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15.02.2024 11:00:36 - Yandex Announces Fourth Quarter and Full-Year -5-
DJ Yandex Announces Fourth Quarter and Full-Year 2023 Financial Results
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Yandex N.V.
Yandex Announces Fourth Quarter and Full-Year 2023 Financial Results
15-Feb-2024 / 13:00 MSK
The issuer is solely responsible for the content of this announcement.
Yandex Announces Fourth Quarter and Full-Year 2023 Financial Results
AMSTERDAM, the Netherlands, February 15, 2024 -- 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 fourth quarter ended
December 31, 2023.
Q4 and FY 2023 Financial and Operational Highlights1,2
market, %
Services
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(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 89.6883 to USD1.00, the official exchange rate quoted as of December 31, 2023 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 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 Eats and Delivery 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 current performance.
Corporate and Subsequent Events . On February 5, 2024, Yandex N.V. announced that it has entered into a definitive agreement with apurchaser consortium to sell all of the Yandex group's businesses in Russia and certain international markets. Thebusinesses being sold represented more than 95% of the group's consolidated revenues in 2023, and approximately 95%of the group's consolidated assets and employees.The total consideration for the sale will be RUB 475 billion (approximately USD 5.2 billion as at the date of theannouncement), subject to adjustments and payable in a combination of cash and Class A shares of Yandex N.V. whereat least 50% of the consideration will be payable in cash. The consideration value reflects a mandatory discount ofat least 50% to "fair value", as currently imposed as a condition to the required approval by the GovernmentCommission for the sale of Russian assets by parent companies that are incorporated in countries considered by theRussian government to be "unfriendly", including the Netherlands. A portion of the net cash consideration (afteradjustments, applicable taxes and other expenses) will be retained to finance the development of certain retainedinternational businesses, with a substantial proportion of such net proceeds to be returned to our shareholders,which we currently expect to be by way of a share repurchase offer.The transaction has been unanimously approved by the Board of Directors of Yandex N.V. and remains subject tocertain conditions precedent, including receipt of required regulatory approvals and our shareholder approval,including a separate approval of our Class A shareholders. Our Extraordinary General Meeting and Class A Meetingare scheduled on March 7, 2024. It is expected that the initial closing pursuant to the transaction will take placein the first half of 2024.Following the completion of the transaction Yandex N.V. will retain a portfolio of international businesses andother non-Russian assets, including four early-stage technology businesses: (i) Nebius AI, (ii) Toloka AI, (iii)Avride, and (iv) TripleTen. Upon completion of the proposed transaction, we intend to publish pro forma financialinformation for the Company and the retained businesses, giving effect to the divestment. . 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 whohave been designated under such sanctions. In July 2023, our "Yandex Pay" subsidiary was designated in Canada; suchdesignation does not apply to Yandex N.V. or its other group companies or operations. Yandex continues to closelymonitor developments in this regard.
Impact of the current geopolitical crisis
Ongoing geopolitical tensions and their impact on the Russian and global economy have created a 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, including significant devaluation, currency controls, 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, 2022, which was filed on April 20, 2023.
We continue to provide services to our users and partners with no interruptions. We are taking appropriate measures 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 almost 26,400 employees in Russia and abroad, while doing everything we can to safeguard the interests of our shareholders and other stakeholders.
Consolidated Results
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The following table provides a summary of our key consolidated financial results for the three and twelve months ended December 31, 2022 and 2023:
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Our segment disclosure is provided in the Segment financial results section below.
Cash and cash equivalents as of December 31, 2023:
-- RUB 96.5 billion (USD1,076.2 million) on a consolidated basis.
Segment financial results
Search & Portal
Our Search and Portal segment includes Search, Geo, Weather and a number of other services offered in Russia, Belarus and Kazakhstan.
Key operational trends:
-- Share of Russian search market, including mobile, averaged 63.8% in Q4 2023, up 1.2 pp from 62.6% in Q42022 and 62.6% in Q3 2023, according to Yandex Radar
-- Search share on Android in Russia was 63.5% in Q4 2023, up 1.5 pp from 62.0% in Q4 2022 and 62.5% in Q32023, according to Yandex Radar
-- Search share on iOS in Russia was 51.2% in Q4 2023, up 3.2 pp from 48.0% in Q4 2022 and 49.8% in Q3 2023,according to Yandex Radar
-- Mobile search traffic was 69.5% of our total search traffic in Q4 2023. Mobile revenues represented 62.5%of our search revenues in Q4 2023
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In RUB millions Three months ended December 31, Twelve months ended December 31,
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Revenues increased by 45% and Ex-TAC revenues grew by 43% year-on-year in Q4 2023. This growth was mainly driven by the strong performance of our core search business and the Yandex Advertising Network underpinned by our ongoing investments in the development and efficiency improvements to our ad-products and technologies, as well as the expansion of advertising inventory.
Adjusted EBITDA margin came to 49.7% in Q4 2023 compared with 52.8% in Q4 2022. The year-on-year margin dynamic mainly reflects our investments in new products and technologies (including our generative neural networks) and related increase in personnel and marketing costs, as well as the low base effect in 2022 on the back of the cost optimization.
E-commerce, Mobility and Delivery
The E-commerce, Mobility and Delivery segment includes our transactional 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, 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 (acquired in September 2022 and previously known as Delivery Club); and (iii) our other O2O businesses, including Yandex Delivery, our middle and last-mile delivery service; Yandex Eats and Delivery, our ready-to-eat delivery from restaurants services; Lavka Israel, our hyperlocal convenience store delivery service; and Yandex Fuel, our contactless payment service at gas stations, and several smaller experiments.
Key operational trends:
-- Total E-Commerce GMV increased by 46% year-on-year in Q4 2023
-- GMV of Mobility services grew 50% compared to Q4 2022
Yandex Market
-- The share of GMV sold by third-party sellers on our Yandex Market marketplace reached 90% in Q4 2023compared to 81% in Q4 2022
-- Marketplace's assortment was 57.1 million SKUs as of the end of Q4 2023, up from 41.7 million SKUs as ofthe end of Q4 2022
-- The number of active buyers6 on the Yandex Market marketplace increased by 33% year-on-year and reached18.5 million as of the end of Q4 2023
-- The number of active sellers7 on Yandex Market marketplace increased by 79% year-on-year and reached 78.1thousand as of the end of Q4 2023
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.
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In RUB millions Three months ended December 31, Twelve months ended December 31,
2022 2023 Change 2022 2023 Change
GMV:
Revenues:
Delivery:
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(8) 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. (9) 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, as well as delivery fee and advertising revenue of Yandex Lavka in Russia and other revenues.
The growth in GMV of Mobility reached 50% year-on-year in Q4 2023, driven by an increase in the number of rides on the back of growth in the number of users, a growing share of non-economy tariffs due to the shift of new vehicles supply on the market towards upper-class models and the positive forex effect from our operations in CIS and EMEA markets. The growth in GMV of E-commerce was 46% year-on-year in Q4 2023 supported by organic growth in the user base, assortment expansion and cross-service synergies with Fintech products (in particular Split and Yandex Pay) and Yandex Plus. GMV of other O2O services grew by 56% year-on-year in Q4 2023, with Yandex Delivery and Yandex Food Delivery services being the largest contributors.
