Nebius Group NV (YNDX) 2018 Q3 法說會逐字稿

Good day, and welcome to the Yandex Third Quarter 2018 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Katya Zhukova, Investor Relations Director. Please go ahead.

Hello, everyone, and welcome to Yandex' Third Quarter 2018 earnings call. We distributed our earnings release earlier today. You can find a copy of the press release on our IR website and on Newswire services.

On the call today, we have Arkady Volozh, our Founder and Chief Executive Officer; Gregory Abovsky, our Chief Operating and Chief Financial Officer; and Mikhail Parakhin, our Chief Technology Officer. Tigran Khudaverdyan, Head of our Taxi Business; and Vadim Marchuk, our VP of Corporate Development will be available on the Q&A session.

The call will be recorded. The recording will be available on the IR website in a few hours. As usual, we prepared a few supplementary slides, which are currently available on the IR website.

Now I'll quickly walk you through the safe harbor statements. 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 27, 2018, 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 rely on those forward-looking statements as representing our views as of any date subsequent to today.

During this call, we'll be referring to certain non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with U.S. 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 Arkady Volozh.

Thank you, Katya, and hello, everyone. It is hard to overstate the progress the company has made over the past several years. The last time we were growing this quickly was in 2012 when we were 1/4 of our size we are today. This growth was made possible because we were able to attract and retain the best people at every level of Yandex.

Our management team remains fully committed to the company, and continues to demonstrate outstanding results, which they will tell you about in just a moment. Our unique culture and spirit continues to drive innovation and progress across all sectors. We're working on numerous exciting projects, which we expect to have long-lasting positive effects on multiple industries. Some of these projects you've already heard of, and our progress there has been phenomenal. Look, for example, at Yandex. Taxi, or self-learning cars, or Yandex. Drive, our car-sharing service, which became the largest in Russia, and the 3rd largest in the world in just 9 months after the launch, or look at Alice, our Intelligent Assistant, or Yandex. Zen, our personalized discovery platform and many, many others.

These were just some of the great initiatives we're working on at Yandex, and our team is constantly developing new and innovative products to keep expanding Yandex ecosystem and creating value for our shareholders.

I know you have seen my statement in the release we put out last week. You know, I'm not normally on these calls, but I felt it was important to be on today so that I can reiterate what I said. I have no intention of leaving Yandex or selling my stake in the company. In fact, quite the opposite. I remain as committed as I have ever been to the company's future. We are very aware of ever-changing operating environment. Some of our verticals are more sensitive to macroeconomic headwinds than others. Some see intensifying competition levels. Some might be affected by regulatory changes in different jurisdictions. In the tech industry of today, effectively managing these sort of challenges has become an important part of our job description. But it is our people and our unique culture that has helped us navigate these headwinds in the past and that will help us continue to manage them in the future.

We are all very excited about the prospects for Yandex in the coming years. Anyway, I don't want to steal the spotlight from the rest of the team. We have a very strong set of results to share with you. So let me now hand over to Mikhail Parakhin.

Thank you, Arkady, and hello, everyone. In Q3, we delivered another solid set of results. Our consolidated revenue grew 39% year-on-year reaching RUB 32.6 billion. Excluding the impact of Yandex. Market, which we deconsolidated, our revenue in Q3 grew 44% year-over-year. This is an acceleration of 5 percentage points compared to Q2 growth rates, primarily driven by the strong performance of Yandex properties as well as by strong growth across other segments: Taxi, Classifieds, Media Services and Experiments.

Revenues of Yandex properties increased by 22% year-over-year. Excluding Yandex. Market from both periods, revenues of Yandex properties grew 30% year-over-year. On the ad network front, revenues of YAN grew 7% year-over-year this quarter. The slight acceleration of growth rate compared to the first half of the year, was mainly driven by improved revenue growth on small and medium partner websites.

I'm very pleased with the performance of Search and Portal in Q3. Revenue grew 26% and accelerated 4 percentage points versus Q2 growth rates. This growth was driven by the Search itself as well as the revenue increases on the Yandex properties front, with Zen, Images from Yandex Homepage as the major contributors. Modest growth of our Ad Network continued to weigh on overall healthy growth rates of Search and Portal. Sales of Yandex. Station, our smart speaker were insignificant in Q3 due to shipment delays.

