Good day and welcome to Yandex’s 2015 Earnings Call. Today’s call is being recorded. At this time, I would like to turn the call over to Katya Zhukova, Director of Investor Relations.

Hello, everyone, and welcome to Yandex’s third quarter 2015 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 and on Newswire services. On the call today, we have Arkady Volozh, our Chief Executive Officer; Alexander Shulgin, our Chief Operating Officer; and Greg Abovsky, our Chief Financial Officer. Our call will be recorded. Recording will be available on Yandex’s IR website in a couple of hours. We’ve also put together a few supplementary slides, currently available on our IR website. And now, I will quickly walk you through the Safe Harbor statement. Various remarks that we make during this call about our future expectations, plans and prospects constitute forward-looking statements. Our actual results may differ materially from those indicated or suggested by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our annual report on Form 20-F dated April 30, 2015, 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 certain non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with U.S. GAAP. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is provided in the earnings release we issued today. And now, I am turning the call over to Arkady.

Thank you, Katya, and hello, everyone. Thank you all for joining our quarterly earnings call. The first quarter was an important turning point for the company for a number of reasons, starting from mid-summer we reversed our search share trend in view our share on the Russian market. We also successfully switched to the VCG auction and the new ranking rules for paid search. We increased our market share in Turkey, we signed a strategy corporation with Microsoft to offer Yandex as the default search for Windows 10 in Russia, Ukraine and several other markets including Turkey. And then just specifically grateful to our excellent legal team for their hard and professional work, we achieve that positive decision from the Russian antimonopoly service that we hope will return fair competition to the market. On the financial front, in Q3 we grew our total revenues by 18% year-over-year and now we are increasing our revenue growth outlook for 2015, previously we were expecting revenue growth of 11% to 13%. Now we expect that our consolidated revenues in 2015 will grow in the range of 14% to 16% compared to previous year. Our search share in Russia increased approximately 70 basis points from June to 57.3% in September. Mostly due to the growth of Yandex browser across all platforms and improvements of our search share on Android phones. We estimate that in Q3, our share on Android was 40% compared to 39% in Q2. Our search share on iOS devices averaged, 45% in Q3 compared to 46% a quarter earlier. Share of mobile in our overall search traffic in Q3 was 26%, 2.5 percentage points up from Q2. In terms of revenues, mobile generated 21% in Q3 compared to 20% of our search revenues a quarter earlier. During the quarter, we added approximately 2 percentage points to our market share in Turkey. Our share there reached 7% according to comp score. We are on track with our initial targets for this year and we are cautiously optimistic about our business in Turkey. Another important milestone for the company was the newly signed deal with Microsoft to become the default search on Windows 10. The [indiscernible] extends to Russia, Ukraine, Turkey and several other markets. Windows 10 has always proven to be a success globally and has significant growth potential. We will be promoting Windows 10 on our websites. With this, I am turning the call over to Sasha, who will take you through the implementation of business reduction, the results of the antitrust case in Russia and several other achievements of the past quarter.

Hello everyone. On September 1st we reached to a new VCG auction for advertising on Yandex Search and implemented the new relevant ranking formula of paid search in our website as well as on the websites of our partners for whom we follow paid search. The main goals of the switch from the generalized second price auction was to provide our advertising clients with a simpler and easier to manage bidding process and to reward bidding for higher positions by charging premiums for incremental clicks only, while driving more highly quality products to advertisers websites. The results of this implementations were different for different advertisers, for those clients who have been carefully watching the quality of their ads, and the relevancy of their landing pages, CPC decreased significantly. This decrease was driven not only by the more efficient approach to pricing, but also by the new [relevant ranking] formula that allows clients with high quality apps to pay lower CPCs and still get to higher positions within the ad-block. For some advertisers CPCs increased in September. We think that the new auction will incentivize this group to more closely monitor the quality of their ads as well as the quality of their landing pages, pushing up their ads to higher positions and paying lower CPCs. In aggregate, these implementations leads to monthly sequential decrease of our average cost per click on search, sale on a year-over-year basis CPCs still grew slightly compared to September 2014. Today, we also see evidence of increased interest from clients [begin] for higher positions in our paid search results, including those clients, who are using minimum business strategies before. The number of advertisers, who are begin upward grew 24% over the last eight weeks. All-in-all, we believe that the new implementations will lead to more…

