Yandex N.V.

Ladies and gentlemen, thank you for standing by and welcome to the second quarter 2021 financial results call. I must advise you, this conference is being recorded today, Wednesday, the 28th of July, 2021. We'd now like to hand the call over to your first speaker today, Yulia Jeromisova, Investor Relations Director. Please go ahead.

Hello, everyone, and welcome to Yandex Second Quarter 2021 Earnings Call. You can find our earnings release and supplementary slides on our IR website. The key speakers on our call today are Tigran Kudverdan, our Deputy Chief Executive Officer, Daniil Shuleyka, the Head of eCommerce and Vitech Business Group, Svetlana Dimishkevich, our Chief Financial Officer, and Vadim Martuk, our Chief Operating 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, Yuli, and hello, everyone. Let me give you a quick overview of the key highlights from the second quarter. I will start with e-commerce, which is a key area of focus for us at the moment. We are encouraged by the progress the team is making. Total e-commerce GNV grew 2.6 times in the second quarter, which we expect to be ahead of our major competitors. Yandex.Market on a standalone basis continued to accelerate its GNV growth to 144% in Q2 from 126% in Q1. This is despite coming from a high base. Q2 last year was the strongest for Yandex.Market with GNV growing 3.5 times. We have significantly expanded our assortment and logistics infrastructure. We are also investing time and resources into improving the quality of our service for both customers and merchants. It's important to know that the investments we are making now will not only support our growth this year. At least half of what we spent in 2021 will form the basis for solid growth in the future. Daniel will talk more about our achievements in e-commerce later. I would just mention that thanks to the team efforts, we expect to grow faster this year than initially anticipated. And we believe that our new full-year target of up to three times GMV growth will help us to improve our market share and narrow the gap with our competitors. Our strong results in e-commerce were also supported by our subscription program, Yandex+. The total number of subscribers increased to 9.5 million in July. The team has been particularly focused on improving the share of paying subscribers, which exceeded 75%. Our strategic goal is to grow the paying subscriber base as fast as possible, to cement our leadership in subscription market, and to further expand the gap between us and our competitors. Relationships between Yandex Plus and our e-transactional services remain highly synergetic, especially for e-commerce. The segment contributes greatly to the issuance of Plus points and also benefits from the redemption. This improves our customer loyalty and business growth, as Plus members generate more orders per customer and hence higher GMV. Plus subscribers generate around 50% of market and each GMV and over 70% of love GMV. The success of Yandex Plus is closely related to the development of our KinePoS content platform. One of our latest hits, a movie called Major Grom Plague Doctor, which Index co-produced, was sold to Netflix and was number one in the Netflix global charts in July. We are very pleased that in Q2, Kinopois became the leader in the video-on-demand market in Russia by both total as well as paying subscribers, according to a recent GFK study. Let me give you a few words about our key cash-generating businesses, advertising and retailing. Starting with advertising, our core advertising business performs extremely well. We are seeing a recovery in our ad revenue growth. on a normalized two-year stack basis, driven by strong performance in search and other Yandex properties. This has been supported by macro recovery as well as improving search quality, our ad tech investments, and progress with SMB. In June, we rolled out a new search engine update with more than 2,000 improvements, which, among other things, helped us to reach a record higher share of 59.5% on Android in Q2 2021. We are encouraged by the progress with SMBs and our simplified subscription ad product, which already generates over 20% of all new ad clients for Yandex. Then continues to be our key platform for video ad development. Video content has become the top generator in terms of time spent outperforming articles. The share of video time spent increased from 25% in March to 28% in June, and is continuing to grow. We also continue to invest in ad tech to improve ad efficiency for our clients and to further increase our market share. We recently launched Campaign Visor. which not only helps advertisers to simplify the process of creating ad campaigns, but also demonstrates solid retention rate for new clients of Yandex ad business higher than those achieved by the professional interface. With this and a number of other improvements, the share of our ad revenues based on CPA conversion strategies increased from 20% in April to 25% in June. Within the Yandex Ad Network specifically, the share went up from 30% to 40% in the same period. Thanks to these efforts, we have seen faster-than-expected growth of our advertising business, which again allows us to upgrade our expectations for the full year. Svetlana will talk about this in more detail. Continue with the right element. Our year-on-year growth was obviously high, even with a low base from last year. But what is important is that we are also seeing an improving two-year stack growth for both RISE and GNV. Daniel will share more details about this later. This quarter, we disclosed the adjusted EBITDA margin for our RISE selling business for the first time. I'm extremely proud for the progress we have made since we first became profitable at the end of 2018, making us the most efficient ride-sharing company globally with a margin of 3.5% of GMV. Overall, we are very confident in the growth and profitability prospects for the ride-hailing business, as well as in our market position. Together, our high-margin advertising and right-hand businesses should allow us to continue reinvesting into new attractive growth opportunities and to expand our total addressable market. Lastly, our self-driving group. We signed a partnership with Grubhub for robot delivery in U.S. college campuses. Grubhub partners with more than 250 campuses across the U.S. with a population of over 3 million. Yandex will act as a delivery management company. The first 50 rovers are now being sent to Grubhub, and we will be rolling out the service at selected campuses later this fall. This partnership is an international validation of our technology and proof of its competitiveness versus other local and global players. It demonstrates the quality of our autonomous technology and shows that we can tap into a substantial dressable market beyond the existing ecosystem. In conclusion, I wanted to say that we are focused on investing in future growth across many verticals, including e-commerce, media services, cloud self-driving, and fintech. In all these segments, we see an opportunity for Yandex to become one of the leading players, and we expect our investments to translate into market share gains and creating additional shareholder value. With this, let me turn the mic over to Daniil.