Q3 2020 Yandex NV Earnings Call
Thank you for standing by we will begin momentarily again, thank you for standing by.
[music].
Please stand by.
Ladies and gentlemen, thank you for standing by and.
Welcome to the third quarter 2020 financial results call.
I must advise you. This conference is being recorded today Wednesday, the 20 Eightth of October 2020.
We now like to hand, the call over to your first speaker today.
Yeah jure symbol <unk> Investor Relations Director. Please go ahead.
Hello, everyone and welcome to young next door to me 20 earnings call you can find out earnings release and supplementary slides are you're about to fight. These dickerson our goal today are Joe.
Never done our Chief Executive Officer did you actually can our chief Executive Officer, Felix taxi incredible ski out cheapest awaking and Chief Financial Officer Denise.
Any sense <unk>, Chief financial officer of Yandex taxi will be available on the kidney tissue.
Now I will quickly walk you through the Safe Harbor statement.
Rice remarks that we make during the cold regarding our financial performance. The waitress maybe considered forward looking such statements involve a number of risks and uncertainties that could cause actual results to differ materially from.
For more information please refer to the risk factor section of our most recent annual report on form 20-F filed with the FCC.
During the call, we'll be referring to certain non-GAAP financial measures you can find a reconciliation of non-GAAP to GAAP measures in the earnings release published today and.
Now I'm, turning the call over to keep it on.
Thank you Judy thanks.
Joining <unk>.
Sure. So we turned out to be a better quarter for Boston initially expected we have seen a recovery.
Good businesses, which coupled with our prudent approach to cost a research just like.
That's true stability pretty much rather will talk about this more later since regain full operating control over it looks more like a few months ago with an increased focus on deepening doing integration between the various business is really not worth the system.
He said Clark with particular attention too young to explore.
Which we see as one of the key enablers <unk> eight years, what do you mean, how skeptics plus access to a full kinda boys catalog. We also replaced several individual bonus programs discounts plus members with a unified categorical free subscribers guest check rewards, but they use.
So I was just.
Yes. These are awards of course, the younger took a system.
Somebody presents a better value proposition for our users, we believe will allow us to improve customer retention and positions across our services.
Number of subscribers has more than doubled since last year and now exceeds 5 million in Russia.
[noise] equal more she is another priority areas for us the integration. We've got this market is progressing well while the kids after yourself. So they should use a much faster decision, making process compared to the JV structure I.
An important milestone for US was the combination of equal most businesses price comparison marketplace into one platform under the yeah. This is mark Brent based unified platform enables us to provide the full suite equal or services to over 30000 books, while we're partners, including access to consumers fulfillment.
Logistics advertising could walk stink payments to support themselves.
<unk> platform is also wants took folks for online buyers.
Among recent developments I wanted to flag, our first step towards people integration with taxi vertical well the de stocking for Stoke.
In Q3, Yeah. This market started to pilot the losses, where consumers make order on demand delivery market place orders using call were several off the dark stores as the last mile delivery solution.
In other areas integration is we've begun to explore with expenses were loyalty program to our marketplace. So users are now able to receive up to 5% of cash, but as it relates to pay for their purchases with the L. <unk>.
Well, let me give you a brief overview of some of our key trends in Q3, <unk> search and portal in Q3, we continued to see sort of show games on Android, which is a record 58.7% what's your sense for the 120 basis point increase.
<unk> remains strong at 59.2 for something just weeks 270 basis points from the previous year, we've seen a slowdown in the piece of our social drove in September October, but we are confident in our ability to continue growing our service.
We continue to enhance our advertising technologies.
<unk> model launch in Q2 is getting very good traction, especially with our SMB partners and its shareholders total advertising revenue has reached the mid single digits compared because Europe. The beginning of Q2 its.
It's a way to be.
Advertisers know spend less per action and there was a better workshop.
Pete only for results.
And Bob just more efficient has to take place more ads. So we got to get worse.
Moreover, this model allows us to attract new customers for <unk>.
Model, but still complicated.
Into a suite. We also completed the acquisition of <unk>, an official fully automated platform for centralized placement in different channels. This company is the one of the leading partners for AD agencies, all the Russian market initiatives, such as our fixed <unk> small bolt on M&A so others.
Are all aimed at increasing the efficiency, that's pending and convenience of use for our customers.
Me too.
User engagement continues to grow for us Your September daily ordeal to reach a new record of 18.2 million users.
45% versus September of last year.
They were encouraged by our progress on the video front would you remains a key focus for this year. The time spent on the video just we increased by 18.5 times versus September last year, and by 42% versus Q2, <unk> Daisy deal calls for 20% of total time spent on that.
Versus 2% last year.
In September.
The new reached 10.3 billion rubles want that I know like run rate basis growing close to 3% year over year.
<unk> compared to the July run rate off a girls.
The performance of the taxi group was also very strong digital will provide you more color on this.
All in all Q3 was a good quarter for us.
For the second wave of Cobiz, he's already emerging there.
Well that number off in your daily cases is a Boston based peak level. The situation remains uncertain until there is greater clarity, we will maintain our conservative approach to quote sorry kept a location. So we believe we are now better prepared to face the challenges compare to six months ago because.
First floor to use our resources, even more efficiently and continue to improve I wouldn't need to come up with even the toughest times second we have seen number of new exciting opportunities, which we believe to our long term growth potential.
