Q2 2020 Yandex NV Earnings Call

Thank you for standing by welcome to the second.

Financial results.

At this time since our analyst.

They will be a presentation.

The station.

At this stage he's pretty style.

Keep it.

I must advise you. This conference is being recorded today. She said between July 2020.

<unk> technical <unk> speaking today.

George.

Relations.

Please go ahead.

Hello, everyone and welcome to young second quarter, two <unk> earnings call.

What do you think that our earnings release today.

You can find its coffee and our yard that side, it's one doesn't use water services.

The goal today, we have dropped would ever done Deputy Chief Executive Officer, and you should Isa, our Chief Executive Officer, Yandex taxi injectable ski actually operating in Chief Financial Officer.

I thought he bullish our founder and Chief Executive Officer, I do hardship RVP of corporate development and he'd Guinea Sanders Chief Financial Officer again, exactly will be available on the kidney function.

Well, we'd be recorded the recording will be available on the I got citing a few hours as usual we started a few supplementary slides, which are currently available on that.

Now I will quickly walk you through the Safe Harbor statement.

I see much made during this call about our future expectations plans and stuff.

Forward looking statements.

Actual results may differ materially some don't seem to get or suggested by the forward looking statement.

That's a nice important factors, including the impact on the in going public 19th and then that's when it sounds discussed in the risk factor section of our annual report on form 20-F dated April 2nd Twentytwenty, which is why would it be he and his available online.

In addition, any forward looking statements represent our views only as of today and should not be relied upon as you're thinking our views as of any subsequent thing.

Although we may elect to be these forward looking statements at some point in the future with specifically disclaim any obligation to do so even if our views change. Therefore, you should not rely on these forward looking statements as representing RBC.

Subsequent dissipate.

During the call, we'll be referring to certain non-GAAP financial measures. This non-GAAP financial measures prepared in accordance with U.S. GAAP, a reconciliation of non-GAAP financial measures for the most directly comparable GAAP measures you survive <unk> earnings release, we should today.

And now I'm, turning the call over kitchen.

Thank you you to thanks to everyone for joining our call Steve.

Like the difficulty spoke to the second quarter, we managed to mobilize or the company's resources in order to overcome the challenges with supporting go to use or sport know something please.

Total we allocated over 1.5 billion rubles to various initiatives, including go we're helping comparable.

Our support from Fourq taxi drivers in 40 years advertising graduates to small and medium businesses as well as our education efforts. The hard work well our team has allowed us to minimize the negative impact on our financial performance and a great well share more details all these would be great.

Today, we are focusing quanta supporting core businesses.

Conversely, what also capitalizing on new opportunities one of these opportunities was the launch of logistic services insight that we got because Texas segment, which I believe will further expand the total addressable market for our mobility businesses.

Another important milestone for us in Q2 was the reorganization of our joint ventures with his burbach the transaction was closed mostly.

As a result, you got it became the controlling shareholder in the optics market.

We think of the youngest money joint venture.

At least the food integration of equal more services into the Galaxy system looks at me if he couldn't seasons years in multiple areas.

Were also excited about determination of don't could become litigation in financial services, which will allow us to of course, you Newport guarantees the feedback space.

Let me give you a brief overview sabal the key trends in Q2.

It's important segment performance in Q2 was clear bleeding back like Cobiz related Sophie's allegion restrictions, particularly.

However, we're platform remains a destination of choice for our users which is reflected in the strong girls what were some share and that number over the course in June we reached a record 58.5% share on Android girl with 260 basis points from March 600 basis.

From June 2019, our order will share grew to 59.6% in June of 270 basis points from previous year.

Over half of our search and portal revenue comes from mobile.

Strong search queries girls continued throughout the quarter.

29% year on year, driven by both mobile desktop traffic after the PK profile and solid growth in May we began to see a normalization of total square was girls in June and July all the big easing Globant all measures.

The same time, we so we're collaborating commercial quarters, which is important for wind season.

<unk> is constantly improving keep your they're trading technology or something to two we launched the seek CP model, which piece of paper pattern model, hoping that clients to increase the effectiveness over there we're just taking placements.

We continue to be excited about that.

The team keeps introducing new features and demonstrating strong called young girls user engagement in June the audience with 16.8 billion daily active users.

But the Muslim in Q2 was the full integration.

The main feet Yandex search app on Android as a result for the time spent on then within our search happening pool like 10%.

Other important milestone this quarter was the progress on integration of media into the feed currently video calls for 15% totals times compared to a low single digit a year ago based on the trends we see month to date, we expect that annual revenue run rate to exceed 8 billion rubles in July.

Compared to 7.9 billion in March.

In terms of year over year girl, we have not come back to put corporate dynamics', Although we're seeing continued improvement here.

Turning to media services as the previous them absent the stakeholders through which has led to a so looking flow of new users onto our video platform. The total number of media services subscribers reached 4.5 meal and enjoy the retention rate of new trials subscribers, who joined Nepalese Keiji Tomorrow.

<unk> has been better than we anticipated, we're particularly pleased to see that the share of paid subscribers increased significantly compared to watch.

Now, let me give you an update on its market.

Give you a marketplace increased by 3.5 times can get.

Supported by why do assortment.

Number $4 soak ever check.

Similar to other businesses, which have benefited during the pandemic of the G.. We didn't have before the marketplace has been normalizing in July.