Thank you, Sasha and thank you all for joining our call today. While the overall economic and geopolitical environment remain challenging, we continue to see signs of stabilization that I discussed with you in the last call. In the quarter, our consolidated revenues grew 18% year-on-year and reached RUB15.4 billion, tax based advertising accounted for 92% our total revenues, and increased 18% year-on-year. Yandex’ own operated websites, constituted 68% of total revenues and grew 13% year-on-year accelerating nicely compared to Q2, despite facing tougher comps. Our tax based industry mix remains diversified, Q3 trends were mostly unchanged compared to the first half of the year. We continue to see weakness in ads spend in auto and financial services. Both of these categories are still shrinking year-over-year although at a much lower rate than we saw in the first half of the year. Excluding these two segments, our tax based revenues would have grown in the mid-20s. Our ad network grew 35% year-on-year, as we added new partners and improved targeting capabilities. Contribution of ad network revenues to total increased 300 basis points compared to Q3 of last year, but remain fairly stable compared to the previous quarter. Display advertising revenue decreased 1%, contributing 5% of our total revenues, display revenues from our own websites decreased 11% year-on-year, please note that this quarter we reclassified some of the display network revenue. If not for this one-time re-class, our network of display revenue would have grown 13%. In Q3, the number of advertisers served by Yandex continue to increase growing 18% year-over-year. Other revenues increased 2.6 times and comprised over 2% of total revenues, the main driver of growth for this segment was Yandex Taxi. Traffic acquisition cost related to partner advertising network grew 28% slightly slower than our tax based partner…

Thank you, [Operator Instructions], we will take our first question from Edward Hill-Wood from Morgan Stanley, please go ahead.

Hi, good afternoon everyone, I've got three questions by me, firstly on the guidance. You've issued revenue guidance but no margin guidance, I was wondering if that's linked to the antitrust ruling in a sense that you have the opportunity, where you have a relative variable rate of potential OpEx depending on how successful you are in renegotiating contracts, if you could just discuss that, that phenomenon. Secondly the mobile monetization rate seems to have reduced fairly significantly Q2 to Q3, [indiscernible] wasn't the Q1 level. Could you just discuss that as how the unbundling is going and whether or not it's been sort of a broadening of the dynamic there? And thirdly just on the taxi service. Obviously there's three players, three main players in the market. There's two local players, do you think that there is the logic potentially in the long term of some form of consolidation with potentially with local partners, thank you.

Hey Ed, it's Greg; I'll try to take all three if I can. On the question of guidance as you know we've never issued EBITDA guidance in the past and this quarterly call is no exception. I think as you've heard me sort of talk about our EBITDA outlook over the course of this year, if you recall we started the year off saying that we think our margins could be down as much as 900 basis points. When we spoke again on the Q2 earnings call I mentioned that you know as we brought our cost structure closer in to line with the current economic environment and reduced our spending we think that EBITDA margins could be around 700 basis points lower than previous year. I think as we look out today we think we should be able to do slightly better than that 700 basis point bogey and I think that's kind of where we are. On the question of mobile monetization I would say that there's nothing incrementally different from the previous quarter. Last quarter there was sort of significantly abnormal month in terms of monetization and things are sort of now back on track and there's no real differences. I think most of the stuff that you guys observe is rounding and that's basically it. And then on the question of taxi, yes there are three players, all of them provide excellent service and all of them strive to improve the service that they provide to their customers. I think each one will ultimately be judged on the time that it takes to get a car delivered to you, the availability of cars within various parts of Moscow I think some of our competitors concentrate just on the very inner city whereas we have much broader coverage than they do with excellent prices, and you know very short time for arrival. So I don't know how the market will evolve but we're just focusing on serving the consumer and I think that covers all the questions right.

