Yandex Announces First Quarter 2013 Financial Results
OREANDA-NEWS. Yandex (Nasdaq:YNDX), one of Europe's largest internet companies and the leading search provider in Russia, today announced its financial results for the first quarter ended March 31, 2013.
Q1 2013 Financial Highlights
Revenues of RUR 8.0 billion (USD 257.3 million1), up 36% compared with Q1 2012
Ex-TAC revenues2 (excluding traffic acquisition costs), up 37% compared with Q1 2012
Income from operations of RUR 2.5 billion (USD 78.9 million), up 57% compared with Q1 2012
Adjusted EBITDA3 of RUR 3.5 billion (USD 112.7 million), up 47% compared with Q1 2012
Operating margin of 30.7%
Adjusted EBITDA margin2 of 43.8%
Adjustedex-TAC EBITDA margin2 of 52.3%
Net income of RUR 2.2 billion (USD 72.2 million), up 79% compared with Q1 2012
Adjusted net income3 of RUR 2.4 billion (USD 77.5 million), up 60% compared with Q1 2012
Net income margin of 28.1%
Adjusted net income margin2 of 30.1%
Adjusted ex-TAC net income margin2 of 36.0%
Cash, deposits and investments in debt securities of RUR 29.3 billion (USD 942.6 million) as of March 31, 2013
"Yandex is off to an excellent start in 2013 with strong financial results and important product improvements," said Arkady Volozh, Chief Executive Officer of Yandex. "During the quarter, we unveiled our newly redesigned homepage, updated our Yandex.Navigator and Yandex.Market mobile apps, and released a number of innovations aimed at enhancing our advertiser solutions."
The following table provides a summary of key financial results for the three months ended March 31, 2012 and 2013.
1 Pursuant to SEC rules regarding convenience translations, Russian ruble (RUR) amounts have been translated into U.S. dollars at a rate of RUR 31.0834 to USD 1.00, the official exchange rate quoted as of March 31, 2013 by the Central Bank of the Russian Federation.
2 This is a non-GAAP financial measure. Please see "Use of Non-GAAP Financial Measures" below for a discussion of how we define this non-GAAP financial measure. You will find a reconciliation of this non-GAAP financial measure to the most directly comparable US GAAP measure in the accompanying financial tables at the end of this release.
3 Adjusted EBITDA and adjusted net income are non-GAAP financial measures. Please see "Use of Non-GAAP Financial Measures" below for a discussion of how we define adjusted EBITDA and adjusted net income. You will find a reconciliation of adjusted EBITDA and adjusted net income to GAAP net income, the most directly comparable US GAAP measure for both non-GAAP measures, in the accompanying financial tables at the end of this release.
Q1 2013 Operational and Corporate Highlights
Share of Russian search market averaged 61.6% in Q1 2013 (according to LiveInternet), an increase of 1.1 p.p. sequentially and a 2.2 p.p. increase on a year-over-year basis
SERPs (search engine result pages) grew 25% from Q1 2012
Number of advertisers grew to more than 226,000, up 26% from Q1 2012 and up 6% from Q4 2012
Enhanced the contextual ads served through our partner network with the addition of images
Launched a newly redesigned Yandex.ru homepage
Announced a share repurchase program of up to 12MM shares; as of April 24th, 2013, we have repurchased 2MM shares
Text-based advertising revenues, accounting for 89% of total revenues in Q1 2013, continued to determine overall top-line performance.
Text-based advertising revenues from Yandex's own websites accounted for 73% of total revenues during Q1 2013, and increased by 37% compared with Q1 2012. Text-based advertising revenues from our ad network increased 28% compared with Q1 2012 and contributed 16% of total revenues during Q1 2013. Revenues from Yandex websites grew faster than those from our ad network as we implemented changes to our advertising technologies on our owned and operated sites.
Paid clicks on Yandex's and its partners' websites, in aggregate, increased 18% in Q1 2013 compared with Q1 2012. Our average cost per click in Q1 2013 increased 14% compared with Q1 2012.
