HomeBusinessEarnings Call: Yandex Releases Q3 2023 Financial Results Amidst Geopolitical Challenges

Earnings Call: Yandex Releases Q3 2023 Financial Results Amidst Geopolitical Challenges



Yandex (NASDAQ and MOEX: YNDX), a Dutch public limited company and one of Europe’s largest internet businesses, today announced its unaudited financial results for the third quarter ended September 30, 2023.

Financial Outlook

Given that uncertainty concerning future geopolitical developments and the macro environment remains high, our visibility over the short- and medium-term is limited and we remain unable to provide any forward-looking expectations at this stage. We aim to remain transparent about the current performance and key trends across our businesses.

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Corporate and Subsequent Events

Yandex’s Board of Directors remains fully committed to the goal of completing the proposed corporate restructuring and the divestiture of the company’s core businesses, including all Russia-based businesses.

We have taken several important, concrete steps to prepare for the consummation of the proposed divestiture, including receiving consent from the Class A shareholders for the Board to undertake preparatory corporate restructuring steps, i.e., the merger of certain intermediate Dutch holding companies into Yandex N.V.

The company has also obtained one of the required approvals from the Government Commission for Control over Foreign Investments in the Russian Federation of the internal restructuring of the group, which is a pre-requisite for the divestiture. We have also made progress towards completing other necessary steps of our corporate restructuring plan.

The proposed restructuring would be subject to further shareholder approval (including separate approval by our Class A shareholders), and the company continues to aim to bring a restructuring proposal to shareholders for approval by the end of this year.

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Neither Yandex N.V. nor any of its group companies are a target of sanctions in the United States, European Union, Switzerland, or the United Kingdom, and the Yandex group is not owned or controlled by any persons who have been designated under such sanctions.

In July 2023, our “Yandex Pay” subsidiary was designated in Canada; such designation does not apply to Yandex N.V. or its other group companies or operations. Yandex continues to closely monitor developments in this regard.

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Impact of the current geopolitical crisis

Ongoing geopolitical tensions and their impact on the Russian and global economy have created a challenging environment for our business, team, and shareholders.

These developments have adversely impacted (and may in the future materially adversely impact) the macroeconomic climate in Russia, resulting in the volatility of the ruble, including significant recent devaluation, currency controls, increased interest rates and inflation, and a potential contraction in consumer spending, as well as the withdrawal of foreign businesses and suppliers from the Russian market.

In addition, laws or regulations may be adopted that may adversely affect our non-Russian shareholders and the value of the shares they hold in our company. We provided detailed information on our risk exposure and possible adverse impacts on our businesses in our Annual Report on Form 20-F for the year ended December 31, 2022, which was filed on April 20, 2023.

We continue to provide services to our users and partners with no interruptions. We are taking appropriate measures to consider our capital allocation and budget appropriately during this period of uncertainty while remaining committed to continue investing in the development of our key businesses and services.

We are closely monitoring sanctions and export control developments as well as the macroeconomic climate and consumer sentiment in Russia and we are assessing contingency plans to address potential developments. Our Board and management are focused on the well-being of our almost 26,000 employees in Russia and abroad while doing everything we can to safeguard the interests of our shareholders and other stakeholders.

Consolidated Results

The following table provides a summary of our key consolidated financial results for the three and nine months ended September 30, 2022 and 2023:

Our segment disclosure is provided in the Segment financial results section below.

Cash and cash equivalents as of September 30, 2023:

RUB 85.4 billion ($876.8 million) on a consolidated basis.

Segment financial results

Search & Portal

Our Search and Portal segment includes Search, Geo, Weather, and several other services offered in Russia, Belarus, and Kazakhstan.

Key operational trends:

Share of the Russian search market, including mobile, averaged 62.6% in Q3 2023, up 0.6 pp from 62.0% in Q3 2022 and seasonally down from 63.6% in Q2 2023, according to Yandex Radar.

Search share on Android in Russia was 62.5% in Q3 2023, up 0.6 pp from 61.9% in Q3 2022 and seasonally down from 63.4% in Q2 2023, according to Yandex Radar.

Search share on iOS in Russia was 49.8% in Q3 2023, up 1.5 pp from 48.3% in Q3 2022 and stable compared to 49.7% in Q2 2023, according to Yandex Radar.

