Earnings Call: Q1 2021

Apr 28, 2021

Hello, everyone, and welcome to Yandex First Quarter 2021 Earnings Call. You can find our earnings release and supplementary slides on our IR website. The key speakers on our call today are Tigran Quadverdan, our Deputy Chief Executive Officer Daniel Shuleika, the Head of E Commerce and Raitec Business Group Greg Abovsky, our Chief Operating and Chief Financial Officer and Vadim Marcuk, our VP of Corporate Development. Yevgeny Sendre, Chief Financial Officer of Yandex. Taxi, will be available on the Q and A session. Now I will quickly walk you through the safe harbor statement. The right remarks that we make during the call regarding our financial performance and operations may be considered forward looking, and such statements involve a number of risks and uncertainties that could cause actual results to differ materially. For more information, please refer to the Risk Factors section of our most recent Annual Report on Form 20 F filed with the SEC. During the call, we'll be referring to certain non GAAP financial measures. You can find a reconciliation of non GAAP to GAAP measures in the earnings release we published today. And now I'm turning the call over to Tigran. Thank you, Yuliya, and thanks to everyone for joining our call today. We are very encouraged by having started the year with a solid recovery in our advertising and ride hailing businesses as well as continued strong momentum in other verticals such as media services for delivery and logistics. We have also made significant progress in executing against our strategic roadmap in e commerce. Since early this year, the business has been run by Danil Shuleik, who has a great track record in both developing market leading services as well as improving their profitability within Taxi Group, and we are already seeing great results. Total e commerce GMV, including Yandex. Market to Marketplace, LAFCA and grocery related GMV of Itz grew 186% year on year in Q1. This growth has been accelerating from month to month with the highest year on year growth rate of 199% in March despite a high base effect from pandemic related growth in March 2020. Yandex. Market GMV on a standalone basis has also accelerated to 126% in Q1 from 71% in Q4 2020 on the back of a significant expansion in assortment and logistic infrastructure, solid results from targeted investments in performance marketing campaign around the holiday weekends in February March, as well as improving the product for our consumers and merchants. We are now even more confident in our ability to deliver on our full year guidance to increase total e commerce GMV by 2.5 times. Let me give you an update on another important initiative Yandex. Plus. The total number of subscribers kept growing above 100% year on year and is now over 9, 000, 000. Yandex services continue to benefit from better integration with Yandex. Plus and we see that our Plus subscribers already generate a material part of GMV for market to AXI, ETH and LAFCA. The strength of Yandex. Plus is especially visible in the Yandex. Market where about half of the GMV came from pro us members in March, up from 24% in Q4 2020. Yandex. Plus subscribers form a loyal customer base who spend more and transact more often in our services if compared to our non Plus customers. For instance, in market, Plus customers generate on average more than 40% higher GMV and 50% higher frequency of transactions than non bus customers. We also see encouraging trends in the average check as well as new customer inflow for Eats and Lavka since these services joined the Yandex. Plus cashback program in February. We are investing appropriately to support the further growth of the Yandex. Plus platform, including investments in the expansion of program benefits for our subscribers, in targeted marketing and promotion to improve cross service usage and in content as the majority of Plus members still come from our streaming services, Kina Boyskin Music. To this point, the number of unique viewing subscribers at KinoPoisk exceeded 4, 000, 000 in March 2021, which has further strengthened our leading position in the Russian audited market based on this metric. Turning to Search and Portal. Search and Portal has continued to grow well and ahead of our expectations in Q1. In March 2021, we reached a record 59.4% share on Android, a 3 50 basis points increase from March 2020. Our total Search share also went up and reached 60% in Q1, which represents a 190 basis points increase year on year. Search was again the key driver of our ad revenue growth acceleration with 18% year on year growth in Q1 20 21, which was supported by our market share gains and the high effectiveness of search ads as a digital marketing channel for our clients. The key investment areas for us in adtech remain video and simplified solutions for small and midsized businesses. The latter include big CPA and subscription models, interest in which continues to grow rapidly. For our large clients, we are