Nebius Group NV (YNDX) 2021 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the First Quarter 2021 financial results call. I must advise you, this conference is being recorded today, Wednesday, the 28th of April 2021.

We'd now like to hand the call over to your first speaker today, Yulia Gerasimova, Investor Relations Director.

Hello, everyone, and welcome to Yandex First Quarter 2021 Earnings Call. You can find our earnings release and supplementary slides on our IR website. The key speakers on our call today are: Tigran Khudaverdyan, our Deputy Chief Executive Officer; Daniil Shuleyko, the Head of E-commerce and (inaudible) Business Group; Greg Abovsky, our Chief Operating and Chief Financial Officer; and Vadim Marchuk, our VP of Corporate Development. Yevgeny Senderov, Chief Financial Officer of Yandex.Taxi, will be available on the Q&A session.

Now I will quickly walk you through the safe harbor statement. The remarks that we make during the call regarding our financial performance and operations may be concerned forward-looking, and such statements involve a number of risks and uncertainties that could cause actual results to differ materially. For more information, please refer to the Risk Factors section of our most recent annual report on Form 20-F filed with the SEC.

During the call, we'll be referring to certain non-GAAP financial measures. You can find a reconciliation of non-GAAP to GAAP measures in the earnings release we published today.

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

Thank you, Yulia, and thanks to everyone for joining our call today. We are very encouraged by having started the year with a solid recovery in our advertising and the ride-hailing businesses as well as continued strong momentum in other verticals, such as Media Services, food delivery and logistics.

We have also made significant progress in executing against our strategic road map in e-commerce. Since early this year, the business has been run by Daniil Shuleyko, who has a great track record in those developing market-leading services as well as improving their profitability within Taxi Group, and we are already seeing great results.

Total e-commerce GMV, including Yandex.Market to marketplace, Lavka and gross related GMV of it grew 186% year-on-year in Q1. This growth has been accelerating from month-to-month with the highest year-on-year growth rate of 199% in March despite a high base effect from pandemic-related growth in March 2020. Yandex.Market GMV on a stand-alone basis, has also accelerated to 126% in Q1 from 71% in Q4 2020 on the back of a significant expansion in assortment and logistic infrastructure.

Solid results from targeted investments in performance marketing campaign around the holiday weekend in February and March as well as improving the product for our consumers and merchants. We are now even more confident in our ability to deliver on our full year guidance to increase total e-commerce GMV by 2.5x.

Let me give you an update on another important initiative, Yandex.Plus. The total number of subscribers kept growing above 100% year-on-year and now over $9 million. Yandex services continue to benefit from better integration with Yandex.Plus, and we see that our Plus subscribers already generate a material part of GMV for market Taxi, Eats and Lavka.

The strength of Yandex.Plus as especially visible in the Yandex market, where about half of the GMV came from Plus members in March, up from 24% in Q4 2020. Yandex.Plus subscribers form a loyal customer base who spend more and transact more often in our services if compared to our non-Plus customers.

For instance, in Market, Plus customers generate on average more than 40% higher GMV and 50% higher frequency of transactions than non-Plus customers. We also see encouraging trends in the ever check as well as new customer inflow for Eats and Lavka since these services on the Yandex.Plus cashback program in February.

We are investing appropriately to support the further growth of the Yandex.Plus platform, including investments in the expansion of program benefits for our subscribers in targeted marketing and promotion to improve cross service usage and in content as the majority of Plus members still come from our streaming services, KinoPoisk and Music. To this point, the number of unique in subscribers at KinoPoisk exceeded 4 million in March '21, which has further strengthened our leading position in the Russian positive market based on this metric.

Turning to Search and Portal. Search and Portal has continued to grow well and ahead of our expectations in Q1. In March 2021, we reached a record 59.4% share on Android, a 450 basis points increase from March 2020. Our total search share also went up and reached 60% in Q1, which represents a 190 basis points increase year-on-year. Search was, again, the key driver of our edge revenue growth acceleration with 18% year-on-year growth in Q1 2021, which was supported by our market share gains and the high effectiveness of search ads as a digital marketing channel for our clients.

The key investment areas for us in ad tech remain video and simplified solutions for small and midsized businesses. The latter include CPA and subscription models, interest in which continues to grow rapidly. For our large clients, we are developing highly effective CPA-based conversion strategies when app bidding is optimized for a specific targeted action. The share of such instruments in our total ad revenue has exceeded 20% in April.

