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Yandex Announces Fourth Quarter and Full-Year 2012 Financial Results



Yandex Announces Fourth Quarter and Full-Year 2012 Financial Results

MOSCOW and THE HAGUE, Netherlands, Feb. 19, 2013 (GLOBE NEWSWIRE) -- Yandex
(Nasdaq:YNDX), one of Europe's largest internet companies and the leading
search provider in Russia, today announced its financial results for the
fourth quarter and the full year ended December 31, 2012.

Q4 2012 Financial Highlights

  * Revenues of RUR 8.8 billion ($290.4 million^1), up 37% compared with Q4
    2011
  * Ex-TAC revenues^2 (excluding traffic acquisition costs), up 36% compared
    with Q4 2011
  * Income from operations of RUR 3.1 billion ($102.3 million), up 19%
    compared with Q4 2011
  * Adjusted EBITDA^3 of RUR 4.3 billion ($140.1 million), up 30% compared
    with Q4 2011
  * Operating margin of 35.2%
  * Adjusted EBITDA margin^2 of 48.2%
  * Adjusted ex-TAC EBITDA margin^2 of 57.5%
  * Net income of RUR 2.7 billion ($88.6 million), up 27% compared with Q4
    2011
  * Adjusted net income^3 of RUR 3.0 billion ($97.6 million), up 35% compared
    with Q4 2011
  * Net income margin of 30.5%
  * Adjusted net income margin^2 of 33.6%
  * Adjusted ex-TAC net income margin^2 of 40.1%
  * Cash, deposits and investments in debt securities of RUR 27.2 billion
    ($895.3 million) as of December 31, 2012

FY 2012 Financial Highlights

  * Revenues of RUR 28.8 billion ($947.1 million^1), up 44% compared with FY
    2011
  * Ex-TAC revenues^2 (excluding traffic acquisition costs), up 41% compared
    with FY 2011
  * Income from operations of RUR 9.5 billion ($311.2 million), up 34%
    compared with FY 2011
  * Adjusted EBITDA^3 of RUR 13.1 billion ($432.7 million), up 42% compared
    with FY 2011
  * Operating margin of 32.9%
  * Adjusted EBITDA margin^2 of 45.7%
  * Adjusted ex-TAC EBITDA margin^2 of 54.8%
  * Net income of RUR 8.2 billion ($270.7 million), up 42% compared with FY
    2011
  * Adjusted net income^3 of RUR 8.8 billion ($288.7 million), up 46% compared
    with FY 2011
  * Net income margin of 28.6%
  * Adjusted net income margin^2 of 30.5%
  * Adjusted ex-TAC net income margin^2 of 36.6%

"Yandex delivered strong fourth quarter and full year 2012 results with robust
revenue growth, solid search share and a continuing stream of important
innovations," said Arkady Volozh, Chief Executive Officer of Yandex. "In Q4,
we launched key products aimed at improving the user experience, including new
mobile apps, personalized search and our Yandex.Browser, which has already
captured a considerable share of the Russian browser market. I am also proud
to report that, for the first time ever, we became the fourth largest search
engine in the world, according to comScore."

^1 Pursuant to SEC rules regarding convenience translations, Russian ruble
(RUR) amounts have been translated into U.S. dollars at a rate of RUR 30.3727
to $1.00, the official exchange rate quoted as of December 31, 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
and twelve months ended December 31, 2011 and 2012:

                                                                              
 In RUR millions     Three months        Twelve months              
                     ended December 31, ended December 31
                     2011  2012  Change 2011   2012   Change
Revenues             6,439 8,819 37%    20,033 28,767 44%
Ex-TAC revenues^2    5,437 7,403 36%    17,035 23,987 41%
Income from          2,603 3,107 19%    7,034  9,454  34%
operations
Adjusted EBITDA ^3   3,269 4,255 30%    9,237  13,142 42%
Net income           2,123 2,691 27%    5,773  8,223  42%
Adjusted net         2,198 2,965 35%    6,003  8,768  46%
income^3

