Nebius Group NV (YNDX) 2014 Q2 法說會逐字稿

Ladies and gentlemen, welcome to the Yandex second quarter 2014 financial results conference call. (Operator Instructions).

I will now hand you over to Greg Abovsky to begin. Thank you.

Hello, everyone, and welcome to Yandex's second quarter 2014 earnings call. We distributed our earnings release earlier today. You can find a copy of the press release on the Company's Investor Relations website as well as the newswire services.

Today, we also have on the call our CEO, Arkady Volozh, and our CFO, Alex Shulgin. Our call will be recorded; the recording will be available on Yandex's IR website in a few hours. We've put together a few supplementary slides which are currently available on our IR website.

Now, I will quickly take you through the safe harbor statement.

Various remarks that we make during this call about our future expectations, plans and prospects constitute forward-looking statements. Our actual results may differ materially from those indicated or suggested by these forward-looking statements as a result of various important factors, including those discussed in the risk factor section of our Annual Report on Form 20-F dated April 4, 2014 which is on file with the SEC and is available online.

In addition, any forward-looking statements represent our views only as of today, and should not be relied upon as representing our views as of any subsequent date. Although we may elect to update those forward-statements at some point in the future, we specifically disclaim any obligation to do so even if our views change. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today.

During this call we will be referring to certain non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with US GAAP. Reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is provided in the earnings release we issued today.

Now I'll turn the call over to Arkady who will give you an update of our Q2 operational activities.

Ladies and gentlemen, thank you for joining us on our second quarter call. We had a strong quarter in our core text-based advertising business with growth of 38% year on year. Nice increase in the number of advertisers and search queries.

This time, I would like to emphasize five areas in the Company development.

One, during Q2 we rolled out Islands, our new search concept; we rolled out in Russia, Ukraine and Belarus.

Two, we continue to demonstrate solid growth in the number of paid clicks, both overall as well as on our own and operated websites. And our CPCs are also growing.

Three, we launched the new mobile app called the Yandex.City which combines our strength in maps where the user generates views of local businesses.

Four, we entered the market of auto classifieds with our acquisition of Auto.ru.

And five, on June 3 our shares were accepted for trading on the Moscow Exchange.

I will elaborate on each of these in a minute, but let me begin with comments about our search share.

According to LiveInternet, our search share decreased from 61.9% in Q1 to 61.6% in Q2. More recently our search share according to LiveInternet has been around 60.5%.

We believe that the decline is a technical artifact as our own internal analytic tools do not show any decrease in user activity, audience size or the number of visits to our search sites. It shows that these metrics are increasing in line with the market as a whole.

During Q2, the number of search queries on Yandex grew 21% year over year, similar to the rate of growth in Q1.

Let me update you on our shares on mobile. In Q2, our search share on android stood at around 54%; our search share on iOS grew from 45% in April to about 46.5% currently. We enjoyed [mass] growth in both iPhones and iPads while our share on iPad in Russia grossed 50% in June.

Share of mobile search queries continues to grow. In Q2 2014 mobile queries represented about 20% of all searches of Yandex, while generating about 14% of our search revenues.

In Q2, we enjoyed 25% growth in the number of advertisers as businesses continued to migrate online and realize the benefits of contextual advertising.

In Q2, the overall growth of paid clicks was 36%, while CPCs increased 1% year over year.

Focusing specifically on our own progresses, several new initiatives allowed us to grow paid clicks there about 30% year over year. While traditional search continues to show solid growth trends, we have been focusing more and more on local based search.

So to that end, in June we launched Yandex.City, our guide to open businesses and organizations. If you need to find a restaurant or a cafe, a pharmacy or a cinema, you can do it both on the desktop and through our iOS and android apps.

In addition to basic information about business such as hours of operations and directions, Yandex.City also incorporates user-generated reviews of local businesses.

Currently, we are experimenting with a number of different integration models including text-based ads on a desktop version, paid model for additional information and listings promotions.