In Q3 2018, we passed the anniversary of the start of our share gains on Android. In Q4, we expect share gains to continue, but at a slower pace compared to previous 12 months. This will logically result in the slowdown of our revenue growth on Android, which was a significant driver of our search revenue growth in Q3. Ad Tech was another important driver for search revenue growth in Q3. We experimented with ad layouts and continued testing and rolling out new templates. Templates are doing extremely well on Mobile. In some cases, we see 3.5x increase in CTR of mobile paid links. In Q3, the share of mobile traffic reached 48.7% of our total search traffic. Mobile revenues represented 39.5% of our Search revenues. Revenue-to-traffic ratio improved 250 basis points compared to the previous quarter. I am happy how mobile search is doing, but it is important to highlight that in addition to Search, we have several other Yandex properties that are primarily mobile-oriented. Turbo Pages, which is an analogue of instant articles, though much easier to implement by website owners, now appear on 45% of our mobile search engine results pages. Monetization of Turbo Pages grew almost 400% year-over-year in Q3.

It is worth noting that Turbo Pages have been well adopted in e-commerce as they make online mobile shopping faster. In Q3, over 800 online stores started using Turbo Pages. One of our experiments with a leading Russian consumer electronic retailer demonstrated the growth of ad-to-cart conversion rate by 50%. Geo Services is another example of truly mobile services, which is still in a very early stage of monetization.

In Q3, we continued exploring the commercial opportunity around our Geo-Services by experimenting with different ad placements. Now businesses can add product offerings with prices in Yandex. Maps. Number of advertisers on Geo-Services has doubled year-over-year, particularly driven by SMB clients. In Q3, we have about 20,000 ad pins in Navigator, which in total were shown almost 4 billion times as compared to zero a year ago.

In Q3, we added an ability to find the specific type of food on our maps. Say, if you want a burger or foie gras, you can now easily find it in nearby cafés and restaurants on the Yandex. Maps. In Q3, local base searches grew 90% year-over-year.

On product launches, in September, we introduced our public cloud platform, Yandex. Cloud, allowing companies to develop and support web apps and services. Providing Yandex' advanced technologies and infrastructure, Yandex. Cloud currently offers: scalable virtual infrastructure with multiple management options; automated services for the labor-intensive management tasks of popular database systems; the AI-based Yandex services, speech recognition and synthesis as well as machine translation. In less than 2 months, we received [8,500] (corrected by company after the call) requests from enterprises and SMBs. Since the service is available per request at this stage, we allowed 5,000 companies to use it. Our client base is currently represented mostly by IT, TMT, retail and professional services.

We continue strengthening our position on Food front, offering our users a broader range of services in the food sector. Recently, we announced the acquisition of Edadeal. It helps users find the best offers in offline retail and obtain cashbacks directly from the FMCG producers. We believe that as a part of our ecosystem, Edadeal will get more traffic from Yandex as well as access to our technologies. It will be able to provide attractive offers from retail and FMCG producers to a wide audience. As of today, the Edadeal application has 6 million monthly active users and operates in 16 cities with a population of 1 million+ people. It partners with 650 retail chains and the 50 largest FMCG producers, such as Ferrero, PepsiCo, Unilever and others.

Turning to must have part of my remarks. Our Search share performance. In September, our overall search share reached 56.3%, up 80 basis points compared with a year ago. Our search share on desktop reached 66.9% in September gaining 100 bps from June and 80 bps from a year ago.

On mobile, our search share averaged at 47.5%, growing 490 bps year-on-year. In August, we overtook Google on Android platform in Russia. As of September, our search share reached 49.5%, up 150 bps from June 2018 and 660 bps year-over-year. Our search share on iOS was 40.7% in September, up 140 bps compared to June 2018 and up 170 bps from a year ago. With this, I'm turning the microphone over to Greg, who'll walk you through the operational performance of business units and our financials.

Thank you, Mikhail, and thank you, all for joining our call today. In Q3, we delivered another strong set of results. Our consolidated revenue grew 39% year-on-year. Excluding Yandex. Market, our total revenues grew 44% year-on-year in Q3. Mikhail mentioned before, online advertising revenues grew 18% year-on-year. Excluding Yandex. Market, online advertising revenues increased 24% year-on-year. Other revenues grew 327% year-on-year in Q3, primarily due to growth of Yandex. Taxi as well as Yandex. Drive, our car sharing service, which did not exist in 2017. Total TAC increased 20% year-on-year and amounted to 16.3% of total revenues, down 250 bps from Q3 2017 and up 40 bps compared with the previous quarter.