Q4 2012 Operational Highlights

  * Share of Russian search market (including mobile) averaged 60.5% in Q4
    2012 (according to LiveInternet)
  * Search queries grew 26% from Q4 2011
  * Number of advertisers grew to more than 213,000, up 22% from Q4 2011 and
    up 5% from Q3 2012
  * Rolled out a new search platform code-named Kaliningrad
  * Launched Yandex.Browser
  * Launched Yandex.Search app for the iPad
  * Announced the formation of a Yandex.Money joint venture with Sberbank

Revenues

                                                                              
 In RUR millions     Three months        Twelve months              
                     ended December 31, ended December 31,
                     2011  2012  Change 2011   2012   Change
Advertising                                            
revenues:
Text-based                                             
advertising
Yandex websites      4,405 6,181 40%    14,590 20,610 41%
Ad network           1,037 1,462 41%    2,922  4,898  68%
Total text-based     5,442 7,643 40%    17,512 25,508 46%
advertising
Display advertising  864   964   12%    2,096  2,592  24%
Total advertising    6,306 8,607 36%    19,608 28,100 43%
revenues
Online payment       115   178   55%    383    552    44%
commissions
Other                18    34    89%    42     115    174%
Total revenues       6,439 8,819 37%    20,033 28,767 44%

Text-based advertising revenues, accounting for 87% of total revenues in Q4
2012, continued to determine overall top-line performance.

Text-based advertising revenues from Yandex's own websites accounted for 70%
of total revenues during Q4 2012, and increased 40% compared with Q4 2011.
Text-based advertising revenues from our ad network increased 41% compared
with Q4 2011 and contributed 17% of total revenues during Q4 2012. Our
advertising network grew generally in line with Yandex's own websites given
that a full year has passed since we made several changes to the monetization
algorithms and added Rambler to our partner network.

Paid clicks on Yandex's and its partners' websites, in aggregate, increased
26% in Q4 2012 compared with Q4 2011 and grew 20% sequentially. 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 made several changes to the
monetization algorithms and added Rambler to our partner network.
Additionally, growth in paid clicks during each of the previous four quarters
benefited from the initiatives that we launched in Q3 2011, which aimed to
lower CPCs in the regions. Our average cost per click in Q4 2012 increased 11%
compared with Q4 2011.

Display advertising revenue, accounting for 11% of total revenues during Q4
2012, increased 12% compared with Q4 2011, considerably faster than the 4%
growth posted by the market overall. As anticipated, the growth rate in
display advertising was significantly lower than in text-based advertising
partially due to increased supply of TV ad inventory at attractive rates.

Online payment commissions accounted for 2% of revenue during Q4 2012, and
increased 55% compared with Q4 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, reflect investments in overall growth, including
personnel. In Q4 2012, Yandex added 154 full-time employees, an increase of 4%
from September 30, 2012, and up 14% from December 31, 2011. The total number
of full-time employees was 3,761 as of December 31, 2012. Total share-based
compensation expense increased 37% in Q4 2012.

Costs of revenues, including traffic acquisition costs (TAC)

                                                                              
In RUR millions        Three months        Twelve months            
                       ended December 31, ended December 31,
                       2011  2012  Change 2011  2012  Change
TAC:                                                   
Related to the Yandex  665   928   40%    1,853 3,128 69%
ad network
Related to             337   488   45%    1,145 1,652 44%
distribution partners
Total TAC              1,002 1,416 41%    2,998 4,780 59%
Total TAC as a % of    15.6% 16.1%        15.0% 16.6%  
total revenues
Other cost of revenues 483   660   37%    1,709 2,408 41%
Other cost of revenues 7.5%  7.5%         8.5%  8.4%   
as a % of revenues
Total cost of revenues 1,485 2,076 40%    4,707 7,188 53%
Total cost of revenues 23.1% 23.5%        23.5% 25.0%  
as a % of revenues

TAC remained stable as a percentage of text-based revenues at 18.5% in Q4 2012
compared with 18.4% in Q4 2011.