E-commerce, Mobility and Delivery segment revenues increased by 51% year-on-year in Q4 2023. The increase was mainly driven by E-commerce services (with Yandex Lavka being the largest contributor to the growth, closely followed by Yandex Market) and Mobility. Mobility revenues increased by 45%, which is lower than GMV growth due to increased investments into driver supply in Russia. E-commerce revenues increased by 49%, slightly surpassing the increase in GMV, reflecting an improvement of 3P take rates and a growing share of advertising revenue. Other O2O services revenues produced 69% year-on-year growth where Yandex Delivery was the key contributor to the growth, followed by our Food Delivery business.
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 our expansion of intercompany synergies with a higher volume of E-commerce and Food Delivery orders fulfilled by our Yandex Delivery business compared to a year ago.
Adjusted EBITDA loss of E-commerce, Mobility and Delivery was RUB 2,209 million in Q4 2023 compared to loss of RUB 10,542 million in Q4 2022. The reduction of loss by RUB 8,333 million was primarily driven by the growing contribution of Mobility businesses as a result of growing GMV on the back of increased demand, as well as improvements made to operational efficiency in E-commerce and Food Delivery services.
Plus and Entertainment Services
The Plus and Entertainment Services segment includes our subscription service Yandex Plus, Yandex Music, Kinopoisk, Bookmate, Yandex Afisha, and our production center Plus Studio.
Key operational trends:
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-- Number of Yandex Plus subscribers reached 30.4 million as of the end of Q4 2023, up 58% from the end ofQ4 2022
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Plus and Entertainment Services revenues grew 72% in Q4 2023 compared with Q4 2022. The increase was primarily driven by the growth of subscription revenue (which increased by 67% year-on-year) on the back of an expanding base of paid subscribers, changes in tariff mix and options, as well as solid trends in other revenue streams (including advertising, licensing, ticketing and other revenue categories). Adjusted EBITDA remained positive for the third quarter in a row reaching RUB 0.3 billion, compared with a loss of RUB 0.6 billion in Q4 2022, driven by an operating leverage effect on the back of the subscription revenue growth, which has more than offset our investments in promotional activities on new products, regional launches and growing personnel expenses. Classifieds
The Classifieds segment includes Auto.ru, Yandex Realty, Yandex Rent and Yandex Travel.
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In RUB millions Three months ended December 31, Twelve months ended December 31,
2022 2023 Change 2022 2023 Change
Revenues 3,938 7,038 79% 12,287 24,174 97% Adjusted EBITDA 208 351 69% 1,111 423 -62% Adjusted EBITDA margin 5.3% 5.0% -0.3 pp 9.0% 1.7% -7.3 pp
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Classifieds revenues increased by 79% in Q4 2023 compared with Q4 2022. This revenue growth was primarily driven by the solid performance of Auto.ru on the back of the dealer base expansion, growth of new projects and improvement in monetization; as well as by Yandex Travel on the back of the market share gains. Revenue increase was also supported by strong growth in primary realty classifieds. Adjusted EBITDA amounted to RUB 0.4 billion in Q4 2023 compared to RUB 0.2 billion in Q4 2022, as a result of margin improvement of Auto.ru, partially offset by the continuing investments in the long-term growth of our businesses, such as Yandex Travel and Yandex Realty international.
Other Business Units and Initiatives
The Other Business Units and Initiatives category includes our self-driving vehicles business (Yandex SDG), Yandex Cloud and Yandex 360, Yandex Education (Practicum and other education initiatives), Devices and Alice, FinTech (including Yandex Pay and Yandex ID) and a number of other experiments as well as unallocated corporate expenses.
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Other Business Units and Initiatives revenues increased 84% year-on-year in Q4 2023, driven mainly by Devices and Alice, Yandex Cloud and FinTech. The Devices and Alice revenue increased 69% year-on-year to RUB 19.8 billion in Q4 2023 due to growth in devices sales supported by the expansion in the range of models available and our efficient targeted marketing activities. Yandex Cloud revenue grew 60% year-on-year, supported by product portfolio expansion as well as improvements in our market share and the increasing demand for our services.
The adjusted EBITDA loss amounted to RUB 15.8 billion compared to RUB 8.4 billion in Q4 2022. The loss increase in absolute terms was mainly attributed to the unallocated corporate expenses from reportable segments recognized within the Other Business Units and Initiatives category (while these costs remain broadly unchanged as a percentage of total group's revenue), investments into growth of FinTech and Yandex SDG (where adjusted EBITDA loss came to RUB 2.9 billion in Q4 2023) businesses, and development of other verticals, which was partially offset by a solid performance in Devices and Alice.
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 sales and others.
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Revenues:
Adjusted EBITDA:
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Eliminations related to our revenues increased 71% in Q4 2023 compared with Q4 2022. The increase was attributed to the increased intercompany revenue between our businesses (related to cross service advertising and marketing activities, the usage of data centers, other IT infrastructure, and other centralized services by all business units), as a result of greater integration of services and overall growth across the Group.
Consolidated Operating Costs and Expenses
Our operating costs and expenses consist of cost of revenues (COS), product development expenses (PD), sales, general and administrative expenses (SG&A), depreciation and amortization expenses (D&A) and goodwill impairment. Personnel-related costs, including share-based compensation expenses, are included in the COS, PD and SG&A categories and represent a significant part of our operating expenses. Increases across all cost categories reflect investments in overall growth. In Q4 2023, our headcount increased by 658 full-time employees. The total number of full-time employees was 26,361 as of December 31, 2023, up by 3% compared with September 30, 2023, and up by 26% from December 31, 2022, which was primarily driven by the accelerated pace of hiring in Search and Portal, Yandex Cloud and Plus and Entertainment Services, as well as by the growth of Yandex Market and Mobility among others.
Operating Expenses
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Total operating expenses increased by 55% in Q4 2023 compared with Q4 2022. The increase was mainly due to the ?ost of revenues related to E-commerce, the Mobility and Delivery businesses, Devices and Alice, as well as Search and Portal. The growth of headcount and related personnel expenses across most of our business units due to the overall expansion of operations; and the impairment of intangible assets of RUB 6.3 billion in Q4 2023 also contributed to the increase in total operating expenses.
TAC grew 53% in Q4 2023 compared with Q4 2022 and represented 7.3% of total revenues. The year-on-year growth of TAC as a share of revenue was primarily driven by the growing contribution of ad revenues related to the Yandex Advertising Network.
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In RUB millions Three months ended December 31, Twelve months ended December 31,
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Total SBC (share based compensation) expenses increased by 203% in Q4 2023 compared with Q4 2022. The increase was primarily related to the replacement of unvested RSU equity awards with salary increases for certain employees, which led to the recognition of additional compensation cost in Q4 2023, as well as changes in the fair value of Synthetic Options and Business Unit Equity Awards and the material appreciation of the U.S. dollar against the Russian ruble. In light of the ongoing halt of trading in our Class A shares on Nasdaq, the remaining participants will continue to receive cash compensation on the vesting dates of the relevant RSU equity awards, in an amount equal to the target value of each tranche of such awards. In Q4 2023, RUB 2.2 billion of the total RUB 14.6 billion in SBC expenses related to RSU equity awards settled in cash were recorded as part of personnel expenses, which reduced consolidated adjusted EBITDA.
