUR 3.5 billion ($107.5 million), up 19% compared with Q4 2012
  • Net income margin of 27.7%
  • Adjusted net income margin of 29.1%
  • Adjustedex-TAC net income margin of 38.0%
  • Cash and deposits of RUR 48.6 billion ($1,484.1 million) as of December 31, 2013

FY 2013 Financial Highlights(1)(2)

  • Revenues of RUR 39.5 billion ($1,206.9 million), up 37% compared with FY 2012 (and up 39% excluding the impact of Yandex.Money)
  • Ex-TAC revenues (excluding traffic acquisition costs) up 32% compared with FY 2012 (and up 35% excluding the impact of Yandex.Money)
  • Income from operations of RUR 12.8 billion ($392.2 million), up 36% compared with FY 2012
  • Adjusted EBITDA of RUR 17.4 billion ($530.6 million), up 32% compared with FY 2012
  • Operating margin of 32.5%
  • Adjusted EBITDA margin of 44.0%
  • Adjustedex-TAC EBITDA margin of 54.9%
  • Net income of RUR 13.5 billion ($411.7 million), up 64% compared with FY 2012
  • Adjusted net income of RUR 12.1 billion ($370.9 million), up 38% compared with FY 2012
  • Net income margin of 34.1%
  • Adjusted net income margin of 30.7%
  • Adjustedex-TAC net income margin of 38.4%

"Yandex delivered strong fourth quarter and full year 2013 results," said Arkady Volozh, Chief Executive Officer of Yandex. "We continued to grow our search share on desktop and mobile. We implemented significant changes in our paid search algorithms, substantially grew the number of advertisers on our platform, and broadened the reach of our partner network. We will continue to create services that benefit our users across the markets in which we operate."

1 Pursuant to SEC rules regarding convenience translations, Russian ruble (RUR) amounts have been translated into U.S. dollars at a rate of RUR 32.7292 to $1.00, the official exchange rate quoted as of December 31, 2013 by the Central Bank of the Russian Federation.

2 The following measures presented in this release are "non-GAAP financial measures": ex-TAC revenues; adjusted EBITDA; adjusted EBITDA margin; adjusted ex-TAC EBITDA margin; adjusted net income; adjusted net income margin and adjusted ex-TAC net income margin. Please see the section headed "Use of Non-GAAP Financial Measures" below for a discussion of how we define these measures, as well as reconciliations at the end of this release of each of these measures to the most directly comparable US GAAP measures.

The following table provides a summary of key financial results for the three and twelve months ended December 31, 2012 and 2013:

     
In RUR millions Three months Twelve months
  ended December 31, ended December 31,
  2012 2013 Change 2012 2013 Change
Revenues 8,819 12,086 37% 28,767 39,502 37%
Ex-TAC revenues2 7,403 9,258 25% 23,987 31,652 32%
Income from operations 3,107 3,921 26% 9,454 12,837 36%
Adjusted EBITDA2 4,255 5,148 21% 13,142 17,367 32%
Net income 2,691 3,346 24% 8,223 13,474 64%
Adjusted net income2 2,965 3,519 19% 8,768 12,140 38%

Q4 2013 Operational and Corporate Highlights

  • Share of Russian search market (including mobile) averaged 61.9% in Q4 2013 (according to LiveInternet)
  • SERPs (search engine result pages) grew 19% from Q4 2012
  • Number of advertisers grew to more than 270,000, up 30% from Q4 2012 and up 10% from Q3 2013
  • Acquisition of KinoPoisk, the largest and most comprehensive Russian-language website dedicated to movies, television shows and celebrities
  • Enhanced the functionality of Yandex.Market with Cost Per Action advertising
  • Yandex.Maps moved to a new unified platform and now provide detailed maps and routing features globally
  • Placed $600 Million of 1.125% Convertible Senior Notes Due 2018 in December 2013 and additional $90 million in January 2014
  • Repurchased 10 million shares as of February 18, 2014, as part of the previously announced share repurchase program, and increased authorization to repurchase a total of up to 15 million shares

Subsequent Events

  • Cooperation agreement with MultiShip, a logistics service aggregator
  • Partnership with Facebook - access to a "firehose" of public data in Russia, CIS and Turkey