Other cost of revenues in Q4 2012 increased 37% compared with Q4 2011,
reflecting growth in personnel and data center-related costs in line with
revenue growth.

Product development

                                                                           
 In RUR millions    Three months        Twelve months             
                    ended December 31, ended December 31,
                    2011  2012  Change 2011  2012  Change
Product development 853   1,115 31%    3,124 4,274 37%
As a % of revenues  13.2% 12.6%        15.6% 14.9%  

The increase in product development expenses in Q4 2012 primarily reflects
increases in the number of developers, as well as in employee remuneration.
Headcount in development staff increased 10% from 1,842 as of December 31,
2011, to 2,027 as of December 31, 2012, with 78 employees added since
September 30, 2012.

Selling, general and administrative (SG&A)

                                                                              
 In RUR millions       Three months        Twelve months             
                       ended December 31, ended December 31,
                       2011  2012  Change 2011  2012  Change
Sales, general and     916   1,661 81%    3,294 4,900 49%
administrative
As a % of revenues     14.2% 18.8%        16.4% 17.0%  

The increase in SG&A in Q4 2012 was driven primarily by increased advertising
and marketing expenses in Russia and in Turkey and by compensation expense
related to contingent compensation paid and potentially payable in connection
with our acquisition of SPB Software.

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        Twelve months             
                       ended December 31, ended December 31,
                       2011  2012  Change 2011  2012  Change
SBC expense included   7     14    100%   26    33    27%
in cost of revenues
SBC expense included   42    70    67%    153   221   44%
in product development
SBC expense included   35    31    -11%   150   122   -19%
in SG&A
Total SBC expense      84    115   37%    329   376   14%
As a % of revenues     1.3%  1.3%         1.6%  1.3%   

Total SBC expense increased 37% in Q4 2012 compared with Q4 2011. The increase
is principally related to new grants.

Depreciation and amortization (D&A) expense

                                                                              
 In RUR millions       Three months        Twelve months            
                       ended December 31, ended December 31,
                       2011  2012  Change 2011  2012  Change
Depreciation and       582   860   48%    1,874 2,951 57%
amortization
As a % of revenues     9.0%  9.8%         9.4%  10.3%  

D&A expense increased 48% in Q4 2012 compared with Q4 2011, primarily
reflecting considerable investments in servers and data centers made last
year.

As a result of the factors described above, income from operations was RUR 3.1
billion ($102.3 million) in Q4 2012, a 19% increase from Q4 2011, while
adjusted EBITDA reached RUR 4.3 billion ($140.1 million) in Q4 2012, up 30%
from Q4 2011.

Interest income in Q4 2012 was RUR 333 million, up from RUR 105 million in Q4
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 gain in Q4 2012 was RUR 17 million, compared to a foreign
exchange gain of RUR 6 million in Q4 2011. Yandex's Russian operating
subsidiaries' functional currency is the Russian ruble, and therefore changes
in the ruble value of these subsidiaries' monetary assets and liabilities that
are denominated in other currencies due to exchange rate fluctuations are
recognized as foreign exchange gains or losses in the income statement.
Although the U.S. dollar value of Yandex's U.S. dollar-denominated cash, cash
equivalents and term deposits was not impacted by these currency fluctuations,
they resulted in upward revaluations of the ruble equivalent of these U.S.
dollar-denominated monetary assets in Q4 2012 and Q4 2011.

Income tax expense for Q4 2012 was RUR 791 million, up from RUR 573 million in
Q4 2011. Our effective tax rate increased from 21.3% in Q4 2011 to 22.7% in Q4
2012 and was in line with our effective tax rate of 22.5% in Q3 2012.

Adjusted net income in Q4 2012 was RUR 3.0 billion ($97.6 million), a 35%
increase from Q4 2011, broadly in line with the revenue growth.

