Nebius Group N.V. (NBIS) Q3 2012 Earnings Report, Transcript and Summary

Thank you for standing by, and welcome to the Yandex Third Quarter 2012 Financial Results Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today, on a Tuesday, the 30th of October 2012. And I would now like to hand the conference over to your speaker today, Katya Zhukova. Please go ahead.

Hello, everyone, and welcome to Yandex' Third Quarter 2012 Earnings Call. We distributed our earnings release earlier today. You can find a copy of the press release on the company's Investor Relations website, as well as on NEWSWIRE services. Today, we have on the call our CEO, Arkady Volozh; and our CFO, Alexander Shulgin. Mr. Barsukov, Yandex's Director of Corporate Finance, will be available during the Q&A session. Our call will be recorded. The recording will be available on the Yandex Investor Relations website in a few hours. We also put together a few slides to supplement the story. These slides are currently available on our IR website as well. And now, I will quickly take you through the Safe Harbor statement. Various remarks that we make during this call about our future expectations, plans and progress 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 2, 2012, 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 these forward-looking statements as representing our views as of any date subsequent to today. During this call, we will be referring to some non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with the 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 before I turn the call over to Arkady, I would like to give you a quick update about Internet usage trends in Russia. Summer month is seasonally slow, with Internet penetration usually remaining unchanged compared with the spring. This year was no different, and according to the Public Opinion Foundation, Internet penetration remained at 51% on a monthly basis, corresponding to 59.4 million people online. This represents 14% growth year-on-year. The growth continues to come primarily from the region. Central and Northeastern federal [ph] districts with more [indiscernible] growth respectively seeing a big growth. Demonstrated year-on-year increase in penetration from 48% to 65%, and from 56% to 68% this past year. At the same time, Euro and southernmost Baltic [ph] regions demonstrated much faster growth in penetration, increasing year-on-year from 43% to 51%, and from 41% to 49%, respectively. According to the most recent research of ACM consulting, household broadband penetration in Russia reached 39% as of the end of H1 2012. This is a 2% increase over the same data as of the end of 2011. In Moscow and St. Petersburg, household broadband penetration increased to 81% and 78%, respectively. And now, I am turning the call over to Arkady Volozh.