Traffic acquisition costs related to our partner advertising network grew 14% year-on-year. Traffic acquisition costs related to distribution partners increased 37% year-on-year. This growth was primarily driven by increase of Android revenue as well as result of our search share gains on that platform as well as ongoing shift to Mobile.

Turning to our cost structure. In Q3, total OpEx, excluding TAC and D&A grew slower than revenues at 28% year-on-year. Excluding stock-based comp, operating expenses increased 24%.

As of September 30, we had 8,854 employees, up 7% compared to June 30, and 28% higher compared to a year ago. This growth was primarily driven by hires in Yandex. Taxi and our Core business, but was muted by the deconsolidation of Yandex. Market.

In Q3, our personnel costs amounted to 18% of total revenues. Stock-based comp increased 96% year-on-year in Q3, and constituted 5.3% of revenues. D&A expense in Q3 increased 6% year-on-year. Our consolidated adjusted EBITDA increased 88% year-on-year. Excluding Yandex. Market, our adjusted EBITDA grew 96% year-on-year. This quarter, the impact from Forex was a gain of RUB 648 million, related to the depreciation of the Russian ruble during Q3 from RUB 62.8 to the dollar to RUB 65.6 to the dollar. Adjusted net income was up 157% year-over-year and adjusted net income margin was 18.7%. Excluding Yandex. Market, adjusted net income was up 167% from Q3 2017.

Our CapEx was 13% of our total Q3 revenues. For the first 9 months of the year, it was at 16% of our revenues. On an annual basis, we continue to expect our CapEx to be in mid-teens as a percent of revenues.

Turning to the performance of our business units.

Search and Portal revenue grew 26% year-on-year, driven by the growth on our owned and operated properties. Adjusted EBITDA of Search and Portal were 37% year-on-year in Q3 and its adjusted EBITDA margin reached 45.7%. At this point, we expect adjusted EBITDA margin of Search and Portal business to expand 100 to 200 basis points in 2018 compared to 2017 levels.

Turning to our Taxi segment. As of September 2018, the combined business operated in more than 600 cities. Our total number of rides grew 131% year-on-year. Revenues of Yandex. Taxi grew 344% year-on-year in Q3. Adjusted EBITDA loss of Taxi was RUB 711 million in Q3. This is a significant moderation of losses compared to previous periods primarily driven by significant improvements in the economics of our business in Russia, offset partially by investments in food delivery, new geographies and autonomous vehicles.

Now let me turn to Classifieds. Revenue of Classified business grew 80% year-on-year in Q3, primarily driven by revenues from listing fees and VAS, which increased 86% as well as from offline revenue related to dealership business, run by Auto.ru on experimental basis. Adjusted EBITDA of Classifieds was positive RUB 78 million.

Turning to Media Services. Yandex. Music continued strengthening its market position in established markets. Recently, we announced that Yandex. Music expanded beyond Russia and CIS by launching in Israel. KinoPoisk continues adding professional content to the platform. As of today, the list of our partners, which provide us with content includes Warner Brothers, Sky and BBC.

In Q3 Media Services revenues were RUB 414 million and grew 43% year-on-year. Media Services adjusted EBITDA loss was RUB 238 million, due to the growth of advertising and marketing costs, personnel costs and our investments in content.

In Q3, revenues of Experiments primarily represented by Zen, Cloud and Yandex. Drive reached RUB 706 million, primarily generated by Drive and Zen. Adjusted EBITDA loss of experiments was RUB 604 million, mainly as a result of our investments in Yandex. Drive and Yandex. Cloud. Yandex. Drive continues its rapid development, taking the leading position in Russia in terms of the size of car fleet. Our car sharing service also became the second largest in Europe and third largest in the world. As of today, Yandex. Drive extended its number of vehicles to 5,000 and reached 5.5 million rides since launch in February. We'd like to highlight that our car sharing service business is only 9 months old.