Adjusted net income margin was 33.6% in Q4 2012, compared to 34.1% in Q4 2011.

Net income was RUR 2.7 billion ($88.6 million) in Q4 2012, up 27% compared
with Q4 2011. The slower growth in net income compared with adjusted net
income was primarily the result of the accrual of expense related to the
contingent compensation paid and potentially payable to certain employees in
connection with our acquisition of the mobile software business of SPB
Software. We adjust for this expense in our non-GAAP adjusted net income
measure.

As of December 31, 2012, Yandex had cash and cash equivalents, term deposits
(including long-term deposits) and long-term debt securities of RUR 27.2
billion ($895.3 million).

Net operating cash flow and capital expenditures for Q4 2012 were RUR 3.9
billion ($126.8 million) and RUR 1.0 billion ($32.9 million), respectively.

The total number of shares issued and outstanding as of December 31, 2012 was
327,760,083, including 202,318,864 Class A shares, 125,441,218 Class B shares,
one Priority share, and excluding Class C shares outstanding solely as a
result of the conversion of Class B shares into Class A shares; all such Class
C shares will be cancelled. There were also employee stock options outstanding
to purchase up to an additional 10.4 million shares, at a weighted average
exercise price of $4.30 per share, of which options to purchase 7.9 million
shares were fully vested; equity-settled share appreciation rights equal to
0.9 million shares, at a weighted average measurement price of $20.21, none of
which were vested; and restricted share units equal to 1.9 million shares, of
which restricted share units to purchase 0.1 million shares were fully vested.

Outlook for 2013

On a like-for-like basis, excluding the revenue associated with Yandex.Money
from 2012 and 2013 results, Yandex expects to achieve full year ruble-based
revenue growth of 28% to 32% in 2013^1.

^1 In 2012, Yandex recognized total revenue of RUR 28,767 million, including
RUR 552 million in payments commissions related to Yandex.Money and RUR 28,215
million in advertising revenue and other revenue. Yandex will continue to
recognize revenue related to Yandex.Money until the Joint Venture with
Sberbank is completed. We currently expect to complete this transaction in Q2
2013.

Conference Call Information

Yandex's management will hold an earnings conference call on February 19, 2013
at 9:00 AM U.S. Eastern Time (6:00 PM Moscow time; 2:00 PM London time).

To access the conference call live, please dial:

US: +1 631 510 7498
UK: +44 (0) 1452 555 566
Russia: 8 10 800 20972044 
 
Passcode: 95073339#

A replay of the call will be available through February 26, 2013. To access
the replay, please dial:

US: +1 866 247 4222 
Russia/International: +44 (0) 1452 550 000 
 
Passcode: 95073339#

A live and archived webcast of this conference call will be available at
http://ir.yandex.com/eventdetail.cfm?eventid=124874

ABOUT YANDEX

Yandex (Nasdaq:YNDX) is one of the largest European internet companies
providing the world with search and online services one market at a time.
Yandex's mission is to help users solve their everyday problems by building
people-centric products and services. Based on innovative technologies, the
company provides the most relevant, locally tailored experience on all digital
platforms and devices. Yandex is the leading search service in Russia and also
serves Turkey, Ukraine, Belarus and Kazakhstan. More information on Yandex can
be found at http://company.yandex.com.

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 2013. 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 at http://ir.yandex.com/sec.cfm and on the SEC website at
www.sec.gov. Additional risk factor disclosure and related information will
also be set forth in our Annual Report on Form 20-F for the year ended
December 31, 2012. All information in this release and in the attachments is
as of February 19, 2013, and 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 employees in connection
    with our acquisition of the mobile software business of SPB Software 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 employees in connection with our acquisition of the mobile
    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); less 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.

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 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.

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,
$7.1 million of which was paid in November 2012. 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 year ended December 31, 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.

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.

