Yandex Announces Third Quarter 2012 Financial Results

Yandex Announces Third Quarter 2012 Financial Results

MOSCOW and THE HAGUE, Netherlands, Oct. 30, 2012 (GLOBE NEWSWIRE) -- Yandex
(Nasdaq:YNDX), the leading internet company in Russia operating the country's
most popular search engine and most visited website, today announced its
unaudited financial results for the quarter ended September 30, 2012.

Q3 2012 Financial Highlights

  *Revenues of RUR 7.3 billion ($235.2 million^1), up 41% compared with Q3
    2011

  Ex-TAC revenues^2 (excluding traffic acquisition costs) up 39% compared with
  Q3 2011

  *Income from operations of RUR 2.5 billion ($82.3 million), up 43% compared
    with Q3 2011
    
  *Adjusted EBITDA^3 of RUR 3.4 billion ($111.3 million), up 47% compared
    with Q3 2011
    
  *Operating margin of 35%

  Adjusted EBITDA margin^2 of 47%

  Adjusted ex-TAC EBITDA margin^2 of 57%

  *Net income of RUR 2.3 billion ($74.2 million), up 34% compared with Q3
    2011

  Adjusted net income^3 of RUR2.2 billion ($72.1 million), up 53% compared
  with Q3 2011

  *Net income margin of 32%

  Adjusted net income margin^2 of 31%

  Adjusted ex-TAC net income margin^2 of 37%

"Q3 marked yet another strong quarter with our core contextual search business
driving 41% top-line growth," said Arkady Volozh, Chief Executive Officer of
Yandex."We launched our own browser, a milestone for the company. And I am
pleased with the performance of our search product over the past few months as
we maintained 60+% market share in Russia. Importantly, we recorded a
noticeable improvement in the quality of our search and increased our share of
searches across all major browsers and platforms."

                                       
^1 Pursuant to SEC rules regarding convenience translations, Russian ruble
(RUR) amounts have been translated into U.S. dollars at a rate of RUR 30.9169
to $1.00, the official exchange rate quoted as of September 30, 2012 by the
Central Bank of the Russian Federation.
                                       
^2 This is a non-GAAP financial measure. Please see "Use of Non-GAAP Financial
Measures" below for a discussion of how we define this non-GAAP financial
measure. You will find a reconciliation of this non-GAAP financial measure to
the most directly comparable US GAAP measure in the accompanying financial
tables at the end of this release.
                                       
^3 Adjusted EBITDA and adjusted net income are non-GAAP financial measures.
Beginning with Q1 2012, our adjusted EBITDA and adjusted net income include
adjustments for the accrual of expense related to the contingent compensation
that may be payable to certain employees through November 2013 in connection
with our acquisition of the mobile software business of SPB Software.
Beginning with Q3 2012, our adjusted net income includes adjustment for gains
from the sale of our equity investments. Please see "Use of Non-GAAP Financial
Measures" below for a discussion of how we define adjusted EBITDA and adjusted
net income. You will find a reconciliation of adjusted EBITDA and adjusted net
income to GAAP net income, the most directly comparable US GAAP measure for
both non-GAAP measures, in the accompanying financial tables at the end of
this release.

The following table provides a summary of key financial results for the three
months and nine months ended September 30, 2011 and 2012.

                                         
In RUR millions        Three months        Nine months
                      ended September 30, ended September 30,
                      2011   2012  Change 2011   2012   Change
Revenues               5,159  7,273 41%    13,594 19,948 47%
Ex-TAC revenues^2      4,341  6,042 39%    11,598 16,584 43%
Income from operations 1,781  2,543 43%    4,431  6,347  43%
Adjusted EBITDA^3      2,335  3,440 47%    5,968  8,887  49%
Net income             1,705  2,291 34%    3,650  5,532  52%
Adjusted net income^3  1,459  2,229 53%    3,805  5,803  53%

Q3 2012 Operational Highlights

  *Share of Russian search market (including mobile) averaged 60.5% in Q3
    2012 (according to LiveInternet)
  *Search queries grew 31% from Q3 2011
  *Number of advertisers – more than 202,000, up 28% from Q3 2011 and up 5%
    from Q2 2012
  *Launched Yandex Browser
  *Expanded Yandex.Market to include the lucrative apparel segment of the
    fast growing e-commerce market

Revenues

                                                
In RUR millions               Three months        Nine months
                             ended September 30, ended September 30,
                             2011   2012  Change 2011   2012   Change
Advertising revenues:                                      
Text-based advertising                                    
Yandex websites              3,768  5,255 39%    10,185 14,429 42%
Ad network                   827    1,284 55%    1,885  3,436  82%
Total text-based advertising 4,595  6,539 42%    12,070 17,865 48%
Display advertising          464    580   25%    1,232  1,628  32%
Total advertising revenues    5,059  7,119 41%    13,302 19,493 47%
Online payment commissions    95     133   40%    268    374    40%
Other                         5      21    320%   24     81     238%
Total revenues                5,159  7,273 41%    13,594 19,948 47%

Text-based advertising revenues, accounting for 90% of total revenues in Q3
2012, continued to determine overall top-line performance.

