Nebius Group NV (YNDX) 2016 Q1 法說會逐字稿

Hello, everyone, and welcome to Yandex's first quarter 2016 earnings call. We distributed our earnings release earlier today. You can find a copy of that press release on the Company's Investor Relations website and on news wire services.

On the call today, we have Alexander Shulgin, our Chief Operating Officer; and Greg Abovsky, our Chief Financial Officer. Arkady Volozh, our Chief Executive Officer, will join the Q&A session.

The call will be recorded. The recording will be available on our IR website in a couple of hours. We've also put together a few supplementary slides, currently available on our IR website.

And now, I will quickly walk 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 Factors section of our Annual Report on Form 20-F, dated March 21, 2016, 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 these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views change. Therefore, you should not on these forward-looking statements as representing our views as of any date subsequent to today.

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

And now I'm turning the call over to Alexander.

Hello, everyone, and welcome to our Q1 earnings call. We delivered a solid set of results with revenues up 34%, ex-TAC revenues up 36%, and adjusted EBITDA up 62%.

At the same time, our investment in our business units is continuing to deliver results as taxi revenues were up 176%, Yandex market revenues were up 5%, and Classifieds revenues grew 35%.

Let me now turn to our search in Russia, which averaged 57.6% in Q1 compared to 57.3% a quarter earlier. Sequential improvement was driven by our gains in Chrome, higher market share of Yandex browser, and our partnership with Microsoft. Our mobile share remained stable in Q1, 40% in Android, and approximately 45% on iOS.

Now, back to products. Yandex browser is steadily gaining share across all platforms on the Russian browser market. The most noticeable gains in Q1 2016 were recorded on desktop and on Android devices where Yandex browser gained approximately 170 basis points of market share compared to the previous quarter.

On iOS Yandex browser gained approximately 60 basis points of market share.

Market share gains were driven by increased marketing support, as well as significant product improvements. Six months ago, we introduced our Protect technology, which automatically protects users from phishing attacks, viruses, untreated WiFi networks, malware, and suspicious sites.

During this period, we have continued to add new features such as DNS script and online payments protection. Our browser product is an important direction for the Company, and we will continue to invest incremental resources in product development and marketing support over the course of the year.

Let me now turn to our business units. As you can see from today's release, and from the 20-F form, which we filed back in March, we have increased the level of transparency into the performance of business units. We have provided separate revenues and adjusted EBITDA results for five segments. They are Search and Portal, E-Commerce, Taxi, Classifieds, and Experimental Businesses.

Search and Portal includes all those services offered in Russia, Ukraine, Belarus, and Kazakhstan, excluding E-Commerce, which includes our Yandex market service Taxi, which includes our Yandex Taxi service; Classifieds, which is Auto.ru, Yandex.Realty, Yandex.Jobs, and Yandex.Travel; and Experimental Businesses, consisting of Media Services, Yandex.Data Factory, our Discovery services, and search and portal in Turkey.

Revenues from our Search and Portal segment grew 30% year over year, driven by our increased search, advertising demand for online advertising in all advertising categories, and implementation of VCG auction in September 2015.

Yandex market delivered solid revenue growth at 55%, driven by product improvements, stronger e-commerce trends, and increased performance-based marketing activities.

Revenues of Classifieds grew 35% in Q1, driven by growth of non-advertising revenues, which increased approximately 90% year over year.

As a result of our marketing activities, we saw solid growth in terms of visitors and a large increase in number of visitors and a large increase in number of listers.

Yandex Taxi grew 176%, and now this service is available in 17 Russian cities, and in Minsk, Republic of Belarus.

We also launched a B2B product for (inaudible) clients, and implemented a new, ultra-low price Express Serve.

We are excited by the prospects of this business unit. Over the course of 2016, we will be making substantial investments in marketing and product development aimed at accelerating their growth.

So, let me know quickly update on the Federal Anti-Trust Service case relating to Google's anti-competitive practices on Android. As you know, FAS initially ruled against Google in September 2015. Google contested the FAS decision in the court in December. In mid-March, the Russian Court of First Instance up held the FAS decision. In mid-April, Google filed an appeal against this court decision.

In case the court upholds the decision of the first instance, the prescription of FAS will come in force following the ruling of the appellate instance. We expect the case to be resolved by the end of the year.