In September, the annualized revenue run rate of Zen more than doubled year-on-year, and exceeded RUB 4.8 billion as of September 2018.

Moving to Yandex. Market. As a reminder, we no longer consolidate the results of Yandex. Market in our financial results. In Q3 revenues of Yandex. Market on a like-for-like basis grew 71%, mainly driven by the growth of price comparison service. Adjusted EBITDA loss of Yandex. Market was RUB 489 million in Q3 as we've ramped up our investments in logistics and infrastructure. Just recently, we announced launch of Beru, which recently came out of beta. Currently, approximately 1,000 merchants provide their products on the Beru marketplace, offering about 100,000 SKUs and by the end of the year, we plan to increase the number to 150,000 SKUs.

Now getting back to corporate matters. We ended the quarter with approximately RUB 93.5 billion in cash and equivalents, which is approximately $1.4 billion at the exchange rate as of September 30. This includes the cash of Yandex. Taxi, which amounted to RUB 26.3 billion. Cash and equivalents of Yandex. Market of approximately RUB 32.2 billion, are not included in the consolidated results of Yandex. N.V.

In Q3, we spent $141 million on share repurchases and as a result bought back 4.5 million shares.

Turning to guidance. Based on our recent solid performance, we increase the outlook for Search and Portal business to the range of 21% to 23% year-on-year in 2018. Excluding Yandex. Market from 2017 and 2018 results, we expect our total revenues to grow 35% to 38% in 2018 compared with 2017 levels. With this, let me turn the call over to the operator for the Q&A session.

(Operator Instructions) We will take our first question from Ulyana Lenvalskaya from UBS.

I'll probably start with the Taxi. Greg, could you please comment on the expected taxi EBITDA loss this year? And maybe would it be fair to say that taxi is now on the path to breakeven?

Hi, Ulyana, this is Greg. Thank you very much for the question. Yes, what we said in the prepared remarks as well as in the press release is that the Taxi business for Russia and CIS is profitable on EBITDA basis, and you can assume that it's even more profitable if you just take Russia proper, excluding CIS. Our expectations for the loss of Taxi are lower than they were when we've provided you updated guidance back in July. However, we have a couple of areas of investment within the Taxi segment, which we still continue to pursue. Those are in no particular order, the food delivery business, the self-driving business and international expansion. As you know, we launched the service in Serbia and Estonia and Lithuania, and we're looking at a few other small markets to launch in. So the overall losses in 2018 should be lower than my previous guidance. And furthermore, we do expect that the profitability of the Russia, CIS segment should continue to improve over time.

If I may, the second question? Could you please comment on the news about potential changes in the regulatory environment about the news aggregation? And do you think Zen could also be potentially subject to this regulation?

Hey, sure. So on the question of news aggregators, so first of all, I think, this is the second time that these potential regulations have surfaced. There was previously talk of them back in 2016. And now, they have resurfaced, again. Obviously, with respect to Yandex. News, which is clearly a news aggregator service, I would just remind folks that, 1), this is a small portion of our overall revenue. And 2), that we will look to restructure our ownership of Yandex. News if and when such regulation were to change.

And then Zen?

Oh, so Zen is not a news aggregator, it's a social media platform where consumers can consume various different forms of media, including videos, including various fairly narrow focused content where they can comment and like things. So it's really much more of a social network/discovery platform than a news aggregator.

We will now take our next question from Slava Degtyarev from Goldman Sachs.

Couple of questions, firstly, on Taxi. How would you qualitatively assess the major components of the taxi margin improvements throughout the third quarter? How much of that is due to the lack of the integration cost with Uber that where in Q2? How much of that is coming from the largest cities, like Moscow and St. Petersburg? And maybe how much is coming from the smaller cities? And secondly, on Android share, your market share has been consistently growing throughout the year until September, but then it stabilized and according to Yandex. Radar it has probably even declining a bit recently. Can you comment on that, so maybe there's any seasonality here?

Hey, Slava. I'll take the first question and Mikhail will take the second question. With respect to taxi, it was a combination of things that led to the EBITDA improvement and the sequential EBITDA improvement in the Russian/CIS Taxi segment was actually quite significant from Q2 to Q3. So was a combination of slightly lower marketing spent, slightly optimized incentives and subsidies. And strong demand for the service in large cities. So I think, that business is doing really, really well, and we're very happy with it. And we expect that it will continue to improve from an operational standpoint as time goes on. And then let me pass on the mic to Mikhail for the question around our Android share.