Revenues

In RUR millions Three months Twelve months
  ended December 31, ended December 31,
  2012 2013 Change 2012 2013 Change
Advertising revenues:            
 Text-based advertising            
 Yandex websites 6,181 8,006 30% 20,610 27,584 34%
 Ad network 1,462 2,830 94% 4,898 7,885 61%
 Total text-based advertising 7,643 10,836 42% 25,508 35,469 39%
 Display advertising 964 1,152 20% 2,592 3,379 30%
Total advertising revenues 8,607 11,988 39% 28,100 38,848 38%
Online payment commissions 178 -- -100% 552 394 -29%
Other 34 98 188% 115 260 126%
Total revenues 8,819 12,086 37% 28,767 39,502 37%

Total revenues increased 37% compared with Q4 2012, and on a like-for-like basis (excluding revenues received from Yandex.Money operations in Q4 2012), total revenues increased 40% compared with Q4 2012.

Text-based advertising revenues, accounting for 90% of total revenues in Q4 2013, continued to determine overall top-line performance.

Text-based advertising revenues from Yandex's own websites accounted for 66% of total revenues during Q4 2013, and increased 30% compared with Q4 2012.

Text-based advertising revenues from our ad network increased 94% compared with Q4 2012 and contributed 23% of total revenues during Q4 2013. The increase of partner network revenues as a share of total revenues, together with an increase in the growth rate of the ad network, reflect our agreement with Mail.ru to power paid search results on Mail.ru properties.

Paid clicks on Yandex's and its partners' websites, in aggregate, increased 52% in Q4 2013 compared with Q4 2012 and grew 22% sequentially. Our average cost per click in Q4 2013 decreased 7% compared with Q4 2012.

Display advertising revenue, accounting for 10% of total revenues in Q4 2013, increased 20% compared with Q4 2012.

Operating Costs and Expenses

Yandex's operating costs and expenses consist of cost of revenues, product development expenses, sales, general and administrative expenses (SG&A), and depreciation and amortization expenses (D&A). Apart from D&A, each of the above expense categories includes personnel-related costs and expenses, including related share-based compensation expense. Increases across all cost categories, excluding D&A, reflect investments in overall growth, including personnel. In Q4 2013, Yandex added 493 full-time employees, an increase of 11% from September 30, 2013, and up 41% from December 31, 2012. The total number of full-time employees was 4,902 as of December 31, 2013.  The employee numbers and growth rates are provided on a like-for-like basis, excluding Yandex.Money employees for the previous periods.

Costs of revenues, including traffic acquisition costs (TAC)

In RUR millions Three months Twelve months
  ended December 31, ended December 31,
  2012 2013 Change 2012 2013 Change
TAC:            
Related to the Yandex ad network 928 2,023 118% 3,128 5,377 72%
Related to distribution partners 488 805 65% 1,652 2,473 50%
Total TAC 1,416 2,828 100% 4,780 7,850 64%
Total TAC as a % of total revenues 16.1% 23.4%   16.6% 19.9%  
Other cost of revenues 660 713 8% 2,408 2,756 14%
Other cost of revenues as a % of revenues 7.5% 5.9%   8.4% 7.0%  
Total cost of revenues 2,076 3,541 71% 7,188 10,606 48%
Total cost of revenues as a % of revenues 23.5% 29.3%   25.0% 26.8%  

TAC increased from 18.5% of text-based revenues in Q4 2012 to 26.1% in Q4 2013, representing the increase in our Yandex ad network revenues as a share of total revenues for the period. The principal driver of the TAC increase was our agreement to power paid search on Mail.ru.

Other cost of revenues in Q4 2013 increased 8% compared with Q4 2012, reflecting further growth in personnel and data center-related costs partly offset by absence of the cost of online payment commissions related to Yandex.Money.

Product development

In RUR millions Three months Twelve months
  ended December 31, ended December 31,
  2012 2013 Change 2012 2013 Change
Product development 1,115 1,651 48% 4,274 5,827 36%
As a % of revenues 12.6% 13.7%   14.9% 14.8%  

Growth in product development expenses in Q4 2013 primarily reflects increases in the number of developers. Development headcount increased 49% from 1,956 as of December 31, 2012, to 2,924 as of December 31, 2013, with 375 employees added since September 30, 2013, on a like-for-like basis, excluding Yandex.Money employees for the prior period.

