Q3 2021 Yandex NV Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the third quarter 2021 Financial results. Call. I must advise you. This conference is being recorded today, Wednesday, the 27th of October 20 21.

One. We'd now like to hand the call over to your first speaker for today. Yulia, gerasimova investor relations director, please. Go ahead.

Ed everyone and welcome to Yandex third quarter 2021 earnings call. You can find our earnings release additional prepared remarks and supplementary slides on our IR website. The key speakers on our call today are two grand for the word. Am our deputy chief executive officer and sadhana, demyashkevich, our Chief Financial Officer, but in were choked our chief operating officer, the new shuleyko, the head of e-commerce and Vitex business group and you Guinea Center of Chief Financial Officer of Yandex Taxi.

Will be available on the Q&A session. Now, I will quickly walk you through the Safe Harbor statement, but rice remarks that we make during the call regarding our financial performance and operations may be considered, forward-looking and such statements involve a number of risks and uncertainties that could cause actual results to differ materially. For more information. Please refer to the risk factors section of our most recent annual report on form to ATF filed with the SEC. During the call will be referring to

A certain non-gaap Financial measures, you can find and Reconciliation of non-gaap to gaap measures in the earnings release to publish today. And now, I'm turning the call over to tigran.

Thank you. You let me know, whatever. One. Let me give you a quick overview of the key highlights from the third quarter. Our results. Again shows strong growth momentum across keyword Vehicles, including the two largest advertising and retailing. This business is continue to generate solid cash flow for us to reinvest in a number of Tractive opportunities. In addition, to that, both businesses, continue to grow faster than their peers. Further, cementing of our leadership in advertising and ability, search.

In Portal deliver, 33 percent Revenue growth supported by our investment in edtech SMB products. And I oh Cheryl, I oh sure. Improve during the quarter to 43.1% in the last week of September, 20, 21 up. 2.4% 8.0 over a year. This group was underpinned by targeted investments in product and marketing, right? Selling revenues increased by almost 70% on the back of solid growth over, right?

VAV. We continue to improve our operation efficiency and

Why is our cost structure with the operational expenses? Decreasing as a percentage of GRE both quarter on quarter and year over year. At the same time? We invested in service quality and in growing the driver base, which led to a better Supply demand balance as well as 32%. Increase year over year in the number of drivers on the platform. Our initiatives in, right. Healing position as well for further growth and Improvement to profitability.

During the third quarter. We also demonstrated our commitment to invest in the future. Growth of the Yandex echo system with a particular focus on expansion in the e-commerce, Yandex plus and Logistics verticals. We are pleased with the results delivered, by these businesses. The number of Yandex plus subscribers doubled year over year old to 10.5 million with even faster. Growth in paying subscribers in e-commerce DMV increase more than three times a year over year.

And it's delivery girl, 4.5 times a year over a year. This was partially driven by the low base effect of the previous year. However, quarter on quarter growth was also a bar with third quarter Revenue at forty percent plus compared to second quarter Ecommerce remains our top priority, which is substantial progress in this key. Vertical with the GM regrowth accelerating to over two hundred percent year-on-year, record levels of Assortment reaching 21 million, excuse.

Further growth of seller, numbers and expansion of logistics infrastructure and significant progress. In terms of service quality during the quarter. We reduce the defect rate in fully control the logistics by 2.5 x 2 level comparable with our key competitors product wise. One of the key priorities for us. In e-commerce is further diversifying both our assortment and geography of our operations. We are actively investing in both of these areas. We have also introduced.

Categories, and reproach to organization with appointed leaders in sponsible for end-to-end, customer experience in categories. Such as fmcg, in fashion. We are developing and continuing to invest in other business, initiatives, such as fintech self-driving, technology and Cloud to ensure we are ready to meet future demand to create additional foundations for sustainable long-term growth with this. Let me turn the mic over to Savannah.

Thank you to Graham. And hello, everyone. You've seen our press release and additional comments about the performance of our businesses that were published on our website. Let me focus on our updated Outlook in our search and portal business. We are now guiding for high twenties year on year growth, for the full year 2021. This is the third time this year. We're upgrading growth expectations for our advertising business. Early in the year faster than expected growth came mostly from

That's a mockery environment. Specifically, a faster than anticipated recovery and business activity. And the advertising Market of the pandemic related restrictions during 2020 in recent months. This has been driven more by all deliberate decision to reinvest part of our margin into growth. Estragon already mentioned. This will primarily investments in EPS X iOS market, share and assembly products with this investment, our adjusted ebitda margin for the full year will.

Be marginally down on a year-on-year basis, but we still expect it to be over 48%, This extra basis points have allowed us to grow faster and solidify our leading position within the digital and Market. Our goal is to optimize for the highest possible absolute cash ebitda in this business, our base case is that we should be able to keep add margin, stable going forward. However, we may consider investing provided that the opportunities, which is a will.

Help us to achieve a higher, absolute, the Justice League.

And B are in line with our long-term strategic priorities. Couple of words about e-commerce, which is currently they key priority for our management team and also the focus of our investments. We were pleased to see JV growth in third quarter accelerate year-on-year 23.1 times from 2.6 times in the previous quarter. This growth was underpinned by investments in expanding our Logistics infrastructure and delivery channels newco.

Numerous enhancements to B2B product and b2c Interfaith indication. The launch of Market Express as well as targeted marketing campaigns to strengthen Our Brands recognition as a multi category Marketplace, our guidance for e-commerce growth and Investments remains unchanged. We continue to expect gnd growth to be up by three times. This year, will total cash, burn for all eCommerce businesses in Russia, will remain at around 650.