Finally, a couple of words about seen tech we continue to explore various opportunities open to us, including keyhole does open architecture.
Our key focus areas our payments some do still finance services for our customers support person age and with this I'm talking to the Mike over to Neil.
Thank you Scott and Hello, everyone.
Was a strong quarter horse affects the gross [noise] kidding.
Kittens shows tend to recovery in the business doubled and all of those and see me Europe or yeah [noise].
Well I can see it so that the scale up.
Oh drives crushing business turns that they single family and focused on optimization you further launches as well as the other disease. She knows this is our education business.
That stuff is that absent in country right increased 24% year over year, Jamie was up 27% year over year. This is a significant improvement compared to the declined 19% in the second quarter Jamie.
Jamie grew faster than rights as demand for our Threed the supply all drivers.
Oh, it's a cost to be extended focused on managing this undersupply condition and in the recent weeks situation. We're starting to normalize gross all seem to be GE v. accelerates its a question that.
Acceleration was the dominant than driven by B to B logistics, which comprise approximately 20% I'll get to be retrofit. Instead. It was you could see it up from zero in the year ago.
And the kids to be significantly increased the number of Boston enterprises, and B to B segment of logistic.
So but to date, the number or business actively using our logistic services exceeded 10000, [noise] nonbelievers continues to grow rapidly.
No lifestyle, it well that exceeds 40 million Deleveraged logistics services is a key focus for us as it believes that this will become a sizable segment for the group.
And exceeds our full delever the business has over 29000 tons.
<unk> equity funds platform. This is the 2.3 times gross compared to September of last year.
It's all in us doing 98% year over year into key well GE v. <unk> by 109% I.
I believe that this is a truly remarkable result or is the business has that been noticed nuisance on <unk> or is some capacity limitations in place yeah touchy. It's even just the 2.6 times year over year, you could see its content Turnpike is gossip offering as of today and this is all for the rest of the due to from nine.
So grocery chains issue is <unk> 8000 fiscal years. In addition, total cost and school, so which I mentioned on the call in July we said they simply added seven more chance among them Mcnaught at Neal talked maybe need the extent and allows us well eat it develop in the script the growth of the model Lavaca continues to scale up its.
Hyperlocal did he was service as of today, we have over 200 expenses outsource all households speech <unk> open into the last six months.
Based on <unk> data I fear that left what does he says the highest number of orders. So there's it's at least concerns for so the girls.
The evidence reached 2.5 billion rubles and could we.
We see gross it as a great opportunity to extend total addressable markets for our service and just to confirm the stresses of places ducks are within 60 minutes walking their ideas for something like 20% of Russia.
Yes.
They also like the six your horse about Tenda right I think that the drought team did an amazing job during the past few months.
He is supposed to 98% year over year revenue growth, which translated into 2.7 billion rubles. So clearly you're doing a bunch of kids to the team focused on cost optimization.
The disciplined approach led to adjusted EBITDA of 71 million rubles Institute or 30% adjusted EBITDA margin I'm very glad that it's James indexing tool. So good that weve been extremely focused on the realization of multiple synergies that right here and Carsten <unk>.
It's a cheap.
As a young disaster youngest <unk> app to provide our customers see the multiple transportation options.
It is this has generated approximately 5% of users the yen to survive.
In August we launched our youngest youngsters go first a collection of services, including right here in <unk> public transport settles it sounds like.
Well, that's a push button. So they tend to go after January 25% of all new customers. For example is finished.
She was about the recent sense, we see I can't I don't.
Oh, but to date.
I've seen some slow down of year over year growth trends as a result of secondly.
Most right energy we are currently enrolling in long 20, this year or yeah. It is difficult to predict because they shouldn't be liberal, but they've developed a clear playbook or how it's Rick I know it was a collection of services that make people's lives more convenient during the second phase.
So we feel pretty confident about the performance of our business is good.
We've also started to expand our quota to let that supports programs. There wasn't it was fit management companies gyros, and clearest restaurants, and they tell us as well as it was although apartments in logistics and drive to ensure safe to all the services, we provide and to offer support to our partners during the difficult task.
Good luck, Oh, I'm, sorry, the Mike over to you.
Thank you Denise Hello, everyone.
I'm pleased with our Q3 results, especially with the profitability in our key business, which is a function of improved operational efficiency and cost optimization [laughter]. Let me walk you through our Q3 performance and the latest trends across our business units.
And fourth.
Our search and portal ex Tac revenue improved materially to plus 8% year over year excuse street from minus 9% in Q2 were.
We're very pleased with this growth we achieved on the back of our proactive steps to optimize our distribution and AD network partnerships.
Total advertising revenue on a like for like basis, I'd, including Ondecks market price comparison, both for Q3 2020, and Q3 29, she came to 2% year over year adjusted to exclude the negative impact from terminating our search contract with nail in early July our total advertising revenue growth in Q3 would have been 4% year over year.
The best performing industries were FMCG, I, see and telecom finance and insurance as well as health care, while the worst performing are still travel due to the ongoing restrictions and the categories, where budgets didn't recover due to the products being out of stock such as an auto or where consumer demand is strong and it certainly doesn't need extensive marketing support.
The moment for example, real estate domestic services and food delivery.
That's nice continues to drive the recovery ahead of large enterprises that being said the pace of recovery has slowed somewhat as a number of new covert teaches it started to increase again.