Thanks, Katya, and thank you all for joining us today. Before I begin, I would like to send my best wishes to those affected by the hurricane in the United States, and we're hoping that things will be back to normal soon. And now over to the business. Over the past 15 years, Yandex has grown from a local search provider into a leading company in Europe providing search and related services to the world. Last September, we celebrated our 15th anniversary. Yandex was launched in 1997 and it took us 3 hard years to attend to leadership taking the Russian market, and we have maintained the #1 position ever since. And now, we now have over 3,600 full-time employees in Yandex offices throughout Russia, Ukraine, Pakistan, Belarus, as well as in the United States, Turkey and Switzerland. And Yandex is an important part of the daily lives of our users and our advertisers. Q3 marks yet another strong quarter, with our core contextual search business earning top line growth. [indiscernible] our financial struggling, it is enough to say that we are pleased with the results. And now I will cover some of the operational highlights. I am pleased with the performance of our search products over the past few months, as we maintained more than 60% market share in Russia. Importantly, we increased our share of searches across all major browsers and platforms. This is due to a noticeable improvement in the quality of our search, including freshness, response time and quality of answers to open-ended [ph] queries. I'll add that approximately 11% of searches are now coming to Yandex from mobile devices, including smartphones and tablets. A key contributor to our strength in search is product quality and market management is working to keep the quality standards high. In the last few months, we reached with new product launches and partnerships. We released our own Yandex Browser, strategically important product for us; we extended Yandex.Market into apparel, a big and high-growth consumer category; we broadened our partnership with Opera; we implemented our joint effort with Apple, who chose Yandex to provide location search for their new maps offered with iO6; and in September, we started manufacturing Yandex.Factory, charging commissions from taxi companies. Now let me share some additional details. I'll start with the Yandex Browser. We have considered the idea of Yandex creating some browser for quite a long time. We felt it was important to maintain neutrality towards browser for developers. But as the environment changed, we decided the time was right to launch our own browser. We strongly believe that our friends in search and cloud services makes the Yandex Browser a highly competitive product that will delight our users. It offers tight integration in Yandex Search, as well as our own and our partner services, such as mail, maps, translation, et cetera. It is fast, light and easy to use. Since its launch on October 1, the number of downloads of the first few weeks of Yandex Browser exceeded 1.5 million, and we started to bite into the Russian market -- browser market. Over in users choice is fundamental to our value proposition, and our browser imported this core value by making easy for users to extend their search to other providers, including our direct competitors, should our platform not answer their question. We were the first to do so 15 years ago, and to date, we feel the only major search player to provide this kind of choice to the users. It is important to note that launching our own browser does not mean the end to partnerships in the highly competitive browser market. As before, we maintained partner relations with key players in the browser market. We have a lot to offer, including our web and browser services, along with web integration with leading search and information products. Today, we bundle all these things through Yandex Elements, a separate folder that is easily integrated with all major browsers available in the market. In Q3, we expanded our deal with Opera to integrate Opera's intuitive technology into our browser, allowing faster page downloading over poor connections. This may sound irrelevant given broadband's penetration levels, but increasingly -- interestingly, as mobile becomes more widespread, a significant portion of the market again relies on critically slow mobile connections. So it makes sense. Our partnership with Opera, who has always been strong in mobile, extends to other areas. Yandex.Store, our apps market, is built on Opera's technology and it already offers nearly 40,000 apps. Our latest release provides OEMs, telephone operators and other turnkey [ph] infrastructure to customize their mobile devices. Yandex Shell is a user-friendly UI that delivers the full range of Yandex services, including Search, Maps, Mail, cloud storage and more. I want to remind you that we have agreements with Microsoft and Samsung that have Yandex, as their default search on all Windows phone and Samsung Bada devices for Russia sales and Turkey. It is particularly noteworthy that Nokia's products, unlike the North America and Europe, continues to be very popular with the users in Russia and Turkey. And we are particularly excited about this partnership, as we believe that the combination of the Nokia hardware, Windows 8 operating system and Yandex services constitutes the strong user proposition. Turning to location-based services, which are a core part of our strategy, especially in mobile. Our Yandex mobile maps audience grew 80% from September 2011 to September 2012. And in Q3, we added a feature that allows consumers to submit their views for the businesses that are now presented on the maps. We continue to work to make our maps more useful. For example, this quarter, we added a feature that forecast traffic jams, a unique feature. Those of you who drive in Moscow and Istanbul will agree that it is sometimes impossible to estimate how long it will take you to get from home to work, and here Yandex comes to the rescue. Also, Yandex Factory service, which is less than 1-year old, is getting good traction with our users in Moscow. In September, we started monetizing Yandex Factory, charging commissions from taxi companies. Now to online shopping, which continues to grow. This fall, we introduced a unique comparison shopping service for clothing. Today, apparel is among the fastest-growing categories of goods for online shopping in Russia. Approximately 20% of searches related to goods on Yandex have to do with clothing or shoes. By introducing apparel on Yandex.Market, we're strengthening our ability to respond to user queries and start to monetize this lucrative theoretical [ph]. And finally, as we continue to invest in providing choice to users in Turkey, we are pleased to report strong progress. According to recent survey, Yandex brand recognition is quite high, over 80% of respondents showing similarity with the brand in Turkey. And our core search and map-based products has been solid adoption. We were pleased to see Yandex capture the first 1% of Turkish search share, according to our own measurements. Formally, we became the #2 search provider right behind Google, with their 89% in the period. And again, it's just early days and we are growing nicely. In summary, Yandex had a strong quarter. We maintained our market leadership a core search quality and launched important new products and partnerships. Based on strong execution of the first 9 months of 2012 and our outlook for Q2, we are narrowing our revenue guidance toward the upper end of the range, expecting 42% to 45% year-on-year growth. I will now pass the mic to Alexander, who will take you through our financial discussion.