$11 as a reminder with you total cash burn as a sum of adjusted. We did our losses capex and changes the working capital based on this. Our spending for nine months amounted to around 40 billion rubles during the quarter. We continue to experience pressure on our unit economics, on the back or front loaded investments in logistics infrastructure, as well as the success of our effort, light Dropship by selling model. The letter. Accounted for 30% of our turnover is a band of a circle.

Vodka and contributed to relatively low utilization of controlled infrastructure. However, this also means that we are fully prepared for continued growth towards the high season and into 2022. We have also continued to work on improving operational efficiency. For example, we have fine-tuned our pricing algorithms and assortment strategy which help to improve our one different. Margin. We benefited from a redesign of our pickup points.

Scheme and an improvement in utilization rates and we made adjustments to our 3D tariffs. Finally, right hailing. We have raised our expectations for Gene. We grow to 65 70 percent. From 60%. Previously, this primarily reflects our efforts to improve driver numbers on the platform and their utilization, which led to solid growth in right with right. Number having, grown both year on year and quarter on quarter, as we said, in our

Q to call in July. We have continued to invest in driver Supply as well as an improving the quality of our service to support our Market position. And long-term growth is human no material changes in consumer or competitive environment in the remaining two models of 2021. We continue to expect the right healing and Justice ebitda. Margin as a percentage of GDP to increase year on year compared to 2020. In conclusion. I would like to underscore that. We have a very strong.

an experienced team with an established track record of finding

Attractive opportunities and turning them into large and efficient businesses Mobility is an excellent example of this, the results to date. Clearly demonstrate that we are making good progress on our growth strategy, which justifies future Investments that we are planning going forward. We will adhere to our policy or financial discipline, which will remain a core Principle as we continue to create value for our shareholders. With this clickhouse.

Let me turn the microphone back to the operator for q and a session. Thank you.

Thank you. Ladies and gentlemen. If you'd like to ask a question, please signal by pressing star one on your telephone keypad. Please ensure that the mute function of your telephone is Switched Off to allow your signal to reach our equipment. Again, please press star one to ask a question. Just take a brief post to all the participants the opportunity to signal for questions.

Our first question today comes from Caesar tyranny of Bank of America.

Hi, everyone. Thank you very much for the call. And thanks for taking my questions. I have to. So I lost the first one over over time. I would like to understand. What do you believe is your key competitive advantage in in e-commerce, not today, but when Once the business scales up would that be things like speed of the river esk? Use automation, or do you think that you you could use some of your

Positive advantage in in Tech to basically get marketer. And if you can explain us, what would that be? Thank you so much.

Hi Cesar, this is wedding speaking. Let me take this one. So when we think about the longer-term, you know, what's our key advantages could be the way we think about those, you know, as in any Market Place, you got to look at the both sides, right? What you can offer to Consumers and what you can actually offer to the sellers and if you were to start with consumers, we believe that. Currently on the market. We are probably the only

A platform that has so many different components in pieces. Under the same roof, whether it's going to be, you know, music streaming video streaming, but that's going to be the right healing. Foodtech, you know, our Yandex Plus subscription was, you know, multiple benefits, whether it's going to be the cash back, you know, on transactions or kind of the the free subscription for both music and streaming. So overall we think that, you know, by putting

Putting this kind of in the complex bundle and offering together for the user. We can get him and then obviously not a component. Here is a logistics, right? Which allows, you know, the last mile delivery and, you know, we can do it relative, you know, quite quickly and smoothly, therefore, you know, maximizing the user experience and therefore, by putting those things together, rather than competing specifically on price alone, right? You will be competing both on price, but also on the bread,

And Woodson depth.

Off you offering. So this is the first thing. The second thing, if you look at the kind of the merchant side, right emerge for the merchants, we can also put together quite a compact. What we believe we can put together quite a compelling bundle which is going to help them both to, you know, improve their kind of own Marketplace, but also potentially off Marketplace, please sales. We do believe that we have the best at tack.

In the country. And therefore this is something that we can provide the merchants as a tool to promote their goods to enhance their sales. We do believe that, you know, throwing their, they kind of our Logistics component can also help them, you know, get rid of of this, you know, hassle of getting the goods to the users. And then, you know, with the addition of our kind of syntax Services leader next year and you know further out.

We would be believed that we would be able to put together quite an attractive bundle that's going to cover all the needs from, you know, starting from kind of the, you know, dealing with their financial questions, all the way to climb client Management Systems to the ways to attract those clients and an ability to sell their goods and then deliver. So this is the way that we think about what, you know, the advantages that

We have and why we can put a better package than probably some of our competitors.

Thank you so much. That was extremely extremely helpful. Just wanted also to check on the on the taxi business specifically on the right. Healing is Delia driver shortage situation in proving. Any any is not how long do you think this will take two to improve and therefore potentially positively impact decorates and and profitability for the for the right setting. Thank you.

Prices are at see you again. You let me take this one. Well, you know, we did say on the last call that we will continue to invest in the quality of the service and also in the driver base and actually in September drivers on the platform, exceeded 1 million and that's up, fifty percent versus sort of the post, lock down some, our 2020. So we don't Envision, you know, when we do our forecast that you know, the cross border and the Border opening situation will improve significantly, but you know, why?

