Yandex N.V. (YNDX) released second-quarter 2019 results on Friday morning, highlighting continued heady growth from its core search and portal business. It announced even more impressive gains from non-core segments such as its budding taxi, ridesharing, and media subscription offerings.
Shares of the Russian internet-search specialist initially climbed more than 10% in Friday's early trading but ultimately gave up those gains to close down around 3.6%. Let's dig deeper to see if there was anything that might have merited today's whiplash.
Image source: Yandex.
Yandex results: The raw numbers
| Metric |
Q2 2019 |
Q2 2018 |
Year-Over-Year Growth |
|---|---|---|---|
|
Revenue |
41.397 billion rubles ($656.3 million) |
29.672 billion rubles |
39.5% |
|
Net income attributable to Yandex |
3.705 billion rubles ($58.7 million) |
33.29 billion rubles |
(88.9%) |
|
Earnings per share (diluted) |
11.03 rubles ($0.17) |
99.00 rubles |
(88.9%) |
DATA SOURCE: YANDEX.
What happened with Yandex this quarter?
- We don't usually pay close attention to Wall Street's predictions, but revenue arrived well above consensus estimates for $642 million.
- Note that last year's second quarter included a 28.2 billion ruble benefit to net income related to the deconsolidation of Yandex.Market to a joint venture formed between Yandex and Sberbank.
- Adjusted for one-time items and excluding Yandex.Market, net income grew 31%, to 6.862 billion rubles. That equates to roughly $108.3 million, or $0.32 per share, technically below the $0.36 per share most analysts were expecting.
- Revenue excluding Yandex.Market grew 41% year over year, to 41.4 billion rubles.
- Revenue excluding traffic acquisition costs (ex-TAC) and Yandex.Market increased 45%, to 35.8 billion rubles.
- Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) excluding Yandex.Market increased 48%, to 13.1 billion rubles, or $207.6 million.
- Yandex's share of the Russian internet-search market (including mobile) fell 10 basis points from last quarter, to 56.9%, but also increased from 56.2% a year ago.
- Search share on Android in Russia was 52.3%, up from 51.2% last quarter and 47.8% a year ago.
- Search queries in Russia increased 9% year over year.
- Paid clicks grew 17% (or 20% excluding Yandex.Market), and cost-per-click climbed 2% year over year (or 1% excluding Yandex.Market).
- Advertising revenue grew 19%, to 29.141 billion rubles, including 20% growth from Yandex properties (to 22.854 billion rubles) and 12% growth from network members' sites (to 6.287 billion rubles).
- Yandex's taxi segment saw its number of rides grow 49% year over year, and resulting revenue climbed 116%, to 8.798 billion rubles, representing 21% of total consolidated revenue this quarter.
- Other segment revenue jumped 249%, to 3.458 billion rubles, led by Yandex.Drive and subscriptions of Media Services.
What management had to say
Yandex CEO Arkady Volozh stated:
We have delivered consolidated revenue growth of more than 40% year-on-year for the fifth straight quarter. Thanks to our focus on sustainable, long-term investments, we have built a strong ecosystem that is continuing to play a key role in the rapid growth of both our existing and new businesses. As a result, non-core businesses contributed one-third of consolidated revenues in Q2. Our advanced capabilities in machine learning are helping to deliver exciting results in self-driving. We also continue integrating Alice, our voice assistant, into a growing number of different platforms to help users get things done more easily, including at home and in their cars.
Looking forward
Given the relative outperformance of those "non-core businesses" in the first half, Yandex raised its full-year 2019 outlook once again to call for growth (excluding Yandex.Market) of 32% to 36%, up from its previous target range of 30% to 34%. The new guidance continues to assume growth of 19% to 21% from Yandex's search and portal revenue.
So why the decline today? Putting aside its modest bottom-line shortfall, shares were already up 40% year to date leading into this report. While Yandex's quarter was indeed strong, it seems it wasn't enough to prevent some investors from taking those profits off the table this morning.
I think patient, long-term shareholders should be more than happy with Yandex's latest quarter.