Among other initiatives, we are focused on improving our market share on iOS devices. We see an opportunity to address the discrepancy between an actual use of Yandex versus Google application on Apple devices, which was previously set by default and real customer preferences. We are confident that targeted investment to support distribution of our products on iOS devices will help us to gain access to more excellent customer base and to improve monetization.

Moving to Zen. Zen continues to outperform our Search and Portal revenues and overall online advertising market. Zen revenue increased by [65%] year-on-year in Q1 '21. Our video format continues to gain very good traction on the share of video in Zen time spend has now reached 28%. And the daily audience grew over 50% year-on-year in January, February and slowed to a still solid 35% in March, primarily due to the high base effect.

In conclusion, we see solid momentum across our key verticals, which gives us the confidence to continue to prioritize growth and to invest prudently into new attractive opportunities, which will benefit Yandex in the long run.

And with this, I'm turning the mic over to Daniil.

Thank you, Tigran, and hello, everyone. Today, I will start with the results of the Taxi Group and particularly providing more details on the performance of our e-commerce business, which I began to oversee earlier this year. I'm very proud of how we started 2021. We saw solid recovery in our (inaudible) business and a further acceleration in its growth rate. Our (inaudible) and logistics services demonstrated significant sequential growth, while Yandex.Market (inaudible) has been accelerated each successive month, leading to market share gains.

Let me cover (inaudible) first. In Q1, (inaudible) grew 24% year-over-year, and GV grew 44%. This significant acceleration from 17% growth in directing GMV in Q4, and this is driven by a number of factors.

First of all, we have seen continuation in the recovery of user activity. Weather conditions also helped growth, cold, wet and record snowfall in Russia in January and February contributed to the demand for ride-hailing services. And starting from the late March here, we begin to place easier year-over-year comps as on March 16 last year, when we (inaudible) introduced initial work-from-home measures. And then GV grew significantly faster than right as the driver under supply, exacerbated by closed borders and growing demand.

Risk on undersupply was also an issue as the manufacturers are not able to completely satisfy demand from our partners for specific new models. In order to ensure high-quality of service, proper balance of demand versus supply, low ETA and high reliability, we apply a high [focus on efficiency,] which led to an increase in average price per ride and high GV growth, also impacted the gross of ride. At the same time, in Q1, urgence of our partners significantly increased.

In Q1, drivers will take orders on our (inaudible) RUB 104 billion, this is only 1/3 of the RUB 300 billion as earned for the full year 2020. And the effective tax rate remains below 10%.

I also want to highlight that despite the expected acceleration of gross in March on the back of (inaudible), our performance here much strongly exceeded our internal expectations. And our last March 2021 run rate was 2.4 billion rides, 44% higher than last year. And well above 1.8 billion run rate in December 2019. GV run rate in March 2021 came in a total RUB 300 billion or USD 6.8 billion. This is 69% year-over-year increase in ruble terms and up 32% from RUB 380 billion December 2019.

As of to date, we see significant acceleration of year-over-year growth rate as we compare with a very low base. Rates are up almost 3x and GV is 3.6x higher than the year ago. On 2-year CAGR basis, rates in GV are growing in the range of high service, low (inaudible) in April. Moscow, which had a major market growth mid- to high teens on the 2-year CAGR basis, investment mid- to high 20s in June.

Now to FoodTech. In Q1, Yandex demonstrated further acceleration in growth rate, orders grew 131% year-over-year. (inaudible) grew 147%. This compared to 118% growth in August and 137% growth in GV (inaudible). Obviously the UTP grocery business contributed to the growth. However, food delivery vertical continued to grow triple digits on a year-on-year basis and did not slow down versus Go [for.]

In Q1, we focused on setting our position on the food delivery market and attracting new customers. The eliminated delivery fee for the short for new users, launches program in significantly lowered order confirmation ratio and (inaudible) tax. In Q1, we continued to invest in the city grocery vertical. As a result of our efforts, the share of gross GV growth to mid-teens of total (inaudible) GV in Moscow reached 20%.

