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Yandex (YNDX) Q3 Earnings Beat Estimates, Revenues Up Y/Y

Yandex N.V. YNDX reported third-quarter 2020 adjusted earnings of 27 centsper share, beating the Zacks Consensus Estimate by 80%. The figure was up 200% sequentially but down 15.6% year over year.

Revenues of $732.1 million (RUB 58.3 billion) lagged the Zacks Consensus Estimate of $811 million. In ruble terms, the figure rose 30% on a year-over-year basisand 40.8% from the previous quarter.

The reported revenue figure includes the consolidated financial results of Yandex.Market. Notably, Yandex became the controlling shareholder of Yandex.Market in July 2020 after which it got reorganized into the business.

Further, the company reformed its e-commerce segment, following this reorganization.

Recovery in the economy remained a major positive. The company witnessed growth across Search, Classifieds, Taxi, Media Services, and Other Bets and Experiments segments.

Further, the reorganization of Yandex.Market was a tailwind. Excluding the impact of Yandex.Market, the top-line figure would have stood at $674 million or RUB 53.7 billion, reflecting a rise of 19% and 29.7% from the year-ago quarter and the prior quarter, respectively.

Additionally, improving advertising revenues contributed well.

Coming to price performance, Yandex has gained 31% in the past year against the industry’s loss of 1.2%.

Apart from Yandex.Market reorganization, the company completed the Yandex.Money joint venture with Sberbank.

 

 

Top-Line Details

Total online advertising revenues were RUB 33.2 billion (57% of total revenues), reflecting growth of 6% on a year-over-year basis.

This was driven by the strong performance of Yandex properties that generated RUB 28.04 billion (84.5% of total advertising revenues), increasing12% year over year.

However, softness in the advertising network, which generated RUB 5.14 billion (15.5% of the total advertising revenues), was a negative. The figure slumped 18% from the year-ago quarter.

Taxi revenues of RUB 18.2 billion (31% of total revenues) grew55% on a year-over-year basis, driven by strength in the FoodTech business and rebound in the ride-hailing business.

Other revenues of RUB 6.9 billion (102% of total revenues) surged 241% from the prior-year quarter. This was primarily driven by well-performingMedia Services, expanding Geo and cloud businesses, and strong IoT initiatives.

Segments in Detail

Search and Portal: The segment generated RUB 31.8 billion revenues (54.5% of total revenues), up 2% year over year.The company’s strong position in the Russian search market remains a key catalyst.Notably, its market share was 59.3%during the reported quarter, up 270 basis points (bps) year over year. This can be attributed to expanding Yandex’s mobile search share.

Notably, mobile revenues accounted for 52.8% of the company's search revenues. Further, mobile search traffic accounted for 62.7% of total search traffic. This was driven by Yandex’s search share on Android, which came in at 58.7%, expanding 590 bps from the year-ago quarter.

Taxi: The segment generated RUB 18.2 billion revenues (31% of revenues), rising55% from the year-ago quarter. The impressive year-over-year growth was driven by positive contributions from Yandex.Lavka and Yandex.Eats, which benefited its FoodTech services during the quarter under review. Further, improvement inthe ride-hailing business remained a major positive. The number of rides increased 24% from the prior-year quarter. Additionally, Yandex witnessed strong performance by its corporate Taxi business.

Classifieds: The segment generated revenues of RUB 1.6 billion (2.7% of revenues), reflecting growth of 16% year over year. This was attributed to recovery in auto-dealership activities.

Media Services: The segment generated revenues of RUB 1.8 billion (3% of revenues), soaring 92% from the year-ago quarter. This can primarily be attributed to solid momentum across Yandex.Plus subscription. Moreover, Media Services subscribers stood at 5.6 million, up 121% year over year.

Other Bets and Experiments: The segment accounted for revenues of RUB 3.1 billion (5.3% of total revenues), up 50% from the prior-year quarter. This was driven by the robust performance of Yandex’s Zen and Geo services. Further, the growing cloud business contributed well.

E-Commerce: This segment accounted for revenues of RUB 5.2 billion (8.9% of total revenues) in the reported quarter. Strong marketplace business, owing to growing momentum across third-party sellers, remained noteworthy.

Yandex N.V. Price, Consensus and EPS Surprise

 

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

Yandex N.V. price-consensus-eps-surprise-chart | Yandex N.V. Quote

 

Operating Details

In third-quarter 2020, adjusted net income margin was 13.1%, contracting 220 bps from the year-ago quarter.

Its operating margin came in at 10.9% in the reported quarter, contracting 660 bps year over year.

Further, adjusted EBITDA margin was 25.9%, which contracted 500 bpsfrom the prior-year quarter.

Operating expenses — as a percentage of revenues — was 89.1%, expanding 660 bps from the year-ago quarter.

The company’s total traffic acquisition costsamounted to RUB 4.5 billion, declining 21% on a year-over-year basis. As a percentage of revenues, the figure contracted 500 bps year over year to 7.7% in the reported quarter.

Balance Sheet & Cash Flows

As of Sep 30, 2020, cash and cash equivalents were $1.2 billion, down from $2.6billion on Jun 30, 2020.

Accounts Receivables totaled $245.2 million, increasing from $230.7 million in the previous quarter.

In thethird quarter, cash generated from operations was $237.2 million compared with$1.9 million of cash used in operations in the second quarter.

Zacks Rank & Stocks to Consider

Yandex currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector are Qorvo QRVO, CDW Corporation CDW and Skyworks Solutions SWKS. While Qorvo sports a Zacks Rank #1 (Strong Buy), CDW and Skyworks carry 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 CDW, Skyworks and Qorvo is currently pegged at 13.1%, 12.66% and 12.35%, respectively.

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