Just to my first question again, just on the OpEx issue around the antitrust ruling. Would you expect that if there was any sort of formal or shift in negotiations with handset manufacturers any of that, any potential OpEx will fall into 2015. Or are we sort of broadly talking about 2016 as a time frame for anything meaningful to occur from a OpEx perspective.

Yes, I think it's highly unlikely that the impact of that will show up in 2015. As you can imagine negotiating agreements with OEMs takes some time and then it takes a further time for devices to be rolled out, purchased, used and so on, so it's a slightly longer process. It doesn't impact 2015 numbers.

We will now take our next question from Lloyd Walmsley from Deutsche Bank, please go ahead.

Thanks, so you guys saw a nice growth [indiscernible] search reaccelerating despite the harder comp, can you kind of give us your best sense as to whether the strong results in outlook is a reflection of an improved macro environment in Russia, and how much of it is a function of things you're either doing at the auction level, or to drive click-through rates with that quality kind of parse out the impact of [indiscernible] --

Hey Lloyd its Greg again. Look I think the overall economic situation is still challenging. I think I would sort of echo the comments that I made on the Q2 earnings call that we are seeing signs of stabilization. I don't think we are seeing growth yet or sort of return to normalcy, is kind of how I would describe it. We are aren’t there unfortunately but things are starting to stabilize. I mean if you look at sort of our industry mix, by categories, we still have the same two industry categories declining on the year-over-year basis we had in the first and second quarter and that is auto and financial services. However the magnitude of the decline is lower than it was in Q2 and considerably lower than it was in Q1. So I would say that, yes the economic situation is stabilization, and if you were to exclude those two categories from the base, you’d see that all the other categories combine a growing sort of in the mid to low 20s, which is pretty robust. I think our results are sort of a combination of some of the benefits of the VCG auction, I think stabilization in the overall environment, and sort of good work from our engineers in terms of helping stabilize our market share, I think all of those things are to be taken together.

And I guess just second if I may, you talked about in terms of market share stabilization, seeing nice gains in the Yandex browser, you are also seeing stabilization within the Chrome browser, can you just give us a sense for what’s behind some of that stabilization and kind of how sustainable you think that is outside of the new deal with Microsoft and the anti-trust victory?

Sure I’ll pass the mic to Sasha to answer that.

Hi Lloyd, this is Sasha speaking. So to give some background to our market share, on desktop we gained about 30 basis points of share compared to previous quarter, we also gained share about 100 basis points on Android, our browser became the clear number two in the Russian market with 15% combined share on desktop. And we are also gaining share across all mobile platforms. So I guess it speaks both to quality of our products and also our market activity that we are running, we are supporting our Yandex browser with promotional campaigns.

Great thanks guys.

Let me just jump in with sort of one more thing, which is -- I don't know if you noticed or not, but we recently launched a new feature of Yandex browser called Protect, which helps protect our users from various dangers out in the internet such as Wi-Fi theft which is the interception of your stream by Wi-Fi points, antivirus and so on and so I think that's helping, that product differentiation is helping us as well.

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

Yes, hi everyone. I have the question on the implementation of the tough decision especially for existing Android users, Am in right in believing that for example if I have an Android phone then, for example the way to apply the decision would be that the -- I would need to have an application install that would be force, and then I would need -- I would be able to select for example the Yandex browser into Google Chrome and if that happens and if I select it on my own, am in right in believing that you would not incur any acquisition cost on those people moving to the Yandex browser -- to the Yandex search engine, sorry?