Mobile search traffic was 70.8% of our total search traffic in Q3 2023. Mobile revenues represented 62.9% of our search revenues in Q3 2023.

Revenues increased by 48% and Ex-TAC revenues grew by 47% year-on-year in Q3 2023. This growth was mainly driven by the solid performance of our core search business and the Yandex Advertising Network on the back of our investments in the expansion of advertising inventory, along with the development and efficiency improvements of our ad products and technologies.

Adjusted EBITDA margin came to 52.0% in Q3 2023 compared with 56.6% in Q3 2022. The solid margin mainly reflects a positive operating leverage effect on the back of strong ad revenue growth, while the year-on-year dynamic is driven by an increase in personnel as well as marketing and advertising expenses from the low base of last year.

E-commerce, Mobility, and Delivery

The E-commerce, Mobility, and Delivery segment includes our transactional O2O businesses, which consist of (i) the mobility businesses, including ride-hailing in Russia and other countries across CIS and EMEA, Yandex Drive, our car-sharing business, and scooters; (ii) the E-commerce businesses in Russia and CIS, including Yandex Market, our multi-category e-commerce marketplace, Yandex Lavka Russia, our hyperlocal convenience store delivery service, and the grocery delivery services of Yandex Eats and Market Delivery (acquired in September 2022 and previously known as Delivery Club); and (iii) our other O2O businesses, including Yandex Delivery, our last- and middle-mile logistics solution for individuals, enterprises and SMB; Yandex Eats and Market Delivery, our ready-to-eat delivery from restaurants services; Lavka Israel, our hyperlocal convenience store delivery service; and Yandex Fuel, our contactless payment service at gas stations, and several smaller experiments.

Total E-Commerce GMV increased by 67% year-on-year in Q3 2023
Yandex Market.

The share of GMV sold by third-party sellers on our Yandex Market marketplace reached 87% in Q3 2023 compared to 82% in Q3 2022.

Marketplace’s assortment was 58.5 million SKUs as of the end of Q3 2023, up from 49.3 million SKUs as of the end of Q3 2022.

The number of active buyers on the Yandex Market marketplace increased by 40% year-on-year and reached 17.6 million as of the end of Q3 2023.

The number of active sellers7 on the Yandex Market marketplace increased by 95% year-on-year and reached 68.4 thousand as of the end of Q3 2023.


GMV of Mobility services grew 51% compared to Q3 2022

The growth in GMV of Mobility reached 51% year-on-year in Q3 2023, driven by an increase in the number of rides, growing share of non-economy tariffs due to the shift of new vehicles supply on the market towards upper-class models, and continued driver undersupply on our domestic market, as well as forex effect from our operations in CIS and EMEA markets.

The growth in GMV of E-commerce was 67% year-on-year in Q3 2023 supported by organic growth in the user base and assortment expansion.

GMV of other O2O services grew by 79% year-on-year in Q3 2023, with Yandex Delivery and Yandex Food Delivery services including Market Delivery, being the largest contributors reporting growth of 109% year-on-year.

E-commerce, Mobility, and Delivery segment revenues increased by 69% year-on-year in Q3 2023. The increase was mainly driven by E-commerce services (where Yandex Market was the largest contributor to the growth in absolute terms, followed by Yandex Lavka).

Mobility revenues increased by 46%, which is lower than GMV growth, on the back of higher investment into driver supply. E-commerce revenues increased by 79%, greater than the increase in GMV, reflecting an improvement in 3P take rates and a growing share of advertising revenue.

Other O2O services revenues delivered 112% year-on-year growth where Food Delivery was the key contributor to the growth, followed by our Delivery business.

Eliminations related to the E-commerce, Mobility, and Delivery segments represent the eliminations of intercompany revenues between different businesses within the segment. The year-on-year dynamic was mainly attributed to our expansion of intercompany synergies with a higher volume of E-commerce and Food Delivery orders fulfilled by our Yandex Delivery business compared to a year ago.

Adjusted EBITDA loss of E-commerce, Mobility, and Delivery was RUB 4,483 million in Q3 2023 compared to a loss of RUB 2,668 million in Q3 2022. This dynamic was primarily driven by the growing scale of the Yandex Market business, as well as the contraction of the Adj EBITDA margin of the Mobility business on the back of increased investments into driver supply.