developing highly effective CPA based conversion strategies when ad bidding is optimized for a specific targeted action. The share of such instruments in our total ad revenue has exceeded 20% in April. Among other initiatives, we are focused on improving our market share on Ios devices. We see an opportunity to address a discrepancy between an actual use of Yandex versus Google application on Apple devices, which was previously set by default and real customer preferences. We are confident that targeted investment to support distribution of our products on iOS devices will help us to gain access to more affluent customer base and to improve amortization. Moving to Zen. Zen continues to outperform our search and portal revenue and overall online advertising market. Zen revenue increased by 65% year on year in Q1 'twenty 1. Our video format continues to gain very good traction, and the share of video in Zen time spent has now reached 28%. The daily audience grew over 50% year on year in January February and slowed to a still solid 35% in March, primarily due to the high base effect. In conclusion, we see solid momentum across our key verticals, which gives us the confidence to continue to prioritize growth and to invest prudently into new attractive opportunities, which will benefit Yandex in the long run. And with this, I'm turning the mic over to Danil. Thank you, Tigran, and hello, everyone. Today, I will start with the results of the Taxi Group and proceed with providing more details on the performance of our e commerce business, which I began to oversee earlier this year. I am very proud of how we started 2021. We saw solid recovery in our ride hailing business and the further acceleration in its growth rates. Our LAP and Logistics Services demonstrated significant sequential growth, while Yandex market GV have been accelerated each consecutive months, leading to market share gains. Let me cover MLU first. In Q1, ride hailing rides grew 24% year over year and GV grew 44%. This is significant acceleration from 17% growth in rides and GMV in Q4, and which is driven by a number of factors. First of all, we are seeing a continuation in the recovery of user activity. Weather condition also helped growth. Cold weather and record snowfall in Russia in January February contributed to the demand for ride hailing services. And starting from the late March this year, we begin to face easier year over year comps as on March 16 last year, many large enterprises introduced initial work from home measures. Right hand NV grew significantly faster than rides as we faced driver undersupply exacerbated by closed borders and growing demand. Vehicle undersupply was also an issue as manufacturers are not able to completely satisfy demand from our partners for specific new models. In order to ensure high quality of service, proper balance of demand versus supply, low ETAs and high reliability, we apply a higher surge coefficient, which led to an increase in average price per ride and high GV growth, also impacted the growth of rides. At the same time, in Q1, earnings of our partners significantly increased. In Q1, drivers who take orders on our platform earned RUB 104, 000, 000, 000. This is already 1 third of the RUB 300, 000, 000, 000 they earned for the full year 2020. And the effective take rate remains below 10%. I also want to highlight that despite well expected acceleration of growth rates in March on the back of the low base, our performance in March strongly exceeded our internal expectation. And our last March 2021 run rate was 2, 400, 000, 000 Rides, 44 percent higher than last year and well above 1.8 1, 000, 000, 000 run rate in December 2019. GMV run rate in March 2021 came in at over RUB500, 000, 000, 000 or $6, 800, 000, 000 This is 69% year over year increase in ruble terms and up 32% from RUB380, 000, 000, 000 RUB run rate in December 2019. April to date, we see significant acceleration of year over year growth rates as we compare with a very low base. Rights are up almost 3x and JV is 3.6x higher than a year ago. On 2 year CAGR basis, rights and JV are growing in the range of high-30s, low-40s in April. Moscow, which is a major market, grows mid- to high teens on the 2 year CAGR basis in rights and mid- to high-20s in GOV. Now to FoodTech. In Q1, Yandex. It's demonstrated further acceleration in growth rates. Orders grew and 31% year over year. JV grew 147%. This is compared to 118% growth in orders and 130 7% growth in JV in Q4. Obviously, the new 3P grocery business contributed to the growth. However, restaurant food delivery vertical continued to grow triple digits on the year over year basis and did not slow down versus Q4. In Q1, we focused on strengthening our position on the food delivery market and attracting new customers. We eliminated delivery fees for the first orders for new users, launched a Plus program in its significantly lowered order cancellation ratio and improved click to eat time. In Q1, we continued to invest in the rupee