Income from operations
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Income from operations amounted to RUB 2.9 billion in Q4 2023 compared to RUB 6.1 billion in Q4 2022. Despite solid performance across our key verticals, including Search and Portal, E-commerce, Mobility and Delivery, as well as Plus and Entertainment, the income loss from operations is mainly associated with the impairment of intangible assets of RUB 6.3 billion and our investments in expansion of our businesses and their future growth. Other income/(loss), net for Q4 2023 amounted to RUB 572 million, down from RUB 9,873 million in Q4 2022. Other income/ (loss), net includes foreign exchange gains of RUB 474 million in Q4 2023 and RUB 9,382 million in Q4 2022. Foreign exchange gain dynamics reflect changes of USD denominated monetary assets in our Russian subsidiaries and RUB denominated monetary assets in our foreign subsidiaries on the back of appreciation of the Russian ruble in absolute terms against the US dollar in the fourth quarter of 2023 compared to the depreciation in the fourth quarter of 2022. Income tax expense for Q4 2023 was RUB 6,807 million, down from RUB 9,666 million in Q4 2022. Our effective tax rate of 1,403.5% in Q4 2023 was higher than 57.8% in Q4 2022. The Group's tax provision for income taxes for interim periods is determined based on the tax rate effective during that period. The major factors influencing changes in the effective tax rates in Q4 2023 and Q4 2022 were: differences in foreign tax rates of our subsidiaries (including reduced tax rates and effects of change in tax rates in certain subsidiaries), non-deductible SBC expenses, deferred tax asset valuation allowances, tax on dividends, tax provision recognized, and statutory expenses not deductible for income tax purposes. Net loss was RUB 6.3 billion in Q4 2023, compared with net income of RUB 7.1 billion in Q4 2022. The net loss is mainly associated with the impairment of intangible assets in the amount of RUB 6.3 billion in Q4 2023 and significantly lower foreign exchange gains compared to Q4 2022. Cash provided by operating activities was RUB 11.9 billion and cash paid for property and equipment, intangible assets and assets to be leased was RUB 38.6 billion for Q4 2023. The total number of shares issued and outstanding as of December 31, 2023 was 361,482,282, including 325,783,607 Class A shares, 35,698,674 Class B shares, and one Priority share and excluding 558,663 Class A shares held in treasury.
There were also outstanding employee share options to purchase up to an additional 2.9 million shares, at a weighted average exercise price of USD44.32 per share, 2.3 million of which were fully vested; equity-settled share appreciation rights (SARs) for 0.1 million shares, at a weighted average measurement price of USD32.85, all of which were fully vested; restricted share units (RSUs) covering 7.0 million shares, of which RSUs to acquire 6.2 million shares were fully vested; and performance share units (PSUs) for 0.2 million shares. In addition, we have outstanding awards in respect of our various Business Units, including options and synthetic options for 5.9 million shares, 3.0 million of which were fully vested and are settled in equity of our Business units or cash.
ABOUT YANDEX
Yandex (NASDAQ and MOEX: YNDX) is a technology company registered in the Netherlands that builds intelligent products and services powered by machine learning. Our goal is to help consumers and businesses better navigate the online and offline world. Since 1997, we have delivered world-class, locally relevant search and navigation products, while also expanding into mobility, e-commerce, online entertainment, cloud computing and other markets to assist millions of consumers in Russia and a number of international markets. More information on Yandex can be found at https://ir.yandex/.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements that involve risks and uncertainties. All statements contained in this press release other than statements of historical facts, including, without limitation, statements regarding our future financial and business performance, our business and strategy and the impact of the current geopolitical and macroeconomic developments on our industry, business and financial results, are forward-looking statements. The words "anticipate," "believe," "continue," "estimate," "expect," "guide," "intend," "likely," "may," "will" and similar expressions and their negatives are intended to identify forward-looking statements. 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, macroeconomic and geopolitical developments affecting the Russian economy or our business, changes in the political, legal and/or regulatory environment and regulatory and business responses to that crisis, including international economic sanctions and export controls, competitive pressures, changes in advertising patterns, changes in user preferences, 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, 2022 and "Risk Factors" in the Shareholder Circular filed as Exhibit 99.1 to our Current Report on Form 6-K, which were filed with the U.S. Securities and Exchange Commission (SEC) on April 20, 2023 and February 8, 2024, respectively, and are available on our investor relations website at https:// ir.yandex/sec-filings and on the SEC website at https://www.sec.gov/. All information in this release and in the attachments is as of February 15, 2024, and Yandex undertakes no duty to update this information unless required by law.
USE OF NON-GAAP FINANCIAL MEASURES
To supplement the financial information prepared and presented in accordance with U.S. GAAP, we present the following non-GAAP financial measures: ex-TAC revenues, Adjusted EBITDA/(loss), Adjusted EBITDA margin and Adjusted net income/(loss). 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 U.S. 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 U.S. GAAP measures", included following the accompanying financial tables. We define the various non-GAAP financial measures we use as follows:
-- Ex-TAC revenues means U.S. GAAP revenues less total traffic acquisition costs (TAC).
-- Adjusted EBITDA/(loss) means U.S. GAAP net income/(loss) plus (1) depreciation and amortization, (2) certain SBC expense, (3) interest expense, (4) income tax expense, (5) expenses (reversal of expenses) related tothe contingent consideration, (6) one-off restructuring and other expenses, and (7) impairment of goodwill andother intangible assets less (1) interest income, (2) other income/(loss), net, (3) income/(loss) from equitymethod investments, (4) gain on restructuring of convertible debt and (5) effect of the News and Zendeconsolidation.
-- Adjusted EBITDA margin means adjusted EBITDA/(loss) divided by U.S. GAAP revenues.
-- Adjusted net income means U.S. GAAP net income/(loss) plus (1) certain SBC expense, (2) expenses(reversal of expenses) related to the contingent consideration, (3) one-off restructuring and other expenses, (4)impairment of goodwill and other intangible assets, and (5) amortization of debt discount and issuance costs, less(1) foreign exchange gains, (2) gain on restructuring of convertible debt and (3) effect of the News and Zendeconsolidation. Tax effects related to the listed adjustments are excluded from adjusted net income.
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.
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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 recurring costs, particularly share-based compensation. 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 U.S. GAAP financial measures:
TAC
We believe that it may be useful for investors and analysts to review certain measures both in accordance with U.S. GAAP and net of the effect of TAC, which we view as comparable to sales bonuses but, unlike sales bonuses, are not deducted from U.S. GAAP revenues. By presenting revenue, 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.
Certain SBC expense
SBC is a significant expense item and an important part of our compensation and incentive programs. As it is 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 clearer picture of our operating performance. However, because we settled the RSU equity awards of our employees in cash during 2022 and 2023, starting from Q3 2022, we no longer eliminate the relevant SBC expense corresponding to the cash payment from adjusted EBITDA and adjusted net income.
Foreign exchange gains/(losses)
Because we hold significant assets and liabilities 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 EBITDA/(loss), adjusted net income and related margin measures excluding these effects, in order to provide greater clarity regarding our operating performance.