Saying all of that. We do continue to see improving profitability and the right healing business. We said before that 2021 is going to be a better year in terms of margin than 2020 and we continue to see improvements in ebitda margin in the, you know, future consecutive years, you know, there is some seasonality Q2 and Q3 tend to be lower margin wise in the taxi business and then Q1 and Q, four expand. But though the overall

Transfer, improving margin and continue.

And I think while that situation would drive raises Challenge and we have found a way to deal with it.

Thank you so much. Very helpful.

The next question today comes from ulyana lenvalskaya of UBS.

Hi everyone. Thank you for this opportunity. I wanted to follow up on the e-commerce business first. Could you please comment on the car and competitive environment and maybe the Dynamics of the you take grapes for you and maybe some of the competitors?

Only on a high. This is. Why do you let me take this one? So as you know, we did increase our take raids back in July of this year and which, you know, I think we discussed during the last quarterly called so far. We haven't seen any kind of negative consequences of that move. And again, you know, as we were describing it earlier the way to think about the take rates rather than just, you know, a pure numerical figure.

Probably the more correct way to think about it. It's kind of the the overall offering that we are providing the merchant with, right. So as our kind of cold, B2B side of the marketplace is improving, you know, we, we do quicker onboarding. We are much better now with kind of, you know, was the pictures that we are putting their the product cards, right? We are able to provide them with means of

different delivery options such as young Jake Logistics Etc. As we seen that, you know, as our platform improves be believe that we can start increasing the, the take rates. And this is what we did. Last last June, July, and that number, and we haven't seen any negative response from the merchants as well. We do believe that the market

It's very large. We are still in relative infancy of e-commerce in Russia. We think that the take rights on the market remained fairly low overall, and we do believe that there are likely to go up in the future for the industry as a whole.

Great. Thank you. This is very helpful. And secondly, I wanted to check with regards to the upcoming kind of working holidays or whatever where we call it something you potential lookdowns. What kind of impact you expect mostly interested in in the core of searching portal trends?

Advertising Market Garden.

Ulyana, it's said, Lana. And so let me take this question. So, you know, of course, that we have been operating I in the pandemic situation for over one and a half years at the moment. And we already adopted to this situation in all our businesses. In addition to that. I think we're well hedged because of our diversification across segments.

Ing.

Of course, some businesses that may have an adverse impact like, advertising, or Mobility as we've seen in 2020, but there are also a number of businesses, which will benefit from the little down. And we already see some of the trends here in any grocery restaurant, delivery, Commerce and streaming services. We should expect some improvement from lockdowns in advertising. We do not

I expect a material impact so far at the moment, new lockdown measures are not very severe while not working period, only five days only, we'll see if it continues. But overall, I think that all sectors within advertising field quite well, we do see positive Dynamic and growth in the, you know, most of the sector's. So, we do not expect any material impact.

Thank you.

I just quickly, I didn't particularly to taxi if her and, you know, to add to. What's better was just saying you heard her earlier, raised our guidance for the taxi. Do you need from 60 to 65 70 so that does include some impact from COVID-19 in the fourth quarter. So, we are planning for some impact. Of course, it's hard to predict with the final situation was going to be but that's our fourth wave that we go through. So we know what to do dealing.

I'm a next question comes from ildar davletshin of wooden Cola.

Good afternoon. Thank you. I'd like also to say thank you for additional disclosures and the Circle the letter which is extremely helpful. So I want to ask a couple of questions. One is your funding position liquidity. So we've noticed you've been using more cash over the past. Couple of quarters due to high Investments organic and

Total cash position is below 1 billion dollars. So the question is are you worried that the only critical flow? Downhill closed trajectory later on? What are you interested? If you're considering any partnership to maybe help with some of the Articles such as a very promising self-driving car, so that would be my first question.

I can.

Oh, hi ildar. And let me take this question. So, of course, it's very important for us to remain financially flexible because as, you know, we're considering and approaching a lot of opportunities. Of course, liquidity is an important factor when we're making decisions, including doing, you know, Ma and as we've seen in Uber transaction.

Liquidity was also one of the factors.

There's for structuring the deal in, in the way it was structured. So, at the same time, we understand the situation on the market and we're very confident in our ability to attract additional funding in different instruments. We are very stable and Performing fast growing with very attractive. So the growth potential. So we're quite sure that funding is available for us in different.

And forms, so we might consider different options going forward subject to the market situation.

Okay, thank you. And maybe the second one is on your antics plus business, which is a great differentiating segment. However, even though year on year growth, looks extremely attractive, but on a quarter and basis, it's actually slowing down. So here is, what is driven by The Slowdown? Is it because you're raising the number of paying customers? Or is it also because of the emotions cogs?

Petition with alternative subscription services available from other providers Seoul Police Department on that things.

Ildar. Hi. This is what in? Let me take this one. So look there. Couple components in our answer. I mean, frankly, we think that we actually achieved quite a you know, nice growth. I think it would be useful, you know, if you were to compare it to the Netflix Amia editions from the 2nd to 3rd quarter and you know, take into account that our geography

Is definitely much more limited but there is definitely someone components as well. It's a third quarter was to summer months. When people tend to, you know, spend outside of this video, go on vacations and spent, you know, last time actually consuming, you know streaming services, which you typically consumed in house and you know, when you spend time Outdoors, you know you tend to watch less. Now we do that friendly focus on paying subscribers and

Therefore, you know, we somewhat limited the with somewhat limited, the proportion of trials in our subscriber base, but overall again, let me emphasize that we are, you know, quite happy with the net additions, this quarter and then, furthermore, you know, talking about the competition Etc. I guess what? It's not sure whether you've seen it, but

There was recently, I would say, probably, within a couple of, you know, two to three weeks time, period. Gfk posted kind of their analysis and Survey of the streaming Market in Russia. And what it actually shows that we are, I would say probably the only one of the very few players in that market that has been added or increasing their

were based in percentage terms.