Lavka continues to grow sequentially, and this growth is driven by the frequency of usage (inaudible) growth in the number of (inaudible). In March, Lavka orders increased by around 30% compared to December. At the end of Q1, Lavka at 280 stores (inaudible) stores from December. Logistics demonstrated solid growth rate as well. In Q1, the number of deliveries reached 13 million. This is more than half of the entire 2020 amount. We continued to increase our partner base. In March, we had over 16,000 active B2B businesses, School, (inaudible), (inaudible) are amongst our top accounts.

And now to e-com. As Tigran mentioned earlier, we have delivered a very strong growth of our total economy GV include , which has reached RUB 25 billion, 45% of the entire full year 2020. GV of our (inaudible) vertical include GV of our easy growth rate in Lavka reached RUB 11.5 billion. We attribute this solid performance to the significant expansion of assortment and consider investment with improved price position across key categories, support from Yandex.Plus program as well as expansion of our logistics operation.

This helped us to affect new buyers at an accelerated pace, increased the number of orders per client and improved retention.

Our assortment has grown very fast. We have almost doubled the total number of SKUs during the quarter to 3.8 million as of end of March and further increased it to 6 million SKUs. We are also actively converting our merchant from CPC to CPA model, and the number of active sellers on our marketplace is now approaching 10,000 from 7,600 at the end of December. The conversion is supported by the most commission in the market and the recent launch of (inaudible) by several model, which already accounts for mid-teens of GV network.

We also invested heavily in the expansion of our logistics infrastructure, especially in the region, and our manager career network is well positioned to support GV growth with the food delivery see. Our total fulfillment and sourcing center capacity could understand at around 170 square meters across 5 warehouses with the latest addition of 50,000 square meters in (inaudible) and 28 [sorting] sectors.

We also continue to expand network of (inaudible) and pickup points. Almost half of our orders in March 2021 was delivered via our own delivery versus 10% in Q1 last year. We continued to develop on-demand delivery of marketplace orders from our (inaudible) stores. It already reached 10% of all orders in Moscow and keeps growing. The customers who use this option show better retention trends and high order frequency. All in all -- and we are pleased with the results we have achieved so far, and how we progress according up to our plan. In the coming quarters, we will focus on further expanding our logistics capacity, assortment and our marketplace seller base.

We are also improving the product and quality of service for our consumers and merchants, as this gives me even more confidence in our ability to achieve our ambitious goals for this year and became one of the leading player on the highly attractive e-commerce market in the future.

With this, I'll turn mic over to Greg.

As many of you know, after more than 8 amazing years at Yandex, I've decided to take on a new challenge. While I'll miss Yandex greatly, I know I'm leaving things in excellent hands with many exciting prospects ahead. There's still a lot of unrealized potential and attractive opportunities for Yandex in areas such as e-commerce, and Tigran and Daniil already talked about the impressive progress that we're seeing here in Fintech, where we're working actively on our strategy in preparing the ground for the ramp of future development of this vertical, autonomous driving as well as a number of B2B initiatives around cloud, AI and SaaS.

I firmly believe that the main driver behind all past and future successes at Yandex is a phenomenal team of people who care deeply about building great products, innovating and serving the consumer. I'm delighted to be handing over to such a great team. I know they're extremely well placed to take advantage of all these new opportunities. And on a personal note, it's been a great pleasure working with all of you, and I hope to stay in touch.

With that, let me hand it over to Vadim.

Thank you, Greg, and hello, everyone. I am pleased that we have delivered yet another quarter of robust results with solid growth and execution across multiple verticals. Our core and most cash-generative businesses advertising and ride-hailing, accelerate on the back of the team's efforts supported by the post-pandemic recovery of the economy and social activity.

Most of the other segments have demonstrated strong performance as well including e-commerce, FoodTech, Media Services, Zen and Cloud. We see that the investments we are making into these businesses are already delivering results and improving our market position. We are confident that our capital allocation strategy will help us to unlock their full strategic potential in the years to come.

During Q1, we made a few changes to our segment reporting to enhance our disclosure and further improve the transparency of our results. We have included the Geo advertising business into our Search and Portal segment and at the same time, moved devices to other business units and initiatives, a segment which previously was referred to as other (inaudible) and experience.