I am sure that you also saw that the EU Commission issued a Statement of Objections in relation to Google's practices on Android. The statement includes the preliminary review of the EU Commission and states that Google abused its dominant market position by imposing restrictions on Android device manufacturers and on mobile network operators.

Based on this statement, EU view is very similar to the conclusion of Russian federal anti-monopoly service.

With this, I am turning the microphone over to Greg.

Thank you, Sasha, and thank you, all for joining our call today.

The year is off to a great start. Our consolidated revenues grew 34% year on year and reached RUB16.5 billion. Online advertising revenues accounted for 96% of total revenues in Q1, and increased 31% year on year.

As online advertising performance continues to converge, we will no longer provide text-based and display advertising revenues separately. However, we will continue to separately present revenues from Yandex websites and revenues from our ad network.

Yandex's owned-and-operated websites, which now include both text-based and display revenues, grew 27% year on year, mainly driven by revenue growth of text-based ads. Our ad network, which now includes revenues from text-based and display partner networks, grew 43% year on year, benefiting from the addition of new partners, improved targeted capabilities that were all implemented late in 2015.

We also see that our existing partners are allocating more of their inventory, both desktop and mobile, to ads powered by Yandex Direct, or those ads coming through our own real-time bidding ad exchange.

Ad network comprised 26.9% of total revenues in the quarter. The contribution of ad network revenues to total revenues increased by approximately 180 basis points compared to Q1 of last year, and was approximately 130 basis points up from Q4 of 2015.

In Q1 we saw growth of ad budgets across all advertising categories, including auto and financial services. Travel performed slowly than other ad categories, but still grew approximately 20%. The best performers were real estate, auto, home and garden, apparel, and FMCG. Other revenues grew 132%, primarily driven by the growth of Yandex Taxi.

Traffic acquisition costs related to partner advertising network grew 34%, slower than ad network revenues due to the change in our partner mix. As a result in Q1 our partner TAC comprised 56.3% of our ad network revenues, down from 60.3% a year earlier.

Distribution TAC increased 5% year on year, and constituted 7.8% of advertising revenues from Yandex websites, compared to 9.5% in Q1 of 2015 and 8.2% in Q4 of 2015.

Total TAC grew 25% versus Q1 of last year. In Q1, our total TAC constituted 21.4% of online advertising revenues, compared with 21.2% in Q4 of 2015 and 22.5% in Q1 of last year.

Paid clicks grew 18% while cost per click increased 12%.

Turning to our cost structure, total OpEx, excluding TAC and D&A, grew 24% in Q1. Excluding stock-based comp, expenses grew 21%.

Growth was primarily driven by growth in advertising and marketing expenses for our business units, as well as for Yandex browser.

Personnel costs still remain the largest cost item. In Q1, our headcount remained largely flat compared with December 31st of last year. In Q1 our personnel costs constituted 23% of revenues. We continue viewing the current economic situation as a good opportunity for us to keep adding talent.

Stock-based comp, which is part of personnel expenses, increased 59% due to ForEx, new grants, and the RSU exchange program that we executed last year.

G&A expense for the quarter increased 61%, reflecting investments in servers and data centers that we made in 2015.

Adjusted EBITDA increased 62% year on year. Adjusted EBITDA margin was 35%, up approximately 6 percentage points from the previous year, despite our increased investment in advertising and marketing.

This quarter, the impact from ForEx was a loss of RUB1.3 billion related to dollar-denominated assets and liabilities on our balance sheet following the appreciation of the ruble from 72.9 on December 31st to 67.6 on March 31st.

Adjusted net income was up 41%, and adjusted net income margin was 19%.

Our CapEx was RUB1.5 billion, or 9% of Q1 revenues, down from 39% of sales during Q1 of 2015. A significant part of our CapEx continues to be denominated in US dollars.

Our outlook for CapEx this year is unchanged as we continue to expect our CapEx revenue ratio to be in the mid-teens, subject to FX movements.

As Sasha already mentioned in his remarks, we're starting to provide more transparency into the performance of our business units, each of which demonstrated solid growth in Q1. Search and Portal revenues were up 30%, driven by improved search share, signs of stabilization in the advertising market, as well as our technological implementations in 2015, including the VCG auction, new ranking formulas, and better targeting capabilities.

Adjusted EBITDA of Search and Portal grew 65% in Q1 compared to year-ago levels. Adjusted EBITDA margin of Search and Portal was 39%, up from 30.9% in Q1 of 2015.