YANDEX N.V.                                                                   
Unaudited Consolidated Balance Sheets                                         
(in millions of Russian rubles and U.S. dollars, except share and per     
share data)
                                                                  
                                                   As of December 31,       
                                                   2011*  2012   2012
ASSETS                                             RUR    RUR    $
Current assets:                                                   
Cash and cash equivalents                          5,930  7,425  244.5
Marketable securities                               --    76     2.5
Term deposits                                      4,789  4,629  152.4
Accounts receivable, net                           1,246  1,767  58.2
Prepaid expenses                                   620    597    19.7
Assets held for sale                               1,656  2,024  66.6
Deferred tax assets                                296    456    15.0
Other current assets                               529    1,217  40.1
Total current assets                               15,066 18,191 599.0
Property and equipment, net                        6,916  8,095  266.5
Intangible assets, net                             481    323    10.6
Goodwill                                           754    750    24.7
Long-term prepaid expenses                         616    695    22.9
Restricted cash                                    454    214    7.0
Term deposits                                      2,344  10,330 340.1
Investments in non-marketable equity securities    569    500    16.5
Investments in debt securities                     6,733  4,810  158.4
Deferred tax assets                                2      35     1.2
Other non-current assets                           141    342    11.3
TOTAL ASSETS                                       34,076 44,285 1,458.2
LIABILITIES AND SHAREHOLDERS' EQUITY                              
Current liabilities:                                              
Accounts payable and accrued liabilities           1,710  2,513  82.8
Taxes payable                                      906    1,455  47.9
Deferred revenue                                   899    1,092  36.0
Liabilities related to assets held for sale        1,196  1,619  53.3
Deferred tax liabilities                            --    3      0.1
Total current liabilities                          4,711  6,682  220.1
Deferred tax liabilities                           189    448    14.8
Other accrued liabilities                          223    108    3.6
Total liabilities                                  5,123  7,238  238.5
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
202,318,864, Class B: 164,621,382 and 125,441,218,                
and Class C: 109,142,922 and 27,972,630,
respectively);
shares outstanding (Class A: 159,217,348 and
202,318,864, Class B: 164,621,382 and 125,441,218, 595    445    14.7
and Class C: nil)
Additional paid-in capital                         12,729 13,617 448.3
Accumulated other comprehensive income             1,828  961    31.6
Retained earnings                                  13,801 22,024 725.1
Total shareholders' equity                         28,953 37,047 1,219.7
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY         34,076 44,285 1,458.2
                                                                  
* Balances related to Yandex.Money are reclassified from their
historical presentation to assets held for sale and liabilities related
to assets held for sale

                                                         
YANDEX N.V.                                                                  
Unaudited Condensed Consolidated Statements of Income                        
(in millions of Russian rubles and U.S. dollars, except share and per        
share data)
                                                                             
                            Three months ended December 31,               
                            2011          2012          2012
                            RUR           RUR           $
                                                         
Revenues                    6,439         8,819         290.4
Operating costs and                                      
expenses:
Cost of revenues^(1)        1,485         2,076         68.4
Product development^(1)     853           1,115         36.7
Sales, general and          916           1,661         54.7
administrative^(1)
Depreciation and            582           860           28.3
amortization 
Total operating costs and   3,836         5,712         188.1
expenses
Income from operations      2,603         3,107         102.3
Interest income             105           333           11.0
Other (expense)/ income,     (12)         42            1.3
net
Net income before income    2,696         3,482         114.6
taxes
Provision for income taxes  573           791           26.0
Net income                  2,123         2,691         88.6
Net income per Class A and                               
Class B share:
Basic                       6.57          8.22          0.27
Diluted                     6.34          8.00          0.26
Weighted average number of
Class A and Class B shares                               
outstanding
Basic                       323,241,474   327,511,749   327,511,749
Diluted                     334,864,888   336,211,460   336,211,460
                                                         
^(1)These balances exclude depreciation and amortization expenses,
which are presented separately, and include share‑based compensation  ^  ^  ^ 
expenses of:
                                                         
Cost of revenues            7             14            0.5
Product development         42            70            2.3
Sales, general and          35            31            1.0
administrative