Text-based advertising revenues from Yandex's own websites accounted for 72%
of total revenues during Q3 2012, and increased by 39% compared with Q3 2011.
Text-based advertising revenues from our ad network increased 55% compared
with Q3 2011 and contributed 18% of total revenues during Q3 2012. Growth
rates on the ad network sharply contrast with those seen from Q3 2011 through
Q2 2012 given that a full year has passed since we implemented changes to our
monetization algorithms that increased network ad revenues and since we added
Rambler to our partner network.

Paid clicks on Yandex's and its partners' websites, in aggregate, increased
35% in Q3 2012 compared with Q3 2011. As with growth rates in network ad
revenues, lower growth rates in paid clicks reflects the fact that a full year
has passed since we launched initiatives on our ad network that resulted in a
significant increase in click through rates and the number of clicks on the ad
network and since we added Rambler to our ad network. Additionally, growth
rates during the four previous quarters benefited from our initiatives also
launched in Q3 2011 targeted at regional advertisers that resulted in many new
lower cost clicks on our own search. Our average cost per click in Q3 2012
increased 5% compared with Q3 2011, and 10% compared with Q2 2012.

Display advertising revenue, accounting for 8% of total revenues during Q3
2012, increased 25% compared with Q3 2011.

Online payment commissions accounted for 2% of revenues during Q3 2012, and
increased 40% compared with Q3 2011.

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, primarily reflect investments in overall growth,
including personnel. In Q3 2012, Yandex added 133 full-time employees, an
increase of about 4% from June 30, 2012, and up 14% from September 30, 2011.
The total number of full-time employees was 3,607 as of September 30, 2012.
Total share-based compensation expense increased 61% in Q3 2012 compared with
Q3 2011.

Cost of revenues, including traffic acquisition costs (TAC)

                                                         
In RUR millions                        Three months        Nine months
                                      ended September 30, ended September 30,
                                      2011   2012  Change 2011   2012  Change
TAC:                                                               
Related to the Yandex ad network       526    814   55%    1,188  2,200 85%
Related to distribution partners       292    417   43%    808    1,164 44%
Total TAC                              818    1,231 50%    1,996  3,364 69%
Total TAC as a % of total revenues     15.9%  16.9%       14.7%  16.9% 
Other cost of revenues                 476    614   29%    1,226  1,748 43%
Other cost of revenues as a % of       9.2%   8.4%        9.0%   8.8%  
revenues
Total cost of revenues                 1,294  1,845 43%    3,222  5,112 59%
Total cost of revenues as a % of       25.1%  25.4%       23.7%  25.6% 
revenues

TAC increased from 17.8% of text-based revenues in Q3 2011 to 18.8% in Q3
2012, primarily representing an increase in our Yandex ad network revenues'
share in Yandex revenues for the period.

Other cost of revenues in Q3 2012 increased 29% compared with Q3 2011,
reflecting growth in personnel and data center-related costs at rates below
revenue growth.

Product development

                                      
In RUR millions     Three months        Nine months
                   ended September 30, ended September 30,
                   2011   2012  Change 2011   2012  Change
Product development 792    1,034 31%    2,271  3,159 39%
As a % of revenues  15.4%  14.2%       16.7%  15.8% 

Growth in product development expenses in Q3 2012 primarily reflects increases
in the number of developers, as well as in employee remuneration. Headcount in
this category grew from 1,738 at September 30, 2011 to 1,949 at September 30,
2012.

Selling, general and administrative (SG&A)

                                                    
In RUR millions                   Three months        Nine months
                                 ended September 30, ended September 30,
                                 2011   2012  Change 2011   2012  Change
Sales, general and administrative 804    1,117 39%    2,378  3,239 36%
As a % of revenues                15.6%  15.4%       17.5%  16.2% 

SG&A costs in Q3 2012 were lower as a percentage of revenues but werehigher
in absolute terms compared to Q3 2011. The principal factor contributing to
growth in this category in Q3 2012 was higher spend on advertising campaigns
in Russia and in Turkey.