Mikhail is here. So it is true that last year, we grew significantly in September, October, which is a little bit unusual because last year, we bucked seasonality. Normally seasonally, September, October are the months where we little bit tend to lose share. Last year, we were really on just in the upswing stage of adoption of the new choice screen and stuff. So we didn't see it last year, but this year turning more to normal, obviously our share gains start plateauing a little bit, not slowing down. We still expect them to continue to grow -- not them -- the search share, I mean, although, as I said, in my remarks, it is slower pace than previously. Part of the decline that we saw in September was mainly driven by significant increase in Google Assistant traffic and Google Now traffic that unfortunately is counted as search that we cannot really technically filter out. So there's is a little bit of an optics issue here and a little bit of seasonality. We still expect the search share gains to continue, but not at the pace that we saw the previous year.

And I would just quickly add to that, that if you look at the last full week of October, our Android share was about 49.8%. So I think the trends are still generally the same, but, obviously, once you've anniversaryed the choice screen, the seasonal factors do become more relevant.

(Operator Instructions) We will now take our next question from Lloyd Walmsley.

Two, if I can. I guess, just the first one would just be taxi revenue looked very strong, but ride growth did slow a bit. So wondering if you can give us a sense for the factors impacting that and then how we should think about ride growth into the fourth quarter and 2019 as it sounds like some of that is optimizing incentives and subsidies. Any color you can share there?

Hey, Lloyd, it's Greg. So no, I think you actually answered your question. It's a question -- it's a matter of optimizing the mix of subsidies and incentives versus profitability. And obviously, we're focused on driving profitability there and finding that sort of ideal trade-off point between further investments for long-term growth versus profitability. And we kind of felt like in Q3, we had the right mix of underlying rides growth and profitability improvements and we're happy with the performance of that segment.

Okay, and then my second one, obviously, been a lot of headlines around potential changes to the capital structure. You guys put out a press release seeming to acknowledge the Board maybe evaluating such changes. So just wondering if there are any clarifying comments you can make around what kind of changes we might see or just in general anything you could give us color to help put that behind us?

Hey, sure. Let me try to take that. So with respect to the comments in the press release about capital structure, I would say that it's obviously the dual-class structure that the company has is a fairly common and well-respected, I would say, practice for technology companies as a way to manage and balance sort of long-term interest to the shareholders versus the short-term volatility of the market. And what we want to do is we obviously want to make sure that we preserve the entrepreneurial normal spirit of Yandex and focus on the long-term vision, rather than sort of the short-term and the day-to-day. And so this is a matter the Board looks on a regular basis, on an ongoing basis to make sure that we have the optimal capital structure to sort of best reflect the current market environment. And look, I think, there was little bit of a confusion in terms of overall market reaction and relates to this particular point on corporate governance, which I think, we're happy to correct that. It's a question of making sure that we continue to put the long-term interests of the company and the shareholders ahead of short-term volatility.

We'll now take our next question from Cesar Tiron.

Yes, I have some questions from the results. I have two. The first one is on the Search business. There was an acceleration of the growth rate of Search querries and paid clicks for each quarter in 2018. Can you please discuss the key drivers? And the second question would be on taxi regulation around the news that there could be a regulation -- a new regulation in Moscow, regulating your ability to price taxi and that pricing decision could move on to the Taxi fleet. Can you please explain if you think this is going to be implemented and then how likely it is?

Hi, Cesar, this is Mikhail. I'll take the first one, and I think Greg will take the second one. So it is true that we saw growth in terms of the number of clicks and CPCs and everything. Search, the main factors are the search growth -- search grew itself. So basically, our Android queries were increasing, obviously, on back of our share increase. We continue releasing new templates. Again, as I said some of them were super-successful especially on Mobile. And also, I would kind of note that our Yandex Properties also grew really well -- phenomenally well for the last 3 quarters. I wanted to highlight, of course, our Zen as well as our Images and Homepage that joined Zen as one of the largest properties that we have right now.