Selling, general and administrative (SG&A)

In RUR millions Three months Twelve months
  ended December 31, ended December 31,
  2012 2013 Change 2012 2013 Change
Sales, general and administrative 1,661 1,983 19% 4,900 6,537 33%
As a % of revenues 18.8% 16.4%   17.0% 16.5%  

SG&A costs grew more slowly than revenues compared to Q4 2012, reflecting a more linear allocation of marketing spend through 2013 compared with 2012.

Share-based compensation (SBC) expense

SBC expense is included in each of the cost of revenues, product development and SG&A categories discussed above.

In RUR millions Three months Twelve months
  ended December 31, ended December 31,
  2012 2013 Change 2012 2013 Change
SBC expense included in cost of revenues 14 18 29% 33 61 85%
SBC expense included in product development 70 128 83% 221 435 97%
SBC expense included in SG&A 31 77 148% 122 258 111%
Total SBC expense 115 223 94% 376 754 101%
As a % of revenues 1.3% 1.8%   1.3% 1.9%  

Total SBC expense increased 94% in Q4 2013 compared with Q4 2012. The increase is principally related to new equity-based grants made in 2012-2013.

Depreciation and amortization (D&A) expense

In RUR millions Three months Twelve months
  ended December 31, ended December 31,
  2012 2013 Change 2012 2013 Change
Depreciation and amortization 860 990 15% 2,951 3,695 25%
As a % of revenues 9.8% 8.2%   10.3% 9.4%  

D&A expense increased 15% in Q4 2013 compared with Q4 2012, primarily reflecting further investments in servers and data centers made this year.

As a result of the factors described above, income from operations was RUR 3.9 billion ($119.8 million) in Q4 2013, a 26% increase from Q4 2012, while adjusted EBITDA reached RUR 5.1 billion ($157.3 million) in Q4 2013, up 21% from Q4 2012.

Interest income in Q4 2013 was RUR 414 million, up from RUR 333 million in Q4 2012, principally as a result of investing our cash provided by operating activities in Russia, where our investments earn higher returns partly offset by interest expenses related to our convertible debt.

Foreign exchange gain in Q4 2013 was RUR 99 million, compared with a foreign exchange gain of RUR 17 million in Q4 2012. This gain is due to the appreciation of the U.S. dollar during Q4 2013 from RUR 32.3451 to $1.00 on September 30, 2013 to RUR 32.7292 to $1.00 on December 31, 2013. Yandex's Russian operating subsidiaries' functional currency is the Russian ruble, and therefore changes in the ruble value of these subsidiaries' monetary assets and liabilities that are denominated in other currencies due to exchange rate fluctuations are recognized as foreign exchange gains or losses in the income statement. Although the U.S. dollar value of Yandex's U.S. dollar-denominated assets and liabilities were not impacted by these currency fluctuations, they resulted in an upward revaluation of the ruble equivalent of these U.S. dollar-denominated monetary assets and liabilities in Q4 2013.

Income tax expense for Q4 2013 was RUR 1,083 million, up from RUR 791 million in Q4 2012. Our effective tax rate of 24.5% in Q4 2013 was significantly higher than in previous quarters due to one-time effect of certain reserves and allowances we have provided for in Q4 2013. Adjusted for these reserves and allowances, our effective tax rate is 21.6%. This compares with an effective tax rate of 21.1% in Q3 2013, adjusted for a non-taxable gain on the sale of a 75% interest in Yandex.Money in Q3 2013.

Adjusted net income in Q4 2013 was RUR 3.5 billion ($107.5 million), a 19% increase from Q4 2012.

Adjusted net income margin was 29.1 % in Q4 2013, compared with 33.6% in Q4 2012.

Net income was RUR 3.3 billion ($102.2 million) in Q4 2013, up 24% compared with Q4 2012.

As of December 31, 2013, Yandex had cash, cash equivalents and long-term deposits of RUR 48.6 billion ($1,484.1 million).

Net operating cash flow and capital expenditures for Q4 2013 were RUR 4.8 billion ($146.3 million) and RUR 1.7 billion ($50.8 million), respectively.

The totalnumber of shares issued and outstanding as of December 31, 2013 was 323,655,509, including 250,732,061 Class A shares, 72,923,447 Class B shares, and one Priority share and excluding 6,266,245 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; all such Class C shares will be cancelled. There were also employee share options outstanding to purchase up to an additional 6.0 million shares, at a weighted average exercise price of $5.11 per share, of which options to purchase 5.2 million shares were fully vested; equity-settled share appreciation rights equal to 1.6 million shares, at a weighted average measurement price of $26.75, 0.2 million of which were fully vested; and restricted share units covering 2.9 million shares, of which restricted share units to acquire 0.4 million shares were fully vested.