Compared to compared to the competition.

Okay, great. I have more questions, but I left thinking.

Our next question comes from Vladimir best pal of of vtb capital.

Hello. Congratulations on. Good numbers and good friends. I have a couple of questions. My first will be one, equal Merce. First. Could you provide may be very broadly, some also call of on how much you're going to spend on e-commerce next year, in terms of your Investments and on investments how in general to evaluate, the efficiency of those Investments that you are making? What are the key metrics? Probably?

You are tracking and how you make decisions on future investments in equal Merce. And in particular, could you also provide brief comments? For example, on this underutilization of logistics infrastructure? In the third quarter of this year, what was behind it? Because in general, we see the logistics has as a bottleneck for the development of the offic Commerce, and about the closure of several dark store for

Yandex lavka G During the period. This is my first question and the second question will be on Logistics and delivery services that you are developing. Could you please provide what you see as your addressable Market here? What are you, who are your competitors? And in general? Maybe what are the key drivers, the key assumptions behind the profitability level guidance, that you provide it. So if you could comment on this,

This will help. Thank you.

Hello, Vladimir itself. It's a lot of questions, and in this tool to be honest. So let me start and then I think the guys will also help me to continue. So let's start with the investment in yquem for this year. Let me remind you. Our investment of 650 million dollars. Allowed us to create 1.5 billion.

Incremental GV, and improve our market share versus our competition. It also allowed us to expand assortment and times and to increase our customer base to fold to 8.4 million. We also managed to improve retention of our clients and or the frequency by 26%. It's also important for us that we were able to grow the number of active merchants.

On our Marketplace or no Marketplace by three times to 18,000 and materially improve the quality of B2B product. In terms of logistics. We added seven, new warehouses mostly in regions and expanded. Our total Warehouse capacity by three times. Now, it's, you know, close to 300,000 Square, metres. We were able to

Create our own Logistics.

Form and expand share of our own delivery in orders to 89 percent from 16 percent last year. So it's also great progress. And what is also important and was mentioned by tigran in his speech. We were able to improve the quality of delivery by 2.5 times. So we were able to decrease our defect rates, a lot of other operational improvements. Also in our lat.

So, to shareholders and, you know, you can look at them. So, you know, that's the justification of further investment for us. We do see the great progress and it increases our confidence in the success of this, you know, investment and overall, the the fact that, you know, we will be one of the leading e-comm players in the market. And, of course, you know, e-comm is

One of our biggest priorities. So looking at the fragments. We have and understanding the, you know, Financial discipline in terms of Investments, including, you know, internally in ecome. We understand that we are committed for the next year. Also, of course, we will not give guidance for the investments in income for the next year. But as we commented previously, during the second,

Quarter call, we shouldn't expect less of Investments than we did this year. So in terms of other investments, just comments. You know, how we make decisions in that respect. Of course, we look at the size of the opportunity. We looked at the growth profile return on investments and we also should understand how we create additional shareholders really in the meter.

So taking into account, all these factors will of course prioritize, and we do maintain Financial discipline. So it's very important for us to be able sometimes to deprioritize some of the businesses or, you know, delay, some of the developments or sometimes even, you know, dismiss some of the projects if we understand that, we don't see improvements in the operational results.

It's, we don't see the increase of the shareholders value or returns with that. I think I'll pass the floor to Vadim - Vadim. This is what I'm talking. So, let me take part number five for question 1, the under utilization of our houses. So look, I mean the way I actually would think about it, right? Is essentially we've

Stupid.

Front right into our warehouse capacity and this is something that will be, you know, the utilization will keep increasing, you know, as the time passes by so it's going to be this quarter IE the fourth quarter next year. Etcetera. The reason might be seeing relative underutilization compared to our original plan. At the beginning of the year is because as you know, at the beginning, starting from the beginning of this year, we started a rather massive switch from the price comparison model. The CPC to

Marketplace model they CPA, right? We had you know, tens of thousands of merchants, you know, the small and medium-sized merchants on price comparison. And as we started, moving them to kind of the marketplace, you know, we realized that it would be much easier to facilitate that move. If we were to provide them with a fulfillment option, what we called internally Dropship by seller, the SBS or DBS.

That's, you know, some other people in this room code and that essentially allows the merchants to list their items on our Marketplace and then fulfill that sale or the transaction from their warehouses of fulfillment centers when it is necessary or when they actually are needed. We also provide the kind of Yandex Logistics service for them.

Actually fulfilled, The Last Mile as well. So as we started transition from CPC to CPA, you saw a significantly higher uplift or faster, uplift in Dropship by seller model, which is actually a good Trend because, you know, it's a it's profitable from day one. We take commission from transaction and essentially don't carry any fulfillment or delivery expenses. And number two. It allowed us to

Quickly expand. Our assortment just to remind you we went from two million at the end of last year, s q used to 20 million at the end of this quarter. So this is actually quite a good model right? At the beginning of the year. We didn't think that many Merchants will actually switch to drop ship by seller as opposed to move to our fulfillment centers and therefore, you know for this quarter and probably some residual effect will remain an exporter is some of the

Our warehouses will be somewhat relatively underutilized. However, at the same time, when you look at our growth numbers, you know, our transaction. So, Gene bees, that go through our fulfillment, obviously growing, you know, extremely fast as well. And therefore, that utilization is going to catch up now moving on to Logistics or I guess part 6 is. So look the way we think.