grocery vertical. As a result of our efforts, the share of gross SGV grew to mid teens of total eGV, while in Moscow, it reached 20%. Lavka continues to grow sequentially, and this growth is driven by the frequency of usage rather than growth in the number of dark stores. In March, Lavka orders increased by around 30% compared to December. At the end of Q1, Lavka had 2 80 stores, up just 10 DUC stores from December. Logistics demonstrated solid growth rate as well. In Q1, the number of deliveries reached $13, 000, 000 This is more than half of the entire 2020 amount. We continue to increase our partner base. In March, we had over 16, 000 active B2B business. Fusil, X5, Lianza, Deskemer are among our top accounts. And now to ecom. As Tigan mentioned earlier, we have delivered a very strong growth of our total ecommerce JV, including Labka and its grocer, which has reached $25, 000, 000, 000 in Q1, 45 percent of the entire full year 2020. JV of our FMCG vertical, including including JV of our Itz Grocery and Lavka, reached RUB 11, 500, 000, 000. We attribute this solid performance to the significant expansion of assortment and concentrated investments into improved price positioning across key categories, support from Yandex. Plus program as well as rapid expansion of our logistics infrastructure. This help us to attract new buyers at an accelerated pace, increase the number of orders per client and improve retention. Our assortment is growing very fast. We have almost doubled the total number of SKUs during the quarter to 3, 800, 000 as of end of March and further increased it to 6, 000, 000 SKUs enabled. We are also actively converting our merchant from CPC to CPA model and the number of active sellers on our marketplace is now approaching 10, 000 from 7, 600 at the end of December. The conversion is supported by the most attractive merchant commission in the market and the recent launch of dropship by seller model, which already accounts for mid teens of our JV network. We also invested heavily in the expansion of our logistics infrastructure, especially in the regions, and our managed carrier network is well positioned to support GMV growth and improved delivery speed. Our total fulfillment and sourcing center capacity currently stands at around 170 ks square meters across 5 warehouses with the latest addition of 50, 000 square meters in Dickson Group and 28 sorting centers. We also continue to expand network of lockers and pickup points. Almost half of all orders in March 2021 were delivered via our own delivery versus 10% in Q1 last year. We continue to develop on demand delivery of marketplace orders from our LaPadar stores. It already reached 10% of all orders in Moscow and keeps growing. The customers who use this option show better retention trends and high order frequency. All in all, I'm very pleased with the results we have achieved so far and how we progressed according to our plan. In the coming quarters, we will focus on further expanding our logistics capacity, assortment and our marketplace seller base, while also improving the product and quality of service for our consumers and merchants. This gives me even more confidence in our ability to achieve our ambitious goals for this year and become 1 of the leading players on the highly attractive e commerce market in the future. With this, I'm turning the mic over to Greg. As many of you know, after more than 8 amazing years at Yandex, I've decided to take on a new challenge. While I will miss Yandex greatly, I know I'm leaving things in excellent hands with many exciting prospects ahead. There's still a lot of unrealized potential and attractive opportunities for Yandex in areas such as e commerce and Tigran and Danil already talked about the impressive progress that we're seeing here. In fintech, we're working actively on our strategy and preparing the ground for the rapid future development of this vertical. Autonomous driving as well as a number of B2B initiatives around cloud, AI and SaaS. I firmly believe that the main driver behind all the past and future successes at Yandex is the phenomenal team of people who care deeply about building great products, innovating and serving the consumer. I'm delighted to be handing over to such a great team. I know they're extremely well placed to take advantage of all these new opportunities. And on a personal note, it's been a great pleasure working with all of you, and I hope to stay in touch. With that, let me hand it over to Vadim. Thank you, Greg, and hello, everyone. I am pleased that we have delivered yet another quarter of robust results with solid growth and execution across multiple verticals. Our core and most cash generative businesses, advertising and ride hailing, accelerated on the back of the team's efforts supported by the post pandemic recovery of the economy and social activity. Most of the other segments have demonstrated strong performance as well, including e commerce, food tech, media services, Zen and cloud. We