Share-based compensation (SBC) expense

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

                                                         
In RUR millions                        Three months        Nine months
                                      ended September 30, ended September 30,
                                      2011  2012  Change  2011  2012  Change
SBC expense included in cost of        7     7     0%      19    19    0%
revenues
SBC expense included in product        41    59    44%     111   151   36%
development
SBC expense included in SG&A           18    40    122%    115   91    -21%
Total SBC expense                      66    106   61%     245   261   7%
As a % of revenues                     1.3%  1.5%         1.8%  1.3%  

Total SBC expense increased 61% in Q3 2012 compared with Q3 2011. The increase
is principally related to new grants as well asthe effects of variable
accounting for certain options previously granted to advisors, included in the
SG&A expense.

Depreciation and amortization (D&A) expense

                                                
In RUR millions               Three months        Nine months
                             ended September 30, ended September 30,
                             2011  2012   Change 2011   2012  Change
Depreciation and amortization 488   734    50%    1,292  2,091 62%
As a % of revenues            9.5%  10.1%        9.5%   10.5% 

D&A expense increased 50% in Q3 2012 compared with Q3 2011, primarily
reflecting our considerable investments last year in servers and data centers.

As a result of the factors described above, income from operations was RUR 2.5
billion ($82.3 million) in Q3 2012, a 43% increase from Q3 2011, while
adjusted EBITDA reached RUR 3.4 billion ($111.3 million) in Q3 2012, up 47%
from Q3 2011.

Interest income in Q3 2012 was RUR 268 million, up from RUR 47 million in Q3
2011, principally as a result of investing more of our cash provided by
operating activities in Russia, where our investments earn higher returns.

Foreign exchange loss in Q3 2012 was RUR 13 million, compared with a foreign
exchange gain of RUR383 million in Q3 2011. This loss is due to the
depreciation of the U.S. dollar during Q3 2012 from RUR32.8169 to $1.00 on
June 30, 2012 to RUR30.9169 to $1.00 on September 30, 2012. Yandex's Russian
operating subsidiaries' functional currency is the Russian ruble, and
therefore changes in the ruble value of these subsidiaries' assets and
liabilities that are denominated in other currencies due to exchange rate
fluctuations are recognized as foreign exchange gains or losses in the income
statement. The U.S. dollar value of Yandex's U.S. dollar-denominated cash,
cash equivalents and term deposits was not impacted by these currency
fluctuations, but they resulted in downward revaluations of the ruble
equivalent of these U.S. dollar-denominated assets in Q3 2012.

Other non-operating income in Q3 2012 was RUR 160 million, arising primarily
from gains on the disposition of Yandex's interest in face.com in connection
with that company's acquisition by Facebook.

Income tax expense for Q3 2012 was RUR 667 million, up from RUR 484 million in
Q3 2011. Our effective tax rate in Q3 2012 was in line with previous quarters
at 22.5%. The effective rate in Q3 2011 benefited from the effect of a change
in our treasury policy following the IPO. In recent years, Yandex's principal
Russian operating subsidiary had been paying dividends to its Netherlands
parent company and incurred a 5% withholding tax in Russia when these
dividends were paid. Under the new treasury policy, however, management does
not currently expect this Russian operating subsidiary to pay dividends to the
parent company out of 2011 or 2012 earnings. Therefore, no accrual for
dividend withholding tax was required for Q3 2012.

Adjusted net income in Q3 2012 was RUR 2.2 billion ($72.1 million), a 53%
increase from Q3 2011. Growth in adjusted net income exceeded revenue growth
as costs generally increased at a rate slower than revenue.

Adjusted net income margin was 30.6% in Q3 2012, compared with 28.3% in Q3
2011.

Net income was RUR 2.3 billion ($74.2 million) in Q3 2012, up 34% compared
with Q3 2011. The growth in net income at a rate below that of adjusted net
income is due to a considerable foreign exchange gain recorded in Q3 2011.

Balance Sheet

As of September 30, 2012, Yandex had cash, cash equivalents, term deposits
(including long-term deposits) and long-term debt securities of RUR 24.3
billion ($785.9 million).

Assets and liabilities related to the operations of Yandex.Money, our
proprietary electronic payments system, have been reclassified on the balance
sheet as assets of RUR 1.7 billion, ($56.0 million) and liabilities of RUR 1.3
billion ($42.7 million), respectively, held for sale, as we are actively
seeking to transfer majority control of Yandex.Money to a strategic buyer.

Net operating cash flow and capital expenditures for Q3 2012 were RUR 3.1
billion ($100.1 million) and RUR 1.5 billion ($49.7 million), respectively.

The total number of shares issued and outstanding as of September 30, 2012 was
327,258,774, including 187,851,850 Class A shares, 139,406,923 Class B shares,
and one Priority share and excluding Class C shares outstanding solely as a
result of conversion of Class B shares into Class A shares; all such Class C
shares will be cancelled. There were also options outstanding to purchase up
to an additional 11.0 million shares, at a weighted average exercise price of
$4.33 per share, of which options to purchase 8.0 million shares were fully
vested; equity-settled share appreciation rights equal to 1.2 million shares,
at a weighted average measurement price of $20.21, none of which were vested;
and restricted share units equal to 1.0 million shares, none of which were
vested.