Outlook for 2014

On a like-for-like basis, excluding the revenue associated with Yandex.Money from 2013 results, Yandex expects to achieve full year ruble-based revenue growth of 25% to 30% in 20141.

1 In 2013, Yandex recognized total revenue of RUR 39,502 million, including RUR 394 million in payments commissions related to Yandex.Money and RUR 39,108 million in advertising and other revenues. Starting July 4, 2013, when the sale of a 75% interest in Yandex.Money was completed, Yandex stopped recognizing revenue related to Yandex.Money in its consolidated revenues.

Conference Call Information

Yandex's management will hold an earnings conference call on February 20, 2014 at 8:00 AM U.S. Eastern Time (5:00 PM Moscow time; 1:00 PM London time).

To access the conference call live, please dial:

US: +1 631 621 5256
UK: +44 (0) 1452 560 304
Russia: 8 10 800 23942044

Passcode: 34382878#

A replay of the call will be available through February 27, 2014. To access the replay, please dial:

US: +1 866 247 4222,
Russia/International: +44 (0) 1452 550 000

Passcode: 34382878#

A live and archived webcast of this conference call will be available at http://www.media-server.com/m/p/n7yp629i

ABOUT YANDEX

Yandex (Nasdaq:YNDX) is one of the largest European internet companies, providing a wide variety of search and other online services. Yandex's mission is to help users solve their everyday problems by building people-centric products and services. Based on innovative technologies, the company provides the most relevant, locally tailored experience on all digital platforms and devices. Yandex operates Russia's most popular search engine and also serves Ukraine, Belarus, Kazakhstan and Turkey. More information on Yandex can be found at http://company.yandex.com.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements that involve risks and uncertainties. These include statements regarding our anticipated revenues for full-year 2014. 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, competitive pressures, changes in advertising patterns, changes in user preferences, changes in the legal and regulatory environment, 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, 2012, which is on file with the Securities and Exchange Commission and is available on our investor relations website at http://ir.yandex.com/sec.cfm and on the SEC website at www.sec.gov. All information in this release and in the attachments is as of February 20, 2014, and Yandex undertakes no duty to update this information unless required by law.

USE OF NON-GAAP FINANCIAL MEASURES

To supplement our consolidated financial statements, which are prepared and presented in accordance with US GAAP, we present the following non-GAAP financial measures: ex-TAC revenue, adjusted EBITDA, adjusted EBITDA margin, adjusted ex-TAC EBITDA margin, adjusted net income, adjusted net income margin and adjusted ex-TAC net income 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 US 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 US GAAP measures," included following the accompanying financial tables. We define the various non-GAAP financial measures we use as follows:

  • Ex-TAC revenue means US GAAP revenues less total traffic acquisition costs (TAC)
  • Adjusted EBITDA means net income plus (1) depreciation and amortization, (2) share-based compensation expense, (3) accrual of expense related to the contingent compensation that is payable through November 2013 to employees in connection with our acquisition of the mobile software business of SPB Software (described below) and (4) provision for income taxes, less (A) interest income and (B) other income/(expense)
  • Adjusted EBITDA margin means adjusted EBITDA divided by US GAAP revenues
  • Adjusted ex-TAC EBITDA margin means adjusted EBITDA divided by ex-TAC revenue
  • Adjusted net income means US GAAP net income plus (1) SBC expense adjusted for the income tax reduction attributable to SBC expense, (2) accrual of expense related to the contingent compensation that was payable to certain employees in connection with our acquisition of the mobile software business of SPB Software (described below), (3) foreign exchange losses (less foreign exchange gains) adjusted for the (reduction) increase in income tax attributable to the foreign exchange losses (gains) and (4) amortization of debt discount related to our convertible debt adjusted for the reduction in income taxes attributable to the amortization of debt discount; less gain from the sale and deconsolidation of equity investments
  • Adjusted net income margin means adjusted net income divided by US GAAP revenues
  • Adjusted ex-TAC net income margin means adjusted net income divided by ex-TAC revenues

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 costs, particularly share-based compensation, that are recurring. 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 US GAAP financial measures:

TAC

We believe that it may be useful for investors and analysts to review certain measures both in accordance with US GAAP and net of the effect of TAC, which we view as comparable to sales commissions but, unlike sales commissions, are not deducted from US GAAP revenues. By presenting revenue, adjusted EBITDA margin and adjusted net income margin 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 clear picture of our operating performance.