About logistics, right? So first and foremost, and I know that we mentioned in previous calls, but I think it is still important to mention. When we talk about the Antics Logistics. This is an asset light model. Essentially, what we do we match Supply drivers in kind of, you know, in in cars or careers of working careers, wisdom, and we and demand here could be C2C, you know, and that was super popular during the lockdown last year when people were locked in their apartments, and they had to send

Thing, you know, from one apartment to another and they couldn't actually, you know.

Get out on the streets so that we're doing through the young. The college is sick service or b2c. Whereby it's, you know, small and medium Enterprises, you know that trade on our platform on, you know, Instagram or any other marketplaces would use our service to deliver interest City. So that business, we believe that time for that business are all interested in deliveries Same Day. Deliveries, as a matter of fact, we actually expanding

By the time by also focusing on the next Day, deliveries. And we started experimenting with those. And as such, I think, there'd be numbers. But basically, we already did in excess of 20 million delivers last quarter to in Q3 and that thing is growing extremely fast. The reason why we talk about the margin that we mentioned, which I think it's me to high single digits of GM D is because we compare the more, we think the

He's very similar to be the right healing model. We are seeing ready, you know, kind of low, single digits, approaching to mid-single digits. But at the same time within, right, healing at the same time, we do think that Logistics is somewhat lighter on the cost side as a model because you don't need to deal with, you know, customer incentives, your customers.

Position. As a matter of fact, is going to be somewhat lower because we fully utilize our existing properties, you know, high traffic, generating properties, like our super apps Etc. So overall, I mean it's a beautiful model we think is going to be highly marginal and we are extremely happy with their growth profile at this date.

Thank you very much. Very helpful.

Let me add on the Yandex lavka and a couple words on delivery. So I your question was in regards to the seven openings. But overall, I think this is expected to happen in any retail business, where certain number of units, you know, will be closed for one reason or the other. But if you look at the overall openings for the quarter at restaurants, went from 360 to 395 and actually in October there already 400. So in lavka, we already see that.

Unit, economic spectrum works very well in the regions with high average check. So if we look at Moscow, you know, approximately 60% of our dark stores, on pre overheads pre-marketing. He did Allah. Well, already positive, the gross margin of top 25 stores in Moscow is approaching 35% and I would dog our stores in Moscow turn profitable in on the pre overheads pre-marketing level ebitda level between 6 to

twelve month after lunch and we actually expect Moscow to become ebitda positive on post overheads level within the next nine months. In Russian overall, you know, pre overheads would be die for top 25 stores, you know in September is already positive and we're seeing very encouraging, the Dynamics with couriers wearing high-density stores where, you know, we have more than four deliveries per hour for

Couriers. So overall, when we look at our lavka,

Art store business that we believe are we eunuchs economics is significantly better than any other competitor out in the market. And for delivery just to provide I think you asked about the customers just a couple of questions, you know, it's we already in a very short period of time captured. We think more than 10% or teens in off the express delivery Market this year express delivery is probably way of third of, you know, sort of over the last mile, you know.

Deliver market with the 2/3 being in DD and we're going to lunch and eat by the next day. Entities, next day delivery. Sorry and did he we're going to launch by the end of this year. And if you look at our customer makeup, you know, we have 22 over 22,000, be to be partners excluding is SMB, small-medium business and that's approximately 46% of our deliveries in the third quarter and SMB was actually another 30%. So I out of the B2B customers, you know, a top.

Town is probably over 70% of total deliveries in that includes almost all large food and non-food retailers, e-comm players and so on.

Great. Thank you very much.

And the next question comes from Kirill panarin of Renaissance capital.

Yeah, hi everyone. Thanks very much for the call. I've got two questions. My first question is on the impact of idea, fake policy changes on your advertising business, especially outside search. It seems, there's no Financial impact. Now, but how could these changes affect targeting capabilities that efficiency measurement or pricing in the future? And would the potential impact be material if and Roid follows the same route as iOS, that's the

Question. And then secondly, on Yandex, eats. Could you please comment on competitive Dynamics and margin Trends in the restaurant segment of Yandex. It's excluding groceries. Thanks.

Hi, Carol, this is why the mm, let me take the first one. So look, the kind of the gist of it. We think that the potential impact on our revenues or profitability from Apple new privacy settings or, you know, for that matter. If Android decides to introduce something similar is very limited and significantly lower than than it's going to be for some of our Global peers and let me explain, why? So as

No, structurally, approximately well, more than 80 percent of our revenues. The coming from the content contact. Contextual advertising, IE. This is something, you know, where a person would be actually show at an advertising for a specific query from a personality search on our search engine results page. So this is piece number one. Now when you look at the remaining call it like, you know, 20 or so percent.

Of the revenue, what you need to keep in mind that, you know, unlike some of the peers that are mobile only and single app type of companies. We operate, number one, you know, quite a few applications on your mobile device. Number one, and number two. We own a lot of desktop properties, but it's going to be ours or whether it's going to be our partner Network. Therefore, we

Get to know quite a lot.

