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Yandex Announces First Quarter 2013 Financial Results

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 ("RUR") and U.S. dollars ("$"), except share and per share data)
  As of
  December 31 , 2012* March 31, 2013 March 31, 2013
  RUR RUR $
ASSETS      
Current assets:      
Cash and cash equivalents  7,425 7,757 249.5
Marketable securities  76 114 3.7
Term deposits  4,629 2,947 94.8
Accounts receivable, net  1,767 1,850 59.5
Prepaid expenses  597 592 19.1
Assets held for sale  2,024 2,079 66.9
Deferred tax assets  456 451 14.5
Other current assets  1,217 1,055 33.9
Total current assets  18,191 16,845 541.9
Property and equipment, net  8,095 8,183 263.2
Intangible assets, net  323 306 9.9
Goodwill  750 755 24.3
Long-term prepaid expenses  695 669 21.5
Restricted cash  214 89 2.9
Term deposits  10,330 13,650 439.1
Investments in non-marketable equity securities  500 512 16.5
Investments in debt securities  4,810 4,946 159.1
Deferred tax assets  35 66 2.1
Other non-current assets  342 522 16.8
TOTAL ASSETS  44,285 46,543 1,497.3
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current liabilities:      
Accounts payable and accrued liabilities  2,513 2,622 84.4
Taxes payable  1,455 1,109 35.7
Deferred revenue  1,092 970 31.1
Liabilities related to assets held for sale  1,619 1,646 53.0
Deferred tax liabilities  3 1 --
Total current liabilities  6,682 6,348 204.2
Deferred tax liabilities  448 430 13.8
Other accrued liabilities  108 95 3.1
Total liabilities  7,238 6,873 221.1
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: 159,494,722 and 159,494,722, and      
Class C: 159,494,722 and 159,494,722); shares issued (Class A: 202,318,864 and      
232,963,523, Class B: 125,441,218 and 96,034,266, and Class C: 27,972,630 and      
57,379,582, respectively); shares outstanding (Class A: 202,318,864 and 232,623,523, Class      
B: 125,441,218 and 95,988,570, and Class C: nil)  445 336 10.8
Treasury shares at cost (Class A: nil and 340,000, and Class B: nil and 45,696)  - (243) (7.8)
Additional paid-in capital  13,617 14,020 451.0
Accumulated other comprehensive income  961 1,287 41.4
Retained earnings  22,024 24,270 780.8
Total shareholders' equity  37,047 39,670 1,276.2
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  44,285 46,543 1,497.3
_____________________      
* 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 March 31,
  2012 2013 2013
  RUR RUR $
Revenues  5,874 7,999 257.3
Operating costs and expenses:      
Cost of revenues (1) 1,518 1,976 63.6
Product development (1)  1,066 1,328 42.7
Sales, general and administrative (1)  1,070 1,363 43.8
Depreciation and amortization  661 879 28.3
       
Total operating costs and expenses  4,315 5,546 178.4
       
Income from operations  1,559 2,453 78.9
Interest income  167 368 11.8
Other expense, net  (124) 26 0.9
Net income before income taxes  1,602 2,847 91.6
Provision for income taxes  344 601 19.4
       
Net income  1,258 2,246 72.2
       
Net income per Class A and Class B share:      
Basic  3.88 6.84 0.22
Diluted  3.75 6.67 0.21
       
Weighted average number of Class A and Class B shares outstanding      
Basic  324,444,817 328,376,050 328,376,050
Diluted  335,035,919 336,739,465 336,739,465
       
 _________________________________      
(1) These balances exclude depreciation and amortization expenses, which are presented separately, and include share‑based compensation expenses of:
       
Cost of revenues  6 11 0.4
Product development  39 82 2.6
Sales, general and administrative  36 58 1.9
 
YANDEX N.V.
 