Acquisition-related costs

We may incur expenses in connection with acquisitions that are not indicative of our recurring core operating performance. In particular, we were required under US GAAP to accrue as expense the contingent compensation that was payable to certain employees in connection with our acquisition of the mobile software business of SPB Software in November 2011. The maximum aggregate amount of such contingent compensation is $14.1 million, payable on the achievement of certain milestones and the continued employment of the sellers, $7.1 million of which was paid in November 2012, $4.1 million of which was paid in February 2013, and $2.9 million of which was paid in November 2013. We have eliminated this acquisition-related expense 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.                                                                                        

Foreign exchange gains and losses

Because we hold significant assets 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 net income and related margin measures excluding these effects, in order to provide greater clarity regarding our operating performance.

Amortization of debt discount

We also adjust net income for interest expense representing amortization of debt discount related to our convertible debt issued in Q4 2013. 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.

Gain from the sale of equity investments

Adjusted net income also excludes (1) a gain in the year ended December 31, 2013 from the sale of our minority interest in face.com in connection with the sale of that company, (2) a gain in the quarter ended September 30, 2013 from deconsolidation of Yandex.Money following the sale of a 75% interest in Yandex.Money to Sberbank on July 4, 2013, and (3) the sale of marketable securities held on our balance sheet. We believe that it is useful to present adjusted net income and related margin measures excluding the effect of these significant items in order to provide a clearer picture of our operating performance.

The tables at the end of this release provide detailed reconciliations of each non-GAAP financial measure we use to the most directly comparable US GAAP financial measure.

 
 
YANDEX N.V.
Unaudited Consolidated Balance Sheets
(in millions of Russian rubles and U.S. dollars, except share and per share data)
       
       
  As of
  December 31, December 31, December 31,
  2012* 2013 2013
  RUR RUR $
ASSETS      
Current assets:      
Cash and cash equivalents   7,425  33,394  1,020.3
Marketable securities   76  87  2.7
Term deposits   4,629  --   -- 
Accounts receivable, net   1,767  2,785  85.1
Prepaid expenses   597  689  21.0
Assets held for sale   2,024  --   -- 
Deferred tax assets   456  596  18.2
Other current assets   1,217  1,332  40.7
Total current assets   18,191  38,883  1,188.0
       
Property and equipment, net   8,095  9,729  297.3
Intangible assets, net  323  633  19.3
Goodwill  750  2,946  90.0
Long-term prepaid expenses   695  1,042  31.8
Restricted cash   214  104  3.2
Term deposits   10,330  15,180  463.8
Investments in non-marketable equity securities   500  1,250  38.2
Investments in debt securities   4,810  2  0.1
Deferred tax assets   35  3  0.1
Other non-current assets   342  1,539  47.0
TOTAL ASSETS   44,285  71,311  2,178.8
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current liabilities:      
Accounts payable and accrued liabilities   2,513  3,710  113.3
Taxes payable   1,455  1,688  51.6
Deferred revenue   1,092  1,501  45.9
Liabilities related to assets held for sale   1,619  --   -- 
Deferred tax liabilities   3  16  0.5
Total current liabilities   6,682  6,915  211.3
Convertible debt  --   16,429  502.0
Deferred tax liabilities   448  1,245  38.0
Other accrued liabilities   108  125  3.8
Total liabilities   7,238  24,714  755.1
       
Commitments and contingencies       
Shareholders' equity:      
Priority share: €1 par value; 1 share authorized, issued and outstanding   —   —   — 
Preference shares: €0.01 par value; 2,000,000,001, shares authorized, nil shares issued and outstanding   —   —   — 
Ordinary shares: par value (Class A €0.01, Class B €0.10 and Class C €0.09); shares authorized (Class A: 2,000,000,000 and 2,000,000,000, Class B: 159,494,722 and 102,115,140, and Class C: 159,494,722 and 102,115,140); shares issued (Class A: 202,318,864 and 256,998,306, Class B: 125,441,218 and 72,923,447, and Class C: 27,972,630 and 23,110,819, respectively); shares outstanding (Class A: 202,318,864 and 250,732,061, Class B: 125,441,218 and 72,923,447, and Class C: nil)   445  242  7.4
Treasury shares at cost (Class A: nil and 6,266,245)   --   (6,886)  (210.4)
Additional paid-in capital   13,617  15,701  479.7
Accumulated other comprehensive income   961  2,042  62.4
Retained earnings   22,024  35,498  1,084.6
Total shareholders' equity   37,047  46,597  1,423.7
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   44,285  71,311  2,178.8
       
