Yandex (YNDX) Down 30.2% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Yandex (YNDX). Shares have lost about 30.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Yandex due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Yandex's Q4 Earnings Miss, Revenues Beat

Yandex reported fourth-quarter 2019 adjusted earnings of 25 cents per share, missing the Zacks Consensus Estimate by 35.9%. In ruble terms, the company delivered earnings of RUB 2.78 per share, which declined 83.4% from the year-ago quarter.

Revenues of $835.1 million (RUB 51.7 billion) surpassed the Zacks Consensus Estimate of $817 million. The figure reflected year-over-year growth of 33.1% in ruble terms.

The company’s growing advertising revenues, solid momentum in the Russian search market and robust performance by Taxi segment drove the top line during the reported quarter. Additionally, the company witnessed year-over-year growth of 20% in paid clicks during the reported quarter.

Further, well-performing Search, Classifieds, Media Services and Experiments segments of the company contributed to the results.

However, increasing expenses hurt margin expansion during the reported quarter.

Nevertheless, Yandex’s strong momentum across Taxi and ride sharing business remains a major positive. Moreover, the company’s strengthening presence in the self-driving car space and its growing mobile search share remain tailwinds. All these factors are likely to instill investor optimism.

Top-Line Details

Total online advertising revenues amounted to RUB 34.3 billion (66.4% of total revenues), reflecting growth of 16.4% on a year-over-year basis.

This can primarily be attributed to robust performance of Yandex properties, which accounted for 80.4% of the total advertising revenues and exhibited year-over-year growth of 23%.

However, Advertising network revenues, which contributed 19.6% to total advertising revenues, declined 5% from the year-ago quarter.

Taxi revenues of RUB 11.9 billion (23% of total revenues) surged 72% on a year-over-year basis, driven by increasing number of rides.

Other revenues of RUB 5.5 billion (10.6% of total revenues) soared 127% from the prior-year quarter. This was primarily driven by well-performing Yandex.Drive and Media Services. Further, strong IoT initiatives remain a positive.

Segments in Detail

Search and Portal: The segment generated RUB 34.5 billion revenues (66.6% of total revenues), up 16% year over year. The company’s strong position in the Russian search market remains a key catalyst. Notably, its market share reached 57.5% during the reported quarter, which went up 100 basis points (bps) year over year. This can be attributed to expanding Yandex’s mobile search share, which stood at 51.9% in the fourth quarter. Notably, mobile revenues accounted for 49.3% of the company's search revenues. Further, mobile search traffic accounted for 57.5% of the total search traffic. This was driven by Yandex’s search share on Android, which came in 54.3%, expanding 480 bps from the year-ago quarter.

Taxi: The segment generated RUB 11.9 billion revenues (23.1% of revenues), surging 72% from the year-ago quarter. Impressive year-over-year growth was driven by increasing number of rides that advanced 49% from the prior-year quarter, on the back of strengthening ridesharing business. Further, robust performance by corporate Taxi and food delivery business contributed to the segment’s results.

Classifieds: The segment generated revenues of RUB 1.6 billion (3.1% of revenues), reflecting an improvement of 45% year over year. Revenues from listing fees and value added service (VAS), which surged 68% year over year, drove the segment’s top line.

Media Services: The segment generated revenues of RUB 1.3 billion (2.5% of revenues), climbing 96% from the year-ago quarter. This can primarily be attributed to improving subscription services and video advertising revenues on the back of KinoPoisk. Further, well-performing Yandex.Music contributed to the segment’s revenues.

Other Bets and Experiments: The segment yielded RUB 5.1 billion revenues (9.8% of total revenues), up 128% from the prior-year quarter. This was driven by robust performance of Yandex’s Zen, Yandex.Drive and Geo services.

Operating Details

In fourth-quarter 2019, adjusted net income margin was 10.4%, contracting 750 bps from the year-ago quarter.

Per the company, its operating margin came in 9.5% in the reported quarter, contracting 970 bps on a year-over-year basis.

Further, adjusted EBITDA margin was 25.6%, which contracted 610 bps year over year.

Operating expenses as a percentage of revenues was 90.5%, expanding 970 bps from the year-ago quarter.

The company’s total traffic acquisition cost (TAC) came in RUB 6.6 billion, climbing 7.6% on a year-over-year basis. As a percentage of revenues, the figure contracted 310 bps year over year to 12.8% in the reported quarter.

Balance Sheet & Cash Flows

As of Dec 31, 2019, cash and cash equivalents were $911.3 million, up from $675.7 million as of Sep 30, 2019.

Accounts Receivables totaled $288.1 million, increasing from $246.8 million in the previous quarter.

For the fourth quarter, cash flow from operations was $139.3 million, which declined from the prior-quarter figure of $228 million.

Guidance

For 2020, management expects revenues between RUB 214 and RUB 221, reflecting growth of 22-26% from 2019.

Further, the company expects revenue growth in Search and Portal in the range of 14-17% from 2019 in ruble terms.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.