Turning to our strategy in classifieds: you probably saw that, in June, we announced our intention to acquire Auto.ru, the largest online classified data source in Moscow.

Auto.ru allows individuals and auto dealers to place classifieds for new and used motor vehicles, as well as auto price. The website also has extensive automotive news and user forums. Auto.ru has a large, loyal and deeply engaged audience with approximately 40% of monthly users being return visitors.

We believe that, with Yandex's technological and marketing support, Auto.ru will increase its presence in Russian regions and become the leader in auto classifieds in Russia. The deal is expected to close in Q3.

Among other product initiatives, I would like to mention the launch of checkout function in the Yandex.Market. Now, our merchants can enjoy the 2% acquiring fee for acceptance for banking cards in Yandex.Money, which is substantially lower than what is available in the market today.

If a purchase is prepaid, Yandex will escrow the money until the goods are sent for delivery. And if there is a dispute between -- an issue with any customer, Yandex buyers' protection service steps in to resolve the issue. There are several more launches that we expect later in this year, and we also launched CPA auction later in 2013.

We continue to enjoy growth of Yandex.Taxi, the largest taxi service in Moscow and St Petersburg. Our revenues almost doubled year on year and we aim to roll this service out in the Russian regions.

On an educational front, students of Yandex's School of Data Analysis became the champions at the World Programming Championship. And we also have outstanding results in our computer science faculty that we announced this April, in cooperation with the Higher School of Economics. This new faculty faces unprecedented demand from applicants in the history of the Higher School of Economics.

Another important milestone in our corporate development was the beginning of trading of Yandex NV shares on Moscow Exchange. We were preparing for this step for more than 12 months and it became possible because of important reforms in market infrastructure. This additional listing broadens our shareholder base and unveils the possibility to our shares to be included into MSCI Russia Index in the future.

And finally, I'm pleased to reiterate the previously issued revenue outlook for this year. Despite weak display market in Q2, we expect our revenue to grow 25% to 30% in 2014 on a like-for-like basis.

And with this, I'm pleased to pass the mic to Alex Shulgin, our CFO.

Thank you, Arkady, and thank you all for joining. In the second quarter of 2014, our consolidated revenues grew 32% year over year, and reached RUB12.2 billion. Excluding the impact of Yandex.Money for Q2 2013, our total revenues grew 35%.

Text-based advertising accounted for 93% of total revenues in Q2 and demonstrated a healthy growth of 39% year on year. Yandex's own and operated websites constituted 70% of total revenues and grew 27% year over year, accelerating slightly from Q1 growth rates.

Our text-based advertising network grew 92% year on year. This growth was driven by our partnership with Mail.ru, started on July 1, 2013, and we expect our text-based ad network revenue growth to stabilize in Q3, 2014, at the anniversary of the start of this partnership. As a result, contribution of ad network revenues to the total revenues grew from 15% in Q2 2013, to 22% in Q2 2014.

Share of display advertising shrank from 7% of total revenues in Q1 to 6% in Q2 as a result of macroeconomic conditions. Revenues from our own and operated display went down 16%, while display ad network revenues grew to RUB101 million from RUB17 million a year ago.

All in all, revenues from display decreased 6% year over year. We expect trading conditions for display advertising to remain challenging in the near to medium term. However, we're actively adding new inventory and developing demand for new products, like RTB network, by adding new platforms and offering new ad formats to advertisers.

Other revenues doubled, but still comprise 1% of the total revenues. Growth was primarily driven by revenues received from Yandex.Taxi.

Traffic acquisition costs, related to the partner ad network, grew 103%, while partner TAC, as a percent of partner revenues, was 67% in Q2 2014. Compared to Q1, our partner TAC as a percent of ad network text-based revenues decreased 50 basis points. As you might remember, partner TAC includes TAC from both display and text-based ad networks.

Distribution TAC growth slowed down, compared to Q1 2014, and grew 47%. On the previous call, I mentioned that we have been taking a number of steps to address the amount of TAC we pay out to our distribution partners.