We believe the new title is a better reflection of the businesses in this setting. The changes were applied retrospectively to Q1 2020. All my further comments will be based on this new structure. Additionally, we have disclosed GV figures for Yandex.Market and total e-commerce and provided a detailed breakdown of Yandex.Market revenues. We will continue working on further improvements to our disclosure by segment.

Now let me walk you through the Q1 performance across our business units. Search and Portal, we are very encouraged by the Search and Portal revenue growth, which significantly accelerated from the previous quarter by 9 percentage points to a solid 15% year-over-year from 6% in Q4 2020. Note that we have restated our Q1 2020 numbers to include Geo, which means that all the growth rates are on a comparable basis.

The ex TAC revenue grew even more strongly by 17% year-over-year. This robust performance was primarily driven by 18% growth in search ad revenues, partially offset by the weaker trends in the ad network. We have seen an acceleration across most industries, even travel, where the decline is now less pronounced. Most factors are now in positive territory. Overall, industries with positive year-over-year growth account for 85% of our total ad revenues. The best-performing sectors are IT and Telecom, Finance and Insurance, Health Care, Education and Employment. While the worse performing are still Travel, Domestic Services and Real Estate.

The growth is significantly accelerated in April due to the low base effect. Importantly, 2-year stack growth rates are also improving, and we expect this trend to continue as the year progresses. The adjusted EBITDA margin in the Search and Portal business came to 46.6% in Q1 2021 compared to 48.3% in Q1 2020.

Do note, however, that in Q1 last year, we made several pandemic-related cost savings decisions, including a decision to forgive cash bonuses for top management, adopt a slow rate of hiring and rigorous control over nonessential marketing and overheads, which helped us to deliver strong margins in Q1 2020 and preserve cash ahead of an uncertain second quarter.

As revenues recover towards the end of 2020, we began to scale back the cost cutting measures. Excluding the effect of the pandemic-related cost cuts that we made in Q1 2020, our Search and Portal margins were broadly flat year-over-year, thanks to further tax optimization. In terms of the full year 2021, we are confident in our ability to deliver a stable, year-over-year margin in the Search and Portal business.

Moving to Taxi. The overall Taxi Group revenues increased by 89% year-over-year. The revenue of of ride-hailing and FoodTech grew 11% year-over-year, which is a material acceleration from 65% in Q4 2020. The growth was driven by the following factors: The recovery of our ride-hailing business overall; continued strong performance in FoodTech despite the removal of lock down measures; combined revenue of Eats and Lavka increased 4x year-over-year; and rapid development of the logistics business.

Ride-hailing revenue growth accelerated to 62% year-over-year in Q1 2021 from 15% in Q4 2020, driven by both recovery wise and GMV. Yandex.Eats revenue increased by 139% year-over-year despite investments in customer acquisition by providing free delivery, which is a component of Eats revenue.

Last year revenues reached RUB 4.8 billion in Q1. We are seeing a slowdown of growth in April on the back of the base effect, but importantly, 2-year stack growth rates remain solid.

Adjusted EBITDA of the Taxi Group was RUB 3.7 million in Q1, significantly above Q4 levels as a result of the strong profitability improvement in the ride-hailing business, leading to 195% year-over-year growth of adjusted EBITDA, which has absorbed increased investments in FoodTech and Logistics. Profitability of the ride-hailing business was supported by efficiency improvements as well as solid growth in GMV in Q1. We are planning to reinvest this profit into driver acquisition beginning Q2 in order to address under supply conditions.

Yandex.Drive revenues were down 5% year-over-year, primarily reflecting significant decrease in the fleet versus a year ago. Adjusted EBITDA drive remained positive at RUB 108 million in Q1, making it the third quarter in a row with positive adjusted EBITDA. 1 year after launch, logistics is developing very well, and we plan to continue investing into this business to further scale it.

Turning to Yandex.Market. Yandex.Market marketplace GMV accelerated to 126% year-over-year in Q1 2020, primarily driven by growth of the 3P model the GV share of which was 66% in Q1 2021 versus 46% a year ago. The revenue growth of our marketplace was more moderate than GMV growth as a result of the changing 1P, 3P mix as well as a reduction of partner conditions from mid-January.

Following the integration of price comparison in marketplace platforms into a single product in Q4 2020, we continued leveraging our traffic to stimulate the transition from CPC to CPA model. This has helped us to increase the number of merchants and expand the assortment in our marketplace, but it also led to a slowdown in price comparison revenue growth to 5% year-over-year in Q1. Despite a stronger base, the solid GMV momentum has continued into April with growth of around 2.4x on a year-over-year basis.

