Yandex Announces First Quarter 2014 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, 2014.
Q1 2014 Financial Highlights
Revenues of RUR 10.9 billion (USD 305.0 million), up 36% compared with Q1 2013 (and up 39% excluding the impact of Yandex.Money)
Ex-TAC revenues (excluding traffic acquisition costs) up 24% compared with Q1 2013 (and up 28% excluding the impact of Yandex.Money)
Income from operations of RUR 2.7 billion (USD 76.1 million), up 11% compared with Q1 2013
Adjusted EBITDA of RUR 4.0 billion (USD 113.3 million), up 15% compared with Q1 2013
Operating margin of 25.0%
Adjusted EBITDA margin of 37.1%
Adjustedex-TAC EBITDA margin of 48.6%
Net income of RUR 2.7 billion (USD 75.1 million), up 19% compared with Q1 2013
Adjusted net income of RUR 2.6 billion (USD 71.5 million), up 6% compared with Q1 2013
Net income margin of 24.6%
Adjusted net income margin of 23.4%
Adjustedex-TAC net income margin of 30.7%
Cash, cash equivalents and long-term deposits of RUR 51.0 billion (USD 1,428.0 million) as of March 31, 2014
"Yandex delivered strong quarterly revenue growth," said Arkady Volozh, Chief Executive Officer of Yandex. "We enjoyed growth in the number of advertisers, enhanced Yandex.Direct functionality for domestic and international clients and made several important launches on the mobile front."
Q1 2014 Operational and Corporate Highlights
Share of Russian search market (including mobile) averaged 61.9% in Q1 2014 (according to LiveInternet)
Search queries grew 21% from Q1 2013
Number of advertisers grew to more than 280,000, up 25% from Q1 2013 and up 2% from Q4 2013
Entered into cooperation agreement with MultiShip, a logistics service aggregator
Repurchased 12.5 million shares as of April 22, 2014 as part of the previously announced share repurchase program
Acquired KitLocate, a developer of an energy-efficient geolocation technology for mobile devices
Announced advertising Partnership for Real-Time Bidding with Google
Total revenues increased 36% compared with Q1 2013, and on a like-for-like basis (excluding revenues received from Yandex.Money operations in Q1 2013), total revenues increased 39% compared with Q1 2013.
Text-based advertising revenues, accounting for 92% of total revenues in Q1 2014, continued to determine overall top-line performance.
Text-based advertising revenues from Yandex's own websites accounted for 68% of total revenues during Q1 2014, and increased 26% compared with Q1 2013.
Text-based advertising revenues from our ad network increased 104% compared with Q1 2013 and contributed 24% of total revenues during Q1 2014. Our agreement with Mail.ru to power paid search results is the principal driver of our increase in partner network revenues as well as the increase in the growth rate of the ad network.
Paid clicks on Yandex's and its partners' websites, in aggregate, increased 49% in Q1 2014 compared with Q1 2013. Our average cost per click in Q1 2014 decreased 5% compared with Q1 2013.
Display advertising revenue, accounting for 7% of total revenues in Q1 2014, increased 16% compared with Q1 2013.
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 2014, Yandex added 234 full-time employees, an increase of 5% from December 31, 2013, and up 39% from March 31, 2013. The total number of full-time employees was 5,136 as of March 31, 2014. The employee numbers and growth rates are provided on a like-for-like basis, excluding Yandex.Money employees for the previous periods.
D&A expense increased 22% in Q1 2014 compared with Q1 2013, primarily reflecting investments in servers and data centers made in 2013.
As a result of the factors described above, income from operations was RUR 2.7 billion (USD 76.1 million) in Q1 2014, an 11% increase from Q1 2013, while adjusted EBITDA reached RUR 4.0 billion (USD 113.3 million) in Q1 2014, up 15% from Q1 2013.
Interest income, net in Q1 2014 was RUR 172 million, down from RUR 368 million in Q1 2013, mainly due to interest expenses related to our convertible notes issued in December 2013 and January 2014.
Foreign exchange gain in Q1 2014 was RUR 647 million, compared with a foreign exchange gain of RUR 7 million in Q1 2013. This gain is due to the appreciation of the U.S. dollar during Q1 2014 from RUR 32.7292 to USD 1.00 on December 31, 2013, to RUR 35.6871 to USD 1.00 on March 31, 2014. Yandex's Russian operating subsidiaries' functional currency is the Russian ruble, and therefore changes due to exchange rate fluctuations in the ruble value of these subsidiaries' monetary assets and liabilities, that are denominated in other currencies, 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 Q1 2014.
Income tax expense for Q1 2014 was RUR 878 million, up from RUR 601 million in Q1 2013. Our effective tax rate of 24.7% in Q1 2014 was significantly higher than in previous quarters principally because in Q1 2014 we accrued for the 5% dividend withholding tax on a part of the current year profit of our principal Russian operating subsidiary, that we considered not permanently reinvested in Russia.
Adjusted net income in Q1 2014 was RUR 2.6 billion (USD 71.5 million), a 6% increase from Q1 2013.
Adjusted net income margin was 23.4% in Q1 2014, compared with 30.1% in Q1 2013.
Net income was RUR 2.7 billion (USD 75.1 million) in Q1 2014, up 19% compared with Q1 2013.
As of March 31, 2014, Yandex had cash, cash equivalents and long-term deposits of RUR 51.0 billion (USD 1,428.0 million).
Net operating cash flow and capital expenditures for Q1 2014 were RUR 2.6 billion (USD 72.9 million) and RUR 2.1 billion (USD 57.9 million), respectively.
The total number of shares issued and outstanding as of March 31, 2014 was 321,175,805, including 250,305,393 Class A shares, 70,870,411 Class B shares, and one Priority share and excluding 8,745,949 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 5.7 million shares, at a weighted average exercise price of USD 5.18 per share, of which options to purchase 5.1 million shares were fully vested; equity-settled share appreciation rights equal to 1.6 million shares, at a weighted average measurement price of USD 26.82, 0.2 million of which were fully vested; and restricted share units covering 3.1 million shares, of which restricted share units to acquire 0.5 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 payment 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.
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