Hey, Cesar, this is Greg. And on the question of regulation with respect to taxi, so I think, the question of regulation in general is something that comes up fairly regularly. I think we're in constant dialogue with regulators and there are sort of lots of questions that tend to come up, and new ideas regarding regulatory frameworks for the Taxi industry that are discussed. And I think that's always been the case and will continue to be the case. And I'd say that Yandex and Russia are no different from the rest of the world. I think that in general, there's a view that you have to look at sort of the interaction of governments and companies. I think it's the case in the west. It's the case in Russia. And we're in constant dialogue. So I think it's something that will come up from time to time, but it's normal.

We'll now take our next question from Miriam Adisa from Morgan Stanley.

Two questions from me. Firstly, on the Search guidance. Could you just confirm that the guidance and the slow growth in Q4 is not including any contribution from the Yandex. Station, but you are including that in the EBITDA guidance or EBITDA margin guidance? And secondly, my second question is on buybacks. I know in the past you've mentioned that there are various tax implications related to doing a large-scale buyback, and if you could just please remind us about what those are, and if perhaps, with the stock at the current levels and the cash and the balance sheet, your appetite to do a large scale buyback might have changed?

Hey, so on the first part of your question with respect to the growth guidance for the Search Portal, I think our guidance from corporate is kind of our best uses of right now. And certainly, it does not incorporate a whole lot of device sales. There is some uncertainty in terms of -- internally in terms of when will be able to get sort of volume production ramped up for our devices, Yandex. Station specifically. And that will impact the amount of revenue that we generate, but the guidance that we provided assumes very little contribution from devices, hopefully that answers the first part of your question. And then on the second part of your question with respect to buybacks, this is a matter the Board looks at regularly. We have just completed a fairly significant buyback over fairly short period of time, just to remind folks, we bought about $150 million worth of stock in the space of the quarter. And I think that we do think that the shares are attractive at these levels and this is a decision that's made up at the Board level whether or not to implement a more aggressive buyback at these levels.

We will now take our next question from Alexander Vengranovich from Sova Capital.

Two questions from my side. First one is on Yandex. Plus. Can you please share with us some numbers of the active subscribers of the service and what sort of contribution of Yandex. Plus you had on the performance of the share, particular segments of your operations? And can you please also like remind us how do you account Yandex. Plus impact on Media Services and Taxi for example? And the second question is on Yandex. Drive. So you guys have pretty solid position in Moscow, based on what I heard, you're launching in St. Pete's and what is your plan for further regional development? Do you think it really makes sense to expand the Yandex. Drive presence outside of Moscow and St. Pete and go to like smaller Russian cities or other cities abroad?

Sure, Alexander. On Yandex. Plus, we haven't disclosed at this point the number of subscribers, but we're happy with the growth in Yandex. Plus. I think still ahead for us is much closer integration of Yandex. Plus and Yandex. Taxi, which, to date, has not been fully completed, and it's something that we're working and hoping to release here in a fairly short period of time. We believe that's going be a significant impetus for consumers to subscribe to Yandex. Plus. In terms of accounting for it, the revenues of Yandex. Plus are recorded in the Media Services segment, whereas, that's what I said. And then on to the second question about Yandex. Drive. So we have been very successful in Moscow in a very short period of time. You're quite correct that we're looking to roll it out to other cities within Russia. St. Petersburg is an obvious one, and I think beyond that there is opportunities to roll it out in other cities as well. Whether they are small cities or medium cities or large cities, I now think it's early to comment, but we do think that there is a market for this service. And it's not just confined to Moscow and St. Pete. I think there's definitely opportunities there and I think we have just an incredible technology stack that we brought to bear to roll this business out as quickly as we have with the sort of minimal size of the team and minimal marketing spend. So we're very, very happy with that performance, and we're looking at other ways that we can scale this business up.

(Operator Instructions) We will now take our next question from Vladimir Bespalov from VTB Capital.

So my first question would be on Yandex. Market. Maybe you can provide us some update, maybe you could provide some numbers in terms of GMV? What was GMV for 9 months of this year? What do you expect for the full year? Plus, in the medium term, I would say, because we have a number from Sberbank, but is it still relative to what they mentioned? And maybe strategically, what are the next steps after launching Beru? What do you expect strategically in development of this business? Then my second question would be also on like strategy to develop peer divisions. Do you think that in any of your divisions that you have, you need a strategic partner to speed up the development of that business or to bringing some additional expertise and things like this, like in Yandex. Market for example. And also, I have 3 technical questions on your buyback, buyback you approved was $100 million, but you spent $150 million, maybe could you explain how this happened? Are there some other programs or I am missing something?