To be grew 2.6 times now both 6000 partners. So the real goods on our marketplace. The share of we'd be sales you reached 56% in Q2.

Sort of an expanded over one wieland excuse we expect that did blue region.

To me wouldn't goods by the end of the are you.

Our price comparison business the daily audience reached 4.5 million unique daily users get too.

Platform continues to demonstrate solid revenue performance in July.

Turning to cells right.

As of the end of June the drove over 4 million miles autonomous board, which puts us firmly among top three companies globally by total discussions with them.

Our fleets, which one other piece of running costs and we expect to at 70 more by the end of the year within the framework cooperation with one diebold.

Do we began commercial use jokes real world over deliver over with SGOCO being called first line. We believe that was a great potential for overs commercial deployment for tech Clubbers business.

Last but not the least indication in excellent late this year over 2 million children were studying from home with our Catholic School platform that users what our video classes more than 4 million times practical by Yandex online educational platform offering multiple <unk> co your investment programs.

Six new courses of the platforms total bookings in Q2 increased by 1.6 times compared to Q1.

By 6.6 times versus Q2 over the last year education remains an important area of focus for US I think schools are central to a number of our corporate social responsibility initiatives.

Overall, we see some continued uncertainty the short term.

We're confident that we remain very well positioned to deliver sustainable long term girls with continuous improvements in our core services. The rapid development of new business pick a logistics.

Over the ecommerce business together the possibilities seek new opportunities in financial services, our eco system is stronger than ever.

Believed that after the recent capital raised with ample financial flexibility to continue investing into all these projects well maintaining couple usually prudent approach to capital occasion.

Turning to Michael will continue.

Thank you to go on and Hello, everyone.

What's in this way to change and but I'm very pleased with what is the April to achieve during this quarter.

To begin the significant decline right in and they said sort of the it just doesn't you that he focused on creating additional demand for our driver clock, but connections and books would either it left my logistic services. This means that our driver of supply Oh, that's too quickly expand the coverage, our food and the grocery delivery abuse.

And to protest on through the why the digital environment.

Well, our users were able to order meals from their favorite restaurant, you wouldn't give us assistant allocate as far away from that homes.

It goes up because of its how a restaurant and the gross or did he refuses utilize this then by corridors.

Also the hearing is now available to more than 20 million people in Moscow must reach out and sensitive about 10 million or you started to provide last mile delivery options for lunch they'll chain equipment and of course, if I can.

No well for thousands of businesses of all sizes and last mile delivery solution. Our ultimate goal is for companies to see that there is no operational financial rationale for them to support that Oh logistic service, even the conditional power logistics acknowledge it and driver and two of supply can deliver local.

But in their liable to the reserves.

The funding became an opportunity to further strengthen our business. We've seen a short period of time, they're able to make our tough but from a flexible thus, allowing us so it's up.

X pundits that seem at the hour drive in specialty.

It which I was there to take the dealer orders. This was previously available for drivers on the slip.

Improvement in the dealer service coverage and quality within our health Defense program, while working on did you read Quintette Ms significant to fine tune, our growth optimization efficiency, which recently rolled out for most exhibitors and pitch.

Their old I'll I'll logistic service in 250 cities across 12 countries and we launched our do it and it's no secret.

With the directed in service that covered.

As a result, it's is now available in 130, plus it is an 86 of them we provide our own delever.

What was the finish this allowed us to finish the quota in excellent shape total revenues were up <unk> percent year over year, driven by foot definitive it picks it and it could be logistics that hit in was up 3% newness with b to b fix it and get to be logistics forget that up 49% its year over year.

Since then but to be however was down 7% year over year.

That's sort of down 6% year or here in total the thrust beat was the vehicle smart Fotis right. After the official and don't stop.

During this week right down 15% year over year.

Less than two months later during the beef or might visits is right for towards as opposed to year over year gross well in June the grow in the mid teens year over year.

As you see.

It was it'd be shape recovery, Jimmy didn't keep up his girlfriend due to the decline in never chip buttons right. We have been she and casinos Tencent in June which has July month to the JV is single digits impoverished corporate level.

When could plus percent year over year basis.

Super focused to cover airport threats as Q down approximately 75% from pick up its level, maybe I'll get to the customers I still working from home well almost like rising cohort has not come but fully yet as far as I've said in market share Chad NATO, we see that some poor.

Okay shed our competitor in Moscow. This was because or is it mix effect our share in premium tends to be sure to could do independently. That's historically been hot so the sprint as temporary the growing economy that is good it's a percentage or is that total.

And the resulted in shutdowns distribution of shares but will be sent that our market position in may and doing further in June I.

Our competitor share a ton two separate corporate level in the low teens in terms of the number right. According to Howe.

Obviously in terms of bookings a share is lower.

So there wasn't clear beneficiary of course, it yen to see exporters doubled year over year GDV grew 2.3 times filed got parents tripled the number of restaurants exceeded 26000 in June of 2.5 task for US is left here.

We lowered our cost per order, thanks to an increase in order that fit as well as the pockets, we implemented a new dispatch algorithm up too much incentives and so just for defaults and Chris and this so the show self employed curious significantly increased.

Joe let Anthony that seemed to be encouraging do it could've been growing in a way to double digits year over year engine because in Dublin.

Lavaca is growing rapidly GAAP revenues net of incentive reached 2.3 billion rubles.