The adjusted EBITDA loss of Yandex.Market was RUB 6.5 billion in Q1, up from the RUB 2.2 billion loss in the first quarter 2020, primarily reflecting our investments in expanding logistics and delivery infrastructure, distribution and marketing support, customer acquisition and headcount.

Overall, we are progressing well with our full year GMV target and planned investments.

Moving on to our other businesses. Media Services continued its rapid growth in the quarter, reflecting increasing demand for our services and a growing number of paying subscribers. We achieved revenues of RUB 3.5 billion, up 143% year-over-year. The adjusted EBITDA loss amounted to RUB 1.3 billion due to ongoing investments in content on the back of increasing demand for our services.

We continue to invest in our regional series production and exclusive film launches, which allowed us to offer our customers a unique product and become a leader in the Russian OTT market by a number of unique viewers. We will continue to make disciplined investments to scale the business and improve predictability.

Revenue in Classifieds delivered healthy growth of 20% year-over-year in Q1 compared to 13% in the previous quarter as the dealership stock level is improving, though not yet enough to fully satisfy current demand due to supply chain bottlenecks. Adjusted EBITDA margin came in at 21.6%, which implies a material improvement on a year-over-year basis on the back of marketing costs optimization initiatives.

Turning to other business units and initiatives. Revenue increased by 171%, mainly driven by strong revenue growth in devices, Zen and Cloud as well as our rapidly developing education business. In Q1, the devices business was the largest contributor to year-on-year growth, with revenue growing by more than 4x to RUB 1.7 billion. Cloud was the second fastest-growing business in this segment, generating almost 3.7x revenue growth in Q1. The adjusted EBITDA loss amounted to RUB 2.4 billion, up from a loss of RUB 1.8 billion in Q1 2020, primarily driven by the increased investment in [Yandex.School,] self-driving group where the adjusted EBITDA loss was RUB 942 million in Q1 2021 and (inaudible) initiatives and partially offset by the improved performance of Zen.

Finally, a couple of words on our outlook. Taking into account faster-than-expected growth across several businesses, we are upgrading our full year revenue forecast. And now expect group revenues to be between RUB 315 billion and RUB 330 billion. We are also increasing our guidance for Search and Portal revenue growth to high teens from mid-teens previously. This is despite the fact that we have moved our fast-growing devices business to another segment. Our other commitments and expectations remain unchanged.

With this, I'm turning the microphone to the operator for the Q&A session.

(Operator Instructions) So we will now take our first question from Slava Degtyarev from Goldman Sachs.

My question is on the ride-hailing margins, which are continuously improving. Would you highlight any factor that can reverse the trends in the medium term? And does it make sense to expect further margin expansion with the ongoing increase in ride and potentially improving the driver supply conditions? And if you can also comment how the food delivery margins are progressing recently and the medium-term outlook. And I will have a follow-up then.

Slava, it's Yevgeny. So on ride hailing, we had a great first quarter. Daniil already mentioned some top line numbers in his remarks. We had really strong GMV growth and as he highlighted, some of it was driven by onetime factors, such as unusually cold in snowy winter even for Russia in January and February. Persistent driver in their supply and also vehicle undersupply, which hopefully is a temporary issue in the medium term.

But -- so if you talk about EBITDA, ride-hailing grew almost 200% year-over-year and 86% sequentially. Again, on the back of GMV growth, adjusted EBITDA margin was extremely strong. Adjusted EBITDA on pre-overhead basis was 7% of GMV in the first quarter. And really -- GMV, but also taking sort of utilizing the cost efficiency discipline that was put in throughout 2020 and getting the benefit of those measures again in the first quarter.

I'm not going to promise you that we're going to deliver the same margin every quarter in ride-hailing as we see in the first quarter. But in the long term, I think margins of the ride-hailing business can reach Search and Portal levels. But if you look if we look for 2021, with all things being equal, we don't expect a significant increase in our net take rate because we do care about our drivers and our partners, as Daniil already mentioned, the growth in numbers that they're receiving in his remarks. We think, in 2021, ride-hailing margins are still going to expand versus 2020. All things being equal, of course.