* Derived from audited financial statements
 
YANDEX N.V.
UnauditedCondensed Consolidated Statements of Income
(in millions of Russian rubles and U.S. dollars, except share and per share data)
       
  Three months ended December 31,
  2012 2013 2013
  RUR RUR $
       
Revenues 8,819 12,086 369.3
Operating costs and expenses:      
Cost of revenues(1) 2,076 3,541 108.2
Product development(1)  1,115 1,651 50.4
Sales, general and administrative(1) 1,661 1,983 60.7
Depreciation and amortization  860 990 30.2
Total operating costs and expenses 5,712 8,165 249.5
Income from operations 3,107 3,921 119.8
Interest income, net 333 414 12.6
Other income, net 42 94 2.9
Net income before income taxes 3,482 4,429 135.3
Provision for income taxes 791 1,083 33.1
Net income 2,691 3,346 102.2
Net income per Class A and Class B share:      
Basic 8.22 10.30 0.31
Diluted 8.00 10.08 0.31
Weighted average number of Class A and Class B shares outstanding      
Basic 327,511,749 324,736,336 324,736,336
Diluted 336,211,460 331,906,108 331,906,108
       
(1)These balances exclude depreciation and amortization expenses, which are presented separately, and include share‑based compensation expenses of:
       
Cost of revenues 14 18 0.5
Product development 70 128 3.9
Sales, general and administrative 31 77 2.4
 
YANDEX N.V.
Unaudited Consolidated Statements of Income
(in millions of Russian rubles and U.S. dollars, except share and per share data)
       
  Twelve months ended December 31,
  2012* 2013 2013
  RUR RUR $
       
Revenues 28,767 39,502 1,206.9
Operating costs and expenses:      
Cost of revenues(1) 7,188 10,606 324.1
Product development(1)  4,274 5,827 178.0
Sales, general and administrative(1) 4,900 6,537 199.7
Depreciation and amortization  2,951 3,695 112.9
Total operating costs and expenses 19,313 26,665 814.7
Income from operations 9,454 12,837 392.2
Interest income, net 1,002 1,717 52.5
Other income, net  118 2,159 65.9
Net income before income taxes 10,574 16,713 510.6
Provision for income taxes 2,351 3,239 98.9
Net income 8,223 13,474 411.7
Net income per Class A and Class B share:      
Basic 25.21 41.25 1.26
Diluted 24.50 40.27 1.23
Weighted average number of Class A and Class B shares outstanding    
Basic 326,210,948 326,657,778 326,657,778
Diluted 335,690,596 334,571,212 334,571,212
       
(1)These balances exclude depreciation and amortization expenses, which are presented separately, and include share‑based compensation expenses of:
       
Cost of revenues 33 61 1.9
Product development 221 435 13.3
Sales, general and administrative 122 258 7.9
       
* Derived from audited financial statements
 
YANDEX N.V.
Unaudited Condensed Consolidated Statements of Cash Flows
(in millions of Russian rubles and U.S. dollars)
       
