Yandex takes money earned in Russia abroad as long as possible

Yandex takes money earned in Russia abroad as long as possible

Yandex reported for the 2nd quarter (and the first half of the year) of 2023, and I found a lot of interesting things in the report. For 4 years now, I have analyzed Yandex’s quarterly reporting, and this is the 16th report (and, perhaps, this is the last analysis in public access). So, I already know where to look and what to see there.

You can download Yandex’s reporting here: https://ir.yandex.ru/financial-releases

It consists of:

1). A beautiful presentation for casual investors on 29 pages.

2). A press release with a text quoted by journalists who need to quickly write a news story and go to the country to grill barbecue. The press release emphasizes all the best and takes a back seat to all the worst.

3). Since recently, the so-called “Additional materials” have been translated into Russian, from which you can really glean some significant information.

So I will analyze “Additional materials”.

“Search and Portal”, as before, remains the main cash machine of Yandex – despite the fears of skeptics related to the sale of Ya. Novyn and Zena. By agreement with the new owner (VK Company) for a long time after the sale, the visitor to the yandex.ru page will be automatically redirected to dzen.ru. As we can see from the company’s reporting, this agreement has no effect on financial metrics.

Business is growing primarily due to the care of two main competitors – Google and the company with the letter “M”. Thanks to this, Yandex can grow by more than 50% per year in its main segment. Profitability remains at the level of >50%, so in 2023, Yandex will earn about ₽160 billion from the search line. Where will this money go? The question is good, now we will try to find an answer to it.

A key metric in this segment this is the profitability of Yandex.Market.

When Yandex wants to hide inconvenient indicators, it always uses the same technique – it mixes different businesses into one segment. And so here: previously divided into different segments “Ridetech and Delivery” (Taxi, Scooters, Food, etc.) and “Electronic Commerce” (Market) now found themselves in one segment without distinguishing profitability indicators for each of them.

But you won’t see us through! From last year’s presentations, it can be assumed that the profitability of “Ridetech” is about 5% (Taxi – more, Scooters, Carsharing – less). So, we only need to know Ridetech’s revenue to get to the key metric.

Raidtech’s revenue is 38.2 billion ₽ per quarter. This is what Yandex received as travel commissions. Not to be confused with GMV – the sum of all our payments for trips. In Taxi, only a small percentage of our payment goes into revenue, and in Scooters and Carsharing – up to 100% of the payment. Based on the assumption of 5% profitability, we will get 1.9 billion ₽ profit for the quarter.

This means that the Market “ate” about 8 billion ₽ of losses for this quarter.

Market turnover for the quarter was 40.2 billion ₽. Again, it consists of Yandex’s own sales (this is about 26% of all sales) and commissions from third-party sellers. Market profitability is estimated at -20%.

Every 100₽ we spend in Yandex.Market causes him a loss of 20₽.

Despite assurances that “the unit economy of the Market is close to positive”, this is not entirely true. Minus 20% is not close to a positive indicator. This is better than it was in 2021 (-37%), but still far from the cherished +0.0001%.

In reality, the profitability of the Market may be slightly better or slightly worse. Since there is another unknown – the profitability of the so-called “Other Online-to-Offline services” – Food, Shop, Delivery.

But the damage from Yeda and Lavka used to be quite limited, and Delivery is the essence of the Market, which was brought here as part of an even greater confusion of traces.

But if there is something to be proud of, Yandex will definitely show it! So, this quarter, the “Plus” subscription became a point of pride, which for the first time in its entire existence turned into a plus. Profitability was 12%.

If you are a top manager of a multibillion-dollar company, write down the recipe for making a paid subscription profitable:

  • Gain 23.5 million users.

  • Remove the cheap tariff for 199₽, transferring everyone to the tariff for 299₽ (calling it “Multi”, kind of better than the previous one).

  • ???

  • Profit!

Every 100₽ spent on a Plus subscription brings Yandex a profit of 12₽

Bulletin boards (Avto.Ru, Ya.Travel, Ya.Rent, Ya.Real Estate) operate at a loss throughout 2023. Moreover, Avto.Ru is usually a profitable part, and all the profit from it goes to the development of the other three boards. Perhaps even you have heard the advertisement of Ya. Mandriv – that’s it. Fortunately, this segment does not require a lot of food, and can exist on the verge of zero profitability.

And now the most interesting:

Do you remember the main principle of Yandex when communicating with the outside world? If you need to hide something, you should mix a loud cocktail from different businesses! So that no one understands anything. According to this principle, the segment “Other business units and initiatives” was formed – even from the name it is not clear what they do there.

This segment includes “Devices and Alice”, “Cloud” and other experimental pieces (mostly related to foreign structures). The segment devoured 12.3 billion ₽ for the quarter.

At the same time, the “home” business – the sale of devices with Alice on board – remained slightly profitable, bringing in ₽5.1 billion in revenue for the quarter. And where did 12.3 billion ₽ go? Yandex answers this question in a press release:

The adjusted EBITDA loss was 12.3 billion rubles, compared to 3.7 billion rubles in the second quarter of 2022. The increase in the loss is mainly caused by the transfer of undistributed corporate expenses that do not belong to the segments directly, […] investments in Yandex Cloud (including international business) and Yandex SDG, […] and even investments in the development of other verticals.

Translating this into Russian, we can conclude that Yandex is trying to divert a significant part of the profit from its most profitable business (search) to those segments that will remain with the international holding after the company is split in two, while this is still possible. The split is scheduled for late 2023, and the cash-out process is now in full swing. Starting from 2024, this will become impossible, and the existence of the unprofitable international part of Yandex will have to be ensured at the expense of diluting the share of shareholders (additional issue of shares) or at the expense of attracting loans. For now, you can withdraw free money from a Russian cash machine.

As for the overall parameters of the company, it managed to earn approximately the same as last year – 24.7 billion ₽ EBITDA for the quarter. At the same time, the adjusted net profit is quite modest – 9.6 billion ₽. If you take into account that for Yandex, the ideal state is with a net profit = slightly above 0₽, they are quite close to the target allocation of their resources.

Metrics familiar to the eye of a casual investor:

r/s = 22.5

p/s = 1.2

According to the “Price to Sales” metric, Yandex is already approaching pension companies, while remaining technological and growing by 45-55% per year. That kind of growth would be the envy of any Silicon Valley tech giant. And they are usually evaluated by P/S = 5-10 (Google P/S = 5.7, META P/S = 6.7).

If it were not for this uncertainty that destroys all value (what will the company look like after the split? will it survive after it?), then the fair valuation of Yandex shares would be more than 10,000₽. The current price is 2650 ₽.

——

Well, according to tradition, the rubric “How much do Yandex employees earn”

Yandex now has 24,300 employees, and 23% of the company’s total revenue or 42 billion ₽ per quarter (3 months) goes to personnel.

Monthly expenses for one Yandex employee amount to 576,500₽

If you work at Yandex, you can deduct pence from the amount of social security deductions. fund and tax and understand how much more (or less) you earn compared to the average employee.


I tried, spent a lot of time and effort. The best thanks will be a positive evaluation of the post and a subscription to a modest personal blog (it does not cost money).

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