Yandex N.V.

Ladies and gentlemen, thank you for standing by and welcome to the fourth quarter and full year 2020 financial results call. I must advise you this conference is being recorded today, Tuesday, the 16th of February, 2021. We would now like to hand the call over to your first speaker today, Yulia Gerasimova, Investor Relations Director. Please go ahead.

Good afternoon and good morning, everyone, and welcome to Yandex fourth quarter 2020 earnings call. You can find our earnings release and supplementary slides on our IR website. The key speakers on our call today are Tigran Hodeverdan, our Deputy Chief Executive Officer, Danil Shuleyka, our Chief Executive Officer of Yandex Taxi, and Greg Obovsky, our Chief Operating and Chief Financial Officer. Evgeny Senderov, 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. Various 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 20F filed with the SEC. 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 we published today. And now, I'm turning the call over to Tigran.

Thank you, Yulia, and thanks to everyone for joining our call today. In Q4, we continue to focus on deepening the integration between our businesses and developing cross-service products to strengthen our platform. NX Plus is one of the most important pillars in our ecosystem strategy. The total number of subscribers reached 6.8 million at the end of December. This strong momentum continued into this year, and our subscriber base is now approaching 8 million, including over 1 million from taxing. We are very encouraged by the results since the upgrade of the program in August and introduction of cashbacks. In particular, we have seen an improvement in conversion from trials to paid subscriptions as well as better cross-service usage. We also see that the average spend increases once users subscribe to Yandex Plus. For example, the GNV generated by a Plus member on Yandex Market Marketplace is on average 25-30% higher than for other customers. We believe other benefits of our subscription model will be in the areas of customer retention and customer acquisition costs. We plan to further expand the cashback program to other services. From this page, Yandex Eats and Lavka are also part of a cashback program. With that, let me walk you through the key highlights for Q4. Starting with e-commerce. Internally, we see e-commerce as being much more than just Yandex Market. In addition to our marketplace GMV, it also includes GMV of our e-grocery business Lavka, as well as FMCG-related GMV of Yandex Eats. We believe this better reflects Yandex's overall exposure to e-commerce and is therefore more comparable to the results of our peers. We are very pleased that our total e-commerce GMV grew threefold in 2020 to over 56 billion rubles, and specifically in Q4 we saw year-on-year growth of 127%. Note that this doesn't include GMV that goes through Yandex.Market price comparison platform and our logistics services, which together account for another 230 billion rubles. For Yandex.Market, Q4 was the first quarter with price comparison on Marketplace operating as a single platform under one brand. The rebranding process went well as we successfully moved our existing buyers and merchants to the new platform. At the same time as we expected this was a transitional quarter, our customers were getting used to the new interface, which marginally slowed our GMV growth during the holiday season. This effect was temporary, and marketing regrowth reaccelerated in early 2021. Despite rebranding and very limited marketing support throughout most of last year, the number of active buyers increased by 2.4 times and now over 6 million, and our assortment has expanded by more than three times and has reached 2 million SKUs. We have launched on-demand delivery options synergizing the Yandex Market and Kudio capabilities of Yandex.Lavka. This service offers 15 to 30-minute delivery to door and is now available to all users in Moscow, parts of St. Petersburg, and Nizhny Novgorod. Integration with Yandex.Plus has also deepened. In addition to cashbacks, most of our Plus subscribers get free delivery on their orders above 700 rubles. In mid-January this year, we decreased our commission for merchants, which are now the most attractive on the market. In the second half of 2020, we laid the foundation for the integration of markets with other businesses. 2021 will be much more about fast growth, more active transition of merchants from the CPC to CPA models, and also expanding our logistics infrastructure. Moving to search and portal. Our total search share reached a new record of 59.7% in Q4, which represents a further 40 basis points increase from Q3 and a 220 basis points increase year on year. Search has been a key driver behind the recovery and advertising revenue in Q4. Our fixed CPA model is also gaining traction among small and mid-sized advertisers. We launched it in Q2. and it already accounts for almost 6% of total advertising revenue as of mid-February, and over 10% specifically within the Yandex advertising network. For 2021, our priorities include video, fixed CP, and a subscription model for SME clients. We believe this initiative will help us to maintain advertising revenue growth at or above the dynamic of the digital ad marketing in Russia. We are very encouraged by the trends we are seeing in Zen, Daily audience has reached 20.3 million users, up 51% year-on-year. Users consistently spend over 40 minutes per day on our platform, 23% of which is on video. In addition to solid user engagement, we have seen revenue growth recovering to our pre-COVID trajectory. In December, Zen revenue reached 13.1 billion rubles on an analyzed run rate basis, growing 49% year-on-year. Media services. We have already discussed our progress with Yandex+, but another important milestone for the team was achieving more than 3 million viewing subscribers per month as of January. Based on our internal estimates, we believe this makes us the leader in the Russian OTT market, head of both EV and OKO. Finally, a couple of words on cloud. The business continued its rapid expansion and reached an important milestone of 1 billion rubles in revenue in 2020. growing 4.5 times year-on-year. Importantly, this impressive revenue growth was driven by both customer base expansion and higher usage per customer. In December, we had approximately 15,000 active users. The number of paying customers increased 40% compared to December 2019 to almost 10,000, while the average check grew 180% year-on-year. To sum up, we entered 2021 in very good shape with a diversified range of services. Our advertising and ride-hailing businesses are likely to gain from the anticipated economic recovery. We also expect to maintain solid growth momentum in services that have benefited from the pandemic, including in media services, food delivery, logistics, and e-commerce. We will continue to work on the further integration of services within our platform while exploring new opportunities such as FinTech. And with this, I'm turning the mic over to Daniil.