As a result of these measures, distribution TAC as a percent of own and operated revenues was down 60 basis points sequentially, but on a year-over-year basis it still grew 130 basis points. Total TAC increased 81% year on year.

Text-based revenues were driven by the growth in paid clicks, which increased 36% year over year. Healthy growth was demonstrated both on own and operated and on the ad network fronts.

Growth in the number of paid clicks on our own websites was at 30%, despite tough comparison with Q2 2013, when we rolled out our [1,000] block, the block of advertising links on the bottom of organic search results. The growth was driven by our focus on own and operated properties and several new initiatives. Growth in the number of paid clicks on the network front was, in a large part, driven by Mail.ru.

In Q3 2014, we cycle a year of our partnership with Mail.ru and expect to see more modest growth in the number of partner paid clicks than during the last four quarters. Cost per click increased 1% year over year.

Now, turning to our cost structure: our total operating cost and expenses, excluding traffic acquisition cost and depreciation and amortization expense, grew [32%] in Q2. Excluding stock-based compensation expense, our costs grew 30%.

As usual personnel costs remain our largest cost item. We considerably decreased our hiring rate in Q2 2014, adding only 164 employees to our headcount, compared to 234 employees added in Q1, and 886 employees added in the second half of 2013. As a result, our personnel cost increased 35% year over year and [about] 20% of total revenues.

Due to slower hiring rate, our personnel cost grew just 2% quarter on quarter. Our depreciation and amortization expense for the quarter increased 22%.

Our adjusted EBITDA grew 17% year on year and our adjusted EBITDA margin was [41%], up 420 basis points compared to Q1 2014, but down 540 basis points year over year.

Improvements versus Q1 2014 were driven by the slowed hiring rate, as well as by our efforts in managing TAC. Still, they were partially offset by increased rent payments for the additional office space in Moscow. The year-over-year decline in margins was the result of increase in partnering distribution TAC, as well growth of personnel expenses, compared with Q2 2013.

This quarter, the impact from foreign exchange FX was RUB625 million lost related to dollar denominated assets and liabilities in our balance sheet as the ruble strengthened from RUB35.7 as of March 31, 2014, to RUB33.6 on June 30, 2014.

Our effective income tax rate was 25.5% in Q2 on US GAAP basis, generally in line with effective income tax rate in Q1 2014, but significantly higher than the effective tax rate on the previous quarters.

The reason is mainly in deferred tax accrual on 50% of unlimited earnings and to be transferred to Yandex NV from Yandex [ROC]. Another reason for effective tax rate growth is one-time effect of certain results and allowances we accrued in Q2. Adjusted for this one-off, our effective tax rate is 24.6%, in line with previous quarter.

Adjusted net income grew 9% and adjusted net income margin was 27.3%. Our Q2 CapEx was RUB2.1 billion, or 18% of Q2 revenue. We raise now our estimate for capital expenditures in 2014 from the range of 14% to 16% to the range of 16% to 19% of total revenues in 2014.

The increase is primarily due to investments into productivity of the advertising technologies and improvement of search quality in foreign languages, which [are really meant] for the Russian users.

I would also like to mention that in Q2 2014 we completed our share buyback program to repurchase 15 million shares from the market. Also, our Board authorized us to repurchase additional 3 million shares.

We ended the quarter with $1.4 billion in cash and cash equivalent.

And now, turning to guidance, despite challenging in macro environment we reaffirm our previously announced revenue growth outlook of 25% to 30% on a like-for-like basis.

Now, I will turn the call over to the operator for the Q&A session.

(Operator Instructions). Lloyd Walmsley, Deutsche Bank.

Wondering if you can give us a bit more color on the [retard] in revenue growth in search, in particular, and how we should think about that going forward.

And as a follow-up, may be you can talk about to what extent that may have been helped by some of the [ad tech] initiatives on server clusterization and provide an update on the status of the API for automated bidding and dynamic accretive?