Advertising growth in October, but an ex Tac basis was around mid single digits. So this has improved the last week or so so high single digit growth case [noise].
Profitability wise, we've managed to deliver the strongest margin ever at 52.6%, which was primarily driven by strict cost controls optimization attack rates and improved operational efficiency.
Overall, we believe that the level of around 50% sustainable for the segment. However, we may decide to reinvest a certain part of our profits to support the growth of our ecosystem and to improve our market position.
Moving to taxi.
Kartik from this quarter, we've included drive into the taxi group, while we have excluded the self driving group [noise].
Taxi group revenues increased by 50% year on year, driven by the solid recovery, our ability businesses, such as ride hailing car sharing as well as the continued strong growth of work through Tech services.
He is a ride hailing apps to tech services combined grew 64% next.
Acceleration from 41% growth in Q2.
Q3 was another impressive quarter in terms of adjusted EBITDA, let.
Let me highlight a few things here.
Adjusted EBITDA for a ride hailing food tech businesses amounted to 1.7 billion rubles immaterial increase compared to 998 million in Q2.
This was driven by further.
Further margin expansion or ride hailing business on the back of cost saving initiatives improved revenue growth as well as supported by recovering writes an average checks [noise].
We also reached breakeven each due to improved efficiency of operations. This is a great achievement from the team given the tough competition in light of the incremental support which we provide to our partner restaurants. During these difficult times.
These two factors helped offset higher investments in yandex locker and B to B logistics [noise].
In addition to eat drive has also delivered positive adjusted EBITDA for the first time in its history, which was enabled by increased demand and higher car utilization also locked out optimization of lease expenses and rigorous cost control now let me give you an update on the performance of Yandex market on a full Q3 basis.
Total E commerce revenue amounted to 6.9 billion rubles, which implies 55% year over year gross price.
Price comparison accounted for about a third of totally onyx market revenues and grew by 23% year on year in Q3.
We see similar trends for price comparison in October month to date.
Jamie the marketplace increased 2.3 times in Q3, which reflects an expected normalization of growth rates close to peak demand during the walk down much in Q2.
The trends in October remain solid with GDP growth of around two X month to date.
Adjusted EBITDA loss of E. Commerce was 1.2 billion rubles to the full quarter.
She is a material improvement from the more than 1.8 billion rubles loss in Q3 of last year.
[noise] the upturn in profitability was driven by improving efficiency of operations, primarily in delivery and fulfillment costs as well as the development of room to your platform improving stock replenishment and availability as well as economies of scale due to a growing number of orders [noise].
Turning to other businesses.
Remedial services. It was another quarter of strong performance with topline growth of 92% year over year, driven primarily by 131% increase in subscription revenue.
Silver month to date total revenue growth is comparable to Q3.
Level of investments grew a little in Q3 compared to the previous quarter as we continue to invest in quality content to meet the demands of our rapidly growing subscriber base.
Revenue in classified recovered to plus 16% year over year compared to a 30% decline in the previous quarter supported by rapid bounce back in demand for cars post the reopening of auto dealerships as well as our market share gains against the backdrop of increased demand combined with cobian related supply chain disruptions.
If something now run out of stock. This had limited the piece of our recovery and growth in October. So far has remained in the mid teens in line with Q3 credits.
On the profitability side, we further expanded our adjusted EBITDA margin, both in a year over year as well as quarter over quarter basis. As a result of positive operating leverage and cost saving initiatives finally onto other bets and experiments.
Revenue increased by 50%, primarily driven by the recovery in Geo exam.
As well as do continuing growth of our cloud business. The adjusted EBITDA loss amounted to 1.9 billion rubles.
Up from a loss of 1.2 billion rubles in Q3, 2090, [noise], primarily due to the doubling of our investment in self driving technology to 800 million rubles, as well as higher costs related to the development of our education platform.
We continue to maintain ample financial flexibility with 3.2 billion of cash as of the end of September including 200 million that was added post the consolidation of younger its market.
We feel confident in our ability to fund our key strategic priorities as opposed to respond quickly to new potential opportunities and changing market conditions with this I'm trying to make to the operator for the <unk> session.
Thank you.
And if you would like to ask a question. Please signal by pressing star one on your telephone keypad.
If you are using a speaker phone. Please make sure your mute function is turned off until your signal to reach our equipment.
If you find your question has been answered you may remove yourself by pressing star Q.
As a reminder, only one question and one follow up question is allowed from participants asking questions.
And now well take our first question from Slava Victor <unk> from Goldman Sachs. Please go ahead.
Oh, yes, thank you very much for the call.
My first question is how sustainable is the margin improvement that shed business in particular, how much would you say that.
<unk> <unk> <unk>.
Goes up innovation and how much that basically that cost savings that you expect to divest a phone call in the coming quarters.
[noise] [noise] pay slob its Greg.
So very good question I would say that the.
Margins are as I commented in the prepared remarks has very much sustainable at around the 50% level, obviously those will be balanced by potential for investment opportunities along the way, but they are sustainable on.
On the question of track I think we've talked about our proactive steps to optimize our.
Both partner and distribution Tac and I think what you're seeing in Q3 is the result of those long effort.
We have looked to essentially again, you know get rid of some of the partners where the arrangements were unfavorable to us on the AD network side.