Display advertising revenue accounted for 8% of total revenues during Q1 2013, and increased 48% compared with Q1 2012. Display advertising rebounded strongly from the 12% growth observed in Q4 2012.
Online payment commissions accounted for 2% of revenues during Q1 2013, and increased 64% compared with Q1 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 Q1 2013, Yandex added 211 full-time employees, an increase of 6% from December 31, 2012, and up 19% from March 31, 2012. The total number of full-time employees was 3,972 as of March 31, 2013.
D&A expense increased 33% in Q1 2013 compared with Q1 2012, primarily reflecting our investments in servers and data centers made last year.
As a result of the factors described above, income from operations was RUR 2.5 billion (USD 78.9 million) in Q1 2013, a 57% increase from Q1 2012, while adjusted EBITDA reached RUR 3.5 billion (USD 112.7 million) in Q1 2013, up 47% from Q1 2012.
Interest income in Q1 2013 was RUR 368 million, up from RUR 167 million in Q1 2012, principally as a result of investing more of our cash provided by operating activities in Russia, where our investments earn higher returns.
Foreign exchange gain in Q1 2013 was RUR 7 million, compared to a foreign exchange loss of RUR 114 million in Q1 2012. The foreign exchange gain is due to the appreciation of the U.S. dollar during Q1 2013 from RUR 30.3727 to USD 1.00 on December 31, 2012 to RUR 31.0834 to USD 1.00 on March 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 cash, cash equivalents and term deposits was not impacted by these currency fluctuations, they resulted in an upward revaluation of the ruble equivalent of these U.S. dollar-denominated monetary assets in Q1 2013.
Income tax expense for Q1 2013 was RUR 601 million, up from RUR 344 million in Q1 2012. Our effective tax rate decreased from 21.5% in Q1 2012 to 21.1% in Q1 2013.
Adjusted net income in Q1 2013 was RUR 2.4 billion (USD 77.5 million), a 60% increase from Q1 2012.
Adjusted net income margin was 30.1% in Q1 2013, compared to 25.6% in Q1 2012.
Net income was RUR 2.2 billion (USD 72.2 million) in Q1 2013, up 79% compared with Q1 2012. Net income grew faster than adjusted net income due to large swings in foreign exchange losses and the associated income tax impact and a decrease in contingent compensation partially offset by an increase in SBC expense. We adjust for these expenses in our non-GAAP adjusted net income measure.
As of March 31, 2013, Yandex had cash, cash equivalents, term deposits (including long-term deposits) and long-term debt securities of RUR 29.3 billion (USD 942.6 million).
Net operating cash flow and capital expenditures for Q1 2013 were RUR 2.6 billion (USD 84.7 million) and RUR 0.9 billion (USD 27.6 million), respectively.
The totalnumber of shares issued and outstanding as of March 31, 2013 was 328,612,094, including 232,623,523 Class A shares, 95,988,570 Class B shares, and one Priority share and excluding 340,000 Class A shares and 45,696 Class B shares held in treasury and all Class C shares outstanding solely as a result of conversion of Class B shares into Class A shares; all such Class C shares will be cancelled. There were also employee stock options outstanding to purchase up to an additional 9.1 million shares, at a weighted average exercise price of USD 4.36 per share, of which options to purchase 7.1 million shares were fully vested; equity-settled share appreciation rights equal to 0.9 million shares, at a weighted average measurement price of USD 20.37, none of which were vested; and restricted share units covering 1.9 million shares, of which restricted share units to acquire 0.1 million shares were fully vested.
Outlook for 2013
We are increasing our revenue guidance for the full-year 2013, and we now expect year-on-year ruble-based revenue growth of 30-35%.1
1 The guidance is provided on a like-for-like basis, excluding the revenue associated with Yandex.Money from 2012 and 2013 results. In 2012, Yandex recognized total revenue of RUR 28,767 million, including RUR 552 million in payments commissions related to Yandex.Money and RUR 28,215 million in advertising revenue and other revenue. Yandex will continue to recognize revenue related to Yandex.Money until the joint venture with Sberbank is effective, which is expected to occur during the current quarter.
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