Outlook for 2012

We are narrowing our full-year revenue guidance towards the upper end of the
previously announced range and expect year-on-year ruble-based revenue growth
of 42-45%.

Conference Call Information

Yandex's management will hold an earnings conference call on October 30, 2012
at 9:00 AM U.S. Eastern Time (2:00 PM Amsterdam time; 1:00 PM London time).

To access the conference call live, please dial:

  US: +1 631 621 5256

  UK: +44 (0) 1452 555 131

  Russia: 8 10 800 23942044

  Passcode: 38529333#

A replay of the call will be available until November 6, 2012. To access the
replay, please dial:

  US: +1 866 247 4222

  Russia/International: +44 (0) 1452 550000

  Passcode: 38529333#

A live and archived webcast of this conference call will be available at
http://ir.yandex.com/eventdetail.cfm?eventid=119637

ABOUT YANDEX

Yandex (Nasdaq:YNDX) is the leading internet company in Russia, operating the
country's most popular search engine and most visited website. Yandex also
operates in Ukraine, Kazakhstan, Belarus and Turkey. Yandex's mission is to
answer any question internet users may have.

The Yandex Company logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=10933

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements that involve risks and
uncertainties. These include statements regarding our anticipated revenues for
full-year 2012. Actual results may differ materially from the results
predicted or implied by such statements, and our reported results should not
be considered as an indication of future performance. The potential risks and
uncertainties that could cause actual results to differ from the results
predicted or implied by such statements include, among others, competitive
pressures, changes in advertising patterns, changes in user preferences,
changes in the legal and regulatory environment, technological developments,
and our need to expend capital to accommodate the growth of the business, as
well as those risks and uncertainties included under the captions "Risk
Factors" and "Operating and Financial Review and Prospects" in our Annual
Report on Form 20-F for the year ended December 31, 2011, which is on file
with the Securities and Exchange Commission and is available on our investor
relations website atir.yandex.com/sec.cfm and on the SEC website at
www.sec.gov. Yandex undertakes no duty to update this information unless
required by law.

USE OF NON-GAAP FINANCIAL MEASURES

To supplement our consolidated financial statements, which are prepared and
presented in accordance with US GAAP, we present the following non-GAAP
financial measures: ex-TAC revenue, adjusted EBITDA, adjusted EBITDA margin,
adjusted ex-TAC EBITDA margin, adjusted net income, adjusted net income margin
and adjusted ex-TAC net income margin. The presentation of these financial
measures is not intended to be considered in isolation or as a substitute for,
or superior to, the financial information prepared and presented in accordance
with US GAAP. For more information on these non-GAAP financial measures,
please see the tables captioned "Reconciliations of non-GAAP financial
measures to the nearest comparable US GAAP measures", included following the
accompanying financial tables. We define the various non-GAAP financial
measures we use as follows:

  *Ex-TAC revenue means US GAAP revenues less total traffic acquisition costs
    (TAC).
  *Adjusted EBITDA means net income plus (1) depreciation and amortization,
    (2) share-based compensation expense, (3)accrual of expense related to
    the contingent compensation that may be payable to employeesin connection
    with our acquisition of themobile software business of SPBSoftware and
    (4) provision for income taxes, less (A) interest income and (B) other
    income/(expense).
  *Adjusted EBITDA margin means adjusted EBITDA divided by US GAAP revenues.
  *Adjusted ex-TAC EBITDA margin means adjusted EBITDA divided by ex-TAC
    revenue.
  *Adjusted net income means US GAAP net income plus (1) SBC expense adjusted
    for the income tax reduction attributable to SBC expense, (2)accrual of
    expense related to the contingent compensation that may be payable to
    certain employeesin connection with our acquisition of themobile
    software business of SPB Software, and (3) foreign exchange losses (less
    foreign exchange gains) adjusted for the (reduction) increase in income
    tax attributable to the foreign exchange losses (gains); minus (4) gain
    from the sale of equity investments.
  *Adjusted net income margin means adjusted net income divided by US GAAP
    revenues.
  *Adjusted ex-TAC net income margin means adjusted net income divided by
    ex-TAC revenues.

These non-GAAP financial measures are used by management for evaluating
financial performance as well as decision-making. Management believes that
these metrics reflect the organic, core operating performance of the company,
and therefore are useful to analysts and investors in providing supplemental
information that helps them understand, model and forecast the evolution of
our operating business. Below we describe why we make particular adjustments
to certain US GAAP financial measures:

TAC

We believe that it may be useful for investors and analysts to review certain
measures both in accordance with US GAAP and net of the effect of TAC, which
we view as comparable to sales commissions but, unlike sales commissions, are
not deducted from US GAAP revenues. By presenting revenue, adjusted EBITDA
margin and adjusted net income margin net of TAC, we believe that investors
and analysts are able to obtain a clearer picture of our business without the
impact of the revenues we share with our partners.