Thank you, Arkady. In the third quarter 2012, Yandex consolidated revenues increased 41% year-on-year, to RUB 7.3 billion. Contextual or text-based advertising continues to be the main core driver for us, growing at 42% year-on-year and accounting for 90% of total revenues. Yandex's own websites bring the bulk of text-based revenue accounting for 70% of total revenue, while ads from the Yandex Ad Network accounted for 18% of total revenue. Yandex advertising network grew 55% year-on-year. As we discussed in our prior calls, our revenue on our partner network have been growing and rates that were considerably higher than those on our own sites. This is primarily explained by 2 factors: In Poland, they added new technology and the addition of Rambler to the partner network. Both these changes were introduced in Q3 2011. Now that we have a full year of results since these changes were implemented, we should be seeing on the ad network very much in line with growth on our own websites. Unless, of course, the advertising technology team comes up with certain helps in their algorithm. Display advertising group grew 25% in Q3, accounting for 8% of our revenue. Display advertising growth was minimal in Q3. While given the summer months, we saw strong advertising patterns, in September the display ad market weakened. While we have seen some results in display advertising growth rates in October, we remain cautious and expect more volatility towards the end of this year. The remaining 2% of our total revenues came from Yandex.Money and other sources. Our traffic acquisition costs related to the partner network grew in line with this revenue growth, while growth of distribution TAC was slightly ahead of the overall [ph] and percentage [ph] revenue, meaning that the [indiscernible] might be the same as the percentage of overall revenue compared to Q2 of this year. As a result, total ex-TAC revenue increased 39% year-on-year. Text-based revenue was primarily driven by paid clicks, which increased 35% year-on-year. Advertise [ph] our full year so the technology initiatives were introduced in Q3 2011, were now ad network and our own sites returned to a normalized paid-clicks growth pattern, where paid clicks grow slightly slower than revenue. As it is suggested [indiscernible] click began to [Audio Gap] the policy of disciplined headcount growth. This quarter, we added 133 employees. The majority of which are product developers. Our total personnel costs in Q, 32% year-on-year and represent 18% of revenue. Our cost associated with operations of data centers and office premises, as well as the cost of utilities, also grew slower than revenue, at approximately 24%. At the same time as we continue to actively invest in Turkey, we saw our advertising and marketing costs more than doubled compared with Q3 last year. And our depreciation and amortization expense for the quarter increased 50%. Revenue growth rate, primarily due to last year's forward investments in receivable funds and the related equipment. Accordingly in Q3, our adjusted EBITDA increased 47%, and our adjusted EBITDA margin for the quarter was also 47%, up from 45% in Q3 a year ago. This quarter, we saw a very small ForEx effect in our net margins, with RUB 30 million loss, primarily related to dollar-denominated liabilities from our balance sheet as rubles strengthened during the quarter from RUB 32.9 to RUB 30.9 to $1. However, I should remind everyone of the RUB 383 million foreign exchange gain in Q3 last year. This large gain makes the comparison with Q3 this year more difficult, and explains the slower growth of net income compared to other growth metrics. Our effective income tax rate in Q3 was 22.5%, reflecting management's intention to continue to reinvest cash generated in Russia, results obviously in dividends to our parent holding company [indiscernible]. And as a result, our net income increased 34% slower than operating income, and our net income margin was 32%. Adjusted net income grew 53%, and adjusted net income margin was 31%. Adjustments include corrections for the effects of share-based compensation, foreign exchange gains and losses and the USD 1,840,000 of contingent compensation, related to the acquisition of SPB Software. Our capital expansion in Q3 was RUB 1.5 billion, or 21% of revenue. CapEx is not usually evenly spread across quarters. And just to remind you, in Q2, we were at only 10% of revenue. We expect that for the full year, we will be between 15% to 18% operating with -- on CapEx. And finally, turning to our balance sheet. We have the equivalent of USD 786 million in cash, cash equivalents, term deposits and other investments and debt instruments. As you undoubtedly noticed in our balance sheet, we have assets and liabilities held for sale, bringing it at RUB 1.7 billion and RUB 1.3 billion, respectively. Taking a step back. In the fall of last year, we started the goal of looking for a majority strategic investor in our Yandex.Money electronic payment system. Management currently believes that we are likely to close the deal within 1 year from the end of Q3. Accordingly, in conformity with U.S. GAAP, we requested by the assets and liabilities from Yandex.Money was held for sale. I would also like to take a couple of minutes to comment on our SEC filing yesterday, relating to an equity exchange we are making to our employees. In the second half of 2011, we granted share options and share appreciation rights with significant number of our non-executive employees. We have since undertaken a comprehensive review of our equity compensation practices for our non-executive employees, as well as those of our peers and happy to mention [ph] that equity award in the form of respected share units would better meet our intended growth. I refuse our intentional rights to receive a number of shares for free, once they completed and conditions have been met. We are, therefore, offering eligible employees the opportunity to exchange their existing options or share appreciation rights or RSUs at the rate of 2:1. In other words, an employee can elect to cancel an option to purchase 2 shares in exchange for an RSU for 1 share. The business terms will not be changed. We believe that RSUs will provide better motivation for rank-and-file employees, while reducing shareholder dilution from employee share rewards. Importantly, the management continues to be compensated with share options or share appreciation rights, which only benefit from increases in our share price following the date of grant. And finally, turning to revenue guidance. Given the dynamics that we are seeing in the market and our performance year-to-date, we are narrowing our full year guidance to the upper end of our previously announced range, expecting that our revenue growth will be between 42% and 45% of our full year 2011. I'll now turn the call over to the operator for Q&A session.