Amortization of debt discount and issuance costs
We also adjust net income/(loss) for interest expense representing amortization of the debt discount related to our convertible senior notes due 2025 issued in Q1 2020. 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. We have repurchased substantially all of the outstanding notes to date.
Expenses related to contingent consideration
We may incur expenses in connection with acquisitions that are not indicative of our recurring core operating performance. In particular, we are required under U.S. GAAP to accrue as an expense the contingent compensation that is payable to certain employees in connection with certain business combinations. We eliminate these acquisition-related expenses from adjusted EBITDA/(loss) 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.
Goodwill and other intangible assets impairment
We adjust our net income/(loss) and EBITDA/(loss) to exclude a loss from goodwill and intangible assets impairment, as well as any related income tax effects. Excluding these expenses, allow us to provide a clearer picture of our business performance, without being distracted by one-off expenses that are not directly related to our operating activities.
Gain on restructuring of convertible debt
Adjusted net income, adjusted EBITDA/(loss) and related margin measures for 12 months ended December 31, 2022 exclude gain on restructuring of our convertible debt and income tax effect attributable to this gain.
In June 2022, we completed the purchase of 93.2% in aggregate principal amount of our USD1.25 billion 0.75% Convertible Notes due 2025. As a result of the restructuring, a gain in the amount of RUB 9,305 million and a related income tax expense in the amount of RUB 751 million were recognized. We have repurchased substantially all of the outstanding notes to date.
One-off restructuring and other expenses
We believe that it is useful to present adjusted net income, adjusted EBITDA/(loss) and related margin measures excluding impacts not related to our operating activities. Adjusted net income and adjusted EBITDA/(loss) exclude expenses related to the proposed corporate restructuring and other similar one-off expenses.
Effect of the News and Zen deconsolidation
We have adjusted net income/(loss), EBITDA/(loss) and related margin measures for the one-off gain as a result of the News and Zen deconsolidation completed in Q3 2022, in the amount of RUB 38,051 million. We have eliminated this gain from adjusted net income and adjusted EBITDA/(loss) as we believe that it is useful to present adjusted net income, adjusted EBITDA and related margins measures excluding impacts not related to our operating activities.
The tables at the end of this release provide detailed reconciliations of each non-GAAP financial measure we use from the most directly comparable U.S. GAAP financial measure.
YANDEX N.V.
Unaudited Condensed Consolidated Balance Sheets
in millions of Russian rubles and U.S. dollars, except share and per share data)
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As of
December December 31, December 31,
31,
ASSETS
LIABILITIES AND SHAREHOLDERS' EQUITY
Commitments and contingencies
Shareholders' equity:
Priority share: EUR1 par value; 1 share authorized, issued and outstanding - - -
Ordinary shares: par value (Class A EUR0.01, Class B EUR0.10 and Class C EUR0.09);
shares authorized (Class A: 500,000,000, Class B: 37,138,658 and Class C:
===
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===
Yandex N.V.
Yandex Announces Fourth Quarter and Full-Year 2023 Financial Results
15-Feb-2024 / 13:00 MSK
The issuer is solely responsible for the content of this announcement.
Yandex Announces Fourth Quarter and Full-Year 2023 Financial Results
AMSTERDAM, the Netherlands, February 15, 2024 -- 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 fourth quarter ended
December 31, 2023.
Q4 and FY 2023 Financial and Operational Highlights1,2
In RUB millions Three months ended December Twelve months ended December 31 31 2022 2023 Change 2022 2023 Change Total Revenues 164,778 249,586 51% 521,699 800,125 53% Total Adjusted EBITDA 17,173 32,903 92% 64,140 96,970 51% Total Group Total Adjusted EBITDA margin, % 10.4% 13.2% 2.8 pp 12.3% 12.1% -0.2 pp Net income/(loss) 7,055 (6,322) n/m 47,615 21,775 -54% Adjusted Net Income 747 11,829 n/m 10,765 27,411 155% Share of Russian search 62.6% 63.8% 1.2 pp 61.9% 63.4% 1.5 pp
market, %
Search share on Android, % 62.0% 63.5% 1.5 pp 61.4% 63.0% 1.6 pp Search share on iOS, % 48.0% 51.2% 3.2 pp 47.6% 49.9% 2.3 pp Search and Revenues 69,859 101,111 45% 226,022 337,514 49% Portal Ex-TAC revenues 56,434 80,962 43% 186,455 274,946 47% Adjusted EBITDA 36,866 50,205 36% 120,503 172,950 44% Adjusted EBITDA margin, % 52.8% 49.7% -3.1 pp 53.3% 51.2% -2.1 pp Revenues 85,874 130,087 51% 261,246 420,753 61% E-Commerce, Mobility GMV of Mobility3 218,427 326,977 50% 762,848 1,104,874 45% and Delivery GMV of E-commerce4 112,098 163,918 46% 307,711 503,385 64% GMV of other O2O services5 66,660 104,103 56% 192,130 330,566 72% Total Adjusted EBITDA loss (10,542) (2,209) n/m (19,644) (23,611) 20% Plus and Entertainment Yandex Plus subscribers, MM 19.3 30.4 58% 19.3 30.4 58%
Services
===
(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 89.6883 to USD1.00, the official exchange rate quoted as of December 31, 2023 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 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 Eats and Delivery 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 current performance.
Corporate and Subsequent Events . On February 5, 2024, Yandex N.V. announced that it has entered into a definitive agreement with apurchaser consortium to sell all of the Yandex group's businesses in Russia and certain international markets. Thebusinesses being sold represented more than 95% of the group's consolidated revenues in 2023, and approximately 95%of the group's consolidated assets and employees.The total consideration for the sale will be RUB 475 billion (approximately USD 5.2 billion as at the date of theannouncement), subject to adjustments and payable in a combination of cash and Class A shares of Yandex N.V. whereat least 50% of the consideration will be payable in cash. The consideration value reflects a mandatory discount ofat least 50% to "fair value", as currently imposed as a condition to the required approval by the GovernmentCommission for the sale of Russian assets by parent companies that are incorporated in countries considered by theRussian government to be "unfriendly", including the Netherlands. A portion of the net cash consideration (afteradjustments, applicable taxes and other expenses) will be retained to finance the development of certain retainedinternational businesses, with a substantial proportion of such net proceeds to be returned to our shareholders,which we currently expect to be by way of a share repurchase offer.The transaction has been unanimously approved by the Board of Directors of Yandex N.V. and remains subject tocertain conditions precedent, including receipt of required regulatory approvals and our shareholder approval,including a separate approval of our Class A shareholders. Our Extraordinary General Meeting and Class A Meetingare scheduled on March 7, 2024. It is expected that the initial closing pursuant to the transaction will take placein the first half of 2024.Following the completion of the transaction Yandex N.V. will retain a portfolio of international businesses andother non-Russian assets, including four early-stage technology businesses: (i) Nebius AI, (ii) Toloka AI, (iii)Avride, and (iv) TripleTen. Upon completion of the proposed transaction, we intend to publish pro forma financialinformation for the Company and the retained businesses, giving effect to the divestment. . 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 whohave been designated under such sanctions. In July 2023, our "Yandex Pay" subsidiary was designated in Canada; suchdesignation does not apply to Yandex N.V. or its other group companies or operations. Yandex continues to closelymonitor developments in this regard.