SBC

SBC is a significant expense item, and an important part of our compensation
and incentive programs. As it is a non-cash charge, however, and highly
dependent on our share price at the time of equity award grants, we believe
that it is useful for investors and analysts to see certain financial measures
excluding the impact of these charges in order to obtain a clear picture of
our operating performance.

Acquisition-related costs

We may incur expenses in connection with acquisitions that are not indicative
of our recurring core operating performance. In particular, we are required
under US GAAP to accrue as expense the contingent compensation that may be
payable to certain employees in connection with our acquisition of the mobile
software business of SPB Software in November 2011. The maximum aggregate
amount of such contingent compensation is $14.1 million, payable on the
achievement of certain milestones and the continued employment of the sellers,
in two installments in November 2012 and 2013.Such maximum aggregate amount
is being accrued substantially pro rata over the eight quarters of such
period. We have eliminated this acquisition-related expense from adjusted
EBITDA and adjusted net income to provide management and investors a tool for
comparing on a period-to-period basis our operating performance in the
ordinary course of operations.

Foreign exchange gains and losses

Because we hold significant assets in currencies other than our Russian ruble
operating currency, and because foreign exchange fluctuations are outside of
our operational control, we believe that it is useful to present adjusted net
income and related margin measures excluding these effects, in order to
provide greater clarity regarding our operating performance.

Gain from the sale of equity investments

Adjusted net income also excludes a gain in the quarter ended September 30,
2012 from our sale of our minority interest in face.com in connection with the
sale of that company.We believe that it is useful to present adjusted net
income and related margin measures excluding the effect of this significant
one-off item in order to provide a clearer picture of our operating
performance.

Although our management uses these measures for operational decision making
and considers these non-GAAP financial measures to be useful for analysts and
investors, we recognize that there are a number of limitations related to such
measures. In particular, it should be noted that several of these measures
exclude some costs, particularly share-based compensation, that are recurring.
In addition, the components of the costs that we exclude in our calculation of
the measures described above may differ from the components that our peer
companies exclude when they report their results of operations.

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


YANDEXN.V.

Unaudited Condensed Consolidated Balance Sheets

(in millions of Russian rubles ("RUR") and U.S. dollars ("$"), except share
and per share data)

                                      As of
                                      Dec 31, 2011* Sep 30, 2012 Sep 30, 2012
ASSETS                                 RUR           RUR          $
Current assets:                                                 
Cash and cash equivalents              6,322         5,196        168.1
Marketable securities                  --            63           2.0
Term deposits                          5,169         6,665        215.6
Accounts receivable, net               1,250         1,437        46.5
Funds receivable, net                  174           19           0.6
Prepaid expenses                       630           589          19.1
Assets held for sale                   --            1,730        56.0
Deferred tax assets                    297           421          13.6
Other current assets                   663           1,153        37.3
Total current assets                   14,505        17,273       558.8
Property and equipment, net            6,973         8,119        262.6
Intangible assets, net                 486           396          12.8
Goodwill                               1,132         756          24.5
Long-term prepaid expenses             616           701          22.7
Restricted cash                        454           436          14.1
Term deposits                          2,454         6,768        218.9
Investments in non-marketable equity   569           508          16.4
securities
Investments in debt securities         6,733         5,666        183.3
Deferred tax assets                    11            1            0.0
Other non-current assets               143           310          10.0
TOTAL ASSETS                           34,076        40,934       1,324.1
LIABILITIES AND SHAREHOLDERS' EQUITY                            
Current liabilities:                                            
Accounts payable and accrued           1,722         2,817        91.1
liabilities
Taxes payable                          916           921          29.8
Deferred revenue                       900           924          29.9
Funds payable and amounts due to       1,174         --           --
customers
Liabilities related to assets held for --            1,319        42.7
sale
Deferred tax liabilities               --            6            0.2
Total current liabilities              4,712         5,987        193.7
Deferred tax liabilities               189           420          13.6
Other accrued liabilities              222           79           2.6
Total liabilities                      5,123         6,486        209.9
Commitments and contingencies                                   
Shareholders' equity:                                           
Priority share: €1 par value; 1 share  —             —            —
authorized, issued and outstanding
Preference shares: €0.01 par value;    —             —            —
2,000,000,001 shares authorized, nil
shares issued and outstanding                                   
Ordinary shares: par value (Class A
€0.01, Class B €0.10 and Class C                                
€0.09); shares
authorized (Class A: 2,000,000,000 and
2,000,000,000, Class B: 273,764,304                             
and
159,494,722, and Class C: 276,063,445
and 159,494,722); shares issued (Class                          
A:
159,217,348 and 187,851,850, Class B:
164,621,382 and 139,406,923, and Class                          
C:
109,142,922 and 14,006,925,
respectively);shares outstanding                              
(Class A: 159,217,348
and 187,851,850, Class B: 164,621,382  595           499          16.1
and 139,406,923, and Class C: nil)
Additional paid-in capital             12,729        13,395       433.3
Accumulated other comprehensive income 1,828         1,221        39.5
Retained earnings                      13,801        19,333       625.3
Total shareholders' equity             28,953        34,448       1,114.2
TOTAL LIABILITIES AND SHAREHOLDERS'    34,076        40,934       1,324.1
EQUITY
* Derived from the audited financial statements



