Good afternoon, ladies and gentlemen, thank you for waiting. And welcome to Yandex Third Quarter 2013 Financial Results Call. [Operator Instructions] I would like to remind you that today's conference is being recorded, on Thursday, October 24. And I'd like to hand the call over to speaker for today Gregory Abovsky. Please begin your meeting and I'll be standing by.

Hello everyone, and welcome to the Yandex's Third Quarter 2013 earnings call. We distributed our earnings release earlier today. You can find a copy of our 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. Our call will be recorded. The recording will be available on Yandex's IR website in a few hours. We've put together a few supplementary slides which are currently available on our IR website. Now I'll quickly take you through the Safe Harbor statement. Various remarks that we make during the 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 the Form 20-F dated March 11, 2013, 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'll be referring to certain non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with the U.S. GAAP. Reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is provided in their earnings release we issued today. Now, I'll turn the call over to Arkady who'll give you an update of our Q3 operation activities.

Thank you, Greg. And thank you, all for joining us today for Q3 conference call. We delivered another set of strong finance and operational results. Let me highlight some of the most important developments in our business over the last 3 months. One, we saw excellent paid clicks growth both on our properties and overall as we increased their evidencing of our ads and drove higher ROI's for our advertisers. Two, we grew our market share on mobile, both on iOS and Android. Three, we unveiled new cost per action model on Yandex.Market, including the ability to complete the process directly on our site. And, four, we announced the acquisition of KinoPoisk movie search, which will serve as a new search vertical at the Yandex. Now, let's get into some of the details. Let me begin by mentioning our search share. According to LiveInternet, our share of searches on all platforms including mobile, was 62% in Q3 of 2013, compared to 60.5% the same quarter last year, an increase of 1.5 percentage points year-over-year, an increase of 0.3 percentage points sequentially. Share gains were driven by a combination of the quality of our search technology, gains seen by Yandex.Browser, and gains on mobile. We launched our Yandex.Browser just over a year ago, currently Yandex.Browser has approximately 6% of market share in Russia. Next month, we're going to introduce Yandex.Browser for iPhones and for other tablets, and fills [ph] based cross platforms synchronization[ph]. Overall, we think that Yandex.Browser is an excellent product and we will continue to invest in it's development. Let me now turn to the growth in paid clicks. The way of improvements to the click prediction Fcoverage and SERP layout, that we have been making since the beginning of the year continued to bear fruit. Paid clicks growth…

Thank you, Arkady and thank you all for joining us today. In the third quarter of 2013, Yandex's consolidated revenues increased 40% year-on-year to RUB 10.2 billion. On the like for like basis, our total revenues grew 43%. Contextual or text-based advertising accounted for 92% of total revenues in Q3 and demonstrated a healthy growth of 43% year-on-year. Yandex owned and operated websites constituted 69% of total revenue, and grew 33% year-on-year. Our advertising network demonstrated year-on-year gross of 82%. As you would recall, starting July 1, 2013, we began to follow base search results on Mail.ru properties. This partnership increased contribution of ad network revenues to 22%, of the total revenues in Q3, compared to 16% in Q2 2013, again on the like for like basis. Display advertising accounted for 8% of our revenues in Q3 and grew 35% year-on-year. On July 4, we announced the completion of our joint venture with Sberbank. In Q3, our online payment commission revenue includes just 4 days of Yandex money operations. And going forward, the comings of our 25% stake in the Yandex Money JV, will flow through the other income line. Our advertising network tax will run 120%, faster than our network revenues overall as we added Mail.ru. Distribution tax grew 46%, also faster than our own and direct revenue. The increase in distribution tax as percentage of O&O revenue was approximately 75 basis points year-on-year, while mobile tax was roughly flat year-on-year. On a sequential basis, however, distribution tax was up only about 10 basis points. Total tax increased 83% year-on-year. Tax-based revenue growth was driven by increase in the the number of paid clicks, both on the own and direct website and on the network front. Paid clicks grow on owned and direct websites was driven by increase in…

[Operator Instructions] The first question comes from the line of Lloyd Walmsley.