Impact of the current geopolitical crisis
Ongoing geopolitical tensions and their impact on the Russian and global economy have created a 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, including significant devaluation, currency controls, 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, 2022, which was filed on April 20, 2023.
We continue to provide services to our users and partners with no interruptions. We are taking appropriate measures 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 almost 26,400 employees in Russia and abroad, while doing everything we can to safeguard the interests of our shareholders and other stakeholders.
Consolidated Results
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The following table provides a summary of our key consolidated financial results for the three and twelve months ended December 31, 2022 and 2023:
===
In RUB millions Three months ended December 31, Twelve months ended December 31, 2022 2023 Change 2022 2023 Change Revenues 164,778 249,586 51% 521,699 800,125 53% Ex-TAC revenues 152,791 231,242 51% 487,007 743,366 53% Income from operations 6,127 2,913 -52% 13,236 28,461 115% Adjusted EBITDA 17,173 32,903 92% 64,140 96,970 51% Net income/(loss) 7,055 (6,322) n/m 47,615 21,775 -54% Adjusted net income 747 11,829 n/m 10,765 27,411 155%
===
Our segment disclosure is provided in the Segment financial results section below.
Cash and cash equivalents as of December 31, 2023:
-- RUB 96.5 billion (USD1,076.2 million) on a consolidated basis.
Segment financial results
Search & Portal
Our Search and Portal segment includes Search, Geo, Weather and a number of other services offered in Russia, Belarus and Kazakhstan.
Key operational trends:
-- Share of Russian search market, including mobile, averaged 63.8% in Q4 2023, up 1.2 pp from 62.6% in Q42022 and 62.6% in Q3 2023, according to Yandex Radar
-- Search share on Android in Russia was 63.5% in Q4 2023, up 1.5 pp from 62.0% in Q4 2022 and 62.5% in Q32023, according to Yandex Radar
-- Search share on iOS in Russia was 51.2% in Q4 2023, up 3.2 pp from 48.0% in Q4 2022 and 49.8% in Q3 2023,according to Yandex Radar
-- Mobile search traffic was 69.5% of our total search traffic in Q4 2023. Mobile revenues represented 62.5%of our search revenues in Q4 2023
===
In RUB millions Three months ended December 31, Twelve months ended December 31,
2022 2023 Change 2022 2023 Change Revenues 69,859 101,111 45% 226,022 337,514 49% Ex-TAC revenues 56,434 80,962 43% 186,455 274,946 47% Adjusted EBITDA 36,866 50,205 36% 120,503 172,950 44% Adjusted EBITDA margin 52.8% 49.7% -3.1 pp 53.3% 51.2% -2.1 pp
===
Revenues increased by 45% and Ex-TAC revenues grew by 43% year-on-year in Q4 2023. This growth was mainly driven by the strong performance of our core search business and the Yandex Advertising Network underpinned by our ongoing investments in the development and efficiency improvements to our ad-products and technologies, as well as the expansion of advertising inventory.
Adjusted EBITDA margin came to 49.7% in Q4 2023 compared with 52.8% in Q4 2022. The year-on-year margin dynamic mainly reflects our investments in new products and technologies (including our generative neural networks) and related increase in personnel and marketing costs, as well as the low base effect in 2022 on the back of the cost optimization.
E-commerce, Mobility and Delivery
The E-commerce, Mobility and Delivery segment includes our transactional 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, 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 (acquired in September 2022 and previously known as Delivery Club); and (iii) our other O2O businesses, including Yandex Delivery, our middle and last-mile delivery service; Yandex Eats and Delivery, our ready-to-eat delivery from restaurants services; Lavka Israel, our hyperlocal convenience store delivery service; and Yandex Fuel, our contactless payment service at gas stations, and several smaller experiments.
Key operational trends:
-- Total E-Commerce GMV increased by 46% year-on-year in Q4 2023
-- GMV of Mobility services grew 50% compared to Q4 2022
Yandex Market
-- The share of GMV sold by third-party sellers on our Yandex Market marketplace reached 90% in Q4 2023compared to 81% in Q4 2022
-- Marketplace's assortment was 57.1 million SKUs as of the end of Q4 2023, up from 41.7 million SKUs as ofthe end of Q4 2022
-- The number of active buyers6 on the Yandex Market marketplace increased by 33% year-on-year and reached18.5 million as of the end of Q4 2023
-- The number of active sellers7 on Yandex Market marketplace increased by 79% year-on-year and reached 78.1thousand as of the end of Q4 2023
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 December 31, Twelve months ended December 31,
2022 2023 Change 2022 2023 Change
GMV:
Mobility 218,427 326,977 50% 762,848 1,104,874 45% E-Commerce 112,098 163,918 46% 307,711 503,385 64% Other O2O services 66,660 104,103 56% 192,130 330,566 72%
Revenues:
Mobility 34,392 49,992 45% 121,906 165,847 36% E-Commerce 37,310 55,598 49% 101,228 178,820 77% Revenues from sale of goods (1P)8 23,465 29,433 25% 69,107 102,185 48% Commission and other e-commerce revenues9 13,845 26,165 89% 32,121 76,635 139% Other O2O services 16,426 27,823 69% 44,335 85,581 93% Eliminations (2,254) (3,326) 48% (6,223) (9,495) 53% Total revenues 85,874 130,087 51% 261,246 420,753 61% Adjusted EBITDA loss E-commerce, Mobility and (10,542) (2,209) n/m (19,644) (23,611) 20%
Delivery:
===
(8) 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. (9) 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, as well as delivery fee and advertising revenue of Yandex Lavka in Russia and other revenues.
The growth in GMV of Mobility reached 50% year-on-year in Q4 2023, driven by an increase in the number of rides on the back of growth in the number of users, a growing share of non-economy tariffs due to the shift of new vehicles supply on the market towards upper-class models and the positive forex effect from our operations in CIS and EMEA markets. The growth in GMV of E-commerce was 46% year-on-year in Q4 2023 supported by organic growth in the user base, assortment expansion and cross-service synergies with Fintech products (in particular Split and Yandex Pay) and Yandex Plus. GMV of other O2O services grew by 56% year-on-year in Q4 2023, with Yandex Delivery and Yandex Food Delivery services being the largest contributors.
E-commerce, Mobility and Delivery segment revenues increased by 51% year-on-year in Q4 2023. The increase was mainly driven by E-commerce services (with Yandex Lavka being the largest contributor to the growth, closely followed by Yandex Market) and Mobility. Mobility revenues increased by 45%, which is lower than GMV growth due to increased investments into driver supply in Russia. E-commerce revenues increased by 49%, slightly surpassing the increase in GMV, reflecting an improvement of 3P take rates and a growing share of advertising revenue. Other O2O services revenues produced 69% year-on-year growth where Yandex Delivery was the key contributor to the growth, followed by our Food Delivery business.
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 our expansion of intercompany synergies with a higher volume of E-commerce and Food Delivery orders fulfilled by our Yandex Delivery business compared to a year ago.
Adjusted EBITDA loss of E-commerce, Mobility and Delivery was RUB 2,209 million in Q4 2023 compared to loss of RUB 10,542 million in Q4 2022. The reduction of loss by RUB 8,333 million was primarily driven by the growing contribution of Mobility businesses as a result of growing GMV on the back of increased demand, as well as improvements made to operational efficiency in E-commerce and Food Delivery services.