see that the investments we are making into this business is already delivering results and improving our market position. We are confident that our capital allocation strategy will help us to unlock their full strategic potential in the years to come. During Q1, we made a few changes to our segment reporting to enhance our disclosure and further improve the transparency of our results. We have included the GEO advertising business into our Search and Portal segment and at the same time moved devices to other business units and initiatives, a segment which previously was referred to as other bets and experiments. We believe the new title is a better reflection of the businesses in this segment. The changes were applied retrospectively to Q1 2020. All my further comments will be based on this new structure. Additionally, we have disclosed GMV figures for Yandex. Market and total e commerce and provided a detailed breakdown of Yandex. Market revenues. We will continue working on further improvements to our disclosure by segment. Now let me walk you through the Q1 performance across our business units. Search and Portal. We are very encouraged by the Search and Portal revenue growth, which significantly accelerated from the previous quarter by 9 percentage points to a solid 15% year over year from 6% in Q4 2020. Note that we have restated our Q1 2020 numbers to include Jio, which means that all the growth rates are on a comparable basis. The ex TAC revenue grew even more strongly by 17% year over year. This robust performance was primarily driven by 18% growth in search ad revenues, partially offset by the weaker trends in the ad network. We have seen an acceleration across most industries, even travel, where the decline is now less pronounced. Most sectors are now in positive territory. Overall, industries with positive year over year growth account for 85% of our total ad revenues. The best performing sectors are IT and Telecom, finance and insurance, healthcare, education and employment, while the worst performing are still travel, domestic services and real estate. The growth is significantly accelerated in April due to the low base effect. Importantly, 2 year stack growth rates are also improving, and we expect this trend to continue as the year progresses. The adjusted EBITDA margin in the Search and Portal business came to 46.6% in Q1 2021 compared to 48.3% in Q1 2020. Do note, however, that in Q1 last year, we made several pandemic related cost savings decisions, including a decision to forfeit cash bonuses for top management, adapt a slower rate of hiring and rigorous control over non essential marketing and overheads, which helped us to deliver strong margins in Q1 2020 and preserve cash ahead of the uncertain second quarter. As revenues recovered towards the end of 2020, we began to scale back the cost cutting measures, Excluding the effect of the pandemic related cost cuts that we made in Q1 2020, our Search and Portal margins were broadly flat year over year, thanks to further attack optimization. In terms of the full year 2021, we are confident in our ability to deliver stable year over year margin in the Search and Portal business. Moving to Taxi. The overall Taxi Group revenues increased by 89% year over year. The revenue of ride hailing and food tech grew 111% year over year, which is a material acceleration from 65% in Q4 2020. The growth was driven by the following factors: the recovery of our ride hailing business overall continued strong performance in FoodTech despite the removal of lockdown measures, combined revenue of Eats and Lascar increased 4 times year over year, and rapid development of the logistics business. Righthaling revenue growth accelerated to 63% year over year in Q1 2021 from 15% in Q4 2020, driven by both recovery in rights and GMV. Yandex Eats revenue increased by 139% year over year despite investments in customer acquisition by providing free delivery, which is a component of its revenue. Laveco revenues reached RUB4.8 billion in Q1. We are seeing a slowdown of growth in April on the back of the base effect, but importantly, 2 year stack growth rates remain solid. Adjusted EBITDA of the Taxi Group was RUB3.7 million in Q1, significantly above Q4 levels as a result of the strong profitability improvement in the ride hailing business, leading to 195% year over year growth of adjusted EBITDA, which has absorbed increased investments in FoodTech and Logistics. Profitability of the ride hailing business was supported by efficiency improvements as well as solid growth in GMV in Q1. We are planning to reinvest these profits into driver acquisition beginning in Q2 in order to address undersupply conditions. Yandex. Drive revenues were down 5% year over year, primarily reflecting significant decrease in the fleet versus a year ago. Adjusted EBITDA of DRiV remained positive at RUB 108, 000, 000 in Q1, making it the 3rd quarter in a row with positive adjusted EBITDA. 