175, Dexter open as well as the end of June However, our approach to growth through the new it is becoming just slot department was retailers across a number of our business you know that even grocers from or.

On the cheapest source of funds <unk> and also there is approximately seven point.

5000, Houston aggregate, Oh last mile delivery services for like White label delivery services for many other retail chain.

In global Metro a shot Dixie and others. Although we are entering Q2 is much more diversified portfolio exciting didnt.

And what is also important yeah and strong position from a cost efficiency perspective, and cut to the guts approximately 1.7 billion rubles and fixed cost with our quoted but as a result, right hidden continued to be profitable and funded our new initiatives. Despite a significant decrease in demand.

And the right Kevin.

Is this entered into the coal autograph.

Thank you the Neil Hello, everyone.

But this was our key financials in our press release, it's been a very challenging quarter, but we're very pleased that we've managed to finishing with a positive adjusted net income and higher than expected adjusted EBITDA. Despite the fact that we had a number of went off expenses.

Over 1.5 billion rubles spent in a variety of targeted corporate related initiatives, including 408 billion rubles expenses for personal protective equipment are helping hand project and the driver in courier support fun.

Our adjusted EBITDA also includes 177 million rubles, and advisory fees related to the recently announced transactions.

Overall, the results exceeded our internal expectations.

The key drivers behind this better than expected profitability rigorous cost control particular optimization of personnel expenses advertising and marketing costs as well as other overheads.

Improving unit economics in certain businesses, particularly niantic seats and faster than expected revenue recovery in our ride hailing advertising classifies businesses.

Now, let me focus on the performance and current trends across our business units.

Search and portal.

There's some portal revenue declined by 12.5% year over year on reported basis and by 8.8% on an ex Tac basis. As we said previously we've seen a sequential recovery and ex Tac AD revenue trends from a high teens decline in April to low double digit decline in may two flat growth in June although year over year basis.

Positive trend is continuing in July.

Ex Tac revenue is growing by mid single digits year over year on a month today basis.

The performance was primarily driven by Smbs, which recovering faster than large enterprises.

There's still a high level of uncertainty over the piece or further recovery given the limited visibility on economic consequences of pandemic as well as the oil price shock.

We see fast recovery in search and yandex websites compared to those of our partner.

Which remains under pressure, we expect this trend to continue and the growth in 2006 properties is likely to outperform its out of our advertising network.

Sector wise.

We see recovering some of the areas that suffered the most during a pandemic.

Example, auto apparel real estate and even to limited extent travel all these sectors are still a negative territory in terms of year over year growth. However, the second derivative is positive and all of them.

Among the sectors, demonstrating the highest recovery or finance and insurance as well as before.

We continue to see strong growth at home and garden consumer electronics and home appliances categories.

Two sectors, which benefited the most during a pandemic I cant telecoms as was FMCG continued to perform well.

Although the growth rates are normalizing at the locked down measures are easily.

Overall slightly more than half of all sector categories, we track demonstrating positive growth in July.

Well in April this was only a quarter.

Moving to taxes.

Actually revenues increased by 42% year on year, primarily driven by the strong growth of our tech services as well as our beauty business.

The team has achieved impressive results in terms of adjusted EBITDA and here I, particularly like to highlight the following.

We finished the quarter with an adjusted EBITDA of 253 million rubles, and a 2% margin. This number includes a 740 million ruble loss and our self driving business as well as second lead cobot expenses, which amounted to 273 billion rubles in Q2 and also compares to the adjusted EBITDA up 115 billion rubles I want.

On margin in Q1 of this year.

The combined adjusted EBITDA of our REIT healing and Foodtech businesses I E. Excluding investments and sell driving was 993 million rubles in Q2 and was driven by.

Hi, good profitability of our ride hailing service as we were able to optimize portion of our costs almost immediately after the start of the locked down.

Significantly improved losses needs, which helped to offset increased investments in our grocery delivery business around the clock on on the back of strong demand for the service.

The adjusted EBITDA margin, excluding sell driving amounted to 8%.

From 7.6% in Q1.

Turning to other businesses.

We do services again demonstrated very strong revenue growth of 94% year on year. Despite a much higher base from Q2 of last year and close to zero revenues from a feature on the back of the cobot.

Subscription based revenues of media services grew by 164% year on year in Q2 and acceleration from the already strong 152% achieved in Q1.

We continue to invest an improving content quality and growing our base of paid subscribers trends in July to date are comparable to the Q2 dynamic.

Classified revenues decreased 32% in Q2.

Primarily as a result of the auto dealerships being shut down from late March early June and the jeweler support mechanisms, which we launched immediately after the shutdown.

We're encouraged by the rebound in revenue growth that we saw in June after the dealerships were allowed to reopen which shows that we were able to monetize deferred demand from April and May.

The improvement has continued in July month to date with revenue growth in the high teens.

Finally onto other bets and experiments.

Our revenues have declined by 18% year over year, driven primarily by the decline in Yandex drive as car sharing services were completely suspended in Moscow in Saint Petersburg for nearly two months between mid April and mid June.

Demand for car sharing is now recovery.

Which drives and improvements in cars utilization.

As of now we are fully recover to pre covered levels in terms of car utilization.

The trends in revenue or even better supported primarily by the change of user behavior post pandemic.