[Operator Instructions] And your first question comes from Edward Hill-Wood from Morgan Stanley.

I've got 2 questions, please. Firstly, the question is on the relationship between paid clicks and CPCs. You were pretty clear on the direction of that in the quarter. But given that you're now down to 35% on paid clicks, is that some level that you'd want to defend more aggressively, maybe to the expense of CPC inflation? I'm really interested in your thoughts on that, and particularly in Q4. And secondly, just on the 11% of traffic coming from mobiles and tablets. Could you just give us a sense of any obvious or clear differential use or behavior you see between the 2 different types of user?

Ed, thank you for the question. This is Alexander. Let me answer this first question on paid clicks. We discussed effective growth in this quarter, in Q3 was 35%, and the cost per click increased 5%. So the growth rate of paid clicks has decelerated compared to Q2, which is absolutely normal and expected trend that we can get [indiscernible] before. Deceleration of paid click growth reflects the fact that a full year has passed these 2 important events; one is ad severance technology improvement on our ad network; and second, additional revenue search. So from this point on, we are now returning to a typical paid clicks growth pattern, where paid clicks will grow slightly slower than revenues, and cost per click will demonstrate moderate year-on-year increases, broadly in line with general inflation in the economy. So we expect the group revenue growth to come primarily from paid clicks and some inflation on CPC click [indiscernible] percent.

Talking about mobile and motivation of mobile, although it continued to be -- mobile usage continues to be more for the leisure and entertainment, from what we see, the more users use mobile, then the less difference we see between monetization per 1,000 searches on desktop and mobile. If we talk about tablets, it's almost the same. And now, on mobile devices, that would be smartphones, the motivation comes close to 70%, 80% of desktop. And I think the more usage will be there, the closer the results will be.

If I can just ask one follow-up. Just wondering how your relationship with Apple is these days?

This is still Dmitry. I just wanted to say, as we said on the conference call, we're quite pleased with the level of [indiscernible] and we hope for further progress. But we cannot say anything further at this point.

Your next question comes from the line of Lloyd Walmsley of Deutsche Bank.

I have 2, if possible. First on the Yandex Browser, are you now promoting that broadly? And could you maybe talk about what percent of the downloads came from organic versus paid source and how you think that might evolve going forward and impact margins? And then second question, on mobile OS, how do you guys think about potentially moving to create your own mobile apps now that you've created your own browser? Is that something you're contemplating or already potentially working on? That would be great if you could answer those.

Talking about the browser, I would like to remind you again that this is the early version of the browser, the first version that we announced before Metro browser. And we didn't start real serious distribution on this. And all the growth read and downloads we've sold so far was mostly Metro again. So we didn't spend on promotion of the browser. We are waiting for this more -- for further directions to maybe start distributing. But again, distribution is not first -- the first time we are doing it. We were in the distribution business for many years, and we do not expect any significant additional cost to that. And on the mobile OS, I would not comment right now. Maybe we'll have some comments later.

[Operator Instructions] And your next question is from Alexander Balakhnin of Goldman Sachs.

I have one question. It's on your paid clicks dynamics on Yandex website. I noticed you don't share -- you don't disclose this year-on-year growth. But can you probably share with us what was the growth relative to the one you saw in the first half? Was it the same for Yandex websites or it slowed down? And probably, if you could share some thoughts on the fourth quarter display advertising sellout via PDK [ph] and if you can just share probably some -- a little bit percentage of inventory you have sold for the fourth quarter? It would also be helpful.