On the distribution side, we work closely with hand in hand, with our various partners to make the arrangements or more appealing to both us and them and so that she is very much sustainable and should be in place for the future.
Oh, Thank you my second would be.
Basically what they've got the youngest markets or what would be your what do you want to just say they need himself. The Tiffany I hope you find a balance between the investments.
Ill take.
Taking into account up and he's got the addressable markets and said do you have a rough understanding of the appeal of the capacity you aim to happen didn't give Tim. Thank you.
[noise], so the logic behind the acquisition and consolidation of Yandex market earlier. This year was because this is an area that we plan on investing significantly that means that we plan on increasing the number of SK use that are offered improving the quality of.
Logistics that we offer to our clients a meeting or offering.
Next day or two day delivery to as many consumers as we can making that delivery more reliable so that our delivery promise matches up with the results.
Obviously, I delivering attractive prices to our consumers and also.
Enhancing and broadening the loyalty program of Yandex, plus to all of the Onyx a market customers and I think to grow I talked about that in his prepared remarks, we think that that should be a very powerful driver for loyalty and for the value proposition of yandex market, meaning consumers who are subscriber Steve.
Index, plus and use that to get their streaming music or online watch online videos or get cash back on.
Their taxi rides can also use a those bonus points for their purchases as well as just receiving cash back offers on all of their purchases and yandex market. So this is very much a focus.
And you know, we're looking to increase the footprint of our logistics infrastructure and a married up with the taxi logistics that weve built in house and that we're continuously expanding would it be to be offering.
Thank you very much.
Well now take our next question from Cesar Tiron from Bank of America. Please.
Go ahead.
Yes, hi, thanks for the cold or treat you two last questions and congrats on the results I have a question. My first question would be on the on the taxi margins I think that they are on the right getting margins I think that the bulked up 400 basis points can you. Please help us understand the key drivers there are obviously.
I suspect enough contributed.
Losses, but but then you have to watch I think margin significantly and then what happened to <unk> as well. So we can better understand the picture.
Sure Hi, Cesar I see the game I look here you know based on the results says its share of the numbers that we reported a we had record profitability now ride hailing business in the third quarter really driven by GE v. recovery and a cost cutting initiatives that were implemented in the.
Second quarter.
Alter our operating expenses significantly decreased.
Although these cost cutting initiatives.
And actually this allowed us to further lower effective take rate for drivers to support them. During these difficult times and September for example, we maintain high margin levels. Despite a decrease in effective take rate down to 8%.
So going forward I think we're able to balance our profitability targets, a while providing additional investments to support our partners and ensure ensure a high level of earnings for them and frankly to support our market position going forward.
Yes, Thanks, that's very helpful.
Yeah, Yeah sure yeah.
On eats a eats turned profitable in the recent months.
Again, as a result of efficiency improvements.
And as well as increased density of orders and all of this leading to better unit economics, and you know positive contribution margins and going forward with each so you know I think you know thinking about our further strategy, where we think it makes sense to rationally reinvest some of these profits in order to further scale up the business.
And to strengthen our market position versus the competition and to support our partners.
Great. Thank you just a very quick follow up question more conceptual <unk> in your in your Fintech strategy or are you really interested boast about up online lending as well as payments or does it have to be books together.
[noise] Ah Hey, Cesar its Greg let me try to answer that so I would say that a payments in transactions is definitely the center piece, but we also recognize the incredibly important role that Ah Ah.
Financing and installments and things like that play in E Commerce, and so we would likely pursue both of those that's on the consumer side and then that's the ground mentioned in his prepared remarks. We're also looking at the SMB side of things, where we believe that an integrated offering.
Targeted <unk> Smbs I should really help those enterprises manage their finances match their advertising manage their customer acquisition.
Does it mean that that's yandex needs to be the the NTT that that gets the up because you keep the ultimate exposure. If you if you're moving into a into lending or would you be willing to pass on the south east exposure to it was third party.
I would say that both of those models are actually currently being studied and pursued in parallel.
Thank you so much.
Thank you Sir.
Well now take our next question from Yonah level skier from U.B.S. Please go ahead.
Hi, everyone. Thanks, a lot for the separately.
<unk> and the <unk>.
Finpac side.
Well, it's difficult for you to elaborate on the option.
I.
Yes.
Okay.
<unk>.
Oh.
Yeah.
In a moment focusing on the cheap Todd like how far it seems like it's in the lease.
<unk>.
Hey, so absolutely we are looking at a number of opportunities on the M&A side as well.
As developing it internally, let me spend a few minutes talking about what we've done internally and what were extremely excited about.
We have rolled out a a very much revised and improved offering.
Within Yandex, plus Yandex, plus as you recall is subscription offering which offers consumers a limited access to streaming music online video cash back offers on taxi and cash back offers a sort of across the ecosystem and that offering has actually had a fantastic.
Result, with consumers consumers are embracing this product.
To a much larger extent that we ever hoped so in terms of the influx of subscribers, let's let's put it this way.
Previously.
Obviously during the cold months during April or March we saw you know a very large inflow of subscribers and we we thought that that was kind of the limit.
And then along came to so thin tech offering of Yandex, plus where the cash backs and being able to use those points across the ecosystem and the number of subscribers has really taken off.
No we are.