Plus and Entertainment Services

The Plus and Entertainment Services segment includes our subscription service Yandex Plus, Yandex Music, Kinopoisk, Yandex Afisha, Bookmate, and our production center Plus Studio.

The number of Yandex Plus subscribers reached 25.8 million as of the end of Q3 2023, up 63% from the end of Q3 2022.

Plus and Entertainment Services revenues grew 123% in Q3 2023 compared with Q3 2022. The increase was primarily driven by the growth of subscription revenue on the back of the expanding base of paid subscribers and changes in tariff mix, as well as solid trends in other revenue streams, including advertising.

Adjusted EBITDA remained positive for the second quarter in a row reaching RUB 1.0 billion, compared with a loss of RUB 1.5 billion in Q3 2022 driven by a positive operating leverage effect on the back of the subscription revenue growth (which increased by 92% year-on-year) as well as cost-efficiency improvements.


The Classifieds segment includes Auto.ru, Yandex Realty, Yandex Rent, and Yandex Travel.

Classified revenues increased by 111% in Q3 2023 compared with Q3 2022. The revenue growth was primarily driven by the solid performance of Auto.ru due to a low base effect of the last year, dealer base expansion, growth of new projects, and improvement in monetization; as well as by Yandex Travel due to the strengthened market position on the back of increasing demand for our travel aggregator service.

Adjusted EBITDA in Q3 2023 remained flat compared to the corresponding period last year and amounted to RUB 0.2 billion: a year-on-year improvement of profitability in Auto.ru was offset by our continuing investments in the expansion of Yandex Travel and Yandex Rent.

Other Business Units and Initiatives

The Other Business Units and Initiatives category includes our self-driving vehicles business (Yandex SDG), Yandex Cloud and Yandex 360, Yandex Education (Practicum and other education initiatives), Devices and Alice, FinTech (including Yandex Pay and Yandex ID) and several other experiments as well as unallocated corporate expenses.

Other Business Units and Initiatives revenues increased 68% year-on-year in Q3 2023, driven mainly by Yandex Cloud, Devices and Alice, and Fintech.

Yandex Cloud revenue grew 60% year-on-year, supported by product portfolio expansion as well as improvement in our market share on the back of increasing demand for our services.

The Devices and Alice revenue increased 94% year-on-year to RUB 7.2 billion in Q3 2023 due to device sales growth supported by our efficient targeted marketing activities and the expansion in the range of models available.

The adjusted EBITDA loss amounted to RUB 17.7 billion compared to RUB 10.8 billion in Q3 2022.

The loss increase was mainly attributed to the segregation of unallocated corporate expenses from reportable segments’ adjusted EBITDA and their inclusion in the Other Business Units and Initiatives category (since September 2022), investments into the growth of the Yandex Cloud business and Yandex SDG (where adjusted EBITDA loss came to RUB 2.9 billion in Q3 2023), and development of other verticals.


Eliminations related to our revenues represent the elimination of transactions between the reportable segments, including advertising revenues, intercompany revenues related to brand royalties, data centers, device sales, and others.

Eliminations related to our revenues increased 162% in Q3 2023 compared with Q3 2022. The increase was mainly attributed to the increased intercompany revenue between our businesses (related to cross-service advertising and marketing activities, the usage of data centers, other IT infrastructure, and other centralized services by all business units), as a result of greater integration of services and overall growth across the Group.

Consolidated Operating Costs and Expenses

Our operating costs and expenses consist of the cost of revenues (COS), product development expenses (PD), sales, general and administrative expenses (SG&A), depreciation and amortization expenses (D&A), and goodwill impairment. Personnel-related costs, including share-based compensation expenses, are included in the COS, PD, and SG&A categories and represent a significant part of our operating expenses. Increases across all cost categories reflect investments in overall growth.

In Q3 2023, our headcount increased by 1,421 full-time employees. The total number of full-time employees was 25,703 as of September 30, 2023, up by 6% compared with June 30, 2023, and up 29% from September 30, 2022, which was primarily driven by the accelerated pace of hiring in Search and Portal, Yandex Cloud and Yandex Market, as well as by the growth of Plus and Entertainment Services and Mobility among others.