About the user through all of the combination of our properties, whether it's going to be mobile or desktop and therefore, we are not that heavily dependent on those limitations that Apple just introduced on top of that. The third factor that you do need to consider a very well, a majority of our users, right? They actually are logged in users into Yandex ID and therefore it's easy to track them for

For us and B, you know, they're ready to certain extent submitted their permission to provide us with first-party information IE their information.

Hi, and it's, you get any. Let me do it. I think your question was on each restaurant. So the restaurants business itself. It actually grew into, you know, if you look in terms of orders agree with 62 percent year-over-year and Jimmy grew, so 67 percent year over year and that's actually on two years Tech basis. It's actually acceleration versus the trends. We saw in the second quarter and we did indeed invest in the growth in the in the you know, in the first nine months of the year and we

We gained five percentage points of market share, according to our estimates and new users, continue to grow fast and actually grow and 30% quarter-over-quarter despite us actually beginning to limits or in promotional campaigns such as free delivery. So, you know, while I'm, you know, I think we're going to update and comment on the overall profitability transfer next year and eats on the next call. We do see

If an improvement and eats profitable in restaurants profitability, and we expect it to continue into the next year.

Okay, that's that's great color on both questions. Thank you very much.

Our next question comes from slav. Addictive of Goldman Sachs.

A couple of questions both on e-commerce. I will start with the first one. If you can come and sit on your strategy in the grocery or fmcg side of e-commerce in terms of the formats and also the willingness to expand beyond the Capital City's, do you see reasonable unit economics in smaller cities in the fast and specifically with your first delivery for months.

Look, uh, you know, eat says, for us is a very sort of, you know, it's very challenging business. But I think that addressable Market is gigantic. So we continue to sort of invest and balance Investments where this is growth in our thinking. And so, I think, you know, when we look at losses per order, they decreased 30% in September compared to June in this business.

so,

It's it's challenging business model. But with think the addressable Market is gigantic, and we're going to continue to look at it again. Carefully waiting investment versus growth.

And specifically, it was not only about the lavka type of format, but maybe if there is some sort of a mix shift happening between the ultra-fast into some sort of a medium fast, whether you have somehow find from the right now. So like

Flower, this is ID and let me add to what January said. Look, it's it's I think pretty much as you know, everybody else in the world right now, right? Everybody's striving for the kind of the right balance between the, you know, ultra-fast and or immediate or something, you know, a shorter one yet, VI experimenting with that. What we are seeing is over all that, you know.

The presence of what is going to be fresh or whether it's going to be fmcg. On our e-comm Marketplace is an important component to have because it drives frequency. It improves your retention. It allows to actually to attract customers easier. So therefore we see it as an important component of our model at the same time, you know endings with what general has said it's a challenging business model because you typically deal with the lower average checks and

A relatively painful CPR, right. And that's why we are trying to play with different kind of, you know, some components of this model to you know, optimize the burn, vis-à-vis, the Improvement in retention and kind of play with a customer frequency. A trend of transactions on the main market place right at the same time. I guess one of the examples that I could give you off, you know what, you know, the to the first question that Cesar asked, you know.

What do we think is our at competitive Advantage, you know, when I mentioned the at, you know, the presence of many different assets under the same route. It does allow us to be much more flexible creative in combining different components of models and assets. So, for example, you know, we mentioned in our script that we published earlier today. The fact that we launched Market Express, right? Essentially, what Market Express is is a combination of two, you know, two more.

Models that we have under the same roof. So, the first one, the supply supply side is kind of remnants of our CPC model, right? This is a lot of partners that were present on our price comparison platform. And when we were looking to solve the kind of the quick scenario, rather than trying to build all the infrastructure ourselves and deal with, you know, the inventory and SKU selection Etc. We figured that it would be much quicker.

caring easier to go to our

Homer CPC partners and all for them. Yandex logistic services in order to provide hundreds of thousands of SK use within, you know, call it under two hours. And again that that's that is something that wasn't present in our business model, you know, even three months ago. We put it together, it flew, right? As we mentioned. It's already kind of, you know, accounts for approximately low teens.

Of the orders in Moscow. And because we have the necessary density on the Yandex Logistics. I'd write the CPR on those orders for us is significantly. More optimized than it would be for any other competitor. So as we think about the fmcg and foods for our econ Marketplace, we will be following kind of the similar logic of trying to achieve the ultimate goal, right? With respect to the user.

Retention and other metrics in the most efficient way by combining what we already have under the same roof.

Okay, thank you so much. And the second would be if you can somehow qualitatively update, where you currently stand on the process of CPC to Marketplace transition in the e-commerce. Do you see mushroom for the further seller additions that are still on the price comparison and maybe also related to that if you can somehow comment on the quality of the DBS model for Consumer specifically versus the experience that consumers have on your own delivery from your own Warehouse.

Twelve a bull. So very good questions. I think the second question is actually, I would say somewhat better than the first one, but let me start with the first one, nonetheless. So look, where do we currently stand? I would say, you know, this year, the added approximately 10,000 active merchants and it just, you know, to align on the definitions. When we say active Merchants, this is somebody who has salt or who did it least one transaction through.

All Marketplace in the past month. So we added 10,000 of those approximately two-thirds of those additions. Came from CPC. The rest actually newcomers to our, to our platform. We do see, you know, there's still room for growth both kind of intensive and extensive. As other Merchants are doing the shift as Merchants that are

Originally didn't switch from CPC to CPA coming back and as so. And then, there is obviously the increase in sales in terms of, you know, of GM V. Volume of those Merchants that actually are on our platform. So we still think there was, you know, a significant potential in the conversion self. Now, when we talk, you know, the second question or the second part of your question, which relates to drop ship by seller? You are right over.