Unaudited Condensed Consolidated Statements of Cash Flows
 
(in millions of Russian rubles and U.S. dollars)
  Three months ended March 31,
  2012* 2013 2013
  RUR RUR $
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income   1,258  2,246 72.2
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization of property and equipment   643  856 27.6
Amortization of acquisition‑related intangible assets   18 23 0.7
Share‑based compensation expense   81  151 4.9
Deferred income taxes   (98) (53) (1.7)
Foreign exchange losses/(gains)   114 (7) (0.3)
Other  13 (25) (0.8)
Changes in operating assets and liabilities excluding the effect of acquisitions:      
Accounts receivable, net   89 (82) (2.6)
Prepaid expenses and other assets   (318)
Accounts payable and accrued liabilities   (18)  (325) (10.4)
Deferred revenue   (85)  (122) (3.9)
Assets held for sale   54 (59) (1.9)
Liabilities related to assets held for sale  6 27 0.9
       
Net cash provided by operating activities  1,757 2,630 84.7
       
CASH FLOWS USED IN INVESTING ACTIVITIES:      
Purchase of property and equipment  (764) (859) (27.6)
Investments in term deposits   (3,950) (5,220) (167.9)
Maturities of term deposits   2,663  3,600 115.8
Escrow cash deposit   —  130 4.1
       
Net cash used in investing activities  (2,051) (2,349) (75.6)
       
CASH FLOWS PROVIDED BY/(USED IN) FINANCING ACTIVITIES:      
Proceeds from exercise of share options  119 132 4.2
Repurchases of ordinary shares (243) (7.8)
       
Net cash provided by/(used in) financing activities  119 (111) (3.6)
       
Effect of exchange rate changes on cash and cash equivalents  (379) 162 5.1
       
Net change in cash and cash equivalents  (554) 332 10.6
       
Cash and cash equivalents at beginning of period  5,930 7,425 238.9
       
Cash and cash equivalents at end of period  5,376 7,757 249.5
       
* 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 millions Three months
  ended March 31, 
  2012 2013 Change
Total revenues  5,874 7,999 36%
Less: traffic acquisition costs (TAC) 992 1,305 32%
Ex-TAC revenues 4,882 6,694 37%
       
Reconciliation of Adjusted EBITDA from US GAAP Net Income
 
In RUR millions Three months
  ended March 31, 
  2012 2013 Change
Net income  1,258 2,246 79%
Add: depreciation and amortization  661 879 33% 
Add: share-based compensation (SBC) expense 81 151 86%
Add: expense for acquisition-related contingent compensation 76 21 -72%
Less: interest income (167) (368) 120%
Less: other income/(expense), net 124 (26) -121%
Add: provision for income taxes 344 601 75%
Adjusted EBITDA 2,377 3,504 47%
       
Reconciliation of Adjusted Net Income from US GAAP Net Income
 
In RUR millions Three months
  ended March 31, 
  2012 2013 Change
Net income  1,258 2,246 79%
Add: SBC expense 81 151 86%
Less: reduction in income tax attributable to SBC expense (1) (2) 100%
Add: expense for acquisition-related contingent compensation 76 21 -72%
Add: foreign exchange loss/(gain)  114 (7) -106%
Less: (reduction)/increase in income tax attributable to foreign exchange loss/(gain) (23) 1 -104%
Adjusted net income 1,505 2,410 60%
 
Reconciliation of Adjusted EBITDA Margin and Adjusted Ex-TAC EBITDA Margin to US GAAP Net Income Margin for the Three Months Ended March 31, 2013
 
In RUR millions 
  US GAAP Actual Net Income Net Income Margin (1) Adjustment (2) Adjusted EBITDA Adjusted EBITDA Margin (3) Adjusted Ex-TAC EBITDA Margin (4)
Three months ended March 31, 2013 2,246 28.1% 1,258 3,504 43.8% 52.3%
 
(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 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 March 31, 2013
 
In RUR millions 
  US GAAP Actual Net Income Net Income Margin (1) Adjustment (2) Adjusted Net Income Adjusted Net Income Margin (3) Adjusted Ex-TAC Net Income Margin (4)
Three months ended March 31, 2013 2,246 28.1% 164 2,410 30.1% 36.0%
 
(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 and foreign exchange losses/(gains) (as adjusted for the (reduction)/increase in income tax attributable to the 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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