Operating Expenses

Total operating expenses increased by 57% in Q3 2023 compared with Q3 2022. The increase was mainly due to the сost of revenues related to E-commerce, Mobility and Delivery businesses, Devices and Alice, as well as Search and Portal, and growth of headcount and related personnel expenses across most of our business units due to the overall expansion of operations.

TAC grew 59% in Q3 2023 compared with Q3 2022 and represented 7.2% of total revenues, 23 basis points higher than in Q3 2022. The year-on-year growth of TAC as a share of revenue was primarily driven by TAC related to our distribution partners and the growing contribution of ad revenues related to the Yandex Advertising Network.

Total SBC expenses decreased by 9% in Q3 2023 compared with Q3 2022. The decrease was primarily related to the replacement of new RSU grants during 2022 and 2023 with an increase in salaries and bonuses as well as the settlement of Business Unit Equity Awards in cash in Q3 2022, which led to additional costs recognized in Q3 2022; partly offset by the material appreciation of the U.S. dollar against the ruble.

In light of the ongoing halt of trading in our Class A shares on Nasdaq, during 2022 and 2023, participants have received and will continue to receive cash compensation on the vesting dates of the relevant RSU equity awards, in an amount equal to the target value of each tranche of such awards. In Q3 2023, RUB 2.8 billion of the total RUB 5.9 billion in SBC expenses related to RSU equity awards settled in cash were recorded as part of personnel expenses, which reduced consolidated adjusted EBITDA.

Income from operations

Income from operations amounted to RUB 12.1 billion in Q3 2023 compared to RUB 10.8 billion in Q3 2022. This dynamic was mainly driven by the improved profitability of our Search and Portal, Plus, and Entertainment segments, as well as the Food Delivery business.

Other income, net for Q3 2023 amounted to RUB 7,209 million, up from RUB 4,053 million in Q3 2022. Other income, net includes foreign exchange gains of RUB 7,500 million in Q3 2023 and RUB 4,242 million in Q3 2022.

Foreign exchange gains dynamics reflect changes in USD-denominated monetary assets in our Russian subsidiaries and RUB-denominated monetary assets in our foreign subsidiaries on the back of a stronger depreciation of the Russian ruble in absolute terms against the US dollar in the third quarter of 2023 compared to the third quarter of 2022.

Income tax expense for Q3 2023 was RUB 7,704 million, up from RUB 6,818 million in Q3 2022. Our effective tax rate of 50.1% in Q3 2023 was higher than 13.0% in Q3 2022. The Group’s tax provision for income taxes for interim periods is determined based on the tax rate effective during that period.

The major factors influencing changes in the effective tax rates in Q3 2023 and Q3 2022 were: differences in foreign tax rates of our subsidiaries (including reduced tax rate in certain Russian subsidiaries), deferred tax asset valuation allowances, non-deductible SBC expenses, statutory expenses not deductible for income tax purposes, tax provision recognized, tax on dividends, as well as tax effects of the News and Zen deconsolidation in Q3 2022.

Net income was RUB 7.7 billion in Q3 2023, compared with RUB 45.5 billion in Q3 2022. The latter included a one-off non-cash gain recognized on the News and Zen deconsolidation in the amount of RUB 38,051 million.

Cash provided by operating activities was RUB 22.3 billion and cash paid for property and equipment, intangible assets and assets to be leased was RUB 31.1 billion for Q3 2023.

The total number of shares issued and outstanding as of September 30, 2023, was 361,482,282, including 325,783,607 Class A shares, 35,698,674 Class B shares, and one Priority share excluding 558,663 Class A shares held in treasury.

There were also employee share options outstanding to purchase up to an additional 2.9 million shares, at a weighted average exercise price of $44.32 per share, 2.3 million of which were fully vested; equity-settled share appreciation rights (SARs) for 0.1 million shares, at a weighted average measurement price of $32.85, all of which were fully vested; restricted share units (RSUs) covering 8.9 million shares, of which RSUs to acquire 6.2 million shares were fully vested; and performance share units (PSUs) for 0.2 million shares.

In addition, we have outstanding awards in respect of our various Business Units, including options and synthetic options, for 6.0 million shares, 2.5 million of which were fully vested and are settled in equity of our Business Units, cash, or Yandex Class A shares.


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Krishna Mali
Krishna Mali
Founder & Group Editor of TechGraph.

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