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Yandex N.V. Stabilizes Market Share and Returns a Solid Quarter

By Steve Symington - Oct 31, 2015 at 7:00AM

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How the Russian search leader beat expectations and stabilized market share.

Yandex N.V. ( YNDX -0.15% ) just reported encouraging third-quarter 2015 results. Despite technically losing ground to Alphabet's ( GOOG 1.52% )( GOOGL 1.36% ) Google in its home country in terms of average market share over the quarter, the Russian Internet search leader managed to reverse the trend, beat expectations, and raise guidance.

Let's take a closer look at what Yandex accomplished this quarter:

Yandex results: The raw numbers


Q3 2015 Actual

Q3 2014 Actual

Growth (YOY)


 15.44 billion RUR

 13.06 billion RUR 


Adjusted net Income

 3.51 billion RUR

 3.91 billion RUR


Adjusted EPS

 10.86 RUR

 12.08 RUR


*Figures in Russian rubles. Data source: Yandex N.V.

What happened with Yandex this quarter?

  • Top- and bottom-line results exceeded consensus estimates, which called for revenue of 15.09 billion RUR and adjusted earnings of 10.24 RUR per share.
  • Revenue excluding traffic acquisition costs -- which Yandex likens to sales commissions -- rose 18% year over year to 12.16 billion RUR. 
  • Adjusted EBITDA rose 2% year over year to 6.02 billion RUR
  • Share of the Russian search market averaged 57.1%, down from 57.4% last quarter
  • That share technically went to Google early in the quarter. On average, Big G increased its slice of Russian search from 34.7% last quarter to 35% in Q3:

  • However, Yandex also reversed its downward trend during the quarter, improving its share of Russian search by 70 basis points from June to 57.3% in September
  • Number of advertisers increased 18% year over year and 1% sequentially from last quarter to 354,000
  • Total Advertising revenue rose 17% year over year to 15.07 billion RUR
  • Text-based ads rose 18% to 14.24 billion RUR, driven by a 35% increase in ad network revenue to 3.74 billion RUR, and a 13% jump in text ads on Yandex's own websites to to 10.5 billion RUR
  • Display advertising fell 1% to 825 million RUR, including an 67% increase from ad network partners and an 11% decline from Yandex websites
  • Aggregate paid clicks grew 15% year over year
  • Average cost per click rose 3% year over year
  • "Other" revenue jumped 156% to 371 million RUR, driven primarily by Yandex Taxi
  • After filing an antitrust complaint against Google this past February, Russia's local antitrust authority ruled last month that Google violated Russian antitrust laws by requiring manufacturers to pre-install its products and services on their mobile devices
  • Shortly after the quarter's end, Yandex signed a strategic deal with Microsoft to be the default search engine for Windows 10 in Russia, Ukraine, and several other countries including Turkey. 

What management had to say 
"This was an excellent quarter for the company on all fronts," added Yandex CEO Arkady Volozh. "We stabilized our search share in Russia, became the default search engine for Windows 10 in Russia, Turkey, and several other countries, and achieved a historic decision from the Russian antimonopoly service that we hope will return fair competition to the market."

Looking forward 
Finally, only one quarter after reinstating guidance previously suspended in the face of macroeconomic challenges, Yandex increased its 2015 outlook for ruble-based revenue to increase 14% to 16%, up from the prior range of 11% to 13%.

All things considered, from Yandex's Q3 top- and bottom-line outperformance, stabilizing market share, and increased full-year outlook, you'll be hard press to find any Yandex investor willing to complain about the company's relative strength right now. In the coming quarters, as the effects of the Google ruling take hold and Yandex solidifies its presence through Windows 10, it seems shareholders have plenty to look forward to from here.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Yandex N.V. Stock Quote
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