Alex, this is Alexander Shulgin. On paid clicks growth, as you've said, we are not disclosing our paid clicks growth by revenue stream. But what I could say on ad network, we saw a very high increase in -- of the growth [indiscernible] with new technology and user fix implemented while on search and other owned website. We saw very solid and stable growth rates. So this acceleration will give you effective growth in Q3, if only due to cycling -- normal cycling of the growth on the ad network, while search remains solid and stable in its growth rates on paid clicks. Talking about next year, it would be too early for us to give you any guidance for our next year's projections because we still have 2 highest months, the sort of highest months, so November and December are heavy months. So we'd like to give the appropriate revenue guidance for the 2013 in our Q4 call in February. But what I could say, that we're optimistic about the next year, and we expect another great year for Yandex.

Your next question comes from the line of Gene Munster of Piper Jaffray.

If we listen to some of the other large Internet companies, whether it's Google or Yahoo! or Facebook, they obviously had some less optimistic things to say about broader Europe, nothing specific about Russia. But maybe, can you just talk a little bit about maybe what you're seeing in the macro related to Russia that might be different from what some of those other companies are saying?

Actually, this is Arkady. We judge whether or not there is any economic slowdown by our contextual advertising. And as far as you see from our numbers, with what we see so far, there is no slowdown and the growth rates are very healthy. Whereas a decline -- a slight decline in display advertising, actually, we think, came to us from other markets. Some of the big budgets decided on some markets, which are much affected by the economy, and maybe the decisions are made there. And that's why without seeing anything dangerous here, we see some decline in the big display budgets. But again, display is not a big part of our business. It's just 9%, so we were higher than the market in display this quarter and it's a small proportion of our revenues. But on search advertising, we're still healthy.

And then, separately, is -- your search share has been slowly increasing here? Can you -- is there 1 or 2 things you can identify that's really been causing that share to slowly return?

It's a lot of small things we're doing to the search core mostly. Because the growth among all the platforms, all the browsers, mobile and desktop, is just increasing of the quality and, hence, the retention of the users. We're reaching new services, and we improve our core search. But the secret is [indiscernible]

The next question is a from Olga Bystrova of Credit Suisse. Olga Bystrova - Crédit Suisse AG, Research Division: My question is on revenue shares in search. You have pretty stable and slightly improving graphic share, but growth in search revenues have been lagging some other competitors that reported their revenues in the same segment. So I wanted to ask you to comment, if I understand correctly, that you have been losing some of the revenue share in search, why that could be a reason, whether it's a one-off in the quarter or is it more of a trend that you're seeing? And I guess, how should we think about it going forward?

Olga, thank you for the question. This is Alex speaking. So on revenue growth on search, we have seen growth rates at approximately 40% for the last 3 quarters, Q1 -- from Q1 to Q3 currently. The other search player which reported figures, as you know, is one of our competitors, which is a much smaller. And the search advertising on this website is powered by another company. So it will be difficult for us to comment on the structure of their deal. What we think of our revenue share of the total search space because the market is stable, it's unlikely to change materially this year. Olga Bystrova - Crédit Suisse AG, Research Division: So basically, it was a one-off in the third quarter then. Right?

Again, the segment advertising revenue on the other search player, which disclosed their figures for the Russian market, it's not clearly revenues derived from the customers, but it's rather revenue from the search distribution deals. And so we won't be able to comment on the contents of this deal and revenue, of course.

Olga, this is Dmitry. I just wanted to add that, essentially, what we're seeing over time, for us, as the biggest player in the contextual market in Russia, the main driver of revenue is the market itself. As long as our share remains stable and solid and considerably above everybody else, so this is why you don't see much fluctuation in our growth rate quarter-to-quarter. Whereas for smaller players in the market, these fluctuations may be more pronounced, and we do not know the terms of their deal. But it could be that their revenue is much more related to traffic. Whereas, for us, the terms are different.

Your next question is from Mariya Kahn of Bank of America.

I wanted just to get some granularity about the sectors that are driving the growth in search. Are you seeing more traditional advertisers, like FMCG companies coming to search at all? Or is it still driven mainly by financials and autos? And also, if you can give us some color on the contribution of e-commerce to search growth as well?

Mariya, this is Alex. So on the revenue growth by sector, we see very stable dynamics in all sectors, no major shift there. So the revenue competition by sector remains basically the same or very close to what we had in Q1 and Q2. So we've seen some accelerated growth under way now for financial search industry and also in e-commerce. We don't disclose revenue contribution by each industry. But I could say that we see some accelerated growth and broadly defined in e-commerce sector, which would account for about 15% of our revenue contributions. So again, it remains very stable. We see some FMCG companies come into search and contextual and search advertising but their contribution is still not so high. And our total revenue remains to be very fragmented with high number of customers, which is very good for the business because this is why contextual and search advertising was so stable and started to grow compared to display.