Revenues of Yandex Market were up 55%. The growth was driven by improved consumer demand, increased traffic coming from search, as well as advertising and marketing support.

As a result of increased investments into advertising and marketing through performance-based and traditional advertising channels, adjusted EBITDA of Yandex market decreased 3% year on year, and its adjusted EBITDA margin was 36% in Q1 of this year, down from 58.6% in Q1 of 2015.

Revenues of Yandex Taxi were up 176%. The growth was driven by the addition of new cities, and an increased number of trips. As we've discussed in the past, we're making significant investments in Yandex Taxi, including advertising and hiring of additional personnel.

In Q1, adjusted EBITDA margin of Yandex Taxi was approximately zero. This compared with 54% adjusted EBITDA margin in Q1 of last year.

Revenues of classifieds grew 35%, driven by growth of [IVASS] and listing revenues at Auto.ru.

Adjusted EBITDA in Classifieds was negative RUB6 million. The main driver of the decline, as in other business units, was growth in advertising and marketing activities aimed at strengthening our competitive position, especially in the regions.

We continued investments in our Experimental Businesses, represented by our media services, Yandex Turkey, YDF, and Discovery Services, while revenues from our Experimental Businesses grew 87%. However, these businesses continue to be a drag on our overall margins.

All in all, we continue to be focused on managing expenses that we can control, and we will continue to invest into our business units to strengthen their competitive positions.

Now, getting back to corporate matters, we've continued to buy back the convertible bonds that were issued in December of 2013. In Q1 we bought back another RUB23 million face value of the bonds. Since inception of the buyback program, we've bought back approximately RUB292 million face value of the bonds.

We ended the quarter with approximately $895 million in cash and cash equivalents. The currency split was approximately 40% rubles and 60% dollars and euros.

Now turning to guidance. Based on the current trading conditions, we are raising our guidance range and now expect full-year revenue to grow in the range of 15% to 19% in 2016.

And with this, I'll turn the call over to the operator for the Q&A session.

Thank you, sir. (Operator Instructions). In interest of time, we would kindly ask you, ladies and gentlemen, to limit your question to one and one follow-up question. (Operator Instructions).

We will take our first question from Lloyd Walmsley from Deutsche Bank. Please go ahead. Your line is open.

Thanks for taking the question. Two, if I may.

First, just when you look at the strength in, I guess, the new segment reporting O&O advertising revenue, I know you're changing how you report that, but can you give us some additional color just on how that strength broke out between the search side and the display side of O&O, perhaps directionally?

And then, I guess second one would just be if you look at the share gains in the Yandex browser, how much of that today is coming from, perhaps, the increased flexibility on doing pre-installs with OEMs and wireless carriers? Or is most of the potential market share benefit of the increased flexibility coming from that FAS ruling against Google? Is most of that to be coming in the future? Any color you can share there would be great?

Thanks.

Hey, Lloyd, it's Greg. I'll take the first question then Sasha will take the second question.

Just to give you a sense, so display grew much slower, and so, it was up about high single digits with the rest coming from the growth of text-based. Okay?

That's helpful. Thanks.

Lloyd, hi. This is Alexander speaking.

So, I will start from the last question on Yandex browser. The growth in market share comes primarily from our investment in product development, so, we basically do a better product, and also from our connectivities.

The effect from pre-installations with OEMs has not yet filtered through the retail chain. So, it, hopefully, we will see the impact from better placement on devices by the end of the year. So, we have some positive movement there, and first devices with better-placed Yandex search service are committed right now.

On FAS, just a quick overview of what is happening. So, as I said in my script, Google has appealed to the court on the FAS decision in December 2015, and in mid-March the Russian Court of First Instance upheld the FAS decision, and now Google has appealed once again into appellate court. So, hopefully, this case will be fully resolved by the end of the year.

What is also interesting is that on April 20th the European Commission published its Statement of Objections on Android on Google -- objections to Google on Android operating system and its use.

So, basically, the European Commission alleged Google on items which are very similar to the findings of the Russian FAS, which is a very positive thing for us.

So, what exactly EU said, that Google is requiring OEMs to pre-install Google Search and Google Chrome browser, and requires OEMs to set Google Search as the default search service on the devices as a condition to license certain Google proprietary apps, basically Google Play.