Hi, Lloyd; this is Alex speaking. Thank you for the question. So talking about O&O revenue growth it was solid at 27% in Q2, compared to 26% in Q1 2014 and 37% in Q2 2013, when we implemented the 1,000 block [overview] in Yandex.Direct.

Just to remind everyone at the end of Q1 2013, so a year ago, we moved out block of advertising to the right-hand part of organic search results -- from the right-hand part to the bottom of organic search results. Taking that, we decreased the number of ad links from [5 to 4]; CTR of the new 1,000 block increased considerably, so did the paid clicks on own and operated [such as our] pages.

Despite the strong growth of O&O a year ago, we still demonstrated a sort of growth in paid clicks in Q2. The driver of O&O growth in Q2 was a bunch of smaller technology [cover] and interface initiatives engine using Yandex.Direct. So as a result of this initiative, paid clicks on own and operated properties grew 30%, while overall for the whole Company paid clicks growth was 36%.

And also the CPC helped a little bit, so CPC were up 1%.

Other drivers of revenue growth were solid as well, and this includes increasing level of advertisers and inflow of foreign advertisers for TAC-based revenue.

Number of advertisers grew 25% to more than 295,000 customers in Q2 2014, and the growth rate in number of advertisers comes from -- and the growth comes primarily from regions, and most [competitor] are already pretty high penetrated.

So the impact of the new technology initiatives that Arkady talked about they are not yet as visible in our Q2 results, but we expect them to contribute to our performance, going forward. This is especial arrangement for the bigger customers who are certificated multiple companies and need to [process] millions of [key words] online.

Thanks, guys.

Edward Hill-Wood, Morgan Stanley.

I have two questions. Firstly, on mobile, you mentioned the traffic is up to 20% of total queries, revenue, 14%. The gap between traffic and revenues widened to around 70% in the quarter and it's been widening every quarter. So I was wondering if you could just touch on mobile monetization and whether or not we should be a little bit concerned that your ability to monetize that traffic is getting a little tougher. Maybe some comments there.

And secondly, on the Yandex.Market, I was wondering if you could give us an update on how the transition to CPA models is going, maybe some conversion rates of how many retailers or [GMV], which has transitioned over, and whether or not that's going according to plan. And just how the marketplace is doing in a tougher consumer environment, and whether or not we should expect that business to grow faster or slower than the core this year. Thank you.

Hi, Ed; it's Greg. A couple of things; turning to mobile first. You're quite right that the gap that you are used to seeing between revenue share and query share widened slightly. There have been no changes in the way that we monetize any of the platforms. And so the divergence is primarily just a result of mix shift inside of mobile, and the relative proportion of tablets, which, as you know, monetize very well, and phones, which don't monetize as well. So that's, I think, all there is to that.

On the question of Yandex.Market, as you know, we have been rolling out a lot of the features. We've added the ability, as Arkady said, to pay with credit cards. We've added the CPA functionality. There's more features which are still coming down the pipe. We currently have about 200 of our customers signed up with the CPA model. It's still not a very large number, but we are hoping that, over time, that will grow.

As you know also, Yandex.Market itself derives a significant portion of its revenues from categories such as consumer electronics and white goods; basically, categories that are ideal candidates for online sales. And the foreign exchange weakness that we've observed in Russia, year to date, has probably negatively impacted the sales of those goods, more so than it has in many other sectors. So I think that's one of the effects that we're seeing out there from a macro standpoint.

I'd say, overall, ecommerce continues to be healthy and grow at a good pace, but certainly certain sectors of it that are much more tied to things like FX are more heavily impacted than others.

Great. Thank you very much. And one final one, if I may, just while I'm on the line? On Auto.ru, which you mentioned, I think the ambition to become market leader in the auto classified sector, I was wondering if this can be achieved without a significant ramp up in marketing budget.