Was just wondering the high-end of the guidance range for the full year would imply a 4Q deceleration to about 38% ex-payments by my math from the 43% you just delivered. So just wondering if there is any reason to expect a deceleration like that or if it's just conservatism? And then as a follow-up, it looked like you were able to fulfill or sell, but increased inventory from Mail without any issue at all, and continue to grow O&O pretty strongly? Do you feel like there is a lot of comp demand as you add more inventory whether that's through network partners or paid click growth that you can continue to just see strong growth on the top line as that inventory comes online?

Lloyd, this is Alexander. I'll take your question. So with what I said, we expect the full year revenue to be close to the higher, and along guidance, we want to be realistic and prudent about when providing the guidance so that we can deliver on it. We also see the relative growth of production due to decline in Q2, it was only about 1.2% and we've also heard from some source that the accretive and [indiscernible] environment becomes tougher for some customers or some industries like for example, B2B industries or automobile. So, given our strong position in Internet advertising market and robust macro trends that drive growth of the Internet and Internet spent, we do not feel anything negative yet, in our business however, Yandex is multi-related from the Russian economy. And if the negative trends continue, our gross rates will be impacted as well, but as I said, we should keep deliver the strong set of results and the business remains strong. So, it's combination of some concerns about macro and intention to provide realistic prudent guidance.

The next question comes from Alex Balakhnin.

Good afternoon from Goldman Sachs. I have 2 questions. The first is on Yandex.Market. The change of former, can you please update us on how many merchants you were able to sign off for the experiment, and specifically what categories are they working, is it like any skewed team sheet of the categories or you have a more or less even categories distribution of the merchants? And, my second question is I just want to get clarification on the paid clicks you mentioned that for all know, it's comparable to the average paid click growth for the group. And I just wanted to check if I understood this correctly? So I would say that O&O paid clicks growth was around 50% year-on-year? Just doesn’t add up with addition of Mail. If you can clarify here, this will be helpful?

This is Arkady Volozh Yandex.Market. So far we have over a 100 shops, which have already claims during the new format. And we have over a 1000 other shops interested in joining.

And categories?

Actually, I don't know exactly we were selecting the best quality shops for this program first. Only those who have feature highest rating. And, I think it's mostly consumer electronics and that stuff.

Alex, this Alexander. I will take your second question about paid clicks. So we disclosed the gross rate of the total paid clicks for the business, but this time we also wanted to particularly highlight that there was also strong growth in clicks on home integrated websites, close to the 50% figure. And, we're very happy about that because it helps us to rely on interest of Yandex and our advertisers by providing more quality traffic to our customers, we improve their ROI's and therefore, eventually they would be more interested to spend their budgets on social advertising on Yandex.

Thanks, so much that's very clear. And just a follow-up on my first question. Was this 100 merchant signed up and 1000 interested, do you see that they are capable to provide a sufficient user experience in terms of deliverability and availability of goods. So you think that with 100, already signed up, you will be able to secure and improve user experience?

Well, it is a multistage rollout of the product. And, we actually hope to have it fully ready for operations by next spring. And, this is just the first stage, and the first 100 is enough to test the model that's all we need. Of course, we need all the Yandex.Market is still there, it's still on, and nothing changes from that side.

Your next question comes from the line of Anna Lepetukhina.

My first question is kind of can you share please what are your plans in online video services? I mean, you acquired KinoPoisk, but then there were also reports that you're looking to expand and to start offering video services? I know that it's all rumors and probably you don't call on speculations, but maybe you can provide some color? And my second also question is on expenses. As a result of the launch of Yandex.Market in November, do you plan some aggressive advertising campaign, and should we expect increase -- additional increase in marketing expenses as a result of this launch?

I will try to pick up the first question about video on KinoPoisk. So Russia is one of the most active, Russian audience is the most active in Europe in video consumption as you know. The KinoPoisk position is just -- for now is just the vertical, which helps us to better answer the queries in this area. KinoPoisk is the best positioned resource to have the all the answers in everything around movies and video. So, we acquired it first of all just to provide best information in this sector. We cannot comment on other speculations on video, but we're looking into the area there actually.

This is Alex. You'd like me to take the second question. So on the advertising spend, we will, of course, support all our good new product launches with appropriate marketing and advertising support. However, as I said, advertising spend this year is more evenly allocated between quarters, and we think we have appropriate funds like we did before. Without any substantial increase spends compared to last year. So, the growth rate will be more and more direct in central marketing before compared to Q3.