Google is also preventing manufacturers -- gain, this is the EU Commission Statement of Objections from failing smartphones running on computer operating systems based on Android open-source code. And Google is also giving financial incentives to manufacturers and mobile network operators on condition that they exclusively pre-install Google Search on their devices.

All these findings are very similar to what Russian FAS was saying, and this is -- in a way this reinforces our position against Google in this case.

So, we expect the positive impact from this litigation with Google to be realized in better place of Yandex apps and the Yandex search service throughout this year, and, given that it takes time to produce devices and sell them in retail chain, and it takes time to replace devices which are used by people, by end of this year and, hopefully, first half of 2017.

Okay, thank you for that color. Appreciate it.

We will now take our next question from Edward Hill-Wood from Morgan Stanley. Please go ahead.

Hi. Good afternoon, everyone. So, I've got two questions, just based on the outlook. You obviously have had a very strong Q1. The guidance has been raised but only by a very modest amount. So, I was wondering if you could just give some color on the trajectory of, particularly revenues, into Q2, and whether or not you're just factoring in a degree of conservatism in terms of tougher comps and -- or whether or not there's been some dynamic change as we enter the second quarter to make you more conservative about the full-year outlook?

And secondly, on margin, in the last call you, I think, broadly guided to margins being broadly flat at the core with some additional 2 or 3 points of investment in Taxi and others. And, given the traction you're seeing, particularly in Taxi and the operational gearing you're now seeing in the core business, do you think it's possible that the -- you could be essentially -- you could have more investment within the Taxi segment for the balance of this year, and offset that with improvements at the core and still come out with broadly the same result?

I just wonder if you could give us some color on how you're thinking about costs, investment, and operational gearing. Thanks.

Hey, Ed, it's Greg. Thanks for the questions.

So, on guidance, yes, you are quite right that the comps do get a little bit tougher over the course of the year as the year evolves. So, in Q2, they'll be 1 point tougher, and in Q3 it'll be slightly more and by September 1st onward, we'll be comping the introduction of VCG Auction.

So, what we wanted to do as we are looking at the guidances, we're looking at the overall economic environment, which is still somewhat challenged. I think it's starting to stabilize. It's starting to improve a little, but we're certainly not out of the woods yet, I think.

We do want to be cautious. We do want to make sure that the guidance that we put out is conservative.

And so, as we go through the year hopefully we can -- we can try to do a little bit better than that, but it's a combination, like I said, of VCG Auction introduction, tougher comps throughout the year, and overall kind of caution around the overall macroeconomic conditions.

On the question of margins, yes. So, in our last call I was saying that we'd probably see overall margins compressing around 200 basis points as we keep the margins within the Search Portal roughly flat, year on year between 2016 and 2015, and as we look to invest the incremental operational gearing of the business back into the business units. And that still is the case today.

Frankly, the results that we're seeing in many of our business units are probably a lot better than what we were anticipating, even at the start of 2016. Some of the things that they're doing are actually kind of really hitting the ball out of the park, and so, we will invest more.

I think, overall, margins are -- may be down 300 basis points, maybe a little more, as most of the excess operational gearing of the business is invested in the business units. Taxi will be the largest recipient of those, followed closely by Classifieds and Market.

That's great. Maybe we should just follow up on that first one again in terms of the current trajectory, as you see it, into Q2, whether or not you're sort of seeing similar, at this point, where it's still very early days, similar sort of broad trends as Q1?

Yes, the conditions are largely unchanged from Q1.

Great. Thanks very much.

Thanks, Ed.

Thank you. We will now take our next question from Alex Balakhnin from Goldman Sachs. Please go ahead.

Yes, good afternoon. I have two questions, if I may.

One is on the Yandex Market. Can you probably provide some background behind the acceleration of the revenue growth there? In particular, was there any shift in the category mix there? Was there any pricing change? Or that is just organic acceleration, the beginning of which we saw in the fourth quarter?

And my second question as we were following up Ed, and, Greg, your comments on up to 300 basis points year-on-year change, I was just wondering that implies quite a substantial ramp-up in costs across the board, and it seems that you've started -- you have started scaling down your activity in Turkey. Correct me if I'm wrong. And it looks like it's probably a little bit, too, on the conservative side to expect the sequential EBITDA margin erosion in the -- in 2016.

So, maybe some more details? Because, I mean, you start the year with 60% EBITDA margin increase. I just struggle to see how this will end up with the margin pressure. So, your thoughts will be helpful.

Thank you.