Hey, Vladimir. On Yandex. Market. So we did say that we grew revenues there in a like-for-like basis by 71% in Q3, and we also talked about the increase of adjusted EBITDA loss there on a year-over-year basis as we continue to invest in the marketplace product namely Beru, and there the goal is simply to add the number of SKUs to the platform, increase the number of merchants in the platform, and improve on-time next day delivery to as many places as we can. And we're quite happy with the way that's developing. Now I don't want to get into the habit of reviewing Yandex. Market results all the time and in a lot of detail since it's a private company that neither us nor our partners in Yandex. Market consolidate. So I don't think it's our place to do that on an ongoing basis, but I would say that we're happy with the way it's developing and our goal is to expand the platform in terms of the number of SKUs, number of merchants and GMV that it delivers. On your second question of partners, look, I would say, the company kind of regularly receives various offers and propositions of interest from third parties. But we would never comment on sort of any specific rumors that may appear in the press. And I would just sort of say that we have ample capital on the balance sheet and our businesses are performing extremely well and we're very happy with the way that they're currently performing. And finally, on your last question with respect to the buyback, the Board did in fact approve and increase a small increase in the size of the program, which we executed over the course of Q3.

(Operator Instructions) We'll now take a follow-up question from Alexander Vengranovich from Sova Capital.

Just very quick question on self-driving cars and your solutions there. Do you have any sort of product road map in mind which you can share with us? And can you also please clarify whether you are generating any sort of revenues from the solution right now? Or are you still a long way to go in the development of the actual product?

So in terms of self-driving, I'd say, on the one hand, we're extremely happy with the progress made to date, and the team has done an incredible job of pulling together on various parts of the organization to get to utilize various IP, and so on pulled together and deployed within the self-driving cars. Things like computer vision, things like machine learning and AI. All of those came together, along with maps and other technologies to create our self-driving vehicles. In terms of where we're today, we're deploying those in Skolkovo, in Innopolis, and we're looking to broaden those out. And I would say, in terms of revenue generation, it's obviously too early for that, but we're very happy with the TAC. We're very happy with the team and we will continue to invest in self- driving as sort of course of new direction of the Yandex Taxi segment.

(Operator Instructions) We have a follow-up question from Ulyana Lenvalskaya from UBS.

Sorry, if I missed it, can you disclose Zen run rate -- revenue run rate at the moment?

Yes, sure. I think it was in my prepared remarks, but it is currently RUB 4.8 billion run rate.

Okay. Sorry, Greg. And secondly, can you please talk a bit about the car sharing economics, like the user economics if possible? Like, excluding marketing, is it far from breakeven theoretically?

I would say that the unit economics, including marketing spend are starting to come into focus. And we're very, very happy with the performance of that segment.

Okay, and do you have any plans to sort of remove it from experiments line, how shall we think about experiments loss in 2019 because it becomes pretty significant?

That's a great question. It's one of those things that we consider. We have an ongoing and regular process of kind of reviewing the performance of our business units in our experiments. And those are usually done once or twice a year and that's when we usually make decisions with respect to whether it's an experiment that becomes a business unit or gets merged with the other business unit or in fact gets moved to another section. For now, we're very happy with the results, and I think we'll be making that decision over the course of the next 6 to 12 months.

We have a follow-up question from Lloyd Walmsley from Deutsche Bank.

I had one on Yandex. Drive as well. I was just curious if you can help us understand how you've been able to be so successful in such a short amount of time? Is that a function of the competitive environment being fairly open? Is that a pricing approach you've taken or a feature set that you bring uniquely to the business? And then as you look to scale that up, how do you plan to manage the capital intensity there? Is that something your leasing cars or buying them out right and is that -- how does that flow through to the P&L, like the balance sheet and cash flow statement would be helpful?