Unaudited Condensed Consolidated Statements of Income

(in millions of Russian rubles and U.S. dollars, except share and per share
data)

                                   Three months ended September 30,
                                   2011           2012          2012
                                   RUR            RUR           $
                                                              
Revenues                            5,159          7,273         235.2
Operating costs and expenses:                                  
Cost of revenues^(1)                1,294          1,845         59.7
Product development^(1)             792            1,034         33.4
Sales, general and                  804            1,117         36.1
administrative^(1)
Depreciation and amortization       488            734           23.7
Total operating costs and expenses  3,378          4,730         152.9
Income from operations              1,781          2,543         82.3
Interest income                     47             268           8.7
Other income, net                   361            147           4.8
Net income before income taxes      2,189          2,958         95.8
Provision for income taxes          484            667           21.6
Net income                          1,705          2,291         74.2
Net income per ClassA and ClassB                             
share:
Basic                               5.28           7.01          0.23
Diluted                             5.08           6.82          0.22
Weighted average number of Class A                             
and Class B shares outstanding
Basic                               322,991,507    326,705,954   326,705,954
Diluted                             335,758,197    335,732,348   335,732,348

^(1)These balances exclude depreciation and amortization expenses, which are
presented separately, and include share‑based compensation expenses of:

Cost of revenues                    7              7             0.2
Product development                 41             59            1.9
Sales, general and administrative   18             40            1.3



Unaudited Condensed Consolidated Statements of Income

(in millions of Russian rubles and U.S. dollars, except share and per share
data)

                                   Nine months ended September 30,
                                   2011           2012          2012
                                   RUR            RUR           $
                                                              
Revenues                            13,594         19,948        645.2
Operating costs and expenses:                                  
Cost of revenues^(1)                3,222          5,112         165.3
Product development^(1)             2,271          3,159         102.2
Sales, general and                  2,378          3,239         104.8
administrative^(1)
Depreciation and amortization       1,292          2,091         67.6
Total operating costs and expenses  9,163          13,601        439.9
Income from operations              4,431          6,347         205.3
Interest income                     117            669           21.6
Other income, net                   74             76            2.5
Net income before income taxes      4,622          7,092         229.4
Provision for income taxes          972            1,560         50.5
Net income                          3,650          5,532         178.9
Net income per ClassA and ClassB                             
share:
Basic                               11.66          16.98         0.55
Diluted                             11.20          16.50         0.53
Weighted average number of Class A                             
and Class B shares outstanding
Basic                               312,946,822    325,774,183   325,774,183
Diluted                             325,941,238    335,327,826   335,327,826
                                                              
^(1)These balances exclude depreciation and amortization expenses, which are
presented separately, and include share‑based compensation expenses of:



Cost of revenues                    19             19            0.6
Product development                 111            151           4.9
Sales, general and administrative   115            91            2.9



YANDEXN.V.

Unaudited Condensed Consolidated Statements of Cash Flows

(in millions of Russian rubles and U.S. dollars)

                                             Three months ended September 30,
                                             2011        2012       2012
                                             RUR         RUR        $
                                                                  
CASH FLOWS FROM OPERATING ACTIVITIES:                              
Net income                                    1,705       2,291      74.2
Adjustments to reconcile net income to net                         
cash provided by operating activities:
Depreciation and amortization of property and 481         708        22.9
equipment
Amortization of acquisition‑related           7           26         0.8
intangible assets
Share‑based compensation expense              50          106        3.4
Deferred income taxes                         8           192        6.2
Foreign exchange losses/(gains)               (383)       13         0.4
Gain from sale of equity securities           --          (234)      (7.6)
Other                                         21          64         2.1
Changes in operating assets and liabilities                        
excluding the effect of acquisitions:
Accounts receivable, net                      (122)       23         0.7
Funds receivable                              14          (43)       (1.4)
Prepaid expenses and other assets             (140)       (348)      (11.3)
Accounts payable and accrued liabilities      328         213        6.9
Deferred revenue                              84          61         2.0
Funds payable and amounts due to customers    76          24         0.8
Net cash provided by operating activities     2,129       3,096      100.1
                                                                  
