OREANDA-NEWS. (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 second quarter ended June 30, 2013.

Q2 2013 Financial Highlights
Revenues of RUR 9.2 billion (USD 281.2 million1), up 35% compared with Q2 2012
Ex-TAC revenues2 (excluding traffic acquisition costs) up 37% compared with Q2 2012
Income from operations of RUR 3.2 billion (USD 98.4 million), up 43% compared with Q2 2012
Adjusted EBITDA3 of RUR 4.3 billion (USD 131.6 million), up 40% compared with Q2 2012
Operating margin of 35.0%
Adjusted EBITDA margin2of 46.8%
Adjustedex-TAC EBITDA margin2 of 55.6%
Net income of RUR 2.9 billion (USD 89.1 million), up 47% compared with Q2 2012
Adjusted net income3 of RUR 3.1 billion (USD 93.5 million), up 48% compared with Q2 2012
Net income margin of 31.7%
Adjusted net income margin2of 33.2%
Adjusted ex-TAC net income margin2 of 39.5%
Cash, deposits and investments in debt securities of RUR 30.8 billion (USD 940.1 million) as of June 30, 2013

 "Yandex delivered strong financial and operating results. We released the mobile version of our Yandex.Browser and a new, task-oriented version of Yandex.Mail," said Arkady Volozh, CEO of Yandex. "We also unveiled Yandex.Islands, a next generation search platform with interactive search results."

 The following table provides a summary of key financial results for the three months and six months ended June 30, 2012 and 2013.                                                                  
1Pursuant to SEC rules regarding convenience translations, Russian ruble (RUR) amounts have been translated into U.S. dollars at a rate of RUR 32.7090 to USD 1.00, the official exchange rate quoted as of June 30, 2013 by the Central Bank of the Russian Federation.
 
2This 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.
 
3Adjusted EBITDA and adjusted net income are non-GAAP financial measures. 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.
Q2 2013 Operational and Corporate Highlights
 Share of Russian search market averaged 61.7% in Q2 2013 (according to LiveInternet)
 SERPs (search engine result pages) grew 22% from Q2 2012
 Number of advertisers grew to more than 239,000, up 24% from Q2 2012 and up 6% from Q1 2013
 Introduced a new concept in search engine result pages — interactive blocks, called Islands
 Launched two versions of our mobile browser — for Android-based smartphones and for the iPad
 Repurchased 4 million shares as of July 24, 2013 as part of the previously announced 12 million share repurchase program

Subsequent Events
 Signed a cooperation agreement with Mail.ru under which Yandex is the paid search services provider for Mail.ru
 Completed the formation of the joint venture between Yandex.Money and Sberbank on July 4, 2013
Text-based advertising revenues, accounting for 88% of total revenues in Q2 2013, continued to determine overall top-line performance.

Text-based advertising revenues from Yandex's own websites accounted for 73% of total revenues during Q2 2013, and increased by 37% compared with Q2 2012. Text-based advertising revenues from our ad network increased 25% compared with Q2 2012 and contributed 15% of total revenues during Q2 2013. Revenues from Yandex websites grew faster than those from our ad network as we implemented changes to our advertising technologies on our owned and operated sites.  

Paid clicks on Yandex's and its partners' websites, in aggregate, increased 29% in Q2 2013 compared with Q2 2012. Our average cost per click in Q2 2013 increased 5% compared with Q2 2012.

Display advertising revenue accounted for 9% of total revenues during Q2 2013, and increased 31% compared with Q2 2012.

Online payment commissions accounted for 2% of revenues during Q2 2013, and increased 57% compared with Q2 2012. In July 2013, we completed our sale of 75% of Yandex.Money to Sberbank and the formation of our joint venture with Sberbank in respect of this business. From Q3 2013, we will deconsolidate Yandex.Money and no longer recognize its online payment commissions as revenue.

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 Q2 2013, Yandex added 326 full-time employees, an increase of 8% from March 31, 2013, and up 24% from June 30, 2012. The total number of full-time employees was 4,298 as of June 30, 2013.
D&A expense increased 31% in Q2 2013 compared with Q2 2012, primarily reflecting our investments in servers and data centers made last year.

 As a result of the factors described above, income from operations was RUR 3.2 billion (USD 98.4 million) in Q2 2013, a 43% increase from Q2 2012, while adjusted EBITDA reached RUR 4.3 billion (USD 131.6 million) in Q2 2013, up 40% from Q2 2012.

Interest income in Q2 2013 was RUR 452 million, up from RUR 234 million in Q2 2012, 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 Q2 2013 was RUR 35 million, compared to a foreign exchange gain of RUR 52 million in Q2 2012. The foreign exchange gain is due to the appreciation of the U.S. dollar during Q2 2013 from RUR 31.0834 to USD 1.00 on March 31, 2013 to RUR 32.7090 to USD 1.00 on June 30, 2013. 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 assets and liabilities were not impacted by these currency fluctuations, they resulted in an upward revaluation of the ruble equivalent of these U.S. dollar-denominated monetary assets and liabilities in Q2 2013.

Income tax expense for Q2 2013 was RUR 772 million, up from RUR 549 million in Q2 2012. Our effective tax rate decreased from 21.7% in Q2 2012 to 20.9% in Q2 2013.

Adjusted net income in Q2 2013 was RUR 3.1 billion (USD 93.5 million), a 48% increase from Q2 2012.

Adjusted net income margin was 33.2% in Q2 2013, compared to 30.4% in Q2 2012.

Net income was RUR 2.9 billion (USD 89.1 million) in Q2 2013, up 47% compared with Q2 2012. Net income grew slower than adjusted net income due to an increase in SBC expense partially offset by large swings in foreign exchange gains and the associated income tax impact and a decrease in contingent compensation payable the recent period in connection with an acquisition in 2011. We adjust for these expenses in our non-GAAP adjusted net income measure.

 As of June 30, 2013, Yandex had cash, cash equivalents, term deposits (including long-term deposits) and long-term debt securities of RUR 30.8 billion (USD 940.1 million).

Net operating cash flow and capital expenditures for Q2 2013 were RUR 4.0 billion (USD 122.2 million) and RUR 0.7 billion (USD 20.9 million), respectively.

 The totalnumber of shares issued and outstanding as of June 30, 2013 was 326,409,208, including 231,020,637 Class A shares, 95,388,570 Class B shares, and one Priority share and excluding 3,512,546 Class A shares held in treasury and all Class C shares outstanding solely as a result of conversion of Class B shares into Class A shares; all such Class C shares will be cancelled. There were also employee share options outstanding to purchase up to an additional 8.1 million shares, at a weighted average exercise price of USD 4.58 per share, of which options to purchase 6.5 million shares were fully vested; equity-settled share appreciation rights equal to 0.9 million shares, at a weighted average measurement price of USD 20.36, 0.1 million of which were fully vested; and restricted share units covering  2.6 million shares, of which restricted share units to acquire 0.1 million shares were fully vested.

Outlook for 2013

 We are raising our revenue guidance for the full-year 2013, and we now expect year-on-year ruble-based revenue growth of 34-38%.1

1The guidance is provided on a like-for-like basis, excluding the revenue associated with Yandex.Money from both 2012 and 2013 results. In 2012, Yandex recognized total revenue of RUR 28,767 million, including RUR 552 million in payment commissions related to Yandex.Money and RUR 28,215 million in advertising revenue and other revenue. On July 4, 2013, Yandex and Sberbank announced the completion of the formation of their joint venture in respect of the Yandex.Money business. Accordingly, we will deconsolidate Yandex.Money in Q3 2013.