                                                         
YANDEX N.V.                                                                  
Unaudited Consolidated Statements of Income                                  
(in millions of Russian rubles and U.S. dollars, except share and per        
share data)
                                                                             
                            Year ended December 31,                       
                            2011*         2012          2012
                            RUR           RUR           $
                                                         
Revenues                    20,033        28,767        947.1
Operating costs and                                      
expenses:
Cost of revenues^(1)        4,707         7,188         236.7
Product development^(1)     3,124         4,274         140.7
Sales, general and          3,294         4,900         161.3
administrative^(1)
Depreciation and            1,874         2,951         97.2
amortization 
Total operating costs and   12,999        19,313        635.9
expenses
Income from operations      7,034         9,454         311.2
Interest income             222           1,002         33.0
Other income, net           62            118           3.9
Net income before income    7,318         10,574        348.1
taxes
Provision for income taxes  1,545         2,351         77.4
Net income                  5,773         8,223         270.7
Net income per Class A and                               
Class B share:
Basic                       18.30         25.21         0.83
Diluted                     17.59         24.50         0.81
Weighted average number of
Class A and Class B shares                               
outstanding
Basic                       315,541,639   326,210,948   326,210,948
Diluted                     328,155,087   335,690,596   335,690,596
                                                         
^(1)These balances exclude depreciation and amortization expenses,
which are presented separately, and include share‑based compensation  ^  ^  ^ 
expenses of:
                                                         
Cost of revenues            26            33            1.1
Product development         153           221           7.3
Sales, general and          150           122           4.0
administrative
                                                         
* Derived from audited financial statements                                  

YANDEX N.V.                                                                   
Unaudited Condensed Consolidated Statements of Cash Flows                     
(in millions of Russian rubles and U.S. dollars)                              
                                                               
                                    Three months ended December 31,         
                                    2011*         2012        2012
                                    RUR           RUR         $
                                                               
CASH FLOWS FROM OPERATING                                      
ACTIVITIES:
Net income                           2,123         2,691       88.6 
Adjustments to reconcile net income
to net cash provided by operating                              
activities:
Depreciation and amortization of     553           790         26.0 
property and equipment
Amortization of acquisition‑related  29            70          2.3 
intangible assets
Share‑based compensation expense     70            115         3.8 
Deferred income taxes                (7)           (39)        (1.3)
Foreign exchange gains               (6)           (17)        (0.6)
Other                                19            (24)        (0.7)
Changes in operating assets and liabilities                    
excluding the effect of acquisitions:
Accounts receivable, net             (295)         (331)       (10.9)
Prepaid expenses and other assets    (232)         (84)        (2.8)
Accounts payable and accrued         289           522         17.2 
liabilities
Deferred revenue                     174           167         5.5 
Assets held for sale                 (328)         (306)       (10.1)
Liabilities related to assets held   196           299         9.8 
for sale
Net cash provided by operating       2,585         3,853       126.8 
activities
                                                               
CASH FLOWS USED IN INVESTING                                   
ACTIVITIES:
Purchase of property and equipment   (1,733)       (1,000)     (32.9)
Acquisition of businesses, net of    (735)         --          -- 
cash acquired
Investments in debt securities       (3,429)       --          -- 
Proceeds from maturity of debt       --            759         25.1 
securities
Investments in term deposits         (4,190)       (6,350)     (209.1)
Maturities of term deposits          5,104         4,788       157.6 
Escrow cash deposit                  (433)         219         7.2 
Net cash used in investing           (5,416)       (1,584)     (52.1)
activities  
                                                               
CASH FLOWS PROVIDED BY FINANCING                               
ACTIVITIES:
Proceeds from exercise of share      89            56          1.8 
options
Ordinary shares issuance costs       (5)           --          -- 
Net cash provided by financing       84            56          1.8 
activities
Effect of exchange rate changes on   312           (96)        (3.1)
cash and cash equivalents
Net change in cash and cash          (2,435)       2,229       73.4 
equivalents
                                                               