Hi, this is Alex speaking. So with Auto.ru we acquired an auto classified portal with a very loyal audience, number of people who use Auto.ru directly and [type in] traffic is very high. There is also the Auto.ru team. So we plan to support Auto.ru on different fronts, from the technology perspective, from the team's perspective, skills, and also from advertising expense.

I don't expect a substantial increase in advertising spend which will be visible in Q3 or Q4 results for the total Yandex Company, Yandex Group level, but we'll definitely plan to aggressively support Auto.ru from different perspectives, also by promoting Auto.ru service on Yandex web properties.

Okay. That's great. Thank you very much.

Anna Lepetukhina, Sberbank.

I have two questions. My first question is on display advertising; can you please talk a bit about revenues growth in display advertising on ad network, what exactly is driving this growth? And do you think, going forward, the decline in display advertising on the Yandex websites can be offset by growth on ad network? Thank you.

Hi, Anna; this is Alex again. So in Q2, our digital advertising in total was 6% down year over year, and the part related to our own web properties was down 16%. So as we mentioned many times, digital advertisers are very sensitive for macroeconomic and geopolitical conditions. And in Q2, we saw cuts of budgets from multinational auto and FMCG brands, and also from local retail, telecom and finance companies.

Also, this was strengthened by the high base in H1, first half of last year, when display advertising was growing at 38% year over year.

The introduction of the partner display network helped to beat this negative trend, so the display ad network increased from RUB17 million a year ago to RUB101 million. And I would say it's still in a stage of fast growth and development.

So we are now actively [taking] new inventory and technology formats in developing demand for the new products, like RTB network and taking new platforms and offer new ad formats for advertisers to overcome the negative trends in display, which as I said is driven primarily by macroeconomic and geopolitical conditions.

Thank you. And my second question is the Yandex.Market; I'm just wondering when do you think you will start advertising this product to customers? When do you plan to launch some advertising campaign, and do you think it will be this year, or already next year?

Hi, Anna; it's Greg. So I think our plan with respect to marketing the CPA functionality of Yandex.Market, is to market that more aggressively in the back half of 2014, probably more closely to the holiday shopping season.

Thank you.

Boris Vilidnitsky, Barclays.

My first question is coming back to perhaps the macro situation; you mentioned a slight slowdown and display is the result of that. Could you perhaps talk about what you're seeing on contextual [ROC in advertising] in the results in the second quarter, but have you had any conversations with advertisers that are perhaps more concerned with the macro situation, or more hesitant to spend money there?

And my second question is actually about CapEx, longer term; so you slightly increased the guidance for this year, but perhaps how you see CapEx evolving over the next three to four years, let's say. Thank you.

Hi, Boris; this is Alexander speaking. So on contextual TAC basic, advertising as you see in our Q2 results, we saw a good trend. There is healthy growth both in O&O and partner ad network fronts, and the growth comes from primarily growing paid clicks, which is very good for our customers. CPC is slightly growing at 1%.

One item to mention is that we also see accelerated growth from the international customers, meaning even foreign customers. The rate of growth has actually accelerated, compared to a year ago. So in Q2 2013 the growth contribution of foreign customers to our total revenues was 4%; now it's 7%.

And by foreign I mean our customers which are based outside of Russia, not have operations in Russia. We also see solid growth trends from multinational companies which are based in Russia.

So by reiterating our revenue guidance, despite the slowdown in display advertising growth, we try to signal that we expect to see good solid trends in TAC-based revenue, in the following quarters.

This is Arkady. Maybe to follow up a little bit on [Russia], this is not the first crisis we have, and in any crisis, display advertising reflects the expectations of the companies, and they're usually low, whereas contextual advertising reflects the real business. And as we see in our numbers, and you see it now also the real business is still going, and we expect it to continue throughout this year.

Yes, answering the second question about CapEx, so we increased the expectations of capital expenditures to the range of 16% to 19% of total revenues in 2014. The reason here is improvement that we will see in the [improving] performance and productivity of our advertising technologies, primarily to serve the needs of the biggest customers [who have ad] campaigns.

