Page 93 - RusRPTAug20

Yandex.Money for RUB 2.4bn (the latter deal does not require FAS approval). While generating value for equity investors from ecommerce exposure might take time (Yandex sees its ecommerce business breaking even by the end of 2023), we continue to see the deal as strategically important for Yandex, as it could allow the company to leverage its strong long-term opportunities in ecommerce, locking in the potential competition between search and ecommerce, and realising synergies within the Group. Meanwhile, we believe that the near-term support for the stock might come from i) the 2Q20 numbers (due in late July), as preliminary estimates released by Yandex in June pointed to a decent performance amid the current pressures; ii) the stock's potential inclusion into MSCI Russia in August (see EMERGING MARKETS – Index Watch – MSCI EM in 2H20, of 7 July, by our strategy team for more details); and iii) a potential deal to buy out Uber's stake in Yandex.Taxi, if it were to materialise (management has recently mentioned such a possibility).
Yandex​ 2Q20 us GAAP results came in broadly in line with preliminary results.​ Overall revenues came in flat y/y at RUB41.4bn, but they were up 4% y/y on an ex-TAC basis. Adjusted EBITDA declined 35% y/y to R8.5bn, which included one-off expenses related to Covid initiatives (R1.5bn) and advisory fees (R177mn).
Ad revenues totaled RUB24.8bn in 2Q20, down 15% y/y (which was worse than the 5% decline reported by ​Mail.ru​ Group last week) due to an 11% drop in revenues from Yandex's own properties.
Search and portal revenues in 2Q20 came in at RUB25.5bn, down 12.5% y/y, while excluding TAC they were down 8.8%. The segment's EBITDA margin fell 3.3 pp y/y to 44.0%. The company noted a further recovery in ex-TAC ad revenue trends in June to flat y/y growth (after a low-double-digit decline in May). So far in July, ex-TAC revenues have been growing in the mid-single digits y/y.
Revenues from the taxi JV were up 42% y/y to RUB12.4bn in 2Q20. The number of rides declined 6% y/y, including mid-teens growth in June after a 39% y/y drop at the end of March. We were pleased to learn that so far in July GMV is up 20% or more y/y and showing single-digit growth above pre-Covid levels. Overall EBITDA from the taxi JV came in at RUB253mn (for a 2.0% margin), up from the 1Q20 level of RUB115mn, while excluding a RUB740mn loss for self-driving cars (SDC), adjusted EBITDA amounted to RUB993mn (up 37% y/y), for an 8.0% margin (up from 7.6% in 1Q20).
Media services revenues grew 94% y/y in 2Q20 to RUB1.7bn. The segment's EBITDA loss was RUB857mn, while its EBITDA margin was flat q/q at -50.4%. Revenues from "other bets and experiments" declined 18% y/y to RUB2.8bn in 2Q20 due to the suspension of car-sharing during the lockdown, while the EBITDA loss expanded to RUB2.3bn from R0.9bn in 2Q19.
Adjusted net income in 2Q20 was down 67% y/y to RUB1.9bn, in line with what was preliminarily reported. Had Yandex.Market been included in the 2Q20 results, consolidated adjusted EBITDA would have been RUB6.6bn and adjusted net income RUB1.2bn.
Spotify is to provide its music services in Russia from 15 July​. Both a free version and subscription services will be available. The reported prices for subscription services include i) RUB 169 per month for ad-free music and ii) a
93​ RUSSIA Country Report​ August 2020 ​ ​www.intellinews.com