As far as Eats margins, well, we did have the same factor that cold and snowing winter makes it hard to hire couriers. So we had an increase in CPO in our business. We are also investing significantly in something we believe in very strong, and this is (inaudible) growth delivery, is currently higher than our restaurant delivery business, but we think it's sort of -- that should improve as the density of orders improves, and we improve our technology and approach as we did in the restaurant delivery business.

We -- on absolute basis, we're probably going to see higher -- again, at this point, we're probably going to see higher absolute number in terms of EBITDA loss in 2021 versus 2020, but in margins, it's going to be roughly the same. And that accounts for the significant investment in grocery delivery.

And my second question would be on the e-commerce GMV. So it -- overall, it's trending above the full year expectation of 150% growth. But the non-grocery part of Yandex.Market is a bit lagging. Where do you see the medium-term mix between the 2 businesses, Yandex.Market and the growth rate initiatives and maybe the relative growth rates this year?

This is Vadim speaking. Look, we -- as we guided last quarter, we expect the overall 2.5x growth for the total e-commerce GV. And we do expect to see the kind of the similar breakdown between the 2 categories, broadly speaking. And so far, what we're seeing, we're tracking quite well with those numbers and with that guidance.

We will now take our next question from Cesar Tiron from Bank of America.

So just 2 very quick ones. I guess the one on Taxi, I guess, and specifically ride-hailing, is the -- do you think the GMV going ahead of rides is sustainable? Or was it just a kind of just a Q1 impact on the -- because of the circuit pricing? Or do you think that's sustainable?

And then the second one would be on the Search and Portal. Could you please make any comments on the -- obviously, you have very easy comps in Q2. So can you please make any comments on the past couple of weeks, how that business was growing on a year-on-year basis?

Cesar, it's Yevgeny again. Let me take the first of your questions. Yes, we already mentioned sort of the onetime factors, but an interesting thing is, for example, we saw in cross -- on a growth in non-economy tariffs as part of our business. I think that will continue. Some -- big part of our business is still relatively depressed to where it was before pre pandemic. The airport rights, the B2B business has continued to grow. But we do not like for GMV to grow well ahead of trips. We believe in balanced growth, and we will invest in the quality of the service and driver acquisition as we prefer that balanced growth.

So for the year, our expectation would be that GMV would go -- trips would grow 40% on GV, about the same, maybe slightly less, also affected by that our regions are going to grow faster than Moscow and a slight difference, at least 40% in trips growth.

And Cesar, this is Vadim speaking. Let me take the second question. So look, as we said, in Q1, we grew by 15% quarter-over-quarter, what we're seeing in April and what you do need to keep in mind that April last year in Russia and especially for us, was probably particularly the most weakest month. So we're definitely seeing a very material acceleration compared to April of last year because, again, the base was very low. As such, what would -- I would say it doesn't really make sense to talk about April month-to-date because it's not representative in terms of what to expect for Q2.

We do focus on 2-year stack, which is improving. And we expect it to accelerate further in the coming quarters. And this is one of the reasons why we are comfortable enough to increase our expectations for Search and Portal revenue guidance from mid-teens to high teens. And the upgrade is based on the better-than-expected performance of Search and other Yandex properties, and as we see a broad-based recovery across many sectors.

Very helpful. Just to confirm, so you basically are expecting a re-acceleration of Search and Portal on a -- if you look at growth on a 2-year basis, right, in the next quarters?

Yes, that is correct.

We will now take our next question from Vladimir Bespalov from VTB Capital.

My first question would be on fintech. You haven't commented about this area. But curiously, you have mentioned a lot of times that is one of the key focuses. Maybe could you update us where do you stand now? And what should we expect from this?

And the second question will be on your net profit. And adjusted net profit. As far as I understand, this was pressured by some nondeductible expenses. Maybe you could provide more color on that? And how should we look at this going forward for this year? And also how the change of the tax treaty between Russia and the Netherlands will affect your bottom line and your taxes and whether there will be a one-off effect, whether it's going to be extended over a certain period of time from this or no effect at all?