1 year after launch, logistics is developing very well, and we plan to continue investing into this business to further scale it. Turning to Yandex. Market. Yandex. Market Marketplace JV accelerated 226% year over year in Q1 2020, primarily driven by growth of the 3P model, the JV share of which was 66% in Q1 2021 versus 46% a year ago. The revenue growth of our marketplace was more moderate than GMV growth as a result of the changing 1P, 3P mix as well as a reduction of partner commissions from mid January. Following the integration of price comparison and marketplace platforms into a single product in Q4 2020, we continued leveraging our traffic to stimulate the transition from a CPC to a CPA model. This has helped us to increase the number of merchants and expand the assortment in our marketplace. But it also led to a slowdown in price comparison revenue growth to 5% year over year in Q1. Despite a stronger base, the solid GMV momentum has continued into April with growth of around 2.4 times on year over year basis. The adjusted EBITDA loss of Yandex. Market was RUB 6, 500, 000, 000 in Q1, up from the RUB2.2 billion loss in Q1 of 2020, primarily reflecting our investments in expanding logistics and delivery infrastructure, distribution and marketing support, customer acquisition and headcount. Overall, we are progressing well with our full year GMV target and planned investments. Moving on to our other businesses. Media Services continued its rapid growth in the quarter, reflecting increasing demand for our services and a growing number of paying subscribers. We achieved revenues of RUB3.5 billion, up 143 percent year over year. The adjusted EBITDA loss amounted to RUB1.3 billion due to ongoing investments in content on the back of increasing demand for our services. We continue to invest in original series production and exclusive film launches, which allowed us to offer our customers a unique product and become a leader in the Russian OTT market by a number of unique viewers. We will continue to make disciplined investments to scale the business and improve profitability. Revenue in Classifieds delivered healthy growth of 20% year over year in Q1 compared to 13% in the previous quarter as the dealership stock level is improving, though not yet enough to fully satisfy current demand due to supply chain bottlenecks. Adjusted EBITDA margin came in at 21.6%, which implies a material improvement on a year over year basis on the back of marketing costs optimization initiatives. Turning to other business units and initiatives. Revenue increased by 171%, mainly driven by strong revenue growth in devices, Zen and cloud as well as our rapidly developing education business. In Q1, the devices business was the largest contributor to year on year growth with revenue growing by more than 4x to RUB1.7 billion. Cloud was the 2nd fastest growing business in this segment, generating almost 3.7x revenue growth in Q1. The adjusted EBITDA loss amounted to RUB2.4 billion, up from a loss of RUB1.8 billion in Q1 2020, primarily driven by the increased investment in Yandex. Sloughi Self Driving Group, where the adjusted EBITDA loss was RUB942 million in Q1 2021 and in education initiatives and partially offset by the improved performance of Zen. Finally, a couple of words on our outlook. Taking into account faster than expected growth across several businesses, we are upgrading our full year revenue forecast and now expect group revenues to be between RUB 315, 000, 000, 000 RUB330, 000, 000, 000. We are also increasing our guidance for Search and Portal revenue growth to high teens from mid teens previously. This is despite the fact that we have moved our fast growing devices business to another segment. Our other commitments and expectations remain unchanged. With this, I'm turning the microphone to the operator for the Q and A session. Thank Okay. So we will now take our first question from Slava Degtytarub from Goldman Sachs. Please go ahead. Yes. Thank you very much for the call. My question is on the Ride Hailing Margins, which are continuously improving. Would you highlight any factors that can reverse trends in the medium term? And does it make sense to expect further margin expansion with the ongoing increase in rides and potentially improving the driver supply conditions? And if you can also comment how the food delivery margins are progressing recently and the medium term outlook? And I will have a follow-up then. Hey, Slava. How are you? It's Hugh Gini. So on ride hailing, we had a great Q1. Daniel already mentioned some top line numbers in his remarks. We had really strong GME growth. And as he highlighted, some of it was driven by 1 time factors such as unusually cold and snowy winter even for Russia in January February, persisted driver undersupply and also vehicle undersupply, which we hopefully is a temporary issue in the medium term. But if we talk about EBITDA, ride hailing grew almost 200% year over year and 86% sequentially. Again, on the back of GMV growth, adjusted EBITDA margin was