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Yandex (YNDX) Misses Earnings & Revenue Estimates in Q2

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Yandex N.V. (YNDX - Free Report) reported second-quarter 2018 adjusted earnings of 24 cents (RUB 101.25) per share missing the Zacks Consensus Estimate by couple of cents. However, the figure surged 20% on a year-over-year basis and 14.3% sequentially.

Revenues came in $472.8 million (RUB 29.7 billion), lagging the Zacks Consensus Estimate of $476 million. The figure exhibited year-over-year growth of 26.4% and quarter-over-quarter improvement of 1.9%.

Robust performance of Yandex’s core Search business and rising online advertising revenues drove top-line growth. Moreover, solid momentum across Taxi, Classifieds and Experiments segments of the company aided the results.

Additionally, the company witnessed growth of 10% in its paid clicks during the quarter.

Notably, the share price of the company has declined 4.5% since the earnings release. This can primarily be attributed to lower-than-expected results.

Nevertheless, shares of Yandex have returned 9% on a year-to-date basis against the industry’s decline of 10.1%.



Top-Line Details

Total revenues of Yandex can be categorized into two groups: online advertising revenues and other revenues.

The total online advertising revenues came in RUB 24.5 billion (82.5% of total revenues), exhibiting growth of 17% on a year-over-year basis.

This was primarily driven by robust performance of Yandex properties which accounted for 77% of the total advertising revenues and exhibited 21% year-over-year growth. Further, Advertising network revenues contributed 23% to the advertising revenues and grew 4%.

Other revenues came in RUB 5.2 billion (17.5% of total revenues), soaring 344% from the prior-year quarter. This was due to the strong performance of Yandex.Taxi.

The company operates in six organized segments.

Search and Portal: This segment remains the key driver of top-line growth. Yandex generated RUB 24.7 billion revenues (83.2% of total revenues), up 22.3% year over year. This can primarily be attributed to the company’s increasing share in the Russian search market which reached 56.2% in the reported quarter and expanded 190 basis points (bps) from the year-ago quarter. Both the desktop and mobile search reached 65.9% and 46.2%, expanding 160 bps and 540 bps, respectively. Notably, mobile search played a significant role in driving top-line growth within this segment. Mobile traffic accounted for 45% of the total search traffic in this quarter.

E-commerce: This segment generated revenues of RUB 442 million (1.5% of revenues), declining 62% due to deconsolidation impact of Yandex.Market.

Taxi: Yandex generated RUB 4.1 billion revenues (13.7% of revenues), improving a whopping 426.4% from the year-ago quarter. Impressive year-over-year growth was driven by increasing number of rides which soared 207% from the prior-year quarter and positive contributions from Uber.

Classifieds: Yandex generated revenues of RUB 915 million (3.1% of revenues) from this segment, advancing 101% year over year. This can primarily be attributed to improving auto.ru division of the company. Moreover, the dealership business under this particular division contributed 18% to the total revenues of this segment.

Media Services: This segment generated RUB 395 million revenues (1.4% of revenues), up 57% from the year-ago quarter. This came on the back of strong performance of Yandex.Music which witnessed 1 million subscribers in the reported quarter. Further, expanding legal content library on KinoPoisk contributed well.

Experiments: This segment yielded RUB 414 million revenues (1.4% of total revenues), up 537% year over year. This was driven by improved user engagement on Zen due to its new and advanced features. Further, strong performance of Yandex.Drive contributed well in the quarter.

Yandex N.V. Price, Consensus and EPS Surprise

Yandex N.V. Price, Consensus and EPS Surprise | Yandex N.V. Quote

Operating Details

In second-quarter 2018, adjusted net income margin was 17.1%, which contracted 100 basis points (bps) from the year-ago quarter.

Per the company, its operating margin came in 14.6% in the second quarter, expanding 110 bps from the year-ago quarter.

Adjusted EBITDA margin was 29.8%, contracting 280 bps year over year due to deconsolidation of Yandex.Market, increased investment in food delivery business and Losses from Uber which impacted the adjusted EBITDA of the company’s Taxi segment.

Operating expenses were $403.5 million, contracting 120 bps from the year-ago quarter as a percentage of total revenues.

The company’s total traffic acquisition cost (TAC) came in RUB 4.7 billion, contracting 320 bps year over year as a percentage of total revenues. This was due to contraction of 10 bps in TAC related to distribution partners.

Balance Sheet & Cash Flows

As of Jun 30, 2018, cash and cash equivalents were $572.5 million, down from $811 million as of Mar 31, 2018. This was due to exclusion of Yandex.Market from the business, which could have generated RUB 32 billion of cash equivalents in this quarter.

Term deposits were $958 million, up from $780 million in the previous quarter.

For the second quarter, cash flow from operations was $191.4 million which increased from the previous-quarter figure of $90.6 million.

Guidance

For 2018, Yandex expects ruble-based total revenues to grow in the range of 30-35% from 2017.

The company anticipates ruble-based revenue from Search and Portal segment to grow in the range of 20-25% from 2017.

Zacks Rank and Other Stocks to Consider

Yandex carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader technology sector are TripAdvisor (TRIP - Free Report) , Micron Technology (MU - Free Report) and Stoneridge (SRI - Free Report) . While Micron Technology and TripAdvisor sport a Zacks Rank #1 (Strong Buy), Stoneridge carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for TripAdvisor, Micron Technology and Stoneridge is pegged at 13.85%, 8.18%, and 8.5%, respectively.

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