Plus and Entertainment Services
The Plus and Entertainment Services segment includes our subscription service Yandex Plus, Yandex Music, Kinopoisk, Bookmate, Yandex Afisha, and our production center Plus Studio.
Key operational trends:
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-- Number of Yandex Plus subscribers reached 30.4 million as of the end of Q4 2023, up 58% from the end ofQ4 2022
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In RUB millions Three months ended December 31, Twelve months ended December 31, 2022 2023 Change 2022 2023 Change Revenues 11,984 20,638 72% 31,782 66,899 110% Adjusted EBITDA/(loss) (585) 330 n/m (7,849) 2,944 n/m Adjusted EBITDA margin -4.9% 1.6% 6.5 pp -24.7% 4.4% 29.1 pp
===
Plus and Entertainment Services revenues grew 72% in Q4 2023 compared with Q4 2022. The increase was primarily driven by the growth of subscription revenue (which increased by 67% year-on-year) on the back of an expanding base of paid subscribers, changes in tariff mix and options, as well as solid trends in other revenue streams (including advertising, licensing, ticketing and other revenue categories). Adjusted EBITDA remained positive for the third quarter in a row reaching RUB 0.3 billion, compared with a loss of RUB 0.6 billion in Q4 2022, driven by an operating leverage effect on the back of the subscription revenue growth, which has more than offset our investments in promotional activities on new products, regional launches and growing personnel expenses. Classifieds
The Classifieds segment includes Auto.ru, Yandex Realty, Yandex Rent and Yandex Travel.
===
In RUB millions Three months ended December 31, Twelve months ended December 31,
2022 2023 Change 2022 2023 Change
Revenues 3,938 7,038 79% 12,287 24,174 97% Adjusted EBITDA 208 351 69% 1,111 423 -62% Adjusted EBITDA margin 5.3% 5.0% -0.3 pp 9.0% 1.7% -7.3 pp
===
Classifieds revenues increased by 79% in Q4 2023 compared with Q4 2022. This revenue growth was primarily driven by the solid performance of Auto.ru on the back of the dealer base expansion, growth of new projects and improvement in monetization; as well as by Yandex Travel on the back of the market share gains. Revenue increase was also supported by strong growth in primary realty classifieds. Adjusted EBITDA amounted to RUB 0.4 billion in Q4 2023 compared to RUB 0.2 billion in Q4 2022, as a result of margin improvement of Auto.ru, partially offset by the continuing investments in the long-term growth of our businesses, such as Yandex Travel and Yandex Realty international.
Other Business Units and Initiatives
The Other Business Units and Initiatives category includes our self-driving vehicles business (Yandex SDG), Yandex Cloud and Yandex 360, Yandex Education (Practicum and other education initiatives), Devices and Alice, FinTech (including Yandex Pay and Yandex ID) and a number of other experiments as well as unallocated corporate expenses.
===
In RUB millions Three months ended December 31, Twelve months ended December 31, 2022 2023 Change 2022 2023 Change Revenues 18,907 34,852 84% 48,784 82,734 70% Adjusted EBITDA loss (8,407) (15,752) 87% (29,844) (56,794) 90% Adjusted EBITDA loss margin -44.5% -45.2% -0.7 pp -61.2% -68.6% -7.4 pp
===
Other Business Units and Initiatives revenues increased 84% year-on-year in Q4 2023, driven mainly by Devices and Alice, Yandex Cloud and FinTech. The Devices and Alice revenue increased 69% year-on-year to RUB 19.8 billion in Q4 2023 due to growth in devices sales supported by the expansion in the range of models available and our efficient targeted marketing activities. Yandex Cloud revenue grew 60% year-on-year, supported by product portfolio expansion as well as improvements in our market share and the increasing demand for our services.
The adjusted EBITDA loss amounted to RUB 15.8 billion compared to RUB 8.4 billion in Q4 2022. The loss increase in absolute terms was mainly attributed to the unallocated corporate expenses from reportable segments recognized within the Other Business Units and Initiatives category (while these costs remain broadly unchanged as a percentage of total group's revenue), investments into growth of FinTech and Yandex SDG (where adjusted EBITDA loss came to RUB 2.9 billion in Q4 2023) businesses, and development of other verticals, which was partially offset by a solid performance in Devices and Alice.
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 sales and others.
===
In RUB millions Three months ended December 31, Twelve months ended December 31, 2022 2023 Change 2022 2023 Change
Revenues:
Segment revenues 190,562 293,726 54% 580,121 932,074 61% Eliminations (25,784) (44,140) 71% (58,422) (131,949) 126% Total revenues 164,778 249,586 51% 521,699 800,125 53%
Adjusted EBITDA:
Segment adjusted EBITDA 17,540 32,923 88% 64,275 95,912 49% Eliminations (367) (20) -95% (135) 1,058 n/m Total adjusted EBITDA 17,173 32,903 92% 64,140 96,970 51%
===
Eliminations related to our revenues increased 71% in Q4 2023 compared with Q4 2022. The increase was attributed to the increased intercompany revenue between our businesses (related to cross service advertising and marketing activities, the usage of data centers, other IT infrastructure, and other centralized services by all business units), as a result of greater integration of services and overall growth across the Group.
Consolidated Operating Costs and Expenses
Our operating costs and expenses consist of cost of revenues (COS), product development expenses (PD), sales, general and administrative expenses (SG&A), depreciation and amortization expenses (D&A) and goodwill impairment. Personnel-related costs, including share-based compensation expenses, are included in the COS, PD and SG&A categories and represent a significant part of our operating expenses. Increases across all cost categories reflect investments in overall growth. In Q4 2023, our headcount increased by 658 full-time employees. The total number of full-time employees was 26,361 as of December 31, 2023, up by 3% compared with September 30, 2023, and up by 26% from December 31, 2022, which was primarily driven by the accelerated pace of hiring in Search and Portal, Yandex Cloud and Plus and Entertainment Services, as well as by the growth of Yandex Market and Mobility among others.
Operating Expenses
===
In RUB millions Three months ended December 31, Twelve months ended December 31, 2022 2023 Change 2022 2023 Change Cost of revenues 77,833 115,169 48% 233,219 360,033 54% Cost of revenues as a % of revenues 47.2% 46.1% -1.1 pp 44.7% 45.0% 0.3 pp including TAC 11,987 18,344 53% 34,692 56,759 64% TAC as a % of revenues 7.3% 7.3% 0 pp 6.6% 7.1% 0.5 pp Product development 19,233 30,539 59% 72,278 102,991 42% As a % of revenues 11.7% 12.2% 0.5 pp 13.9% 12.9% -1 pp Sales, general and administrative 53,359 89,876 68% 172,092 267,552 55% As a % of revenues 32.4% 36.0% 3.6 pp 33.0% 33.4% 0.4 pp Depreciation and amortization 8,226 11,089 35% 30,874 39,952 29% As a % of revenues 5.0% 4.4% -0.6 pp 5.9% 5.0% -0.9 pp Goodwill impairment - - n/m - 1,136 n/m As a % of revenues - - n/m - 0.1% 0.1 pp Total operating expenses 158,651 246,673 55% 508,463 771,664 52% As a % of revenues 96.3% 98.8% 2.5 pp 97.5% 96.4% -1.1 pp
===
Total operating expenses increased by 55% in Q4 2023 compared with Q4 2022. The increase was mainly due to the ?ost of revenues related to E-commerce, the Mobility and Delivery businesses, Devices and Alice, as well as Search and Portal. The growth of headcount and related personnel expenses across most of our business units due to the overall expansion of operations; and the impairment of intangible assets of RUB 6.3 billion in Q4 2023 also contributed to the increase in total operating expenses.