Cash and cash equivalents at         8,365         5,196       171.1 
beginning of period
Cash and cash equivalents at end of  5,930         7,425       244.5 
period
                                                               
* Cash flows related to Yandex.Money are reclassified from their
historical presentation to cash flows related to changes in assets held
for sale and liabilities related to assets held for sale

                                                               
YANDEX N.V.                                                                   
Unaudited Consolidated Statements of Cash Flows                               
(in millions of Russian rubles and U.S. dollars)                              
                                                               
                                     Year ended December 31,                
                                     2011*        2012        2012
                                     RUR          RUR         $
                                                               
CASH FLOWS FROM OPERATING                                      
ACTIVITIES:
Net income                            5,773        8,223       270.7 
Adjustments to reconcile net income to net cash                
provided by operating activities:
Depreciation and amortization of      1,826        2,812       92.6 
property and equipment
Amortization of acquisition‑related   48           139         4.6 
intangible assets
Share‑based compensation expense      286          376         12.4 
Deferred income taxes                 (169)        72          2.4 
Foreign exchange (gains)/ losses      (101)        57          1.9 
Gain from sale of equity securities   --           (234)       (7.7)
Other                                 40           51          1.7 
Changes in operating assets and liabilities                    
excluding the effect of acquisitions:
Accounts receivable, net              (436)        (526)       (17.3)
Prepaid expenses and other assets     (974)        (923)       (30.4)
Accounts payable and accrued          1,044        1,277       42.0 
liabilities
Deferred revenue                      347          195         6.4 
Assets held for sale                  (530)        (411)       (13.5)
Liabilities related to assets held    352          421         13.8 
for sale
Net cash provided by operating        7,506        11,529      379.6 
activities
                                                               
CASH FLOWS USED IN INVESTING                                   
ACTIVITIES:
Purchase of property and equipment    (5,530)      (3,984)     (131.2)
Acquisition of businesses, net of     (735)        --          -- 
cash acquired
Investments in non-marketable equity  (478)        (47)        (1.6)
securities
Proceeds from sale of equity          --           174         5.7 
securities
Investments in debt securities        (6,548)      --          -- 
Proceeds from maturity of debt        --           1,521       50.1 
securities
Investments in term deposits          (13,028)     (16,585)    (546.0)
Maturities of term deposits           9,200        8,512       280.3 
Escrow cash deposit                   (433)        219         7.2 
Net cash used in investing            (17,552)     (10,190)    (335.5)
activities
                                                               
CASH FLOWS PROVIDED BY FINANCING                               
ACTIVITIES:
Proceeds from exercise of share       231          361         11.9 
options
Repurchase of share options           (8)          --          -- 
Ordinary shares issuance costs        (28)         --          -- 
Proceeds from issuance of ordinary    11,403       --          -- 
shares
Net cash provided by financing        11,598       361         11.9 
activities
Effect of exchange rate changes on    1,353        (205)       (6.7)
cash and cash equivalents
Net change in cash and cash           2,905        1,495       49.3 
equivalents
                                                               
Cash and cash equivalents at          3,025        5,930       195.2 
beginning of period
Cash and cash equivalents at end of   5,930        7,425       244.5 
period
                                                               
* Cash flows related to Yandex.Money are reclassified from their
historical presentation to cash flows related to changes in assets held
for sale and liabilities related to assets held for sale

                                                        
YANDEX N.V.                                                              
                                                        
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES                           
TO THE NEAREST COMPARABLE US GAAP MEASURES                               
                                                        
Reconciliation
of Ex-TAC
Revenues from                                           
US GAAP
Revenues
                                                                         
In RUR         Three months            Twelve months                 
millions       ended December 31,     ended December 31,
               2011    2012    Change 2011    2012     Change
Total revenues 6,439   8,819   37%    20,033  28,767   44%
Less: traffic
acquisition    1,002   1,416   41%    2,998   4,780    59%
costs (TAC)
Ex-TAC         5,437   7,403   36%    17,035  23,987   41%
revenues
                                                        