CASH FLOWS USED IN INVESTING ACTIVITIES:                           
Purchase of property and equipment            (1,711)     (1,536)    (49.7)
Investments in non-marketable equity          (478)       --         --
securities
Investments in debt securities                (3,119)     --         --
Proceeds from sale of equity securities       --          174        5.6
Proceeds from maturity of debt securities     --          763        24.7
Investments in term deposits                  (7,338)     (1,600)    (51.8)
Maturities of term deposits                   2 042       845        27.3
                                                                  
Net cash used in investing activities         (10,604)    (1,354)    (43.9)
                                                                  
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:                       
Proceeds from exercise of share options       --          70         2.3
Net cash provided by financing activities     --          70         2.3
Effect of exchange rate changes on cash and   1,323       (237)      (7.6)
cash equivalents
Net change in cash and cash equivalents       (7,152)     1,575      50.9
                                                                  
Cash and cash equivalents at beginning of     15,805      4,677      151.3
period
Cash and cash equivalents at end of period,
including cash and cash equivalents           8,653       6,252      202.2
classified as assets held for sale
Cash and cash equivalents classified within   --          (1,056)    (34.1)
assets held for sale
Cash and cash equivalents at end of period    8,653       5,196      168.1



YANDEXN.V.

Unaudited Condensed Consolidated Statements of Cash Flows

(in millions of Russian rubles and U.S. dollars)

                                              Nine months ended September 30,
                                              2011       2012       2012
                                              RUR        RUR        $
                                                                  
CASH FLOWS FROM OPERATING ACTIVITIES:                              
Net income                                     3,650      5,532      178.9
Adjustments to reconcile net income to net                         
cash provided by operating activities:
Depreciation and amortization of property and  1,273      2,021      65.4
equipment
Amortization of acquisition‑related intangible 19         70         2.3
assets
Share‑based compensation expense               216        261        8.4
Deferred income taxes                          (162)      111        3.6
Foreign exchange losses/(gains)                (95)       75         2.4
Gain from sale of equity securities            --         (234)      (7.6)
Other                                          21         74         2.4
Changes in operating assets and liabilities                        
excluding the effect of acquisitions:
Accounts receivable, net                       (138)      (198)      (6.4)
Funds receivable                               (49)       (37)       (1.2)
Prepaid expenses and other assets              (759)      (715)      (23.1)
Accounts payable and accrued liabilities       771        787        25.5
Deferred revenue                               174        28         0.9
Funds payable and amounts due to customers     137        91         2.9
Net cash provided by operating activities      5,058      7,866      254.4
                                                                  
CASH FLOWS USED IN INVESTING ACTIVITIES:                           
Purchase of property and equipment             (3,817)    (2,999)    (97.0)
Investments in non-marketable equity           (478)      (47)       (1.5)
securities
Investments in debt securities                 (3,119)    --         --
Proceeds from sale of equity securities        --         174        5.6
Proceeds from maturity of debt securities      --         763        24.7
Investments in term deposits                   (9,228)    (10,730)   (347.1)
Maturities of term deposits                    4,311      4,709      152.3
                                                                  
Net cash used in investing activities          (12,331)   (8,130)    (263.0)
                                                                  
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:                       
Proceeds from exercise of share options        142        305        9.9
Repurchase of share options                    (8)        --         --
Ordinary shares issuance costs                 (23)       --         --
Proceeds from issuance of ordinary shares      11,403     --         --
Net cash provided by financing activities      11,514     305        9.9
Effect of exchange rate changes on cash and    1,041      (111)      (3.6)
cash equivalents
Net change in cash and cash equivalents        5,282      (70)       (2.3)
                                                                  
Cash and cash equivalents at beginning of      3,371      6,322      204.5
period
Cash and cash equivalents at end of period,
including cash and cash equivalents classified 8,653      6,252      202.2
as assets held for sale
Cash and cash equivalents classified within    --         (1,056)    (34.1)
assets held for sale
Cash and cash equivalents at end of period     8,653      5,196      168.1
                                                                  


RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO THE NEAREST COMPARABLE US GAAP MEASURES

Reconciliation of Ex-TAC Revenues to US GAAP Revenues
                                                        
In RUR millions                      Three months         Nine months
                                    ended September 30,  ended September 30,
                                    2011   2012   Change 2011   2012   Change
Total revenues                       5,159  7,273  41%    13,594 19,948 47%
Less: traffic acquisition costs      818    1,231  50%    1,996  3,364  69%
(TAC)
Ex-TAC revenues                      4,341  6,042  39%    11,598 16,584 43%
                                                                  