Already kind of Oh much further ahead than the numbers that we that we talked about in the call. You know we <unk> as of the end of Q3, we had an excess of 5 million subscribers and now we have in excess of 6 million subscribers and oney call. It a you know four weeks later.
And it turns out that to Yandex taxi is a very large a contributor to that growth. So quite a lot of consumers are being able to be cross sold with.
Within that Super App, and so we certainly have inside the company a lot of teams that are getting a very good and very smart about fintech very very quickly and so the combination of you know inorganic acquisitions that were pursuing as well as the organic capabilities. We have inside I think should really position us.
Very well to pursue opportunities in Kentucky.
Thank you guys. That's very helpful and the second question will be on taxi when I look at the number of rides a they were up 24% guarantee or can you. Please try to sleep is on the core rightly rights versus the logistics contribution.
Yeah, Hi, early on it's you get it so.
Just give me a second.
The ride hailing rides overall, they grew a 24% year over year and.
Logistics, a grew 36% sequentially, that's both b to B and B to C sequentially quarter over quarter or it doesn't really make sense to compare it to previous year, we didn't have really logistics a year ago.
But the consumer right <unk> are they up or down.
That's correct.
They're up.
Okay.
They're up but well they will continue to increase every month during the quarter. So you know in September they grew 26% and for the quarter. They grew 24%.
Mhm.
Good.
And we'll now take our next question from Mariama I sang from Morgan Stanley. Please go ahead.
Thank you good afternoon, everyone I'm I've asked questions just to follow up on that.
Yes, I'm, sorry could you talk a bit about the coal behavior.
The China customers quite right at the beginning of <unk>.
You're starting to see now.
But.
And then also if you have any medium term targets in terms of the number of subscribers, whether you end up perhaps he has time, if he could share that as well.
Henry how are you thinking about the investment side.
That's an EBITDA losses, how should we think about how that may trend.
The fourth quarter and then also for next year, given it seems that you're adding a lot of different services into less.
[noise] Ah hey, marry him it's Greg.
So in terms of cohort behavior, obviously, you know the subscribers that that came on during cobot, you know many of them rolled off but I would say, they're cohort performance has been not dramatically different from the cohort performance of are regularly acquired subscribers.
And you know so if you look at kind of what happened to the subs.
They peaked in April right in the post cobot or cobot period.
They kind of rolled off a bit over the next three months and so I would say the trough again was in June and then we sort of started seeing this exponential growth again, which as I mentioned culminated in more than 6 million subscribers as of October 27th So overall co.
<unk> performance is strong it's not materially different from Noncovered performance I don't want to provide guidance or just because when you're in an exponential growth growth phase, it's very hard to predict where things will shake out, but we think the value proposition to consumers is extremely strong and we're still experimenting with you.
Exactly how to drive for more and more cross sell behavior across Yandex plus subscription base.
And I wasn't sure I completely understood. Your second question could you just clarify it a bit.
Yes, no. It was just on the EBIT that trajectory that the EBITDA loss to check she said media that says I'm just getting the facts are adding more services.
Yes that was into Yandex das how should we think about the investment plans going forward.
So.
The.
Color the bread and butter of Ah investments in younger plus is the music offering where as you recall where are the number one player in subscription music in Russia, and despite the launch of Spotify that has had essentially no impact on the business.
In fact, maybe because of the added awareness that their marketing investments are made the growth of yandex plus actually accelerate it.
And the other investments are around video content and so obviously, we have to be cautious and prudent with content investments.
The the ability of having more subscribers gives you obviously.
More funds to invest and content both on the original side, where where again I think blessed with yet another hit on our hands a that we recently released a.
In Russia, it's called <unk>, which has been a a very well taken up on top of a number of other previous TV.
TV series that we had so you know we feel very good about the content slate that we have coming up.
Great. Thank you I just had one moment drives how much of the profitability that we saw in the quarter.
You too I potentially temporary cost savings and how much was driven by synergies with the yandex taxi business and then if you could just give any color on what you think about the long term margin if that business [laughter].
Hi, I forget it again I worked with driver I think it's difficult to predict there are a number of factors that you know at play that may affect drive performance going forward, but.
The team has done a fantastic job this year, so far and all things being equal we expect the business to remain at least breakeven and actually a little bit targeting for further profitability expansion going forward.
Okay. Thank you.
Well now take our next question from Lloyd Walmsley from Deutsche Bank. Please go ahead.
Hi, Thanks, it's Chris on for Lloyd Thanks for taking our question.
Maybe for first one do you think the surge in E. Commerce activity. This year is coming with a commensurate surge in online AD spend and how do you think about this how this dynamic will impact the holiday this year.
Hey, it's Greg So I think as we sort of mentioned in the prepared remarks.
Given just how much.
You know the extent to which E. Com is just a natural said during the pandemic I'd say, it's not as if there's an explosive demand for E com advertising that being said a as we mentioned in the prepared remarks, the price comparison site of E. Com a saw kind of a 20% plus your every.
Your growth, which is an excess of overall advertising. So it's a it's certainly helping it's a tailwind, but I wouldn't call it out as being a complete game changer, where you know online advertising related to E commerce growing hundreds of percent year on year. It's strong it's strong against the backdrop of the old.
Overall, a softness in advertising driven by the pandemic, but it's not a you know a game changer.
Got it thank you and maybe just one follow up I think it was oh comp.