Can I just, then ask a follow-up. As a result of these, previously you didn’t give guidance kind of you indicated that we can expect margins to be somewhat flat, is it something that we still can expect or kind of it has somehow changed the following the addition of Mail.ru [indiscernible] advertising?

Mail.ru deal will certainly have an impact on our adjusted EBITDA margins. For the full year, we expect about 100 basis points negative impact because we generate lots of incremental revenue, yet, we have to pay the TAC for this year. On a quarterly perspective, in Q3 and going forward in Q4 as well, the impact would be as we estimated currently about 200 basis points. So, barring the Mail.ru deal our intention for Q3 adjust EBITDA margins on the same level as last year remains unchanged. As always said, but again as always said, given that it is strategically important project that requires one off the incremental investment, it could have an impact in any given quarter. Yet, we just to give you some data points, we said that we expect the full year revenue gross to be a bit higher and allow guidance range closer to 58%. We also had the strong search results in Q3. And there is some negative impact from the Mail.ru deal.

The next question comes from the line of Boris Vilidnitsky.

Two questions from me. First, are you guys already making plans for 2014, and if so I'd love to hear some initial thoughts there? And second, something we ask every quarter, the cash on the balance sheet, if you guys have any updates there?

Boris, thanks for the question. Yes, as I said, we have close to $1 billion of cash and equivalents in our balance sheet. We run the share buyback program and we already purchased 6.6 million shares. So, the shareholder return was about $200 million. We expect to fulfill this program by the end of March next year. According to our [indiscernible] plan. Beyond that, it's up to the board to decide on the appropriate news and if to return cash to shareholders.

Thank you. And anything for 2014?

And 2014, we have a policy. We provide guidance on 2014, on each fiscal year at the Q4 conference call, so you guys will have to wait until that point in time.

The next question comes from the line of Betty Martine.

2 questions. One, the first one is just more of a clarification question on Yandex.Money. We do have this adjustment number just target of 552 million from 2012, just wondering, if you can give a number from January to July for 2013 to adjust, to figure out exactly what this 38% guidance is. That's the first question, the second question is really a follow-up to earlier question on this Yandex.Market's cost-per-action model, and really about what -- can you give any color about what types of merchants are these 100 merchants that have already signed up, are they the specialist retailers, are they local retailers. I mean if I just think about you mentioned something about consumer electronics, we also look at consumer electronics sector in Russia, and the only trading company there, I mean operating margins are very low. If you're talking about 1% payment for company like INvideo that's like 25% of their operating profit last year? That would be just quite significant. I'm just wondering, is there some kind of character of the merchants that you're dealing with, that we should be aware of?

This is Greg. Thank you very much for your questions. The first one is easier to answer which is year-to-date. Yandex.Money looks like it generated about RUB 394 million from revenue. And our guidance of 34% to 38% -- to be at the higher end of 34% to 38% as in a like for like basis. So, it excludes any impact from the addition of or removal of Yandex.Money from our results. So, this is the perimeter of Yandex as it is today compared to the perimeter of Yandex as it was a year ago. So, it's completely like for like. And the question of Yandex.Market, and why does it -- why is it an attractive value proposition. First of all, in the context of global marketplaces, 1% is actually an extremely attractive price point. And it was chosen specifically to draw a large number of potential merchants to the site, to embrace the platform. While, obviously each company keep its take rates under wraps, it's sort of well known that eBay's take rates are in the 8% to 10% range and, people estimate that other players are in that neighborhood so 1% by comparison is very low. Furthermore, like we said, it alligns our interests much better with the interest of the merchants because they only pay us if they have made a sale. Does that answer your question?

Yes. It does. But that I just want a follow-up on there. Is your expectation, and the way look at this, is this a real incremental revenue opportunity or how much of this is just kind of a channel shift from what it was previously, the same merchants would have been advertising on your site and now are talking about revenue sharing? Or is this a true incremental revenue stream?

Yes, very good question. Look, obviously we will have to wait and see to see how successful this product is before we can answer that question fully. The intention is that it increases the velocity of transactions on Yandex.Market's site. As Arkady mentioned, the shopping cart abandonment and ease of use, is the primary targets here, and then secondly, it's alignment of interest between us and the merchants. We believe both of those factors should contribute to higher velocity of goods sold.