And also to improve our search quality and increase the index in foreign languages which are relevant for the Russian users, so for Russian users, who search in foreign languages. So these are two main reasons for CapEx increase.

And the result for some part which could be potentially related to new legislation which [is] in Russia.

I see. Thank you so much.

Anastasia Obukhova, VTB Capital.

Could you please share with us the percentage Yandex.Market price comparison revenues had in the revenue structure of Yandex in the second quarter?

And also, your estimated time of CPA auction launch, launched this year. And do you also believe that the additional costs regarding advertising these new services regarding Yandex.Market, etc., will materially impact your overall budget, or overall expense? Thank you.

Hi, Anastasia; it's Greg. A couple of things on the Yandex.Market CPA auction that I think you were asking about; I think the current plan is to roll it out later this quarter.

In terms of the advertising, to support the Yandex.Market, obviously that's in the budget itself, at a certain level of spend, and obviously we will tailor that spend based on how well or not well it's going. But so far, that's already in the budgets that are currently laid out. Was there something else?

Yes, the share of Yandex.Market in total revenue structure of Yandex, will it change for example, versus the past year, how it's evolving, or higher than in the context of the income? Thank you.

It's slightly lower than it was historically, but a very small amount. It's in the same mid to high single-digit area, as it was before. But as I was saying, a significant portion of the Yandex.Market revenues are derived from consumer electronics and white goods, which are growing slower than other ecommerce categories, such as apparel or toys or building supplies. Therefore, Yandex.Market itself is probably growing a little slower, but still showing nice healthy growth trends for the business.

Thank you.

Ulyana Lenvalskaya, UBS.

You didn't touch yet on Turkey; could you please kindly update us on the progress with the market share? And do you expect maybe start monetizing this market share any time soon?

Yes, hi there; it's Arkady. In Turkey, as we reported, we reached 5% market share in previous quarter. Then we switched off a couple of distribution channels, which didn't give us enough conversions. Our market share went a little bit lower, below 5%, but still there.

And our quality of traffic improved dramatically. It's really our users now, the number of [clicks] per user, and all the other [factors] are now higher than ever.

We continue in Turkey, we've got a brand new team there, and we still expect to grow our market share this year. On monetization, we already monetized it. We've just got the sales director there; maybe you read some news. We're going to have the first revenues from Turkey this year.

Thank you, Arkady. And maybe another question to Alex; could you please update on the margin guidance this year, given we have seen some improvement [in profitability] quarter on quarter?

Hi, sure; it's Greg. So a couple of things on margins, overall, as you saw, we demonstrated some operating leverage quarter over quarter, from Q1 to Q2. And we continue to invest in personnel, though probably at a slightly slower pace than we have before. As you know, personnel is obviously the primary cost category for us.

Our thinking is that it still makes sense for us to keep hiring people, to keep investing in various strategic initiatives that we have, regardless of the macroeconomic environment that we see and read about.

Revenues, on the other hand, are driven by the success we have in converting strategic focus areas to actual dollars and cents, as well as the overall macro backdrop that we operate in.

And so macro is challenging. There's certain sectors of the economy that are not doing as well, as you know, certain segments of our business which are not doing as well, such as display, which are obviously getting impacted by the challenging environment that we have. But at this point, I don't think I can point to anything that will make display better. But at the same time, contextual feels pretty good.

So when you have certain expenses and certain revenues, margins end up just being a product of that. I think we will keep the expense structure more or less where it is; we will continue to invest in the strategic focus areas. And the revenues will be what they will be, based on how the situation evolves, and then the margins will fall out of that.

It's Arkady. I would like to add that we keep focused on margins. And although experiments in Turkey or our focus on [macro], we will always be there, and we will be sure that we keep the healthy margins as we have now.

Okay. Thank you.

Igor Semenov, Deutsche Bank.