Hi Cesar, thank you for the question. This is Alexander speaking. So talking about the existing users of Android phones, FAS has requested Google as I said to provide a note as directly to the users, to the phone screens of the users of Android in Russia informing them that they can do certain changes in their operating system, like deactivating Google apps, change in the default browser and replacing the Google search widget with another widget. It doesn’t mean that this decision for the existing users gives us possibility to somehow upload our apps on the phones, for the existing users who gives our [market channels] to communicate them and kind of give them to download our apps, [and] search browser and other applications. But now for the new phones that will be sold from 2016 and on FAS decision gives us an opportunity to make deals with OEMs to preinstall our applications on the phones that we produce for the Russian market, and this is very important. Because we know that we monetize well and based on the marketing and revenue sharing deals and the promotional support we can provide to OEMs for their equipment in Russia from our website, we can increase our market share on Android. Just to be also clear on the process of going forward, I have to say that Google still can appeal the decision of FAS and the deadline for appeal is December 18, we don't know if Google will decide to do so, but technically they have a right to do so. Yes basically that's it.

We will now take our next question from Ulyana Lenvalskaya from UBS. Please go ahead.

Thank you and good afternoon gentlemen, congratulations on good numbers. Firstly, I have a follow-up question on Lloyd’s question on the top-line growth. Given VCG auction has been just launched in September, would it be fair to assume that September was the strongest month within the quarter?

Hi Ulyana, this is Greg. That’s not necessarily the right assumption, because there's also question of comping. We’re actually, in September we’re comping a strongest growth of the quarter from a year ago.

Got it, thanks. Greg, could you please also update us on Yandex's market this summer and what would be the topline growth without Yandex market if possible?

Sure. I think overall on Yandex market, the rate of growth is similar to the overall rate of growth. Although, it seems to be doing slightly better off recent and I think that holiday season will be a very telling quarter for Yandex's market and we’ll report back to you on that in Q4. And I think, if your question is what is the impact of VCG and what is the implication of your guidance for the rest of the year, I just want to sort of remind people that Q4 is the largest quarter that we have in terms of revenue, and obviously forecasting it is often most difficult and so revenue guidance attempts to be prudent and conservative as we sort of look out. Clearly VCG auction as well as other changes that we implemented, such as the ranking changes do benefit our advertisers in terms of driving higher ROIs to them. In terms of encouraging and to bid more aggressively for higher positions and so all those things should get reflected in the numbers. But, we just want to be cautious obviously, given that the economic situation is not completely recovered and we're still kind of in the period of stabilization.

Makes sense, thank you. And a question to Arkady probably. What were the drivers behind the improvement of market share in Turkey? Was it the agreement with the football club or agreement with Microsoft or anything else?

As usual any improvement in market share first derives from the protocol achievement, you understand. This quarter, yes there was this unique deal with the football club. Microsoft has not materialized yet, it’s only in the months to come. And on the football club, as you know we made a unique deal with Fenerbahce, one of the most popular clubs in Turkey. And this is I think maybe one of the real, maybe the first deal in history of sports sponsorship which is performance based, which means that the more Fenerbahce funds are converted to Yandex, they won’t pay to the club. And we see a lot of growth from that deal.

Thanks. And on the Microsoft, is it possible for you to provide any kind of estimate of potential market share improvement purely on account of Windows 10 update?

Sure, Ulyana. Let me try to take a stab at that. First of all, in terms of timing, while the deal was announced a little while ago, it actually doesn’t rollout in terms of the new version of Windows, the patch to Windows 10 until sometime in November. That’s why you kind of don’t see it show up in the numbers yet, it'll start showing up in the numbers from that point on. In terms of potential impacts on us, it will clearly depend on the rate of uptake of Windows 10, so far the rate of uptake of Windows 10 has been very good. It also depends on the usage of various browsers inside of Windows 10, sometime that we obviously cannot control to the extent that people choose to use a native Windows 10 browsers such as Internet Explorer or Edge, that should benefit us more to the extent they choose to use Yandex browser, that will benefit us as well. So I think it’s kind of hard to predict, but at any rate it’s not a large impact, but it’s definitely observable. And I think it will take probably six to nine months for that effect kind of roll through and become kind of observable to the naked eye.

Thank you.