TAC grew 53% in Q4 2023 compared with Q4 2022 and represented 7.3% of total revenues. The year-on-year growth of TAC as a share of revenue was primarily driven by the growing contribution of ad revenues related to the Yandex Advertising Network.
===
In RUB millions Three months ended December 31, Twelve months ended December 31,
2022 2023 Change 2022 2023 Change SBC expense included in cost of revenues 144 393 173% 593 906 53% SBC expense included in product development 2,594 7,146 175% 13,831 16,985 23% SBC expense included in SG&A 2,077 7,046 239% 9,614 13,885 44% Total SBC expense 4,815 14,585 203% 24,038 31,776 32% As a % of revenues 2.9% 5.8% 2.9 pp 4.6% 4.0% -0.6 pp
===
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Total SBC (share based compensation) expenses increased by 203% in Q4 2023 compared with Q4 2022. The increase was primarily related to the replacement of unvested RSU equity awards with salary increases for certain employees, which led to the recognition of additional compensation cost in Q4 2023, as well as changes in the fair value of Synthetic Options and Business Unit Equity Awards and the material appreciation of the U.S. dollar against the Russian ruble. In light of the ongoing halt of trading in our Class A shares on Nasdaq, the remaining participants will continue to receive cash compensation on the vesting dates of the relevant RSU equity awards, in an amount equal to the target value of each tranche of such awards. In Q4 2023, RUB 2.2 billion of the total RUB 14.6 billion in SBC expenses related to RSU equity awards settled in cash were recorded as part of personnel expenses, which reduced consolidated adjusted EBITDA.
Income from operations
===
In RUB millions Three months ended December 31, Twelve months ended December 31, 2022 2023 Change 2022 2023 Change Income from operations 6,127 2,913 -52% 13,236 28,461 115%
===
Income from operations amounted to RUB 2.9 billion in Q4 2023 compared to RUB 6.1 billion in Q4 2022. Despite solid performance across our key verticals, including Search and Portal, E-commerce, Mobility and Delivery, as well as Plus and Entertainment, the income loss from operations is mainly associated with the impairment of intangible assets of RUB 6.3 billion and our investments in expansion of our businesses and their future growth. Other income/(loss), net for Q4 2023 amounted to RUB 572 million, down from RUB 9,873 million in Q4 2022. Other income/ (loss), net includes foreign exchange gains of RUB 474 million in Q4 2023 and RUB 9,382 million in Q4 2022. Foreign exchange gain dynamics reflect changes of USD denominated monetary assets in our Russian subsidiaries and RUB denominated monetary assets in our foreign subsidiaries on the back of appreciation of the Russian ruble in absolute terms against the US dollar in the fourth quarter of 2023 compared to the depreciation in the fourth quarter of 2022. Income tax expense for Q4 2023 was RUB 6,807 million, down from RUB 9,666 million in Q4 2022. Our effective tax rate of 1,403.5% in Q4 2023 was higher than 57.8% in Q4 2022. The Group's tax provision for income taxes for interim periods is determined based on the tax rate effective during that period. The major factors influencing changes in the effective tax rates in Q4 2023 and Q4 2022 were: differences in foreign tax rates of our subsidiaries (including reduced tax rates and effects of change in tax rates in certain subsidiaries), non-deductible SBC expenses, deferred tax asset valuation allowances, tax on dividends, tax provision recognized, and statutory expenses not deductible for income tax purposes. Net loss was RUB 6.3 billion in Q4 2023, compared with net income of RUB 7.1 billion in Q4 2022. The net loss is mainly associated with the impairment of intangible assets in the amount of RUB 6.3 billion in Q4 2023 and significantly lower foreign exchange gains compared to Q4 2022. Cash provided by operating activities was RUB 11.9 billion and cash paid for property and equipment, intangible assets and assets to be leased was RUB 38.6 billion for Q4 2023. The total number of shares issued and outstanding as of December 31, 2023 was 361,482,282, including 325,783,607 Class A shares, 35,698,674 Class B shares, and one Priority share and excluding 558,663 Class A shares held in treasury.
There were also outstanding employee share options to purchase up to an additional 2.9 million shares, at a weighted average exercise price of USD44.32 per share, 2.3 million of which were fully vested; equity-settled share appreciation rights (SARs) for 0.1 million shares, at a weighted average measurement price of USD32.85, all of which were fully vested; restricted share units (RSUs) covering 7.0 million shares, of which RSUs to acquire 6.2 million shares were fully vested; and performance share units (PSUs) for 0.2 million shares. In addition, we have outstanding awards in respect of our various Business Units, including options and synthetic options for 5.9 million shares, 3.0 million of which were fully vested and are settled in equity of our Business units or cash.
ABOUT YANDEX
Yandex (NASDAQ and MOEX: YNDX) is a technology company registered in the Netherlands that builds intelligent products and services powered by machine learning. Our goal is to help consumers and businesses better navigate the online and offline world. Since 1997, we have delivered world-class, locally relevant search and navigation products, while also expanding into mobility, e-commerce, online entertainment, cloud computing and other markets to assist millions of consumers in Russia and a number of international markets. More information on Yandex can be found at https://ir.yandex/.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements that involve risks and uncertainties. All statements contained in this press release other than statements of historical facts, including, without limitation, statements regarding our future financial and business performance, our business and strategy and the impact of the current geopolitical and macroeconomic developments on our industry, business and financial results, are forward-looking statements. The words "anticipate," "believe," "continue," "estimate," "expect," "guide," "intend," "likely," "may," "will" and similar expressions and their negatives are intended to identify forward-looking statements. 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, macroeconomic and geopolitical developments affecting the Russian economy or our business, changes in the political, legal and/or regulatory environment and regulatory and business responses to that crisis, including international economic sanctions and export controls, competitive pressures, changes in advertising patterns, changes in user preferences, 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, 2022 and "Risk Factors" in the Shareholder Circular filed as Exhibit 99.1 to our Current Report on Form 6-K, which were filed with the U.S. Securities and Exchange Commission (SEC) on April 20, 2023 and February 8, 2024, respectively, and are available on our investor relations website at https:// ir.yandex/sec-filings and on the SEC website at https://www.sec.gov/. All information in this release and in the attachments is as of February 15, 2024, and Yandex undertakes no duty to update this information unless required by law.
USE OF NON-GAAP FINANCIAL MEASURES
To supplement the financial information prepared and presented in accordance with U.S. GAAP, we present the following non-GAAP financial measures: ex-TAC revenues, Adjusted EBITDA/(loss), Adjusted EBITDA margin and Adjusted net income/(loss). 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 U.S. 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 U.S. GAAP measures", included following the accompanying financial tables. We define the various non-GAAP financial measures we use as follows:
-- Ex-TAC revenues means U.S. GAAP revenues less total traffic acquisition costs (TAC).