Comment made about the effective take rate in September at 8% can you just talk a little bit about how you guys are thinking about returning that affected take rate you Brito good levels are higher.
Look were like.
Like we said I think going forward, we're going to several balance our effective take rate another expenses down at the piano you know were aimed to sustain profitability going forward at the same time supporting the drivers and protecting our market shares. So Oh, you know we were able to go down to 8% and still show record.
<unk> ability.
You know we are long term, we'll make decisions based on what's happening with the overall economy went to market with competition without drivers and so on.
Thanks.
Well now take our next question from Vladimir.
Yes, Paula from VTB. Please go ahead.
Oh Hello, congratulations on good numbers and thanks for taking my question I I would like to talk to you about Oh driving cars, maybe you could provide some color on these threats you will well for these parts of your business and it's not even another thought some experiments, but you could sell that walk up the louts hopefully the panda since may.
Maybe you could give us some metrics about how the prices that will be car. So I expect it to go down what will be the level you have in the <unk> and they'd be on some regulatory developments in <unk> in the area. When for example, you're back to Earth correct about commercial service.
Yeah.
Sure Hi, Vladimir So a self driving remains an important strategic project for us.
We certainly believe in its long term potential.
We continue to invest here and in the technology and the team.
We currently have about 130 cars on the roads are which are spread between Moscow, because I know Ah Israel and U.S., a we're also investing and delivery robots a one of them is called the youngest rover, which we're investing into as well for applications like food and parcel b.
<unk>.
In total we have driven something like a 5 million miles and autonomous mode, which I think puts us firmly among the top three companies globally by total distance driven and we're also interested in technological partnerships with Oems as it may help us into internationalize. The technology. So I'd say you know no a specific up.
It's here other than we continue to invest we continue to believe and we think you know we have some of the world's leading technology in this area.
Okay. Thank you and you end up in the <unk> or if you would be what.
Next yeah, what are the expectations.
So you know I can repeat what I said about the Q3 investments, where we invested approximately 800 million rubles into self driving a we expect that those investments will step up overtime.
But I'm.
I'm not here to provide sort of detailed guidance that.
That being said, we don't expect that they will grow by you know multiples are factors right. We will continue to increase investments here, but.
But we will do it prudently in the same way that we've done before.
Hi, Thank you very much and it's the kind of person I didn't get all the case you mentioned that you have a big cash pile a.
Potential opportunity.
But my question is are we know about little bit of which you mentioned treated and maybe you could update you know we know about INTECH, yeah that you're looking at maybe you equipped to provide more color you're looking at some other areas or these are the key areas, where you're planning to make the smoke them yes.
Thank you.
Yeah, I think outside of those two areas that you mentioned, specifically a consolidation of our minority stakes as well its fintech, we're not looking at major strategic opportunities. Those are the two key focus areas, but obviously, we want to be disciplined and prudent there we also.
Do a number of small tuck in acquisitions around the margins, which we think really help us accelerate our growth such as the K 50 acquisition that to ground talked about in his prepared remarks.
Okay. Thank you very much.
Thank you.
Well now take our next question from Maria second over from BCS. Please go ahead.
Yes, Hello. Thank you for the color I wanted to ask about AD network performance could you. Please comment usage decline mostly to the termination of the spot contracts work Oh, you see that like your your partners Oh levels and that gets you a copy.
[laughter].
Sure.
On the partner network side. It it has to do with just sort of being.
Focus on higher quality.
Partners.
That we want to keep in our partner network.
It's about focusing on our own properties, which are developing fast and supporting the growth there and I can spend a few minutes on that.
As a great example of that and it's also about being focused on the bottom line and so you know we've been very active over the course of this year and calling if you will.
The AD network side of things and.
Terminating or exiting some of the relationships, which were not profitable to us or attractive and so we were willing to do is essentially sacrifice add AD advertising revenue growth. Hence you see kind of a year now our AD revenue growth being somewhat muted in Q3 a foot.
Or profitability and for quality.
And you know just to give you a sense of why we think that that is prudent take.
Take a look at that so that today has is a business with a you know about a 10 billion ruble run rate.
It is up about 33% versus September of last year.
It is currently a you know average of 18 million daily average users in fact last week were already surpassed 20 million daily average users. These users are spending over 40 minutes per day per user with that which is absolutely remarkable and even more importantly, I would.
Say is we've been able to inject more and more video watching it's inside the news feed so a year ago.
Only 2% of total time spent on video was on <unk> or time spent on Zen was on video. So about 40 minutes roughly a time you know people were spending 0.8 of a minute watching videos on.
Now it's in excess of 20%. So every single day, something like 20 million users watch eight minutes of video a new seed video without per day, and I think it's absolutely remarkable and you should expect us to continue to invest more and more in our properties like that.
Yes.
Understood. Thank you and just a follow up on a taxi Maria.
Yes, yes, so SOVEST taxi, what kind of Oh, we have <unk> and turn costs and so could.
Could you please tell us what happened in the market there what kind of acute each day see oh from CLSA.
Yeah, Hi, it's a it gives your game well de enter it because I know, there's a <unk> 0.2 months ago and the lunch was basically along their typical strategy lines of having initial discounting and subsidizing and when you do that this leads to the expansion of the overall ride hailing market and.
It's happened then khazzan and allow duty to become <unk> number two player there as far as our own performance is concerned we are actually very satisfied.
