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Yandex Rides Android Gains to Market-Share Growth

By Steve Symington - Oct 24, 2017 at 4:24PM

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The Russian internet search is investing big to reverse recent market-share losses on its largest platform.

Yandex N.V. (YNDX -6.79%) announced strong third-quarter 2017 results on Tuesday, reversing last quarter's market-share losses and demonstrating continued broad growth from its supplementary businesses.

With shares up 7% as of this writing, let's take a closer look at what the Russian internet leader accomplished over the past few months, as well as what investors can expect for the rest of the year.

Yandex black and red logo

IMAGE SOURCE: YANDEX.

Yandex results: The raw numbers

Metric

Q3 2017

Q3 2016

Year-Over-Year Growth

Revenue

23.438 billion RUR

19.293 billion RUR

(21.5%)

Net income attributable to Yandex N.V.

900 million RUR

2.443 billion RUR

(63.2%)

Earnings per share (diluted)

2.72 RUR

7.47 RUR

(63.6%)

Figures in Russian rubles (RUR). Data source: Yandex N.V.  

What happened with Yandex this quarter?

  • Revenue excluding traffic acquisition costs (ex-TAC) grew 22% year over year to 19.033 billion RUR.
  • On an adjusted basis, which excludes items like stock-based compensation, Yandex's net income declined 37% to 2.371 billion RUR.
  • Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) dropped 17% year over year to 5.695 billion RUR, primarily driven by an increase in advertising and marketing for both search (aimed at increasing market share on Android) and Yandex.Taxi related to geographical expansion. Yandex also incurred one-off accruals related to its previously announced agreement to combine ride-sharing businesses with Uber in Russia and five neighboring countries.
  • The company's share of the Russian internet search market (including mobile) averaged 54.9% during the quarter, up from 54.3% last quarter and 54.7% in Q1. Yandex's market share reached 55.5% in the month of September.
    • Within that, Yandex's search share on Android -- which comprises around 70% of total traffic -- climbed to 41.2% this quarter, up from 38.2% last quarter. It has since grown to 43.9% so far in the month of October.
  • Search queries in Russia increased 7% year over year.
  • Online advertising revenue grew 19% to 21.881 billion RUR, including 22% growth from Yandex properties to 16.33 billion RUR and 11% growth from ad network properties to 5.551 billion RUR.
  • Nonadvertising revenue grew 83% to 1.557 billion RUR.
  • By segment:
    • Search and portal revenue increased 21% to 21.117 billion RUR.
    • E-commerce revenue fell 12% to 1.060 billion RUR.
    • Taxi revenue grew 96% to 1.150 billion RUR, driven by a 360% increase in the number of Yandex.Taxi rides from the same year-ago period.
    • Classifieds revenue grew 58% to 556 million RUR.
    • Experiments revenue grew 96% to 412 million RUR, primarily including media services like Yandex.Music and Yandex.TV.
  • Announced a joint venture with Sberbank based on the Yandex.Market platform.
  • Launched Alice, a "conversational intelligent assistant" product.

What management had to say

Yandex CEO Arkady Volozh stated:

This was another strong quarter with 21% revenue growth and significant increase in our search share on Android. I am also very excited about the recent launch of Alice, the first conversational intelligent assistant for the Russian market.  Alice is a great demonstration of how we can apply our expertise in AI, voice recognition and synthesis technology to create products that delight our consumers.

"I am very proud of the pace of innovations in our core business," elaborated Yandex COO Alexander Shulgin. "[...] We continued to invest in our business units, including in regional expansion within Yandex.Taxi and our Classifieds segment."

Looking forward

Given its latest impressive performance, Yandex once again boosted its full-year 2017 revenue guidance to call for ruble-based sales to climb in the range of 22% to 23% from 2016 (up from 18% to 21% previously).

In the end, this was a strong beat-and-raise situation for Yandex. And even with shares having climbed more than 50% year to date leading up to this report, it's no surprise to see investors bidding up the stock even further today.

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