Consumers, our rent a car for a longer period and an average order duration Moscow is now 30% higher than in Q1.

Revenue growth in other businesses and the other bets and experiments line was positive in absolute terms geo enzyme where the key contributors to Q2 revenue.

While the growth rates in both businesses have slowed down we're now seeing an improvement on the back of increasing advertisements activity. Despite the material revenue had taken by annex drive who managed to contain the losses for this business, which in absolute terms were actually better than Q1 due to the optimization of our lease agreements and some other cost optimization.

Total losses other bets experiments amounted 2.3 billion rubles, when Geo and cloud contributing the most after yandex drive.

Now.

Let me give you an update on the performance of Yandex market.

In our Q2 results, we still accounted for yandex market using the equity method.

So we will be consolidating the business.

Your next market from July 20, Threerd when the deal actually was closed.

Total revenues of Yandex market group amounted to 7.2 billion rubles, which implies year over year growth rates of 89%.

Revenue from the price comparison segment accelerated to 33% in Q2 compared to 27% than the previous quarter.

The adjusted EBITDA loss in Q2 again this market was 1.8 billion rubles and.

And adjusted net income was negative 1.8 billion rubles as well.

We have included Yandex market into our Q2 financial results.

Our consolidated adjusted EBITDA.

Correct, correct intercompany eliminations would be around 6.6 billion rubles, and our adjusted net income would have been around 1.2 billion rubles debits market had 17.8 billion rubles and cash and term deposits on its balance sheet as of the end of June and no outstanding debt.

Our balance sheet remains strong we had 3.5 billion cash as of the end of Q2, excluding 250 million related to Yandex market.

This includes a proceeds of the recent capital raise around two thirds of the cashes in US dollars, our cash position allows to maintain strategic flexibility and our capital allocation decisions, including our decisions to invest into existing businesses, well look for potential new opportunities with us I'm, turning the might to the operator that acuity session.

Thank you very much as a reminder, if you'd like to ask a question today. Please press Star then one on your telephone keypad and interest of time can we please ask everyone to ask one question and then a follow up.

And then if you do need to ask another question. Please press star one again.

The first question we have today comes from the line of Slava Dick.

From Goldman Sachs.

Please go ahead.

Yes. Thank you much for the conference call.

My question is on Tech you executed better best of Yours, and Jim guidance. Thank you line and both on the Ramius and EBITDARM, what's driving that leaves and so was there any mosquito incremental acceleration of growth.

Yeah, hi, slower and its a.

Well I'd say, you again et cetera. So look if you did compose or 42% revenue growth rate right. You know the main contributors as the neo already said, where a lot of Cray eats and b to b, including B to B logistics right in the descending order.

Ride hailing revenues, excluding b to b or were slightly down.

But include B to B itself grew 49% year over year and gave us about eight percentage points out of the animal you revenue growth rate.

B to B logistics, which oh.

Bartlett counted and B to B.

Was roughly half of that growth.

So.

Foodtech droves the rest of the growth you know its revenues tripled a lot of current revenue reached a point 3 billion.

I love curve in years booked in gross basis less incentives.

They're actually about 12, just under 20% animal your revenue.

If we're looking at getting back to ride hailing you're looking at July our GMB a month to date is growing 20% year over year.

And rides are roughly in line with that number as well over 20%.

Okay. Thanks, and my follow up would be also on tech heap.

Perhaps comments about the entering the Russian techie markets.

In the coming months.

Kevin It's sold about ambitions in the local market and the potential strategy to defend their market share on your side. Thank you.

Thanks, a lot well look but did you obviously, it's a strong player with access to capital and sophisticated technology.

Obviously their lunch or when it happens or will increase the competition level, both on user side and on driver front.

But we believe that first and foremost leidy will be.

The market position off small share players.

As far as competition for driver supply is concerned I, we think that Multek upping.

Best City for drivers is limited they really cannot use efficiently more than two driver EPS at the same time and we believe that our yandex driver Apple remain one of the mainstays for the drivers.

Provides the highest utilization rate on the market and a higher utilization rate the higher driver earnings are and this has always been our primary focus.

As far as users are concerned I mean.

DTC and city mail, but both and gift for that matter already have sophisticated user apps.

And there are backed up by good Nick talked with good technology. So.

They provide similar user experience.

Both companies are well capitalized and a city, Andy and both compete for audience or by subsidizing, meaning initially that target audience are going to be very similar and we expect them.

So primarily compete for the same writers. So you know looking ahead.

You're confident about our competitive position and strategy on the market.

I think we have a clear plan on how to protect their leadership.

And by focusing on superior efficiency of service higher driver utilization.

Quicker each year age as well as driver in the partner earnings as I said, it's <unk>.

So already for us and by.

Utilizing our multi brand approach.

So we feel pretty confident about our market position long term.

Thank you very much.

Thank you very much. The next question today comes from the line of Julianna Lenvalskaya from yes. Please go ahead.

Hi, Don Thanks, I'll turn the call.

I just wanted to elaborate some tax year mortgage.

Driving revenue.

First time. However, it is just from the a deliberate at all but you have mentioned Don do you have any on the term targets will be a self driving cars in terms of shop centralizing will come too much.

Hey were down its Greg let me jump in on that.

The revenue represents a both small contribution from scope of as well as a some revenues generated from the rubber taxi service that we will be launching and Michigan later this year.