I just wanted to go back to one of the previous questions, and just to follow up on CapEx. Could you talk a little bit about the medium-term outlook for your CapEx? Do you see any need to increase CapEx dramatically as a result of maybe recent regulatory initiatives? Thank you.

Hi, Igor; this is Alex speaking. In Q2, our CapEx was 18% of revenue; as I said, the outlook for this year, 16% to 19%. This year, we expect to complete investments in our new datacenter in Finland.

Next year, therefore, CapEx as a percentage of revenues should not be increasing, and probably will be lower than this year, simply because we will not be investing in any material substantial amounts in datacenters. But we will continue to invest in server equipment in order to increase capacity and productivity of our core technologists.

In 2016, maybe 2017, we will probably start to invest in datacenters again, to be in line with our projections on productivity that we need from equipment perspective. But since we invest into much higher efficiency datacenters that we used to have, we expect the new construction to have positive impact on our operating costs, especially on electricity costs, and also on rental fees.

So all in all, we think that, this year, CapEx will be slightly on the higher side of our multiyear level. And probably there will be some decrease as a percentage of revenues in the following year and then, new datacenter will have some additional impact.

Okay. Thank you very much.

Anastasia Obukhova, VTB Capital.

Could I ask one more question, please? Our last conference call during the first quarter, you kindly shared with us your understanding of where the EBITDA profitability might dilute, under the best and the worst case scenario. You gave 130 up to 300 [basis point] range of potential full-year dilution. Would you now stick to this kind of understanding, or is it becoming worse or better, the outlook for profitability dilution for this year? Thank you.

Hi, Anastasia; it's Greg again. No, it's the same. I just wanted to explain to you the puts and takes that go into it, right. Again, at the lower end of our revenue outlook, it could be 300 basis points. At the high end, it should be a little lower. But at the end of the day, we will keep investing in personnel and strategic initiatives.

And we, obviously, will watch what the macro situation is, and what the revenue is as it comes in, but we also want to keep investing in the business. We don't want to target margins blindly. And the range that we gave before of the various sensitivity cases, it's just as valid today.

Okay. Thank you.

Mitch Mitchell, UCS.

I just wanted to clarify on the share buybacks. So the 15 million share program is over, and you have an additional 3 million shares that you're buying; has that program already started?

And also, it looks to me like you bought 3 million shares just over the last quarter, which suggests you're moving at pretty quick pace. What happens at the end of the next quarter if you've bought out these 3 million shares? Would you have another buyback program, or might you be looking at paying [us] dividends at that point? Thanks.

Hi, Mitch. So first of all, the quarter was a fruitful one, I guess, in terms of volatility for our stock, and presented us with many opportunities for a stepped up pace of buyback, which we were able to take advantage of. Again, it's very hard to predict what the stock prices will do, but we remain disciplined and we would rather buy stock at low prices than high prices.

The 3 million share repurchase plan has not commenced yet, but will commence shortly after this quarter, in a couple of days. As you know, we're limited somewhat in our ability to buy back stock beyond the hypothetical needs of our employee stock option plan. As an [NV], as you know, any buybacks in excess of that would be taxed and will not be very capital efficient for us.

So the 3 million shares represents our expectations of the shares that we can buy back over some period of time on an annual basis. So I don't think we'll be speaking here in three months' time, again, depending on the stock price, but about reloading the share buyback program by another 3 million shares.

We will also continue to evaluate other means of returning capital to shareholders. The Board, as a whole, is committed to returning capital to shareholders, and will continue to evaluate alternative means of returning capital to shareholders over time.

Great. Thank you.

Thank you. We have no further questions coming through, so I will hand back to [Mr. Volozh] and Gregory Abovsky to conclude today's conference. Thank you.

Great. Well, thank you, everybody, for dialing in to today's call. We're very happy with our results, and we're looking forward to speaking with you again in another quarter's time in October.

Ladies and gentlemen, thank you for joining today's conference. You may now disconnect your lines.