Reconciliation of Adjusted EBITDA to US GAAP Net Income
                                                        
In RUR millions                      Three months         Nine months
                                    ended September 30,  ended September 30,
                                    2011   2012   Change 2011   2012   Change
Net income                           1,705 2,291 34%    3,650 5,532 52%
Add: depreciation and amortization   488   734   50%    1,292 2,091 62%
Add: share-based compensation (SBC)  66    106   61%    245   261   7%
expense
Add: compensation expense related to --   57    n/m    --   188   n/m
contingent consideration
Less: interest income                (47)  (268) 470%   (117) (669) 472%
Less: other income, net              (361) (147) -59%   (74)  (76)  3%
Add: provision for income taxes      484   667   38%    972   1,560 60%
Adjusted EBITDA                      2,335 3,440 47%    5,968 8,887 49%
                                                                  
Reconciliation of Adjusted Net Income to US GAAP Net Income
                                                        
In RUR millions                      Three months         Nine months
                                    ended September 30,  ended September 30,
                                    2011   2012   Change 2011   2012   Change
Net income                           1,705 2,291 34%    3,650 5,532 52%
Add: SBC expense                     66    106   61%    245   261   7%
Less: reduction in income tax        (6)   (1)   n/m    (9)   (3)   n/m
attributable to SBC expense
Add: compensation expense related to --   57    n/m    --   188   n/m
contingent consideration
Add: foreign exchange loss /(gain)   (383) 13    -103%  (95)  74    -178%
Less: reduction / (increase)in
income tax attributable to foreign   77    (3)   -104%  14    (15)  -207%
exchange loss /(gain)
Less: gain from sale of equity       --   (234) n/m    --   (234) n/m
investments
Adjusted Net Income                  1,459 2,229 53%    3,805 5,803 53%

Reconciliation of Adjusted EBITDA Margin and Adjusted Ex-TAC EBITDA Margin to
US GAAP Net Income Margin for the Three Months Ended September 30, 2012


In RUR                                                         
millions
                       Net                            Adjusted     Adjusted
              US GAAP Income     Adjustment Adjusted EBITDA       Ex-TAC
               Actual  Margin     ^(2)       EBITDA   Margin ^ (3) EBITDA
                       ^(1)                                        Margin ^(4)
Net income     2,291   31.5%      1,149      3,440    47.3%        56.9%


(1) Net income margin is defined as net income divided by total revenues.
(2) Adjusted to eliminate depreciation and amortization expense, SBC expense,
expense related to SPB Software contingent compensation, interest income,
other income, net, and provision for income taxes. For a reconciliation of
adjusted EBITDA to net income, please see the table above.
(3) Adjusted EBITDA margin is defined as adjusted EBITDA divided by total
revenues.
(4) Adjusted ex-TAC EBITDA margin is defined as adjusted EBITDA divided by
ex-TAC revenues.For a reconciliation of ex-TAC revenues to GAAP revenues,
please see the table above.

Reconciliation of Adjusted Net Income Margin and Adjusted Ex-TAC Net Income
Margin to US GAAP Net Income Margin for the Three Months Ended September 30,
2012


In RUR                                                         
millions
                       Net                             Adjusted    Adjusted
               US GAAP Income      Adjustment Adjusted Net         Ex-TAC
              Actual  Margin     ^(2)       Net      Income      Net
                       ^(1)                   Income   Margin ^(3) Income
                                                                   Margin ^(4)
Net income     2,291   31.5%       (62)       2,229    30.6%       36.9%


(1) Net income margin is defined as net income divided by total revenues.
(2) Adjusted to eliminate SBC expense (as adjusted for the income tax
reduction attributable to SBC expense), expense related to SPB Software
contingent compensation, gain from sale of equity investments and foreign
exchange losses (as adjusted for the reduction in income tax attributable to
the loss). For a reconciliation of adjusted net income to net income, please
see the table above.
(3) Adjusted net income margin is defined as adjusted net income divided by
total revenues.
(4) Adjusted ex-TAC net income margin is defined as adjusted net income
divided by ex-TAC revenues.For a reconciliation of ex-TAC revenues to US GAAP
revenues, please see the table above.

CONTACT: Investor Relations
         Dmitry Barsukov, Katya Zhukova
         Phone: +7 495 739-70-00
         E-mail: askIR@yandex-team.ru
        
         US Investor Contact
         The Blueshirt Group, for Yandex
         Alex Wellins
         Phone: +1 415 217-58-61
         E-mail: alex@blueshirtgroup.com
        
         Media Relations
         Ochir Mandzhikov, Dina Litvinova
         Phone: +7 495 739-70-00
         E-mail: pr@yandex-team.ru

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