  Three months ended December 31,
  2012 2013 2013
  RUR RUR $
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income   2,691  3,346  102.2
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization of property and equipment   790  945  28.8
Amortization of acquisition‑related intangible assets   70  45  1.4
Amortization of debt discount and issuance costs   --   24  0.7
Share‑based compensation expense   115  223  6.8
Deferred income taxes   (39)  58  1.8
Foreign exchange gains  (17)  (99)  (3.0)
Other   (24)  (6)  (0.1)
Changes in operating assets and liabilities excluding the effect of acquisitions:    
Accounts receivable, net   (331)  (450)  (13.7)
Prepaid expenses and other assets   (84)  (424)  (13.0)
Accounts payable and accrued liabilities   522  920  28.1
Deferred revenue   167  206  6.3
Assets held for sale   (306)  --   -- 
Liabilities related to assets held for sale   299  --   -- 
Net cash provided by operating activities   3,853  4,788  146.3
CASH FLOWS PROVIDED BY/(USED IN) INVESTING ACTIVITIES:      
Purchase of property and equipment   (1,000)  (1,665)  (50.8)
Acquisitions of businesses, net of cash acquired   --   (2,438)  (74.5)
Investments in non-marketable equity securities   --   (12)  (0.4)
Proceeds from maturity of debt securities   759  2,668  81.5
Investments in term deposits   (6,350)  --   -- 
Maturities of term deposits   4,788  2,620  80.1
Loans granted   --   (109)  (3.3)
Escrow cash deposit   219  (5)  (0.2)
Net cash used in investing activities   (1,584)  1,059  32.4
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:      
Proceeds from exercise of share options   56  61  1.8
Proceeds from issuance of convertible debt   --   19,719  602.5
Payment of debt discount and issuance costs   --   (179)  (5.4)
Repurchases of ordinary shares   --   (3,368)  (102.9)
Net cash provided by financing activities   56  16,233  496.0
Effect of exchange rate changes on cash and cash equivalents   (96)  (68)  (2.2)
Net change in cash and cash equivalents   2,229  22,012  672.5
Cash and cash equivalents at beginning of period   5,196  11,382  347.8
Cash and cash equivalents at end of period   7,425  33,394  1,020.3
 
YANDEX N.V.
Unaudited Consolidated Statements of Cash Flows
(in millions of Russian rubles and U.S. dollars)
       
       
  Twelve months ended December 31,
  2012* 2013 2013
  RUR RUR $
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income   8,223  13,474  411.7
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization of property and equipment   2,812  3,584  109.5
Amortization of acquisition‑related intangible assets   139  111  3.4
Amortization of debt discount and issuance costs   --   24  0.7
Share‑based compensation expense   376  754  23.1
Deferred income taxes   72  (197)  (6.0)
Foreign exchange (gains)/losses   57  (139)  (4.2)
Gain from sale of equity securities   (234)  (2,137)  (65.3)
Other   51  (28)  (0.9)
Changes in operating assets and liabilities excluding the effect of acquisitions:      
Accounts receivable, net   (526)  (966)  (29.5)
Prepaid expenses and other assets   (923)  (1,301)  (39.8)
Accounts payable and accrued liabilities   1,277  1,195  36.5
Deferred revenue   195  401  12.3
Assets held for sale   (411)  (156)  (4.8)
Liabilities related to assets held for sale   421  86  2.6
Net cash provided by operating activities   11,529  14,705  449.3
CASH FLOWS USED IN INVESTING ACTIVITIES:      
Purchase of property and equipment   (3,984)  (4,936)  (150.8)
Acquisitions of businesses, net of cash acquired   --   (2,438)  (74.5)
Investments in non-marketable equity securities   (47)  (14)  (0.5)
Proceeds from sale of equity securities   174  2,023  61.8
Proceeds from maturity of debt securities   1,521  4,969  151.8
Investments in term deposits   (16,585)  (11,450)  (349.8)
Maturities of term deposits   8,512  11,290  345.0
Loans granted   --   (279)  (8.5)
Escrow cash deposit   219  125  3.8
Net cash used in investing activities   (10,190)  (710)  (21.7)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:      
Proceeds from exercise of share options   361  439  13.4
Proceeds from issuance of convertible debt   --   19,719  602.5
Payment of debt discount and issuance costs   --   (179)  (5.4)
Repurchases of ordinary shares   --   (8,518)  (260.3)
Net cash provided by financing activities   361  11,461  350.2
Effect of exchange rate changes on cash and cash equivalents   (205)  513  15.6
Net change in cash and cash equivalents   1,495  25,969  793.4
Cash and cash equivalents at beginning of period   5,930  7,425  226.9
Cash and cash equivalents at end of period   7,425  33,394  1,020.3
       
       
* Derived from audited financial statements
 
YANDEX N.V.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO THE NEAREST COMPARABLE US GAAP MEASURES
             
Reconciliation of Ex-TAC Revenues to US GAAP Revenues
     
In RUR millions Three months Twelve months
  ended December 31, ended December 31,
  2012 2013 Change 2012 2013 Change
Total revenues 8,819 12,086 37% 28,767 39,502 37%
Less: traffic acquisition costs (TAC) 1,416 2,828 100% 4,780 7,850 64%
Ex-TAC revenues 7,403 9,258 25% 23,987 31,652 32%
             