Just to follow up out, you said that e-commerce is about 15% of your revenues. Can you give me where it was a year ago?

Our e-commerce growth were slightly lower than that, Mariya, about a couple of percentage points lower.

And your next question is from Anastasia Obukhova of VTB.

The question follows your audience growth in September was behind the market was up 12% versus 17% overall Russian to metric audience. Do you attribute or do you see from your own point the audience is going to some other smaller websites? And the follow-up question is on the e-commerce and the search. Do you see -- effectively see the tremendous slowdown in the first quarter in the paid clicks? Do you see some other revenue stream materials coming in 2013 that might change, for example, your business model?

Anastasia, this is Dmitry. On your first question, I just wanted to say that, for us, the more relevant metric to look at is queries group, as we disclosed in our press release. It's about 30%. Overall, Russian Internet audience continues to grow quite nicely, and we are seeing continued traction with the users.

By the way, to answer this question, we are still #1 by audience in Russia by -- according to comScore, and this didn't change.

Yes, and #2 after U.K. in terms of daily audience according to the announced [indiscernible] And can you please comment on the -- like the different revenue business that may impact your business model structure in 2013?

This is Alexander speaking. Yandex, of course, remains to be primarily a search and tech-based advertising company, and there is still lots of opportunities to increase integration in this advertising sector because there are ways to improve display rates and new advertising technologies to be implemented. So we think there are lots of things to be done for Yandex in this particular area. Another potential revenue growth segment is the Yandex.Market, which is the media e-commerce platform for Russian units. So online, it has been about 30% of searching decisions are made through the Yandex.Market or using information on Yandex.Market. As we discussed just recently, we launched a company strategy focused on issues on Yandex.Market and given that about 20% of searches [indiscernible] on all searches from Yandex, i.e., such as from [indiscernible] we believe that long term, this could be a good revenue growth opportunity for Yandex, which is not exactly related to search.

Your next question is a from Alexander Vengranovich of OTKRITIE.

I have a question regarding your product development and advertising expenses going forward. So we've seen some pickup in advertising expansion in the third quarter. What do you expect for the fourth quarter this year and going forward? Should we expect that product development and advertising expenses will grow in line with the revenue? And also, do you see any additional advertising activity from Google in the third quarter?

Alexander, this is Dmitry. Traditionally, we do not disclose our expectations regarding specific categories growth. One thing I should like to express is that while we like to keep optionality for outstanding [indiscernible] grow with EBITDA in mind. And as you saw based on our results, we not only can be but we are very prudent in the ways of the system.

I would also add that with our current level of revenues and EBITDA level, the budget we can afford and we plan for the advertising is high enough for market or any brand building.

Okay. And one more question, if I may, about display advertising. Actually, we have seen that the market is quite depressed in the third quarter. Probably, that would be the same case for the fourth quarter. Do you have any coming initiatives going forward just to simulate your growth in display advertising? So there's fewer kind of small revenues for you but you have one of the biggest portals in Russia and probably you can also simulate that revenue stream?

Again, display advertising is not the core of our revenue stream, and we are not the biggest player on the market to influence the core market. The total advertising counts for something like 20% to 25% of the total display market in Russia. And as you saw, we are growing above the market average level. We're showing healthy results in display. We don't know. We don't know if we should drive the result here because it does influence much our total top line growth.

And the next question is a from Anna Lepetukhina of Sberbank.

My question is that if you accumulated almost RUB 800 million of cash on the balance, you generate enough cash to finance context, and you have some cash even left. So what do you intend to do with this cash? Do you plan any M&As? Do you plan to pay dividends? And for how long you will continue accumulating this cash on your balance sheet?

Yes, thank you for the question. This is Alex speaking. We think that having a strong balance sheet is a strategic advantage for Yandex, which provides us flexibility to acquire the developed technologies or to acquire technologies, which will complement our search and other products. Talking about dividends or the potential use of cash, this is probably a discretion of our shareholders, and we are not able to comment on that front. The decision or the initial plans on cash position and policy is reviewed on a normal basis by our shareholders and the Board of Directors, and the current plan is to continue to accumulate cash, as I said, to have a flexibility with our investment for Yandex.