Hi, Alex. Thanks for your question -- questions.

I guess I'll take Yandex Market first. So, the drivers of the acceleration have been primarily driven by incremental traffic, which has been coming through both search as well as through incremental marketing activities undertaken by Market. Pricing itself hasn't really moved much, so, it is, more or less, a function of increase in gross merchandise value, as well, coming through the platform.

I do think that there's a lot more that we can do in Yandex Market, but I think let's see how the rest of this year evolves and to what extent can we drive up GMV, can we drive up revenues? How much can we invest in marketing there, and in terms of improving the product? We've actually done a fair amount already in terms of improving the product. We are trying to be more aggressive about switching certain categories over to the CPU model, as we sort of always talked about.

At this point, we're experimenting with one or two categories where we're doing it sort of wholesale, i.e., there is no cost per click model any more within one or two categories, and if that's successful, you'll see us rolling that out more widely.

On the question of margins, you're absolutely right about taking some of the costs out of the Turkish business and scaling that business against sort of the opportunity there. What we are doing, and I think this is similar to what I've told on Ed's question, is we are really stepping up massively in the investment in Taxi, because of the results that we're seeing. The way that we can scale up cities now, very, very quickly is -- it gives us confidence to invest much more.

So, that's where it's all going to go.

Thank you. And if I may ask you a quick follow-up, I mean, now you disclose quite a bit of information on your Taxi business, and how do you think your cost base in Taxi compares to what Gett -- GetTaxi is spending? I mean, do you think it's comparable or you are substantially ahead of them?

I honestly don't really know. All I can guess is, those guys have raised a lot more capital historically, and raising more capital, on top if it, and they've spent it somewhere, whereas we have been EBITDA positive up until, I think, Q4 of last year. So, that, kind of gives you kind of a sense as to the differentials in terms of investment.

And, look, the other places that we're going to invest are also the other business units. Frankly, Classifieds will get a lot more investment. What we've seen is, we're making really large strides in terms of growing our listings base compared to Avito here in Russia. We've increased the number of listings by 34 percentage points, year over year.

So, I think right now we have about 60% as many listings as Avito does on a nationwide basis. Clearly, we are considerably larger than them in Moscow. We're about on par with them in St. Petersburg, but generating a lot more calls per listing than they are, either in Moscow or St. Pete.

So, that's another area where we're going to invest substantially in terms of scaling this Classifieds platform out into the regions.

Thank you.

Thank you. We will now take our next question from Cesar Tiron from Bank of America Merrill Lynch. Please go ahead. Your line is open.

Yes, thank you. I have, actually, two questions.

The first question is on Yandex Taxi. Can you please tell us into how many cities did you, year to date, roll out the service. And in how many cities you are actually already charging the drivers?

And the second question would be on Turkey, can you please tell us what was the rough negative contribution of the Turkish spend to the consolidated margin?

Thank you so much.

Hi, Cesar, it's Greg again. I guess I'll take the second question first. So, Turkey is inside the experimental segment, as disclosed in the -- in the earnings release.

And they are the majority -- the overwhelming majority of that, I would say. So, that should give you some sense.

In terms of cities that we've started to date, I can't remember, off the top of my head, and I'm sure I can get back to you offline. My guess is we've probably ramped up about 8 to 10 cities, year to date, maybe something like that. And we're really monetizing only a handful at this point.

Thank you.

Thanks.

Thank you. Our next question comes from Vladimir Bespalov from VTB Capital. Please go ahead.

Hello. Congratulations on great results and thank you for taking my questions.

My first question is on your real estate deal. Could you update how the things are developing? Is the timeline the same? And, given that you have a pretty huge cash pile, are you still planning to pay half of the debt once the deal is closed? Or you might be considering like redeeming the full amount upon the closure of the deal?

And the second question is on your headcount. Your headcount hasn't changed over the past year, but do you think you would be able to sustain this growth and develop your new business units with the same amount of personnel, or you see some changes in this area through the end of the year?

Thank you.

Hi, Vladimir. I'll take the first question and Alexander will take the second question. On the headquarters acquisition, it's still looking like October 2016, no real changes there.

And in terms of how exactly we are going to pay down the debt or keep the debt or swap it out or whatever, we're still talking to banks and exploring various ideas that we have. I think the operating assumption is still to pay down roughly half of it, but it might evolve over time.

I'll let Sasha answer the second question.