The next question comes from the line of Ulyana Lenvalskaya.

Thank you very much for the presentation. Could you please update us on the Turkish project. Would you expect this to continue next year, and what is the current status there?

Well, my question, my favorite. We continue operating in Turkey. Since last call, our market share increased a little bit despite the fact that we stopped all the advertising activities and didn't increase any distribution channels there. The audience is still with us. We are still their largest domestic site in terms of audience there. And, now, we started actually our tactic there is to start or launching the first serious products which are really unique for the markets, not just [indiscernible] products as was a launched previously. The last launch was the Yandex.Navigator, which we launched couple of weeks ago. And since that time, it has become a still is the number 1 by downloading all the app stores, Android and Apple App Store. And we actually doubled the number of TACs and so on. And it was extremely well accepted by the market. We're also continue improving our search quality and we will be launching several more products this year. We launched a shopping vertical there in September, which differentiates our search. So, we continue pushing there. I will say that we'd plan to continue investments in Turkey during 2014. And we have pretty good results for that.

And we should not expect you to give up. My second question, is about.

We're not planning to spend much more than we do. So.

Can I have another question? What is current share of mobile searches in your revenue and the number of searches for it?

Ulyana. This is Alexander, let me take this question, so in our total [indiscernible] about 15% from apps and mobile devices include on, traditional phones, smartphones and tablets and the revenue contribution is about 11%, a bit lower.

And there's a number for third quarter, right?

Yes, this is related to the third quarter.

The next question comes from line of Alexander Vengranovich.

Actually, 1 question on KinoPoisk, as far as I understand, so you've already acquired the company, and that will be impacting your financials in the fourth quarter. So I was just wondering, whether the FX of KinoPoisk position is already included in your financial projection for this year, this is because of as far as I understand, it is quite a significant category with a quietly significant average number from monthly users, we should be sure drive your revenues significantly, and that would your [indiscernible] not sure with the partners? So, can you please give us some update on this? And with regards to [indiscernible] ,your partner TAC so as we've seen in the third quarter on the back of Mail contract the share of partner TAC in partner raising has increased substantial. So, I'm I getting it right that this 70% share of TAC in the revenues is sustainable going forward and you will really have that contract with Neil?

Alexander, thanks for the question. This is Alexander speaking. So on KinoPoisk, this website has a very big audience, that's correct. But, from the course or revenue perspective, compared to Yandex, the impact would be minimal in Q4. We acquired this website primarily as important search category and search vertical to provide better quality answers for these type of queries. The revenue share that you see now is obviously I think it's sustainable going forward. Increase was attributable to Mail.ru, revenue sharing turns result, other partners remain unchanged.

On KinoPoisk just a follow-up. Are you planning to sell contract season pricing on this using KinoPosk kind of platform for this?

Yes, absolutely. KinoPoisk, as we discussed, has big audience and therefore where we use it as a platform, publisher for text business.

So you expect that most of the effect will come in next year and effect for this quarter will be not very big?

Yes. Exactly implementation of all advertising technology plus some other things we plan to implement on this website will have more visible impact going next year, not in Q4.

There is a follow-up question from Alexander Balakhnin.

I wanted to ask you on the accelerated [indiscernible] search engine results pay just to 26% in the quarter, apart from the mobile traffic, coming from a higher market share, is there anything else contributing to the acceleration of the SERPs? And my second question little bit of follow-up to the KinoPoisk questions, the fastest-growing advertising segment online as, is online video. And, could you just share a little bit, what is your strategy to deal with on your presence there and how KinoPoisk or Yandex video or anything fits your strategy to build the presence in online video advertising?

This is Greg. On the question of SERPs. Obviously, there is a multiple things that went into that number. It reflects both obviously rapid growth of mobile SERPs as well as good growth on the stop queries as well. In terms of our plans for online video, as you've seen currently we've decided to purchase KinoPoisk to really strengthen our vertical search there. Obviously, there will be some component of video ads on KinoPoisk for pre-rolling things like that. But beyond that, we have no -- nothing to comment on in terms of other plans for video advertising and video sites.

There are no further questions at this time, sir. Now I'll turn the conference back to you.

All right, thank you, everyone for joining us on our Q3 earnings call, and we look to forward to speaking with you at our Q4 call, later -- actually in 2014. Thank you so much.