That's a great question. Sometimes I kind of wonder myself how we have been so successful, but I think, the key ingredient has been the leverage of the Yandex. Auto platform, which we have talked about on previous earnings calls. And what Yandex. Auto is, is it's an in-dash infotainment system developed by Yandex and this is a system that we have partnered with many car OEMs with guys like Toyota and Ford and Renault and many others. And that platform essentially allows you to integrate all of the Yandex services right into the dashboard. So the use case one could imagine with Yandex. Drive which I think is fairly unique is you unlock your car with your smartphone, you can actually even start the car and turn on the AC or the heater before you get in the car. And once you're inside, the Yandex. Auto platform greets you using Alice, it asks you if you'd like to be directed to your home or work, which is obviously tied in through your Yandex. Navigator. Pulls out the Yandex. Navigator and starts your journey. And it's also even tied in with Yandex. Music and Yandex. Radio and can put on your favorite radio station. And so I think using various parts of the Yandex ecosystem is something that's unique to us and something which has been one of the key distinguishing features. So again, I couldn't quite express how happy I'm with the team and how much they have been able to accomplish. In terms of the accounting, the cars that are part of the Yandex. Drive fleet are leased by us. So they're not on the balance sheet. The expense for those leases flow through the P&L. And so its part of the drag on the experiments line on an EBITDA basis, was very much driven by Yandex Drive. Hopefully that answers your question.

We will now take a follow-up question from Vladimir Bespalov from VTB Capital.

So I would like to ask you about Yandex. Cloud and your first impressions about this new business for you, and what are your expectations, because if you look at your international peers, for example, this could develop into a bit big chunk of your overall business. So could you provide some color?

Sure. Mikhail here. So we just started letting people use it in earnest. Currently, we get more request to use it than we can actually let people in. We gradually roll it out because it's important to do it carefully, not to burn anybody, the trust in this area is very important. So we want to make sure that the launch is as smooth as possible. So every week, we will let more and more companies and people in. So we see very strong reception and very happy with how it's going. Obviously there are some growing pains and things that -- technical things that we need to sort of final out. But so far, we're optimistic and we're roughly staying on schedule. As I said, in my remarks, already out of 8,500 requests that we received in first 2 months, we let 5,000 to use it. And again, it's mostly IT companies and decorative and professional services companies and retailers too. We will continue, of course, invest in that area and hope to grow it very aggressively.

And maybe you could comment a little bit on your competitive advantages in this area?

Yes, of course. So we're operators -- we're the largest operator of data centers in Russia. So we have best economy of scale here. Our data centers are uniquely positioned unlike our main overseas competitors. Our data centers are uniquely positioned to service traffic from the major populated areas in Russia with lowest ping times. They're compliant with data storage regulations. We have very large Russian presence. In the same time for certain customers we also have international data centers. So we can provide sort of best of both worlds. Currently, none of the competitors can offer that. We're, of course, in terms of the feature set, we have some time, have some work to do catching up to, I would say, Azure is our main competitor probably here. But we're working on it, and currently, we believe we provide very compelling package, aggressively priced, and reliable and high up-time, low ping time, exactly what people here have been missing.

We will now take our final question from Ulle Adamson from T. Rowe Price.

I have a question regarding the latest press speculation that Sberbank might be interested in taking a stake in Yandex. And I think it's great for Arkady to confirm that he is not interested in selling his stake, but there's been a lot of rumors that perhaps Yandex would consider issuing new shares, something like 20%-plus and Sberbank would be buying those shares. So just to put our minds at rest, I was wondering if the management had any comments on that? And is that scenario really was to take place, what would Yandex do with that cash?

Hey, Ulle, it's Greg. Let me try to take a stab at it. Look, again, I'd just reiterate what we've said before, which is that we constantly receive various offers and proposals and expressions of interest from third parties. And I don't think we have ever been in a position to sort of provide specific comment on market rumors. And I also don't want to speculate about a scenario, which is purely hypothetical such as the one that you described. I think beyond that there's nothing much else left to say.

This will conclude our question-and-answer session. So I would like to hand the conference back to Katya Zhukova for any additional or closing remarks.

Yes. Thank you. Thank you all for joining our call today. We're happy to catch up over the phone or via e-mail. With this, I would like to invite you to our next Q4 and full year 2018 earnings call, which will be held in February 2019. Thank you. Goodbye.

Ladies and gentlemen, this concludes today's conference. Thank you all for your participation. You may now disconnect.