In terms of longer term plans, obviously the goal is to.

[noise] develop a fully fledged.

Robert Taxi service, where we're developing just the driver.

And that's why we're investing as much as we are and putting driverless Myles.

And testing and real world conditions on city streets, and in Moscow and elsewhere.

And hoping that over time this would be something that would really differentiate both the index actually business model and a as well as provide further revenue streams beyond the applications outside of the footprint Pmsix taxi.

I'm very cool thank him and I also want to talk about the debt service sense. Thank you to point that the subscribers now for 4.5 nerve again, which is basically more lateral change first quarter.

I was really Scott why.

Hello stronger at Kittila.

Maybe you can comment on that and it's close to vote to leave so looking the points versus usage.

And.

On that.

If you see for a while about sent the good luck.

The strategy.

Sure. So couple of things the number subscribers did grow and.

In terms of total subscribers, they're growing strongly in a year over year basis. In July we are ready at 4.6 million subscribers and Q1 level I think was probably the low fours 4.24 0.3.

And I think were generally very happy with what we're seeing on.

Subscript subscription front.

If you take a step back and think about kind of what is the goal of.

Of Yandex plus.

Plus is this sort of umbrella subscription service, which includes access to music to videos to.

Two movies to TV shows.

Two discounts on Yandex taxi two other benefits from within the Yandex ecosystem, whether that's in drive or whether that's E commerce or anything else and so over time, but we'd like to do is we'd like to get as many subscribers as we can.

Paying a certain fixed monthly subscription fee and benefiting from the entire variety of.

The Ondeck services that we have to offer so I think like the differentiation if you will between a standalone.

Streaming music service on US is that for the same price you essentially get a whole lot more you get original.

Content wins in the form of TV shows and movies.

Get discounts on Yandex taxi, you get discounts on shipping on our marketplace ecommerce business and so on and so forth.

So.

We believe this is going to be one of the the key differentiating factors of yandex ecosystem going forward.

And what's the number of number last year going its merrill.

4.6 as of July.

Thank you.

Thank you very much once again, if you'd like to ask a question that stabbing one on your telephone keypad and we are just one question in a follow up question. Initially the next question comes from the line of Lloyd Wamsley Deutsche Bank. Please go ahead.

Hi, Thanks to two questions first on marketplace can you talk a bit more about how full ownership freed up kind of strategic considerations for E Commerce and and its came as a strategic focus for you on that.

Money, it's fully separated.

And then second second one also related marketplace.

Can you help us understand Peru, and kind of some of the CPI how much of the business is one key persist three key and how to think about unit economics, maybe.

Take rates on the Threec gross margins on the one p. side.

And kind of how you'll be accounting for revenue gross versus net any kind of high level color you can share on that would be helpful.

Hi, Lloyd so yes, the transaction closed last Thursday, and we've obviously been very busy working on how best to integrate the various assets together.

Those include.

Kind of utilizing the the full breadth of services that we offer to merchants on Yandex market and then driving them to advertise on other.

Places in the Ondecks on in the and extract and vice versa, ticking ecommerce advertisers and moving over to the Yandex market side I'd say, that's one area of focus the other one is just driving more traffic to our marketplace business.

From various count six properties I see the third one where the focus is increasing the number of transactions.

In terms of improving conversion rates and then more traffic and then finally, it's the integration of logistics piece of that that has offered by the annex taxi platform.

In terms of accounting it it's a.

Currently the marketplace generates approximately 56% three p. generates approximately 56%.

Of the business and the other 44% is one piece one piece, obviously accounted on a gross basis threepi businesses accounted as a commission.

Based business, obviously, our take rates are currently low and we expect that they will evolve and grow overtime. The other thing to keep in mind is within that revenue number that I gave in my prepared remarks. It also includes the price comparison business, which has the kind of the original yandex market.

Where people go and can compare prices on different goods and where merchants can.

Bid for traffic with CPC like advertising.

That business is alive and well, it's growing rapidly it's about 33% in Q2 compared with 27% growth in Q1.

And it has extremely high high EBITDA margins. So in Q2, it had 44% EBITDA margins. So taking a step back you obviously have the marketplace business, which are developing which consist of one P.M. threepi, where one plus 44% of the of the GMB Threepi is 56% or the GMB.

That businesses loss, making so we're still working on improving the unit economics, there and attached to it as a price comparison business, which is healthy and growing and in some ways. It helps the to develop and we think by integrating it together with the Ondecks we can.

Even accelerate even more there the rate of growth of our ecommerce business.

Your second part of your question was on payments I would say that its a.

It's I would see our ambitions up probably bigger than just payments I think we are very interested in finding.

Financial services in general, we're spending a lot more time audit and I think importantly.

Post the sale of our minority stake in Yandex money.

We are free and clear to go and pursue those opportunities.

We'll probably do those that prudently and slowly but we think it's this is very important business for us to have together with E commerce together with taxi together all the other businesses that we have.

Alright, thank you.

Thank you very much the mates question today comes from line of Cesar Tiron from Bank of America. Please go ahead.

Yes, hi, everyone. Thanks for the cool and thanks for taking my my my question I.

I have I have to actually they are linked to.

Your search and portal business. The first one I wanted to understand how do you think the.