[Operator Instructions] We will now take our next question from Alexander Vengranovich from Otkritie Capital. Please go ahead.

Yes, hi. First question is a follow-up on negotiations with OEMs. So can you please update us on the status and did you make any progress with any of the OEMs you’ve been talking. And in case you have -- I know you had some agreements before the whole situation of this Google started. And looks like for these OEMs it got easier. But are there any new smartphones producers which are also interested in cooperating with Yandex going forward? Is there anything changed for last year? So any information that could be interesting. And then second, actually I see that the Yandex text-based ad network revenue growth accelerated for a second quarter in a row, from 24% last quarter to 35% this quarter. And you said that reasons for this growth was like some additions of the new partners. Can you please a little bit elaborate here, are there any big partners added or just the nature of overall improvements, so you're kind of getting new partners which going forward will be also positively impacting your revenue and it's nothing special to report at this stage, thank you.

Hi Alexander, thank you for the question. This is Alexander Shulgin speaking again. So on OEMs, we [didn’t] see a change in the attitude and openness to discuss distribution deals with us, [indiscernible] interest in making business with Yandex and [indiscernible] Yandex apps. I cannot this point in time say that we have anything specific to declare on this call, because you know it takes time, big deals cannot happen immediately so fast as we're doing advertising industry. But yes we see signs of progress there. And on the second question Greg will comment.

Sure, Alexander on your question about the partner network, yes we've added some new partners to the network although those partners were added quite a while ago. So they've been in the base for many quarters not just this one. I think the acceleration, the rate of growth is a combination of a, higher, better targeting and b, the fact that you do have those partners on the base that are helping you. Partner network is continuing to grow at a good clip and I think our outlook for it is fairly upbeat.

Okay, good. And just a quick question also, [you were counting their] headcount for four quarters in a row and will this thing will impact your decision to get back to the hiring trajectory like you had before. So basically they are driven by the overall market improvements or specific projects you have inside the company?

Alexander, this is Alex speaking again. So on the headcount I will say that we are rather shift in headcount between different products and our total headcount was much closer to be stable this year rather than decrease. We were adding people in the key important projects like Yandex browser for example, a mobile search and also in some specific business units, while reducing headcount in other products. So this is my view on the headcount situation.

So, if the market recovers fast, you don't need to hire additional big amounts of people, so it's basically driven by your internal process and not by the overall markets improvement.

Look, we always are hiring people and we're always on the lookout for talented engineers, especially anyone who can help our efforts on Yandex browser, on our mobile products or with our business units which are all growing rapidly. Whether it's Yandex Auto, Taxi, Yandex Market or [indiscernible]. I think overall we're trying to be judicious in terms of controlling the overall headcount. But that also means that you shift resources from one to the other as Sasha has said. So I think you should expect our headcount to increase but very gradually, if the economy does recover and if we feel like we can support sort of a larger headcount base.

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

Hello and thank you for taking my question. I have a couple of things to ask. First I'd like to ask you about your project [the way] Yandex with that of the logistics aggregator, we haven't heard for a while about this project, is it abandoned or are you developing it, how are the things are developing here. The second question is on your rent payments, is there still a chance to renegotiate payments into rubles or you are going to [indiscernible] with the situation as it is now where the payments are [still linked] and the last probably question you have a pretty big cash pile if we take cash, and term deposits on your balance sheet. Are there any plans how you're going to deploy this cash? Thank you.

Hi Vladimir, on the question of logistics, no it's not abandoned at all, in fact we are working closely with a number of smaller merchants to provide them logistic services under the brand of Yandex market so that's very much still intact and ramping but it's still quite small. So nothing to sort of report at this time in terms of actual metrics but it's not abandoned, it is an important area that we believe in and will work to provide those services to smaller merchants. On your question of clearly we're not terribly ecstatic about our rent situation. And we are trying to do something about it to reduce our payments, to recast them as rubles or whatever else we can. However it's obviously difficult when you have a commercial agreement and things are as they are. And we've also been trying to reduce our overall square meters wherever we can and kind of getting rid of office space that we think is extraneous both in smaller offices inside of Moscow as well as in regions. And I think your last question was on -- remind me…

On cash on your balance sheet, if we take cash and cash deposits, it's something about 38 billion I guess, so how are you going to stand this cash, what are you going to do with this?