With what is happening there.
You know I'll multi brand strategy and our quality of service our investments and efficiency.
Actually allowed us to accelerate our year over year growth rates of rights in September.
Sequentially, our rights and because I grew even faster than they typically have their own September to August and at the same time. According to our estimates a number of rights for all other players in the market are actually decreased in September versus August in absolute terms.
So looking at October to date trends, we see that did he started to decrease its investments and substantially increased take rates.
I misled to you know approximately five percentage point share loss.
And you know these five percentage points, where there were distributed to us. So we will continue to pay very close attention to their competitive dynamics and you know we will respond accordingly, but overall.
After the last two months, we continue to remain confident.
That our focus on service quality or are backed by leading technology, our multibrand strategy and the focus on the long term earnings drivers.
The drivers and the our partner fleet management companies and positions us very well in the competition.
Understood. Thank you very much.
Well now take our next question from Eldar that lesson from <unk> Company. Please go ahead.
Yes. Good afternoon. Thank you so I'd like to follow up on Yandex <unk>.
And it's still visited there a plaintiff seen it isn't a it looks like great traction with your subscribers for the services, but my question is could you provide a bit sort of details.
On some as things like average ticket for example of such a young explore subscribers in ecommerce. So may be other services are they using are they paying a little bit more or are they using your services more regularly more often that's would be Mike.
Question thinking.
[noise] tail, though it's Greg.
Yeah, we do we do see a younger X plus subscribers I'm, taking more rides and yandex taxi, they're ordering more on yandex market.
And so you know I don't want to share the exact figures, but absolutely the core behavior of Yandex plus is.
Displays a lot greater loyalty to yandex services than an average consumer.
Alright, and maybe just some oh, there's a particular economic as we've noted that there are more I'm not the case and being sent to.
The apps all of 'em Youre Yandex market users more recently it should we think that you could even accelerate soda and I'm, particularly interested in the program. So you took control in late July obviously, you can't change things immediately it takes time.
But would you say that now you see even more but then so all you had pretty much a you know a good pace from the start.
And also are you growing do you think you're growing ahead of the market like are you gaining market share in ecommerce or is it pretty much steel the whole market is accelerating so it's very hard to estimate that there's little.
Sure.
I would say that you should expect the pace of our integrations and improvements to accelerate.
You know if we close the deal call. It three months ago, we probably spent a you know sometime just.
And organizational kind of realignment if you will what's happened since that is I think we're making a lot of progress on a product improvements we've already unified the brand we've gotten a rid of they'd be rebrand and everything is unified under the yandex market umbrella, which we think is a positive.
In that process, we executed a I'd say very smoothly in terms of not losing any consumers along the way I'm sorry in terms of not losing any traffic.
And I'd add I'd say the team has been actually working very hard at making almost daily improvements to the app into the site in terms of simplifying a checkout.
In terms of simple improving search.
In terms of integrating I'd like I said Yandex plus.
Inside of a yandex market and I'd say that you know that that pace should continue to accelerate and then in terms of how we're growing our sense is we're growing much faster than the market overall.
And we are rapidly gaining share on our way a hopefully a into the top five sometime next year.
And potentially on our way to be a you know the top two top three player in the market.
Oh, Thank you Greg thinking.
Well now take our next question from.
On a cup, we know that from <unk>.
Oh, that's coming please go ahead.
Hi, good afternoon, and thank you very much felt lucky <unk> question that they would be and station. All my first question a little bit you guys in the <unk>, even though I pointed to <unk> second in your press release, you mentioned that the non <unk> out of <unk> and I think that's a bit calm inflows, it's not like you did.
Adult level I understood. It eats a younger you maybe some other businesses could you. Please comment on that thank you.
Hi, Anna Thank you very much for your question and Patrick birthday by the way.
So a in terms of the.
Segments that are turning positive its drive as we talked about and its each as we also talked about and obviously those are two very exciting developments for us.
Oh, Thank you my second.
Right right healing and so on.
Oh, Yes, Oh I understand thank you very much and my second question, a little bigger guys enough Oh, what trends I I understand that they are slowing down the income statement, maybe you could give us some mom bus because I didn't feel it would still October it will tell you about it Oh gosh I don't you.
Well, it's something else. Thank you.
Sure.
Yes sure so.
I would say that while the absolute numbers of covert cases is up and it's actually higher than the first wave.
The economic impact of the pandemic is lessened I would say by the prudent actions of the government agencies. So the the choice that seems to have been made is in favor of a much softer lockdown of enforcing things like face masks.
As opposed to all of almost a full scale shut down to the economy. The way that we had in March and April as a result of that obviously you know the entire market is impacted but I would say the impact is a lot lower on the search side. What were seeing is a month to date in October we're growing ex Tac search and portal revenues by mid single digits.
Which is in line with kind of the late July growth that we saw.
And then the trends are improving slightly <unk> last week. For example October is growing and are in the high single digits.
If you look at things like ride hailing the trends are there are also a.
A lot better than during the first wave a we're still seeing a very nice growth in ride hailing, it's slowed down a little bit versus kind of the peak September month, but it's still in the low twentys.
Oh, Thank you very much and it sounds maybe ill tell you feel kind of course yeah.
Sure so food.