Vladimir, talking about headcount, so, as Greg said, we are putting investments behind the particular units where we see growth. Business units are clearly growth opportunities, so we are going to support them both with investments in product, which is primarily people, so, good software developers which are building the product, sales and marketing, admin teams, and so on. And we are also supporting them with investment in marketing.

There are also growth opportunities in search, specifically on mobile, for example, or in maps, and we are also planning to add a certain number of people in these growth opportunities.

This year -- so, in 2015, now the headcount was broadly flat, compared to previous years, slightly down. This year we plan to add some number of people to headcount.

Thank you very much.

Thank you. We will now take our next question from Maria Sukhanova from Sberbank. Please go ahead.

Yes, hello. Thank you. So, I have two questions.

First, about Taxi, could you please share with us some operating numbers, like number of trips in Moscow or overall, something like this? And also, you've just recently introduced differential commissions for your drivers. What effect do you expect from this?

And second, this -- the way you changed -- you changed methodology for disclosing revenues. So, thank you for showing those five and other businesses, but what's the point in not showing display and text-based advertising? Aren't -- isn't the pool for advertisers very different in these two segments? Like you said in the first quarter, the dynamics was very different, so, could you maybe give more color on that, please?

Maria, this is Alexander. Let me answer the second question, and then Greg will talk about Taxi.

So, on display and text-based advertising, the logic's very simple. These two advertising channels, they eventually converge. And here we see now with the growth in programmatic display, or display which solely based on auction system. So, the differentiation between display and text-based becomes a bit artificial. So, we think that, long term and currently, at this point in time it makes more sense from investor disclosure standpoint to combine these two revenue streams.

And I would just add to that, that's also similar to how most of our competitors disclose their results, as well. So, it's to be consistent with industry practices.

On the question of Taxi, as I said, since we don't monetize in most cities, with the exception of Moscow and St. Pete, you can assume that the number of trips grew much faster than revenues.

With the -- respect to your question about commissions, yes, our commission structure is, we believe, unique, and it helps us achieve certain results such as get more drivers to serve certain tariffs, and I guess that's all I want to say about that.

Okay, thank you.

Thank you. (Operator Instructions). We will now take our next question from Alex Balakhnin from Goldman Sachs. Please go ahead.

Yes, thanks for taking a couple of questions from me. You tend to disclose the share of mobile in revenues and traffic. I just was wondering if you can do this, this time, as well.

And, also, I see the ad network revenues is growing quite fast, because you used to have the expansion of the partners. Are you pretty much there with this expansion of this ad network, or it's still ongoing, i.e., will ad network revenues grow faster for a couple more quarters, or not really?

Thanks.

Hi, Sasha. Yes, happy to give you details about search -- search queries and search revenues on mobile. Search queries were 27%, so about the same as last quarter. Search revenues on mobile were about 21%. So, I think it's just a little bit less than the last quarter, but still good. No real sort of changes, other than just seasonal factors or what-not playing around with it.

Speaking of monetization on mobile, I think we're definitely getting a lot more interest from advertisers for mobile advertising, mobile -- better targeting on mobile, and I think we should be able to improve monetization there sort of by the end of this year.

And then I guess your other question was about --?

Well, the size of ad network, which has been growing quite rapidly, and I was just wondering if you achieved pretty much the size of that network, you're satisfied with, or it's still growing, i.e., will that line of revenue grow faster than business, on average?

I think it will grow faster. I think it's more of a function of getting more inventory within a partner, as opposed to just expanding the size of the partner network.

What we've seen happen over the last few quarters is our partners are allocating more and more of their inventory to both Yandex Direct and Yandex real-time bidding products, and that's accelerating the growth there, and we sort of expect that to continue over the course of the year.

Okay, thank you.

Just a couple of points to add. We see opportunity to grow our ad network on mobile. I think we're just starting monetize mobile as an advertising network.

And also, we see opportunity to provide products within (inaudible) rates, so more fine-tuned products for the biggest advertisers, and that's another opportunity to increase monetization of inventories that is available to Yandex advertising network.

Thank you.

Thank you. There are no further questions at this time. I would like to turn the call back to the speakers for any additional or closing remarks.

Thank you all for joining us today. We hope to see you on our Q2 earnings call in late July. In the meanwhile, you definitely can reach out to us at our IR email address or by phone. Our contacts are available on our IR website.

Goodbye.

That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.