Sure, so on the balance sheet right now we have U.S. $832 million equivalent of cash, we’ve been using it to buyback our convertible bonds which we think is an attractive use of capital, we’re also are able to buyback our stock, which we might do from time-to-time and beyond that there are sort of no immediate plans of what to do with that.

We’ll now take our next question from Mitch Mitchell from BCS. Please go ahead.

Hi and thank you for the call. I actually want to follow-up on [the] questions that have been asked previously, I mean to start with personnel, as I look back at the trend over the last couple of years, 20% of your revenue going to personnel is significantly lower than we saw at the beginning of the year and I know it's higher year-on-year, but I’m just wondering, you talk about this being a good time to invest in [how], but it seems like you are sort of relentlessly trying to cut personnel cost and I’m just help -- if you can help me reconcile those two comments and -- well let me stop there, and then give you the next question.

I think as we said before we slowed down our overall rate of hiring and we’ve basically kept our overall headcount essentially unchanged, if you look back to a year ago, our headcount is down about a 100, if you look back sort of quarter-to-quarter it's just down very modestly, and our personnel cost as a percentage of sales is actually up year-over-year.

Okay. It still looks a little strange to me, but I'll take your word for it, and then I just wanted to go back to the negotiations, the potential negotiations with equipment manufacturers, the current status under the FAS ruling is that Google should change the contracts with manufacturers by November 18th, but you said they actually have until mid-December to appeal the case, at what point can you actually sit down and start talking to the manufacturer to a point would it be realistic to sign an agreement with them, could that happen on November 19th, or do you actually in effect have the wait until Google loses the right to appeal the decision? Thanks.

Mitch this is Alexander speaking. So of course we have started the discussions with OEMs right now, immediately after the FAS decision and we were contact with them before, but our [indiscernible] so currently we see a lot of interest from OEMs, but are cautious a bit looking forward for what Google’s reaction would be, but still then understand that FAS ruling is here and Google probably could appeal, but yet FAS decision tells that the government is looking into it, and current Google's practice will considered to be being unfair and illegal, so I expect us to have something more concrete to say about potential OEM deals in the call, but of course we are OEM with our partners right now.

Thank you.

We will take our next question from [indiscernible] with Sberbank. Please go ahead.

Yes, good afternoon everyone. May I have please two questions, first question is about your potential dividends, you have quite a pile of cash on your balance sheet, would you consider to announce dividend policy in the coming future and pay [stable] dividends?

Sure, this is probably, obviously much better question for our Board of Directors. Given the fluctuation in the exchange rates, which impact our business both vis-à-vis our office rent as well as vis-à-vis CapEx which is dollar-denominated, we kind of felt like it was a little premature to revisit a policy of dividends. I think if we were to see some stability in the exchange rate I think we would definitely look back to bringing this issue up with the Board and revisiting it. I think that obviously a good, strong and healthy paying dividends and that's kind of how we feel.

Thank you very much. That's fair enough. And my second question would about next year, we are pretty much through the current year and you see that we see some kind of stabilization, what would you expect next year in terms of advertising, in terms of recovery of advertising spend and advertising expense and in terms of topline growth?

Sure, look I think it's obviously premature a comment on next year, and we will leave that for our Q4 earnings call. But as I said before, I do think that the economic situation is starting to stabilize somewhat and hopefully the current trends will continue.

That will conclude today’s Q&A session. I would now like to hand the call back to speakers for any additional or closing remarks.

Thank you once again for joining us today. We will update you on our Full Year 2015 results in February 2016. And you know how to reach out to us, please feel free to reach out with your questions. Good bye.

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