Food Tech continues to grow at a you know the same to access we have before so a 100% year over year growth or more than that that's on the food delivery side restaurant delivery side, and then <unk> is just growing obviously by leaps and bounds as the number of orders is increasing and is the average check and started to go up again and so we're very happy with both.
The.
Demand for that service and the path to profitability that were steadily marching towards a in yandex locker.
[laughter] on me define the noncash waiting to see if you can.
Yeah, let's dive.
Car sharing has slowed down a little bit and Ah you know there we were seeing people, taking a slightly longer trips again.
And fewer trips per day per car, so overall, a little weaker but nothing like the Q2 trends that we saw before.
Mhm, and Hey, if I call it sounds as though the need to be taxi porcelain, Oh, what I've seen is thinking about since <unk> instead of <unk>.
You mentioned before I, let us show you flat yet.
If I understood correctly okay.
Sorry can you repeat the question would be to be Oh Oh.
Yes, it's interesting you believe topic dot dot dot subsidiary notes as I understood was 22% of total thought he is <unk> I havent instead of what that looks like we'll make them just a few minutes on default.
Okay. Let me just give you a rundown of sort of the structure. So you know for a look at overall new revenue structure B to C. Ride hailing services were slightly less than half of segment revenues in the third quarter, a b to B services drive off or each or in mid teens.
And each of them has booked on gross basis and gap. Its revenues were in the low teens a commission based revenues.
Thank you very much it's very helpful.
Thank you.
Well now take our next question from Katherine O'neill from Citi. Please go ahead.
Right. Thank you.
The question on St delivery, and just what are you still on well type neat and clean we tend to not lets say what you think.
The impact will be on phase delivery, how the sticky it will be and I will say I think you mentioned on the advertising side, there's a C level apatorsen specialties if possible.
And I guess never discount thing how much of your Comfortability and people who has come from that I guess in Colombia.
Some degree once we get back to normal.
Sure Oh, let me try to take that up so our view is that dependent demick has probably fundamentally changed quite a number of behaviors <unk>, including things like a work from home travel.
Business travel and they certainly other industry it has changed as food delivery.
So in the past I think Russia was always Underpenetrated I would say in terms of the number of consumers who were interested in ordering food and for delivery and that was primarily confined to you know things like pizza [noise].
I think with the last.
Call. It seven months have shown is that a lot more consumers have now traded a lot more of them are using it they're using it more frequently than ever before.
And we believe that that behavior will stick.
Sure it could slow down somewhat but there is kind of a fundamental change and how people are looking at it and I think you could also see something similar about groceries, where we've we've added a top nine grocery chains onto our platform each with two to 8000 sq use.
Prior to the pandemic, probably many of these chains never even recognized that there was a a customer demand for this product and the pandemic show that not only is there demand, but that demand is extremely robust and that consumers value the convenience the choice and the ease with which they can order it on a single platform.
Such as the Ondeck seats, so I think that that are there to stay as well.
And then in terms of profitability.
Our our path to profitability and food delivery was.
[noise] was fundamentally a question of improving operations, so higher utilization per courier, a better mapping and logistics battle algorithms and batching.
It was also predicated on more efficient.
Subsidy structure, where we've really kind of moved away from the concept of of giving people free food, which is I think very prevalent and with a lot of our competition.
And so I think the business itself becomes much more resilient ER and ER.
A much more sustainable.
And then I'm going to talk about the baby gets it and you mentioned do you think it will be sizeable insights looking to see longer term could you.
No because I can stay on how to think about the addressable market and I would say the highly economic climate, but yeah, I'm not going to be.
Hi.
Sure just although I'll remind you of some of the figures that a the Neal talked about in his prepared remarks. So our current annualized run rate of deliveries is 40 million for zero deliveries per year, which is quite a lot and I think ultimately longer term you could envision that.
We make you know.
Call It a dollar or two in each one of those deliveries as as our.
Sort of EBIT per delivery from from that point of view.
Obviously that that's going to take some time.
For that to develop.
But as we build out the scale as we build out the capabilities as we bring on more and more customers onto the platform. We think that that will materialize and obviously this segment is at an extremely rapid growth phase and overall the logistics infrastructure in Russia is relatively poor.
For you don't have strong players like a U P S or Fedex or postal service.
That has that has has quite as much popularity as and some of the other countries. Obviously, yeah postal services here, but there is no Fedex there is no U P. S and so I think we have an opportunity to become a significant player in the space.
And then I'd say find the old crop size and knowledge in wood.
No not how should we think about the margins I thought if I, yeah, even sort of longer term.
So on the margin profile of classified Oh, you know, we expect that Oh, we are sort of past the heavy investment phase we feel like we have a very strong compare.
<unk> position in this space, a it's more a function of auto production restarting and dealerships restocking.
Currently most dealers are totally out of stock.
And we think that.
As we go into next year, assuming things are kind of normalize a bit.
Oh, we should be able to increase our margin significantly and 2021 and beyond.
And I'd say, we're very excited about the prospects of the classified segment.
Oh, okay.
Thank you.
And with that that does conclude our question and answer session for today.
And I will hand over the call to Yulia Gerson Lewis for any closing remarks.
Thank you very much for your participation and the questions you do they have any full ops. Please contact our IR team. Thank you very much and good bye.
Thank you and that does conclude today's call.
Thank you for your participation.
You may now disconnect leaving is ending.
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