Search and portal revenue or D. The context revenue in general will evolve versus social networking in a in Russia in the next couple of quarters of course it it underperformed in Q2, but do you think that too that will normalize in next couple of quarters and indeed, the second question that they have was really on the on the.

Call side of the of the search and portal looks like the.

The dock was what was very low into into Parker is there anything delayed or is there any.

Any savings that you that you've made and what do they are where they too. Thank you so much.

Hi, Cesar its Greg.

Thank you for your question so I.

I think we are very optimistic about the outlook for the search and portal business. We're seeing extremely strong trends I believe in that segment and I can just walk you through sort of the pacings. If you will over the last couple of months right March which was sort of the last month here before covered shutdown really took.

Place, our search and portal ex Tac revenues were up about 7%.

You know a month later in April.

This was kind of the trough and revenues in search and portal and ex Tac basis were down.

Hi teams about 17% down.

Hey, down about 10% June flat.

And now in July, we're actually seeing 5% to 6% growth in search and portal business and Nextseq basis, just think is pretty remarkable and I think compares extremely favorably.

Versus other digital advertising platforms and as I said on previous calls I think the main reason for that is just extremely high ROI is that we are driving for our customers, especially on search so inside that search and portal business. Obviously, you have different parts of advertising right you have our AD network car.

Next website you have search.

But I'd say, most importantly is that search is growing the most.

And then on your question on TAC I think that what we've also done is we have gone in and looked to optimize our traffic acquisition costs. Both on the partner side as well as a distribution side and you see the benefits of that.

Flowing through and we expect a dose will continue into Q3 and later.

Thanks, so much that's very clear thank you so much.

Mhm.

Thank you very much. The next question comes from let them at this spielo from VTB capital. Please go ahead.

Oh, Thank you my questions.

Michael My first question would be on the competitive environment since it hurt the supported by the Russian market did you started to provide services.

So maybe you could comment what do you expect from from these new players something market. How you would compete with those have been shaking out on maybe not only with with them Bucks in place on the market and the second question would be on caustic soda I see on your flight the what could be quite can classics and.

Is that something readiness in the quarter, maybe you could provide more color what is behind this and what to expect going forward. Thank you.

Hey, Latam here.

I'll take the Capex question first because it just because it really simple one that's a timing question I'm. So.

We're sticking to sort of our initial.

Guidance that we kind of set out at the beginning the year, which is we expect low to mid.

Apple digits, so call it 12% to 15%.

In terms of Capex to sales.

And we are not expecting any changes from that we've made some optimizations inside of that and kind of realigned where we're spending that capex during the year, but overall same as it was and so you should expect it to come down as a percentage.

In in the second half of the year.

On the competitive front.

Look I I'd say competition is not new.

Russia is a very competitive market, it's one of the.

As far as I know one of only.

To really open markets, where you know.

Companies like Google have real competition right does Google is not limited and you way shape or form from.

Participating this market and despite of that you know our market share on Android, which is googles our own operating system is almost 60% compared to googles 40.

So whether it's a gd or spot if I I think weve always operate environment of competition.

We take it very seriously and.

Our focus is on just develop the best products, we can provide value to consumers and I you know and if you take somebody like Spotify I think that's not a you know.

It's not be assessed real value that we tried to consumers. So if the consumers buying the same subscription to spot of five or T. Ondecks plus the value that he is going to get that subscription.

For younger plus is considerably higher.

We have incredible content assembled Duncan up whisk, we haven't.

The best ride hailing service in the country on what you get significant discounts and the list goes on and on so you are sort of comparing apples and oranges.

And beyond beyond that I think I'm pretty sure where the leading.

Player and streaming music in Russia, we have great recommendations, great playlist lots of AI, that's used there and.

And people really do like to service so.

On the on the question of D., I think you'll be any kind of address that really well as well. So look I think it's great that Russia is a very open very competitive market I think it drives us to build better products and deliver more value to our consumers.

Thank you very much at the next question comes from the line of the deflection from wouldn't company. Please go ahead.

Yes. Good afternoon. Thank you very much for taking my question. So I'd like to follow up on a couple points. The one on this search and PUCO business.

Your margin, which seem to be pretty good.

Despite challenging macro environment. So I am wondering how much it was due to your redistribution of expenses maybe some.

No one else from cost savings such as a reduced compensation management.

Which you introduced Atlanta.

Yeah.

How much of what did you benefit in the second quarter or how much. It's really just the resilience of the business and I'm going forward into the year ramp.

Would you think about.

Your margin in that segment also like video calling comes I think you in plastic previously which was.

Part of your costs spontaneous such important and then separately or no.

Pack and hold back sorry, like profitability it like I understand these or the loss, making businesses, but maybe any outlook or when this could be.

Particular, lavaca or eat achieving profitability or any milestones. Thank you.

Hi, Eldar its Greg that's quite a lot of questions packed in there let me try if I can piece them apart.

In terms of what helped search and portal margins and Q2.

The optimization of tack that we've undertaken with certainly a big help and that's going to be something that's going to be with us going forward as well.

We've also did take a number of targeted measures at optimizing our cost structure at slowing down the pace of hiring at being.

More aggressive with performance management at a reducing a top management salaries and eliminating top management cash bonuses.

And many other things.

I'd say bottom line as we've had quite a number of cost savings already in Q2, some of them, we'll stick around some of them.

Obviously return over time.

