OREANDA-NEWS. Mail.Ru Group Limited (LSE: MAIL, hereinafter referred as "the Company" or "the Group"), one of the largest Internet companies in the high-growth Russian-speaking Internet markets, today provides an update on the preliminary unaudited segment revenues for Q3 2014.

Q3 2014 Performance Highlights

- Q3 2014 Group aggregate segment revenue grew 12.9% Y-o-Y to RUR 7,448 million (9 month 2014 Group aggregate segment revenue grew 18.6% Y-o-Y)

- Net debt position as of 30 September 2014 was RUR 19,053 million

- Monthly audience of Mail.Ru portal in September 2014 reached 57.8 million Russian users (TNS, all Russia, age 12-64, desktop)

Key Recent Developments

Products and user offering

- myMail for iOS now supports Microsoft Exchange ActiveSync

- New mobile strategy game Iron Desert launched on iOS and Android (under the My.com brand)

- Mobile version of our popular MMO game Legend: Legacy of Dragons released on iOS and Android

- New ICQ for iOS featuring interface themes, new contact list, enhanced customization options, ability to send multiple photos and videos at once and edit chat history

- New ICQ for Android updated with friend recommendations, lots of customization capabilities (notifications for events, autoupload of files of different types, etc.), ability to send multiple photos and share ICQ profile on social networks

- Mail.Ru email service made SSL-encrypted connection mandatory for all email clients accessing Mail.Ru servers via POP3 and SMTP protocols

- Online document editor available in Mail.Ru email service and Cloud.Mail.Ru now allows editing spreadsheets (.xls/.xlsx) and presentations (.ppt/.pptx) (currently in beta)

- Afisha.Mail.Ru introduced new user-friendly interface with focus on movies and TV series and offers licensed content from major Russian online providers

- Answers.Mail.Ru released a mobile app for Android

- Mobile web version of Health.Mail.Ru optimized for smartphones and tablets (touch version)

- Odnoklassniki introduced audio and video messages

- Odnoklassniki app for iOS is back on the App Store; now features location sharing in posts (individual and group) and photo sharing in chat

- Target.Mail.Ru launched mobile ad network allowing advertisers to extend their campaigns to third-party mobile apps

- Target.Mail.Ru introduced conversion tracking and cross-device targeting

- Update of mobile game Evolution (Black Legion) introduced on Android

- Release of updates for Allods Online (Broken Chains) and ArcheAge (Ernard Library)

Corporate

- The acquisition of the remaining 48.01% stake in VK.Com Limited (VK, Vkontakte) in an all cash deal for a total consideration of USD 1.47bn bringing Mail.Ru Group to 100% ownership

- The Group sold 2.165m shares of Qiwi on September 12th, reducing its stake from 5.28% to 1.31%

- Appointment of Jan BunЁ¦ as Chairman of the audit committee replacing Vasileios Sgourdos. Vasileios remains both a member of the board and the audit committee

- Mail.Ru Group hosted the final stage of Russian Code Cup 2014

- TechnoSphere, a joint educational project of the faculty of Computational Mathematics and Cybernetics of Lomonosov Moscow State University and Mail.Ru Group, opened machine learning laboratory

Vkontakte

- Q3 2014 VK revenue grew 6.7% Y-o-Y to RUR 968 million (9 month 2014 VK revenue grew 9.0% Y-o-Y to RUR 2,971 million)

- While the acquisition was closed on September 16th the business will be consolidated from September 30th and hence there is no revenue contribution from VK in the Group's reported Q3 results

Commenting on the Q3 revenue update, Dmitry Grishin, Co-Founder and CEO of Mail.Ru Group, said:

"In Q3 2014, the Company achieved Y-o-Y revenue growth of 12.9% to RUR 7,448 million with 9 month 2014 Y-o-Y revenue growth of 18.6%. As in H1 MMO games and community IVAS revenues remained broadly on budget, but advertising revenues and our Headhunter business continued to face challenging conditions as a result of the ongoing economic and geo-political environment. As in H1 this continued to have a negative effect on our advertising revenues and in particular the display advertising revenues which saw similar declines to Q2. Our other revenue stream remains sensitive to the underlying economic environment and hence grew at 4.4% in Q3.

In Q3 we continued to execute on our MMO games strategy which proved successful over the last years. Warface remains our largest revenue generating game. In late Q3 the previously discussed issue with Archeage was largely rectified, and the initial signs are that monetization is improving. We have also released a number of other titles, most notably the mobile strategy game Iron Desert where initial user feedback has been positive. The pipeline remains strong over the next 9 months with World of Speed, Skyforge and Armored Warfare, amongst others, all scheduled for release. We will also continue to internationalize our most successful titles under the My.com brand. As such we expect the MMO games revenues to continue to show solid growth through the year.

We are also encouraged by the continued traction of myMail which was launched in November 2013 as part of the wider My.com launch. In Q3 this remained the most downloaded alternative mail client tool on both iOS and Android globally. The US is the largest market followed by UK, France, Germany and Brazil.

In late Q3 we acquired the remaining 48.01% of Vkontakte for USD 1.47bn taking Mail.Ru Group to 100% ownership. As we commented at the time of the acquisition, the first priority for us is the retention of the talented programmers and engineers, and the continued focus on the product and the user experience. While we will retain VK as a stand-alone brand, we will be looking to leverage the wider Mail.Ru Group experience, especially across IVAS and advertising, to the widest possible audience. Additionally we will be looking for non-personnel cost savings, particularly in the areas of server hosting and facilities.

Our engagement with users remains very strong, and user behavior remains unchanged. International initiatives under the My.com brand are going well and VK presents a number of opportunities to expand the reach of the mail experience over as many users as possible. However there is no change in the underlying environment from what we said with the H1 results and hence forecasting remains problematic. As such we do not anticipate any near or medium term improvement in the display revenues, or in the Headhunter business. Notwithstanding this, we retain the full year 2014 revenue guidance (ex-VK contribution in Q4) of between 14-18% growth and despite FX headwinds we continue to maintain tight cost control and hence continue to anticipate full year EBITDA margins at around 53%."