             
Reconciliation of Adjusted EBITDA to US GAAP Net Income
     
In RUR millions Three months Twelve months
  ended December 31, ended December 31,
  2012 2013 Change 2012 2013 Change
Net income  2,691  3,346 24%  8,223  13,474 64%
Add: depreciation and amortization  860  990 15%  2,951  3,695 25%
Add: share-based compensation (SBC) expense  115  223 94%  376  754 101%
Add: compensation expense related to contingent consideration  173  14 -92%  361  81 -78%
Less: interest income, net  (333)  (414) 24%  (1,002)  (1,717) 71%
Less: other income, net  (42)  (94) n/m  (118)  (2,159) n/m
Add: provision for income taxes  791  1,083 37%  2,351  3,239 38%
Adjusted EBITDA  4,255  5,148 21%  13,142  17,367 32%
             
             
Reconciliation of Adjusted Net Income to US GAAP Net Income
     
In RUR millions Three months Twelve months
  ended December 31, ended December 31,
  2012 2013 Change 2012 2013 Change
Net income  2,691  3,346 24%  8,223  13,474 64%
Add: SBC expense  115  223 94%  376  754 101%
Less: reduction in income tax attributable to SBC expense  (1)  (3) n/m  (4)  (9) n/m
Add: compensation expense related to contingent consideration  173  14 -92%  361  81 -78%
Less: foreign exchange (gain)/loss  (17)  (99) n/m  57  (139) n/m
Add: increase/(reduction) in income tax attributable to foreign exchange (gain)/loss  4  20 n/m  (11)  28 n/m
Less: gain from sale of equity investments and deconsolidation  --   --  n/m  (234)  (2,067) 783%
Add: amortization of debt discount  --   24 n/m  --   24 n/m
Less: reduction in income tax attributable to amortization of debt discount  --   (6) n/m  --   (6) n/m
Adjusted net income  2,965  3,519 19%  8,768  12,140 38%
 
Reconciliation of Adjusted EBITDA Margin and Adjusted Ex-TAC EBITDA Margin to US GAAP Net Income Margin
               
           
In RUR millions           
  US GAAP
Actual Net
Income
Net Income
Margin (1)
Adjustment (2) Adjusted
EBITDA
Adjusted
EBITDA
Margin (3)
Adjusted Ex-
TAC EBITDA
Margin (4)
Three months ended December 31, 2013  3,346 27.7%  1,802  5,148 42.6% 55.6%
Twelve months ended December 31, 2013  13,474 34.1%  3,893  17,367 44.0% 54.9%
               
(1)  Net income margin is defined as net income divided by total revenues.
(2)  Adjusted to eliminate depreciation and amortization expense, SBC expense, expense related to SPB Software contingent compensation, interest income, other (expense)/income, net, and provision for income taxes. For a reconciliation of adjusted EBITDA to net income, please see the table above.
(3)  Adjusted EBITDA margin is defined as adjusted EBITDA divided by total revenues. 
(4)  Adjusted ex-TAC EBITDA margin is defined as adjusted EBITDA divided by ex-TAC revenues. For a reconciliation of ex-TAC revenues to GAAP revenues, please see the table above. 
               
Reconciliation of Adjusted Net Income Margin and Adjusted Ex-TAC Net Income Margin to US GAAP Net Income Margin
               
           
In RUR millions           
  US GAAP
Actual Net Income
Net Income
Margin (1)
Adjustment (2) Adjusted
Net Income
Adjusted
Net Income
Margin (3)
Adjusted Ex-
TAC Net
Income
Margin (4)
Three months ended December 31, 2013  3,346 27.7%  173  3,519 29.1% 38.0%
Twelve months ended December 31, 2013  13,474 34.1%  (1,334)  12,140 30.7% 38.4%
               
(1)  Net income margin is defined as net income divided by total revenues.
(2)  Adjusted to eliminate SBC expense (as adjusted for the income tax reduction attributable to SBC expense), expense related to SPB Software contingent compensation, gain from sale and deconsolidation of equity investments, foreign exchange losses (as adjusted for the reduction in income tax attributable to the loss) and amortization of debt discount (as adjusted for the reduction in income tax attributable to the expense). For a reconciliation of adjusted net income to net income, please see the table above.
(3)  Adjusted net income margin is defined as adjusted net income divided by total revenues. 
(4)  Adjusted ex-TAC net income margin is defined as adjusted net income divided by ex-TAC revenues. For a reconciliation of ex-TAC revenues to US GAAP revenues, please see the table above. 
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