For example, we cut back on some advertising and marketing expenses or office and utilities, where obviously lower as offices, mostly set empty and we essentially were able to save on utilities.

Thats temporary but I think it shows you kind of the steps that we took.

Early on and how we tried to manage the business proactively.

And manage the profitability there.

As far as things like investments and media and content.

Of course, we're going to be doing more of those.

We are really really happy with how media services is doing we're also investing and content and search and portal as well.

And look those are.

Decisions that were making because we think that they have positive NPV for the business.

Now let me.

Address your question on Foodtech, So we saw really strong improvements.

And on the restaurant delivery side of the business.

And despite that we actually supported our restaurant partners to a very large extent during the quarter. We spent just under 200 million rubles in Q2 on support measures for our restaurant partners, which we think is very important it's a three sided marketplace and.

And to make sure that your restaurant partners are happy and that there.

Able to survive and that you're supporting them through through the cycle.

So I'd say, we're much more positive on the food delivery business.

But because of the unit.

Economics that we're seeing there because of the optimization.

Measures that we were able to implement.

For example, we decreased our cost per order by about 10% in June versus March, which I think is pretty significant.

We also had a number of implementations, which improved utilization rates for our careers and Weve introduced batching.

Which also lower our delivery costs.

Let's see Lapka, our grocery business is probably earlier stage.

We're quite excited about it but it's just given that it's less than 12 months old it's too early to judge we're happy with what we're seeing in terms of kind of.

Same store sales improvements and so on a but that's that's kind of a longer term investment.

Hopefully that kind of clears things up a bit.

Yeah. Thank you.

Thank you.

Thank you very much. The next question today comes from one of the.

Okay Prana first Gazprombank. Please go ahead.

Hey.

Good afternoon. Thank you very much for visitation end up by two to tough question. My question a little there that.

That's an experiments maybe a quick follow up so I will call I would go ahead, Paul watches the over that well open online education and Qual Bob.

That's helpful radius.

Hey, Ana it's not something that we've provided yet or will probably provided over the course of the year, but basically in terms of size. The biggest contributor to that other bets and a new initiatives line is drive.

Geo.

Then and after that it's a cloud and after that it's education. So that's kind of the rough order, which hopefully give you some color.

And you know in terms of losses in that segment they were up slightly on a sequential basis.

But based on what we're seeing and drive for example, we were probably more optimistic about it going into Q3.

Especially because most of Q2 Yandex drive was essentially shut down so we had.

A lot of the rental costs without any revenues to offset them. So.

And maybe you can add some good hillshire, Joan yet Oh girls suites.

For the Gail cloud cover one indication I mean, if it's like double triple digit okay.

Yeah, I I think we said that education was up like six sexy every year and and cloud is up massively as well so.

You know anyway.

Yeah.

Hundreds of paid but it's still a small line.

Well, thank you very much and to just a quick follow up well you feel you should go I tell you it'll show good and getting your Bill do you see Okay. Do you think you're live well the cost well well building OPI nail Clippers that's.

Yeah.

We're obviously still waiting to get the all the necessary permits into place the expectations to start construction sometime this fall.

I think rather than give you.

Sort of estimates on how much is going to cause us to build I'd, rather give you kind of expected NPV of this project, which is massive you know we think that by building it we're going to generate.

Hundreds of millions of dollars of NPV to our shareholders potentially as much as half a billion.

Versus comparable market rents in Moscow, So we're quite excited about it.

That sounds very good thank you very much Francis.

Thank you.

Thank you very much the thinks question today comes from the line is at a pivotal data from Alfa Bank. Please go ahead.

Hi, good afternoon, Thank you very much.

I have all the questions. The first of all the ball TR.

Outlook or but to say that the you themes from giving the outlook for the remainder of the yet. So generally you sounds quite quite confidence in terms of flaw that they oh. It just I think in your market towards the month recovery and across other business lines. So.

Well the great to understand toward this contest the counterbalancing he'll up like positive FA observations, what sort of what do you see on the negative side, what's the because you point.

Yes, Italy.

Microeconomic developed mensa, so well did right to understand thank you for businesses generally.

Going well.

Where are the result could that.

Do not allow you to give some guidance.

For the second for the next two quarters and my second question would be.

Again on the picks and many other and that option I T industry. So some ah Ah into separate Blair. So ray do you see that this is an opportunity.

For them.

To see for on the system cost items like social contribution from there.

The full set of development developed percent.

So would be great thought to hear a once again, a youre estimates expectations. So it wouldn't be.

Would you be able to live it its positively on the sad that provision changes so or not thank you.

Hi, Anna So look I think were.

With holding guidance at this point just because it's unclear how this situation will develop and primarily I think what's not clear is.

What will happen as the economy starts to reopen world will there be a second wave how significant will it be will there be further shut downs.

I would say if the if there are no further shutdowns of the economy from the Corona virus pandemic.

I'd say our outlook as quite robust I think the trends that we're seeing any search and portal business again, we're seeing ex Tac revenue growth of 5% to 6%.

Which is.

Which is which is I think extremely healthy under the under the current environment.

Obviously things will turn out quite well I would also say that you know if you look at the trends that we're seeing in the taxi business in July.

Those are extremely strong we're growing GMDSS as Youve Guinea said or right around 25% year on year.

Right, which is I think compares extremely favorably and on top of that obviously you have all of the revenue coming from eats and groceries and someone.

So.