All, you know, like cold.

Is equal. We do think that that model is somewhat inferior to to situation where we fulfill the transaction and the delivery by ourselves at the same time, you know, as I mentioned before, this is something that allowed us to, you know, convert CPC to CPA easier and grow faster in that conversion, but the way we think about it.

We mitigate that experience of the user experience by inserting the Yandex Logistics, you know, last lack if you will because then you know, the user does know exactly what's happening with the with the delivery because we control that lack at the same time, you know, be focus on this. And the way we think about it is also we look at the kind of the Matrix of the categories versus the

Going to see versus the margin that we can earn by keeping those SK use in our warehouses Etc. And I do think that some of you know is probably correct to say that some of the goods that are currently being fulfilled by Dropship by selling model will be moving to other models fulfillment models where we will be taking more and more kind of involvement.

That's pretty much it.

Thank you very much.

Much. Our next question comes from Luke Holbrook of Morgan Stanley.

I've got a couple of questions on the self-driving group. Just wondered if you have any if you can kind of get provide more color on the plans that you have to accelerate maybe investment in this part of the business given what competitors are doing in the space and can you provide a bit of a bit of an update on the progress that you're making in terms of launching the robo taxi service in Moscow by the end of the year and also on the importance of the deal? You struck with the Russian post earlier this week or on the road beside. Thank you.

Luke. Hi. This is Vadim. So let me take this one and let me start with the last one. The, so the the the kind of the deal that we announced with the Russian post earlier this week. I would say this is something similar to what we did of done with GrubHub in the u.s. Whereby. We doing the kind of the last segment delivery with our robbers and

Therefore, replacing essentially the mailman. If you will, we are seeing, you know, kind of the way it will work. They'll be testing the different kind of user cases in this particular model and we will see whether and we will see whether this is the pilot that we will start, you know, kind of convert it to a must much more kind of, you know, mass or a larger project. Now with respect to the

sdg or the

Of driving group. They autonomous vehicles. We do think that our investment next year will be, you know, kind of somewhat similar. But this year with some modifications. We think, you know, we don't need to kind of increase in absolute terms. Our investment as much as our competitors because historically we've been extremely cost efficient in achieving the same results as any other self.

Driving autonomous company and therefore, you know, like just kind of well, there might be some increase, it will be nothing compared to what others are spending. And then finally, I think it was the second part of your question, with respect to the robot, taxi Robo, taxi services, and Moscow. We are ready operating. We already operating

Limited cell service self driving, taxi service in Moscow, Dresden in Moscow. And one of the district's, it's will be kind of more officially launched a little bit later this fall and the passengers will be able to kind of order a robber taxi, we our Yandex taxi app, and traveled, you know, between different, you know, pick-up and drop-off points. We think this is actually pretty cool. I giving that's, you know, out,

Our technology is only 4 years old.

Great and just a quick follow-up. Is there any update on on your search for an oem partner at the stage?

Age-wise. Look, this is a process that's, you know, you kind of still, you know evaluating and when we have something to report we will

Thanks.

Our next question comes from Maria sukhanova of BCS.

Yes, good afternoon. I have two questions. The first one on the right and gross insertion portal segment. So it will be good if we percent, you mentioned the factors, but if you could put them into numbers like to say, what was the contribution of strategies this new tools for an increasing share of. I also would have been if you didn't have this extra factors. So the first one and second in car sharing with you.

About to go public.

Yeah, hi. My this is evgeny. Let me start with your last question with drive, you know, just sort of give you a couple of a couple of words in our strategy. We're also would drive, you know, we've been, you know, successful and b2c and it's the continues to be extremely important. And it's also very synergistic with outright healing business, but it also turned out to be a great R&D, and idea, platform and vehicle sharing, and let's acknowledge it. We can use it. Also in B2B space Fleet Management vehicle share.

And we think the space besides be.

She has huge opportunities for growth for and drive business, you know, especially with the rapidly evolving, e-commerce, delivery markets. And this business has significantly better vehicle utilization which leads to better Revenue per car and ultimately to better margins. So if we just look at the third quarter of this year and B2B was approximately, 12% of Drive revenues and 30% of ebitda adjusted. If you'da.

So and you know, we continue to accelerate in grow in both areas of the business, you know, our ebitda margin reached 11 percent of GDP in the third quarter, but I think it's important to know, you know, there is operating in financially since so it's I think important to look at ebitda margin post Finance lease costs or kind of all in and I needed margin. There was 7% of gmv accounting.

For sort of taken into Financial least cost. If they were counted and needed in operationally, the business continues to perform very well. We have 535 Mound September. And you know, that's where the user base. We tend to have thresholds which are higher for registration in the in the service versus our competitors. So it's 21 years old plus and with at least two years Driving Experience. Usually, these restrictions are more loose.