Reconciliation of
Adjusted EBITDA from                                    
US GAAP Net Income
                                                                                  
 In RUR        Three months           Twelve months                      
millions       ended December 31,     ended December 31, 
               2011    2012    Change 2011    2012     Change
Net income      2,123   2,691  27%     5,773   8,223   42%
Add:
depreciation    582     860    48%     1,874   2,951   57%
and
amortization
Add:
share-based     84      115    37%     329     376     14%
compensation
(SBC) expense
Add:
compensation
expense         --      173    n/m     --      361     n/m
related to
contingent
consideration
Less: interest  (105)   (333)  217%    (222)   (1,002) 351%
income
Less: other
income/         12      (42)   -450%   (62)    (118)   90%
(expense), net
Add: provision
for income      573     791    38%     1,545   2,351   52%
taxes
Adjusted        3,269   4,255  30%     9,237   13,142  42%
EBITDA
                                                        
Reconciliation of
Adjusted Net Income                                     
from US GAAP Net
Income
                                                                                  
 In RUR        Three months            Twelve months                     
millions       ended December 31,     ended December 31,
               2011    2012    Change 2011    2012     Change
Net income      2,123   2,691  27%     5,773   8,223   42%
Add: SBC        84      115    37%     329     376     14%
expense
Less:
reduction in
income tax      (4)     (1)    n/m     (13)    (4)     n/m
attributable
to SBC expense
Add:
compensation
expense         --      173    n/m     --      361     n/m
related to
contingent
consideration
Add: foreign
exchange loss/  (6)     (17)   183%    (101)   57      -156%
(gain) 
Less:
(reduction)/
increase in
income tax      1       4      n/m     15      (11)    n/m
attributable
to foreign
exchange loss/
(gain)
Less: gain
from sale of    --      --     n/m     --      (234)   n/m
equity
investments
Adjusted Net    2,198   2,965  35%     6,003   8,768   46%
Income

 
Reconciliation of Adjusted EBITDA Margin and Adjusted Ex-TAC
EBITDA Margin to US GAAP Net Income Margin for the Three Months
and Twelve Months Ended December 31, 2012
                                                                              
In RUR millions                                                               
           US GAAP Net                          Adjusted  Adjusted
           Actual  Income  Adjustment Adjusted  EBITDA    Ex-TAC
           Net     Margin  ^(2)       EBITDA    Margin ^  EBITDA
           Income  ^(1)                         (3)       Margin
                                                          ^(4)
Three
months
ended      2,691   30.5%   1,564      4,255     48.2%     57.5%
December
31, 2012
Twelve
months
ended      8,223   28.6%   4,919      13,142    45.7%     54.8%
December
31, 2012
                                                                              
(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/ (expense), 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 US 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 and Twelve Months Ended December 31, 2012
                                                                              
In RUR millions                                                               
                                                Adjusted  Adjusted
          US GAAP  Net                Adjusted  Net       Ex-TAC
          Actual   Income  Adjustment Net       Income    Net
          Net      Margin  ^(2)       Income    Margin ^  Income
          Income   ^(1)                         (3)       Margin
                                                          ^(4)
Three
months
ended     2,691    30.5%   274        2,965     33.6%     40.1%
December
31, 2012
Twelve
months
ended     8,223    28.6%   545        8,768     30.5%     36.6%
December
31, 2012
                                                                              
(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 loss/ (gain) (as adjusted for the            
(reduction)/ increase in income tax attributable to loss/ (gain)).
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
         Greg Abovsky, Katya Zhukova
         Phone: +7 495 974-35-38
         E-mail: askIR@yandex-team.ru
        
         Media Relations
         Ochir Mandzhikov, Dina Litvinova
         Phone: +7 495 739-70-00
         E-mail: pr@yandex-team.ru

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