-- Adjusted EBITDA/(loss) means U.S. GAAP net income/(loss) plus (1) depreciation and amortization, (2) certain SBC expense, (3) interest expense, (4) income tax expense, (5) expenses (reversal of expenses) related tothe contingent consideration, (6) one-off restructuring and other expenses, and (7) impairment of goodwill andother intangible assets less (1) interest income, (2) other income/(loss), net, (3) income/(loss) from equitymethod investments, (4) gain on restructuring of convertible debt and (5) effect of the News and Zendeconsolidation.
-- Adjusted EBITDA margin means adjusted EBITDA/(loss) divided by U.S. GAAP revenues.
-- Adjusted net income means U.S. GAAP net income/(loss) plus (1) certain SBC expense, (2) expenses(reversal of expenses) related to the contingent consideration, (3) one-off restructuring and other expenses, (4)impairment of goodwill and other intangible assets, and (5) amortization of debt discount and issuance costs, less(1) foreign exchange gains, (2) gain on restructuring of convertible debt and (3) effect of the News and Zendeconsolidation. Tax effects related to the listed adjustments are excluded from adjusted net income.
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.
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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 recurring costs, particularly share-based compensation. 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 U.S. GAAP financial measures:
TAC
We believe that it may be useful for investors and analysts to review certain measures both in accordance with U.S. GAAP and net of the effect of TAC, which we view as comparable to sales bonuses but, unlike sales bonuses, are not deducted from U.S. GAAP revenues. By presenting revenue, 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.
Certain SBC expense
SBC is a significant expense item and an important part of our compensation and incentive programs. As it is 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 clearer picture of our operating performance. However, because we settled the RSU equity awards of our employees in cash during 2022 and 2023, starting from Q3 2022, we no longer eliminate the relevant SBC expense corresponding to the cash payment from adjusted EBITDA and adjusted net income.
Foreign exchange gains/(losses)
Because we hold significant assets and liabilities 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 EBITDA/(loss), adjusted net income and related margin measures excluding these effects, in order to provide greater clarity regarding our operating performance.
Amortization of debt discount and issuance costs
We also adjust net income/(loss) for interest expense representing amortization of the debt discount related to our convertible senior notes due 2025 issued in Q1 2020. 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. We have repurchased substantially all of the outstanding notes to date.
Expenses related to contingent consideration
We may incur expenses in connection with acquisitions that are not indicative of our recurring core operating performance. In particular, we are required under U.S. GAAP to accrue as an expense the contingent compensation that is payable to certain employees in connection with certain business combinations. We eliminate these acquisition-related expenses from adjusted EBITDA/(loss) 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.
Goodwill and other intangible assets impairment
We adjust our net income/(loss) and EBITDA/(loss) to exclude a loss from goodwill and intangible assets impairment, as well as any related income tax effects. Excluding these expenses, allow us to provide a clearer picture of our business performance, without being distracted by one-off expenses that are not directly related to our operating activities.
Gain on restructuring of convertible debt
Adjusted net income, adjusted EBITDA/(loss) and related margin measures for 12 months ended December 31, 2022 exclude gain on restructuring of our convertible debt and income tax effect attributable to this gain.
In June 2022, we completed the purchase of 93.2% in aggregate principal amount of our USD1.25 billion 0.75% Convertible Notes due 2025. As a result of the restructuring, a gain in the amount of RUB 9,305 million and a related income tax expense in the amount of RUB 751 million were recognized. We have repurchased substantially all of the outstanding notes to date.
One-off restructuring and other expenses
We believe that it is useful to present adjusted net income, adjusted EBITDA/(loss) and related margin measures excluding impacts not related to our operating activities. Adjusted net income and adjusted EBITDA/(loss) exclude expenses related to the proposed corporate restructuring and other similar one-off expenses.
Effect of the News and Zen deconsolidation
We have adjusted net income/(loss), EBITDA/(loss) and related margin measures for the one-off gain as a result of the News and Zen deconsolidation completed in Q3 2022, in the amount of RUB 38,051 million. We have eliminated this gain from adjusted net income and adjusted EBITDA/(loss) as we believe that it is useful to present adjusted net income, adjusted EBITDA and related margins measures excluding impacts not related to our operating activities.
The tables at the end of this release provide detailed reconciliations of each non-GAAP financial measure we use from the most directly comparable U.S. GAAP financial measure.
YANDEX N.V.
Unaudited Condensed Consolidated Balance Sheets
in millions of Russian rubles and U.S. dollars, except share and per share data)
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As of
December December 31, December 31,
31,
2022* 2023 2023 RUB RUB USD
ASSETS
Cash and cash equivalents 83,131 96,519 1,076.2 Funds receivable 8,290 13,178 146.9 Accounts receivable 58,014 85,444 952.7 Sales financing receivable 5,738 21,916 244.4 Prepaid expenses 16,968 19,818 221.0 Inventory 28,220 21,276 237.2 VAT reclaimable 22,602 29,560 329.6 Other current assets 16,971 23,184 258.4 Total current assets 239,934 310,895 3,466.4 Property and equipment 127,706 193,918 2,162.1 Goodwill 143,778 142,840 1,592.6 Intangible assets 31,766 28,361 316.2 Content assets 16,844 26,625 296.9 Operating lease right-of-use assets 28,646 35,522 396.1 Equity method investments 2,118 731 8.2 Investments in non-marketable equity securities 6,746 8,278 92.3 Deferred tax assets 3,904 9,723 108.4 Other non-current assets 15,277 29,735 331.5 Total non-current assets 376,785 475,733 5,304.3 TOTAL ASSETS 616,719 786,628 8,770.7
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, accrued and other liabilities 122,816 193,448 2,156.8 Debt, current portion 21,306 92,046 1,026.3 Income and non-income taxes payable 28,137 39,362 438.9 Deferred revenue 15,585 22,805 254.3 Total current liabilities 187,844 347,661 3,876.3 Debt, non-current portion 29,885 49,438 551.2 Deferred tax liabilities 5,473 11,463 127.8 Operating lease liabilities 17,609 25,556 284.9 Finance lease liabilities 21,185 27,600 307.7 Other accrued liabilities 16,545 28,618 319.2 Total non-current liabilities 90,697 142,675 1,590.8 Total liabilities 278,541 490,336 5,467.1
Commitments and contingencies
Shareholders' equity:
Priority share: EUR1 par value; 1 share authorized, issued and outstanding - - -
Ordinary shares: par value (Class A EUR0.01, Class B EUR0.10 and Class C EUR0.09);
shares authorized (Class A: 500,000,000, Class B: 37,138,658 and Class C:
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February 15, 2024 05:00 ET (10:00 GMT)
| Name | WKN | Börse | Kurs | Datum/Zeit | Diff. | Diff. % | Geld | Brief | Erster | Schluss | |
|---|---|---|---|---|---|---|---|---|---|---|---|
 |
Yandex N.V. | A1JGSL | Quotrix | 13,550 | 28.02.22 13:28:40 | -4,056 | -23,04% | 0,000 | 0,000 | 17,000 | 13,550 |