Assuming that there is no.

Shutdown measures, we should we should do quite well.

And then on the question of tax Yeah, we will have some savings next year.

We expect a positive effect from the social tax impact.

We expect some minor negative effects from the cancellation of Europe percent B T for certain activities.

None of it.

That is we probably think that a this should be a tailwind in the order of kind of low single digit percentage of Ah EBITDA in 2021.

Which I think is in line.

What we said in the previous call.

Thank you very much.

Thank you very much a the next question today comes from motives Sebastian Italy from Jefferies. Please go ahead.

Hello, everyone and thank you for taking my questions cited that before my line crops for 30 minutes.

The first one is about he can you please talk a bit about the Moscow market in particular, a city imobile looks to be quite strong. There lately is there something that you're doing better than new or is it just a result that your corporate taxi business is not operating squarely at the moment.

And secondly, you mentioned that benefits, we're not breaking the multi brand approach.

So beyond that number brands.

What do you think that benefits not breaking the same brand across verticals as a taxi within the context to delivery on exceeds.

Car sharing with down to drive.

This is to do more built everybody crop DB so on its of course.

It doesn't matter in this case.

Right.

Hybrid bus tentative game.

Look of for we'll look at our overall competitive position in Russia ride hailing, we've been pretty stable over the past several months.

You are asking Moscow in particular, so in Moscow in April.

We did have a slight decrease.

Sure as the result of the tariff mix effect and.

We had premium classes were restricted.

And that's the for US historically pre cava, that's a large share.

Our total Jamie in Moscow.

You know economy tariff proportion.

As percent of tolling increased.

And actually after the premium tariff restrictions were withdrawn it took us a couple weeks, but we did get back to pre khalid levels in terms of market position.

Very quickly and in June we strengthened our market position even further so based on our competitive intelligence you know our competition market share.

Returned from high teens in April two low teens in June in terms of rights and then in terms of GMV either even lower.

[noise] San Sebastian on the question of the multi brand approach.

Recall that we operate both the yandex taxi brand as well as the Cooper brand and reposition them slightly different for our consumers and that gives us I think additional flexibility in terms of how we run that business.

I mean look ultimately the proof the proof is in the putting and so if you look at our competitive position or if you look at at the ability.

Two.

Sustain.

Strong margins in this business I think we feel very good about where we are and.

I think we're we're very happy with kind of how this business has been executing.

The other thing that we've recently rolled out as we rolled out.

A a second driver app once we have so we actually have to consumer apps and to drive wraps, there's yandex taxi and there's goober for consumers in there as tax emitter and Dewbre driver for drivers.

And that as a strategy that has also served us well.

Okay. Thank you.

Thank you very much the the last question today comes from the line of let me add this below.

Capital. Please go ahead.

Thank you for taking my follow up question I have actually to the first will be on that.

The next year or so far yandex.

Developing at least my question this area Morris sort so.

Kind of thing but.

Great. That's in there right before disruption and online education of the penetration it's very low so maybe you could talk a little bit about strategic opportunities that you see in this sector.

How long that you're going to take advantage of those opportunities and the second question is on the cost per click and trends.

What the treated big decreased in the second quarter, which implies that the prices were under pressure during the quarter when you're speaking about the recovery.

So what do you have coming from like more paid clicks or are the price of thinks it maybe you could provide some color on that thank you.

Sure let him here on the education initiative. They are we kind of see our mission is twofold on the one hand, we're focused on providing free education services.

To students and in Middle schools, and high schools, and so on and there it's more about corporate social responsibility if you will.

And I think we take that matter very seriously and we are extremely grateful.

To the sort of the Russian education system in terms of the in terms of.

The.

The students that it's able to graduate is the people that were hiring the very strong foundation and data analytics and data science.

Beyond that we also have a focus on Pete education initiatives there.

As a.

Program called the unexpected which has been growing as I said in terms of revenue by something like six ex year over year.

And we are very excited about that service that one is focused on.

Paid education, it's a combination of online learning with follow ups with kind of.

Professionals in the field and one one on one tutoring.

And so these are I would say.

Real focus areas.

For us.

And something that we will continue to investment over time.

On the CP she question.

Obviously this is a result of the pandemic. So what happens is as you.

As you obviously have a huge increase in the total volume off queries, which you could sort of Steve in terms of clicks and in terms of the queries that we report.

In Q2.

You kind of.

There's less demand from advertisers for this traffic and therefore, they end up pulling back and the auction cools down and that's why in fact, ROI start going up massively for advertisers and Thats why they turned to.

Search and they flock to search.

To the advantage of other forms of digital advertising. So for example, it sounds like Russian.

Social networks are actually struggling a bit with advertising revenue growth in July right with sort of flat revenue growth and social network side, where search as up much more than that and our search and portal business is up 5% to 6%.

So you see advertisers redistributing their AD dollars to higher ROI platforms.

So over time, you would you will see those cpcs start to come back up.

And you will start to see clicks slowed down a bit and that's I think just kind of normal.

On normal tendency of the auction.

Okay. Thank you very much.

Thank you.

Thank you very much there no further questions. Please continue.

Thank you very much everyone for all your questions. Today, if you have steel any follow up questions. Please contact the IR team I wish you good day and see you next time. Thank you bye.

Thank you very much that does include the conference for today, Thanks for participating.

Well I'm meeting has ended.