And can I have just one more question? Can you please explain what is the rationale behind selling Yandex.Money?

Again, Alexander speaking. We think the business overtook the electronic money and created a convergence with traditional bank and financial services industry, as bank and financial evolves on the [indiscernible] to income page. So we think that Yandex Money will be better off for the business having a strategic initiative from the financial industry, while keeping connection with Yandex technology and IT side. We think the combination of 2 strategic shareholders will complement our skills and will make Yandex.Money a stronger business than it is now.

And the next question is from Alex Balakhnin of Goldman Sachs.

I have 2 follow-up questions. One is on your regional traffic monetization. Can you probably share with us what instruments do you have in place to further improve the regulation of all the regional traffic? Because I think there is still a bit of discrepancy between where the traffic is originated and where it is mostly monetized. So I think it's still skewed to most current peaks. And the second question will be on the return on investments of advertisers into the paid clicks acquisition. You have probably an extensive framework at hand. Do you -- would you say the reach on investments is staying the same, improved or decline? I mean, any observations on this would be helpful.

Alex, talking about monetization of regional traffic. On one side, this is a very traditional process as people get more accustomed and used to doing commercial Internet. Local businesses come online and improvement of websites and move their product conference online. What we can do and what we do is that we are opening sales officers in the region and educate the local customers and local advertising agencies on the ways to sell online and to use Yandex advertising technologies effectively. We have advertising offices in almost all cities of mid or high population, and we are active and educating and advertising our business proposition for the local businesses. So our return on investment for advertisers, as we discussed, that this quarter we saw very moderate in case on cost of click. So we think these -- given that Yandex is the majority of contextual advertising market, the return on investment for our customers is stable and, in case of cost of click, is offset by additional improvements on the technology side, which improves conversion and click for rates.

And your final question comes from Olga Bystrova of Credit Suisse. Olga Bystrova - Crédit Suisse AG, Research Division: Just a follow-up on the question that Anna asked and is related to CapEx. The CapEx has gone up a little bit in the third quarter. It is sort of within the range that you highlighted earlier this year in terms of your expectation, but it did increase from the first half. And I was wondering if you could comment to sort of which areas increase came from, in particular, which markets was related to Turkey-Russia regions, et cetera? And how do you see CapEx development going forward and which projects you will be addressing as a priority?

Olga, thank you for the question. As we discussed, CapEx is not given from quarter-to-quarter because it depends on when we open new data centers. In Q3, we opened our new data center in one of the largest regional centers, which is quite a big one, and we expect to continue investment in data center in Q4. This is the reason why our CapEx for the full year is expected to be in the range of 15% to 18%. While in the first 6 months of the year, it was about 10% to 11%. So it's simply due to the time schedule of our investment process. This CapEx is primarily to Russia, while all of data centers are also able to search such queries from other countries like Turkey [indiscernible] as well. But majority of our traffic is still Russia and, therefore, CapEx is driven primarily into Russia and primarily to search and our biggest and most capital-intensive product. At this point in time, we remain at the same view, as we communicated before, but our long-term CapEx to revenue ratio is between 18% to 20%. And if and when we see in Q2 improve use along data centers or reduce deflation, which we'll certainly do so. Olga Bystrova - Crédit Suisse AG, Research Division: And sort of just a related question on international expansion because I think there were a couple of comments, if I'm not mistaken, about maybe more appetite for international or more international ambitions from you going forward. Are you -- you seem to be happy with the Turkey -- is it meeting your expectations relative to what you expected before and whether you would indeed be contemplating other countries?

As we said, it's still early to talk about Turkey, and we are preparing to analyze it a little bit later. Thus far, we are very much pleased, as we said. We spent a year to build the products. We spend this year to build the brand, and we have built the brand in Turkey. And now we're going to build the audience. And before we prove the model where, we are not going to spend anything else. Olga Bystrova - Crédit Suisse AG, Research Division: And what about other -- potentially other markets?

Of course, if Turkey works, and we will be seeing revenues coming from the -- from some of the market, of course, I think all of our investors will just push us hard to go further. And we will be ready to do this. Olga Bystrova - Crédit Suisse AG, Research Division: But it's not like, I would say, an imminent decision, but it's just a more conceptual one?

We didn't make the decision yet, but we want to see a clear success first.

That does conclude our conference for today. Thank you all for participating. You may now disconnect. Thank you.