Vladimir, this is Vadim speaking, so let me take this one. So essentially 3 questions. Let me start with the first one, the fintech. Look, I mean, it's pretty much what we said before. It's -- the work is in progress. We do believe we made a decision for ourselves that we will enter the financial services market. It is a rather competitive and crowded space in Russia. And we believe that investing more time to prepare is the proper way to proceed, and it will pay off in the future. We are working on obtaining all the relevant and required licenses. And the only thing, frankly, what I can say at this moment, just stay tuned for more updates that will be coming shortly.

Moving on to the adjusted net income. The impact on adjusted net income that you see in our reported results, is essentially a combination of a couple of factors. Search and Portal, ride-hailing and Classifieds performed better than -- they actually increased their profitability in absolute terms. However, that was offset by our investments in our other businesses. Such as, for example, whether it's going to be FoodTech, whether it's immediate services and Yandex.Market in particular. So this is the overall mix of the impact as well.

Now moving to the third question related to the double taxation treaty between Netherlands and Russia. So look, first and foremost, the situation is still rather unclear and uncertain at this stage. What we do understand is that the likelihood of initiation of the tax agreement with Netherlands is relatively high. However, we also do hope that the negative consequences of such development would be addressed at the legislative level in Russian federation.

But in any case, what you do need to keep in mind is that we have planned liquidity at the Dutch level as of now. Because this is where we keep our convertible debt proceeds and equity raise proceeds done in 2020. And on top of that, we do generate all our cash in Russia. And given the fact that we have quite a few highly rewarding and promising project to reinvest our net income in Russia, we do not expect to be upstreaming any cash in the, kind of, call it, in the near future.

We will now take our next question from Kirill Panarin from Renaissance Capital.

Firstly, on your investments at the Yandex.Market, you mentioned quite a lot of initiatives in Q1, including assortment expansion, lower commissions, fulfillment, delivery, marketing, could you comment on which of these areas are more efficient in driving faster GMV growth? And so presumably, will be the largest focus for you.

And it would also be helpful if you shared your thoughts on the midterm growth and margin outlook for the price comparison business, given the conversion of merchants to the marketplace? That's the first one.

Kirill, this is Vadim speaking. So let me take this one. Look, all the initiatives that we kind of mentioned and highlighted during our last call in February, namely the expansion of the -- our fulfillment and sortation center capacity, the expansion of the delivery capabilities including the last mile, expansion of assortment, improving the take rates for our partners, for our merchants and improving the delivery accuracy. I mean, all of those things, we essentially view as equally important. Because at the end of the day, what is important this overall experience of the platform, both for the buyers and for the sellers.

We do believe -- and as we measure our progress, in our e-com initiative, we actually take stock in pretty much the same level of importance and allocate the same way to all of those initiatives.

So overall, if you go 1 by 1 there, the expansion of our fulfillment and sortation centers actually increased from 100,000 square meters to 170,000 square meters. We also expanded our delivery capabilities and added 1,300 pickup points and more than 1,000 lockers. And I think we added approximately 1,000 cargo, the small ones that actually do intra city deliveries, the last mile deliveries.

As Tigran mentioned in his opening remarks, we expanded our assortment quite significantly. We went from 2 million SKUs at the end of 2020 up to 6 million SKUs in April. And all of those pieces, right, I mean, the kind of the build, the overall experience, again, for the buyers and the sellers. When we think about the commission levels that we lowered in January or February of 2020. If you look at the overall experience for our sellers on our platform, and it has to work in balance.

Now moving to CPC. The CPC business will obviously be affected by the merchant transition to CPA model. You will see great results in -- from that transition on our marketplace side. That will potentially lead to somewhat slower growth in CPC revenues. And -- but overall, we look at this as 1 whole experience in e-commerce for Yandex.

Great. And just a follow-up on Media Service, if I may. Can you share your thoughts on the sustainable long-term market structure in online videos? And how far do you think the market leaders are from breakeven? That's it for me.

All right. So good question, right? And frankly, I mean, this is the question that we probably could spend the next 45 minutes kind of discussing and debating, which we don't have.

So I think it's -- to a certain extent, it's a function of the market size, right? So Russia, is sizable enough. You're looking at 140 million population overall. So it's definitely large enough to support in our thinking. And again, this is something that's kind of the future will tell us. But it's probably the market of 2 to 3 players. How far are we from getting to breakeven? Well, it's -- frankly, it's a function of a market share. How the market structure will actually will split between first, second and third player. And obviously, it could be -- I probably would speculate that assuming the first player gets a significant market share earlier that will get to breakeven faster compared to other players?

