Nebius Group NV Q3 FY2021 earnings call

• Strong growth momentum across key verticals including advertising and ride-hailing. - Search and Portal growth supported by investments in ad tech, SMB products, and iOS share. - Ride-hailing improved operational efficiency, reduced operational expenses as percentage of GMV, and grew driver base. - E-commerce saw GMV growth acceleration, expanded assortment to 21 million SKUs, reduced logistics defect rate, and introduced category-centric organization. - Invested in future growth areas like Fintech, self-driving technology, and Cloud.

Search and Portal delivered 33% revenue growth. IOS share improved to 43.1% in the last week of September 2021, up 2.4 percentage points year-over-year. Ride-hailing revenues increased by almost 70% with a 33% year-over-year increase in the number of drivers on the platform. E-commerce GMV increased more than 3x year-over-year, delivery grew 4.5x year-over-year, and the number of Yandex.Plus subscribers doubled to 10.5 million with faster growth in paying subscribers. Search and Portal revenue contribution is not specified separately from other segments, ride-hailing and E-commerce contributions are also not given absolute revenue figures but their growth rates are highlighted.

• Search and Portal: Guiding for high 20s year-on-year growth for full year 2021, adjusted EBITDA margin over 48%. - E-commerce: Expect GMV growth to be up 3x this year, total cash burn for E-commerce businesses in Russia around $650 million. - Ride-hailing: Raised GMV growth guidance to 65%-70% from 60%, expects ride-hailing adjusted EBITDA margin as percentage of GMV to increase year-over-year.

• Regulatory/privacy: Impact of IDFI policy changes on advertising targeting, efficiency, and pricing; potential impact if Android follows iOS. - Competition: Competitive dynamics in E-commerce, including take rates and market share. - Logistics: Underutilization of logistics infrastructure in third quarter due to transition from CPC to marketplace model.

Q: Over time, what do you believe is your key competitive advantage in E-commerce?

A: Vadim Marchuk stated that Yandex's key advantages include having multiple components under one roof (like music streaming, video streaming, ride-hailing, FoodTech, Yandex.Plus subscription) to offer a compelling bundle to consumers, and a strong ad tech, logistics, and potential Fintech bundle for merchants.

Q: Is the driver shortage situation improving in the ride-hailing business?

A: Yevgeny Senderov said drivers on the platform exceeded 1 million in September, up 50% vs post-lockdown summer 2020, and while the situation is challenging, they have found ways to deal with it and expect improving margin trends.

Q: Comment on the current competitive environment in E-commerce and take rates?

A: Vadim Marchuk said Yandex increased take rates in July, haven't seen negative consequences, and the take rates should be considered in the context of the overall offering provided to merchants.

Q: Impact of upcoming working holidays on Search and Portal trends?

A: Svetlana Demyashkevich said new lockdown measures are not very severe, advertising sectors have felt quite well, and Yevgeny Senderov added Taxi GMV guidance includes impact from COVID fourth wave.

Q: Concern about liquidity slowing growth trajectory?

A: Svetlana Demyashkevich said they are confident in attracting additional funding in different instruments and are stable with fast growth potential.

Q: Slowdown in Yandex.Plus growth?

A: Vadim Marchuk said there is a seasonal component, they focus on paying subscribers, and GFK analysis shows Yandex is one of the few increasing subscriber base in percentage terms.

Q: Outlook on E-commerce investments next year, efficiency of investments?

A: Svetlana Demyashkevich discussed E-commerce investments this year, growth in GMV, assortment, customer base, and warehouses, and how they evaluate investments based on opportunity size, growth profile, return on investment, and shareholder value creation.

Q: Impact of IDFI policy changes on advertising business?

A: Vadim Marchuk said potential impact is very limited for Yandex compared to global peers due to structural revenues from contractual advertising, multiple properties, and logged-in users.

Q: Competitive dynamics and margin trends in Yandex.Eats restaurant segment?

A: Yevgeny Senderov said Yandex.Eats restaurant orders grew 62% year-over-year, GMV grew 67% year-over-year, gained 5 percentage points of market share, and expects improvement in profitability.

Q: Strategy in grocery/FMCG E-commerce formats and ultrafast delivery in smaller cities?

A: Vadim Marchuk discussed combining existing assets to optimize user retention and metrics, using models like Market Express, and experimenting with different delivery formats.

Q: CPC to marketplace transition in E-commerce and DBS model experience?

A: Vadim Marchuk said they added 10,000 active merchants this year, and while DBS model is somewhat inferior to own fulfillment, Yandex mitigates user experience by using Yandex logistics for the last leg.

Q: Self-driving group plans, Robotaxi in Moscow, OEM partner search?

A: Vadim Marchuk said they have deals with Russian Post, will continue cost-efficient investments, Robotaxi service is being launched in Moscow, and they are evaluating OEM partner search.

Q: Revenue growth breakdown in Search and Portal and car sharing update?

A: Yevgeny Senderov discussed growth in B2C and B2B of drive business, and Vadim Marchuk said it's hard to separate components of Search and Portal growth impact.

Q: Logistics internal group deliveries, Fintech update, other businesses potential?

A: Yevgeny Senderov mentioned low double digits for internal group deliveries, Vadim Marchuk discussed Fintech Split product progress, and highlighted Cloud business with 3x year-on-year revenue growth and 60% year-over-year increase in active clients.

Q: Ad tech and education investment plans?

A: Vadim Marchuk discussed education initiatives like practicum with good traction but didn't comment on M&A in education.