With our competitors and if you look at our revenues, you know sort of the so-called incidental fees, which essentially fines paid paid by the users for various violations. There's a half as much as they are with our closest competitor. So the business continues to perform very well. We in we plan to both grow the b2c and B2B segment of it.

so let me quickly afterwards and said look the actually welcome that listing, we think that you know, it would allow all of you to you know, finally get a benchmark in car-sharing and incorporate the relevant metrics into our sum of the parts for younglings Drive, which we actually think, you know again in our humble opinion is a better business, but going back to your first question with respect to the

Advertising on surgeon portal grows, look overall. It's very difficult to say the impact of any particular components or any one of the ad revenues because they all interconnected. Probably. Some of the useful numbers here would be, you know, talking about our CPA, right? It's the the share, the our CPA conversion strategies that see know the clients actually be

Seeing really, you know, accepting rather widely. It's already 30 percent of our revenues today. I think it was in approximately 20% range in Spring. We are seeing that, you know, the kind of on the numbers that we run together with the clients that the return on their marketing Investments. It's much higher than when compared to the CPC strategies.

we're all similar kind of a

Sighs for the Yandex business subscription, you know, for the smaller businesses. We are seeing a pretty high, you know, kind of reception or well. We see that kind of subscription model as well received by our customers. Because for the clients on a small budget, it is definitely more difficult to optimize our typical tools such as the and exact, and that essentially be giving them kind of

You know, a tailored product, just for them. What a buy, we actually optimize their return on investments, on marketing investment. And that's pretty much it. I mean, it's really difficult to kind of separate all the different factors, and their impact.

Appreciate it. Anyway. Thank you very much.

The next question comes from kupriyanova of gazprombank.

Good afternoon. Thank you very much for the opportunity to ask question. I will have a couple of quick follow-ups when you use, we discussed your Logistics business. You gave us break down or b2c B2B, but maybe you can also mention, which part of your Logistics, irenaeus is coming from internal group. Deliveries. This is my first question. Second question will be on your feet. You have date. You mentioned that

You will be prepared like to start active operations next year, but maybe just for our understanding some comments where you are at this point. And finally maybe you can say couple of thoughts on your other businesses including a check or Cloud business. Which of them. Do you see most potential as maybe next driver over 1/2 yet period, that's it. Thank you very much.

Hi quickly. Answer your question. Probably. I would say low double digits. I think that's kind of you know, they are we working with.

A little double digits. It's, it is a share of internal deliberations, right? Oh, okay. Thank you.

On a high. This is what in. So, let me take the fintech question. So it's essentially what we've been saying before, right. We are building the infrastructure to launch both the the client facing products, as well as kind of, you know, the necessary and, as well as the kind of code banking, as a service to our internal services, and we'll be ready to report more, you know, college next year. I would say, you know,

Not early in the year. Other than that we reported before that. We launched a limited experiment was buy. Now pay later called split. We talked in the beginning of September that we opened that product for ten percent of Young Turks Market. Users. We've since then, we expanded it to 90% of the audience. And frankly. We seeing quite encouraging results.

Okay. Thank you very much. And on the other businesses, if possible.

I'm sorry. Can you repeat the question then? So my third question was regarding your other but in the experiments where you have done clout and some other things which of them do you see as the next potential maybe driver of your revenues over the next 2-3 at three years? Period.

Which develops is the best way. Do you see most potential? Where would you like to focus your operations in future, for example, maybe it's at the next potential Target for Yandex is a group in 2021 2022.

Honestly, like all our other best and experiments because otherwise we wouldn't be doing them. But probably out of many favorite children. We would like to highlight our Cloud initiative. We are seeing extremely encouraging results. It's, you know, three times year on year Revenue growth, this quarter and 25% quarter-on-quarter. We continue onboarding new clients.

You have approximately 30,000 active clients at the end of Q3, which is an increase of you know, 60% year only over a year. We do believe there is a problem, you know, probably we do believe there is a number of kind of key advantages. Why we think we would, you know, take or be kind of the leading player in this market and number one, you know, we it's a hundred percent intact in-house technology.

Form. IE. We are the only cloud provider in Russia, you know, hyperscale. It was a fully-fledged. Scalable, in-house infrastructure, which combines our own data centers, our own hardware and our own software capabilities. We are locally present. So we are compliant with all the laws and requirements for the data storage or he hasn't Russian users. Unlike of some of the other foreign competitors within the segment. And then finally,

You know, this is kind of, you know, an interesting title, but I think we are the most certified clouds in Russian Market. IE be received all the required certification from different regulators and authorities that allows us to work with, you know, personal data of Russian clients, and we can work with clients and financial Industries and state-owned Enterprises Etc.

Thank you. That's great. And do you plan to actually develop your edshare? Maybe to push some more effort into this area where you don't see it as a priority for your business development at this stage.

I'm sorry, that's a chasm.

Resizing Technologies. Not sure it's education. Education.

Well, look if you being, you know, we've been kind of saying, I think for the past number of years that I received as an important kind of national wide Project important for the state. We believe that there is we have a lot of In-House, kind of knowledge and abilities to provide Cutting Edge. And, you know, top-of-the-line education, whether it's going to be in mathematics or whether it's going to be in, you know, programming, Etc. And this is what we're doing in must,

Quite a lot in and our, you know practicum which is you know, the professional. This is the the online courses for people that are willing that are looking at changing professions is gaining superb traction. And we think this is probably the best product on the market and we are very excited about it. Okay, but you don't plan any other investment specific, like a man in this segment given its

very good momentum for achieve development currently in Russia.

As usual, we do not comment on Ma. Okay. Okay, this particular too much, you, thank you.

That concludes our question and answer session. I like to have them to call back for any additional or closing remarks.

Yes, go ahead of investor relations. Thank you very much for all, dialed in participants and all your questions. We hope that the answers were helpful. If anything, that we haven't discussed. Please feel free to reach out. I our team. Thank you so much and goodbye. Today's conference call. We thank you for your participation. You may now disconnect.