Yandex N.V. (YNDX) Q2 2012 Earnings Call July 31, 2012 9:00 am ET Executives Katya Zhukova Arkady Volozh - Founder, Chief Executive Officer and Director Ilya Segalovich - Co-founder, Chief Technology Officer and Director Alexander Shulgin - Chief Financial Officer Analysts Edward Hill-Wood - Morgan Stanley, Research Division Lloyd Walmsley - Deutsche Bank AG, Research Division Alexander Balakhnin - Goldman Sachs Group Inc., Research Division Charles Eugene Munster - Piper Jaffray Companies, Research Division Mariya Rubanovskaya - BofA Merrill Lynch, Research Division Anna Lepetukhina - Troika Dialog, Research Division Olga Bystrova - Crédit Suisse AG, Research Division Alexander Vengranovich - OTKRITIE Securities Ltd., Research Division David Ferguson - Renaissance Capital, Research Division Anastasia Obukhova - VTB Capital, Research Division Presentation Operator
As usual, we put together a few slides to compliment this story. These slides are currently available on our IR website.And now, let me follow the Safe Harbor. Various remarks that we make during this call about our future expectations, plans and profits constitute forward-looking statements. Our actual results may differ materially from those indicated or suggested by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our Annual Report on Form 20-F dated March 2, 2012, which is on file with the SEC and is available online. In addition, any forward-looking statements represent our views only as of today, and should not be relied upon as representing our views as of any subsequent date. Although, we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today. During this call, we will be referring to some non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with the U.S. GAAP. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is provided in the earnings release we issued today. And before I turn the call over to Arkady, I would like to give you a quick update about a huge triumph in the Russian Internet. This spring, monthly Internet penetration reached 51% or nearly 60 million people according to the Public Opinion Foundation. This is an increase of 2 million people from the previous quarter measurement. 77% of them use the Internet on a daily basis. This recent data shows that Internet usage in Russia, followed the growth trajectory forecasted by the Public Opinion Foundation back in 2011. This forecast calls for the Internet to reach 71% Internet penetration by the end of 2014.
And now, I'm turning the call over to Arkady Volozh.Arkady Volozh Thanks, Katya. And I will start with a quarter-level overview, including a discussion of our achievements for the quarter and the competitive landscape. And then Ilya will get into more detail on products and services and Sasha will drill down into our financials. After that, we'll take your questions. Well, first of all, we delivered another strong quarter with 50% top line growth and more than that, we expanded our profitability margins as we confirm our full year guidance of 40%, 45% year-on-year growth. And our position as the search engine leader in Russia remains unquestionable. Despite change in web browser share and evolving consumer behavior on mobile versus desktop usage, we firmly called the 60% leadership addition on the Russian market. And let me further tell you about it-- on this important point. A year ago, Google Chrome browser was on the rise and we felt pressure. But Chrome's adoption rate slowed down at the end of 2011. At the same time, over this period we grew our share of searches in Chrome from 41% to 46%. Today, our share of searches in Chrome is even higher than those on Google. Despite the fact that Google is the default search provider in Chrome and it's not easy to change that default. In addition to our success in Chrome, we grew our share of searches in all other major browsers including Mozilla, Opera and Internet Explorer. We made it happen by concentrating efforts, primarily on the problem. Distribution is, of course, important. But its importance sometimes is overestimated. For example, as we informed the investor and analyst community in June, [ph] as default search starting from version 14, which became available for download about 2 weeks ago. For those of you who have been watching out sales, such as -- may have noticed that over 1 of 60% of Firefox's teen users, already switched to the new version of the browser. This had a negligible impact on our shares of searches. On a related note, I'm happy to inform you that our relationship with Opera continues as before and we are looking to further extend this global world partnership. Read the rest of this transcript for free on seekingalpha.com