(Operator Instructions) We will now take our next question from Anna Kupriyanova from Gazprombank.

So my first question will be regarding software preinstallation or the gadgets. I understand it's too early to make a final conclusion or full picture how it goes on. But given it's already started, maybe you can give us some understanding how we can assume impact over your online revenues and your market share in this segment.

And my second question will be regarding Yandex.Market again. And a couple of them, actually. The first one, how do you see correlation between Yandex.Plus users and the Yandex.Market users, if you can give some maybe share of the Yandex.Plus subscribers, who are doing in Yandex.Market as a result of first quarter, for example?

And second question on the market will be regarding your change in e-commerce GMV and of first quarter versus end of the year, if you could give such number.

Anna, this is Vadim speaking. So let me take it one by one, and let's start with preinstallation. So look, so far, we see no impact. And overall, it is likely to be rather limited at first, given that it applies to new devices only. And there is always a few months lag before a newly produced device would actually hit the shelves in the stores and people buy them and start using them. So there is a lag.

As Tigran mentioned though, again, in his opening remarks, there is an opportunity to increase the actual usage of Yandex apps on iOS devices as we believe the real customer preferences would imply higher market share for us. What we are also doing in addition to -- at the same time, as the preinstallation is rolling out, we are making targeted investments to support distribution of our products on iOS devices. That should help us to gain access to a more affluent customer base and to improve monetization overall.

Now going to your second question with respect to Yandex.Market, and how you should think about Yandex.Plus users and their behavior in Yandex.Market. So look, what we see in Yandex.Market, and frankly, across some of our other services is that the Yandex.Plus users are typically a higher frequency users, and they do generate a higher average transactions.

So when we talk about specifically for Yandex.Market, currently, somewhat, I would say, somewhat more than 50% of market GMV comes from Plus subscribers. And Plus subscribers generate, on average, more than 40% higher GMV and 50% higher frequency in transactions. What we also see that the Plus members show better retention and stronger cohort behavior. And then question number 3, could you repeat it?

My third question was, if you could give us some numbers regarding your GMV for e-commerce in first quarter of this year versus fourth quarter of last year. Maybe I missed somewhere, but I have the number for the full year 2020, and now I have first quarter versus first quarter. But I'm interested to understand dynamics versus fourth quarter of last year.

Anna, we did not disclose the breakdown between the different GMVs in our e-commerce platform in the fourth quarter.

(Operator Instructions) It appears there are no further questions.

One question is just coming. We will now take our next question from Alexei Cercacor from Prosperity.

Can you give us some update on your 2021 CapEx? How much do you plan to spend? And how does kind of headquarter also fits into the situation?

Alexei, this is Vadim speaking. Look, there is no change to what we guided to previously.

We will now take our next question from Anna Kurbatova from Alfa-Bank.

So basically, my question was also with relation to CapEx, but could I formulate in such a way? So there is no change from your earlier guidance in terms of CapEx, but could you maybe give some update on what do you expect in terms of works, type of work like engineering, I don't know, construction, et cetera, to start or to continue during this year in relation to new HQ?

Anna, this is Vadim. Look, so the way you should think about our CapEx, the way we typically spend it, it's 2/3 allocated to our infrastructure and servers. And another 1/3 is essentially allocated to our other businesses.

Yes. But I just wondered what works -- you will be -- what will be your progress in terms of HQ construction, project construction this year. So are you still busy with the project documentation? Will you be like starting to destroy that old building on the Kosygina Street? Will you be able to start constructing the new building? So what's going on there?

Got it. Thank you for the clarification. So look, where we stand with the -- our kind of new campus construction. We actually demolished the old building, I think, towards the end of last year. We started construction of the foundation. And all the -- clearly, all the paper work and permits already received and in place. And the construction is fully ongoing.

So hopefully, within a reasonable period of time, we all can celebrate, do the housewarming in our new headquarters.

It appears there are no further questions at this time. I will pass the call back over to Yulia Gerasimova for any addition or closing remarks.

Well, thank you very much for all your questions. As usual, if there's any follow-ups, please contact IR team. Thank you, and have a good day.

Thank you very much. That does conclude the conference today. Thank you for participating. You may now all disconnect.