extremely strong. Adjusted EBITDA on pre overhead spaces was 7% of GMV in the 1st quarter. And really, again, GMV, but also taking sort of utilizing the cost efficiency discipline that was put in throughout 2020 and getting the benefit on those measures again in the Q1. I'm not going to promise you that we're going to deliver the same margin every quarter in ride hailing as we see in the Q1. But in the long term, I think margins of the ride hailing business can reach search and portal levels. But if we look for 2021 with all things being equal, we don't expect a significant increase in our net take rate because we do care about our drivers and our partners. As Daniel already mentioned, the growth in numbers that they're receiving in his remarks. We think in 2021, right, Hayley margins are still going to expand versus 2020, all things being equal, of course. As far as Eats margins, well, we did have the same factor, the cold and snowy winter makes it hard to hire couriers. So we had an increase in CPO in our business. We're also investing significantly in something we believe in very strong and this is 3P gross delivery. CPO there is currently higher than our restaurant delivery business, but we think is sort of that should improve as the density of orders improves and we improve our technology and approach as we did in the restaurant delivery business. We on absolute basis, we're probably going to see higher again, at this point, we're probably going to see higher absolute number in terms of EBITDA loss in 2021 versus 2020, but in margins, it's going to be roughly the same. And that accounts for the significant investment in grocery delivery. Thanks. And my second question would be on the e commerce GMV. So it overall is trending above the full year expectation of 150 percent growth. But the non grocery part of Yandex. Market is a bit lagging. Where do you see the medium term mix between the 2 businesses, Yandex. Market and the grocery initiatives and maybe the relative growth rates this year? Slava, hi. This is Vadim speaking. Look, we as we guided last quarter, we expect the overall 2.5 times growth for the total e commerce JV. And we do expect to see the kind of the similar breakdown between the 2 categories, broadly speaking. And so far, what we're seeing, we're tracking quite well with those numbers and with that guidance. Okay. Thank you very much. We will now take our next question from Cesar Tiron from Bank of America. Please go ahead. Yes. Hi. Thanks for the call and the opportunity to ask questions. So just 2 very quick ones. I guess the 1 on Taxi, I guess, and specifically ride hailing. Do you think the GMV growing ahead of rides sustainable? Or was it just a kind of just a Q1 impact on the because of the surge pricing? Or do you think that's sustainable? And then the second 1 would be on the search and portal. Could you please make any comments on the obviously, you have very easy comps in Q2. So can you please make any comments on the past couple of weeks, how that business was growing on a year on year basis? Thank you so much. Hi, Cesar. It's Sayujini again. Let me take the first of your questions. Yes, we already mentioned sort of the 1 time factors, but an interesting thing is, for example, we saw in cross growth in non economy tariffs as part of our business. I think that will continue. Some big part of our business is still relatively depressed to where it was before pre pandemic, the airport rights, the B2B business has continued to grow. But we do not like for GMV to grow well ahead of trips. We believe in balanced growth and we will invest in the quality of the service and driver acquisition as we prefer that balanced growth. So for the year, our expectation would be that GMV would go trips would grow 40% and GMV about the same, maybe slightly less also affected by that our regions are going to grow faster than Moscow and slight difference, at least 40% in trips growth. And Cesar, hi, this is Wadeem speaking. Let me take the second question. So look, as we said, in Q1, we grew by 15% quarter over quarter. What we're seeing in April and what you do need to keep in mind that at April last year in Russia and especially for us was probably particularly the most weakest month. So we're definitely seeing a very material acceleration compared to April of last year, because again, the base was very low. As such, what would I would say it doesn't really make sense to talk about April month to date because it's not representative in terms of what to expect for Q2. We do focus on 2 year stack, which is improving, and we expect it to accelerate further in the coming quarters. And this is 1 of the reasons why we are comfortable enough to increase our expectations for search and portal revenue guidance from mid teens to high teens. And the upgrade is based on the better than expected performance of search and other Yandex properties. And as we see a broad based recovery across many sectors. Thanks. Very helpful. Just to confirm, so you basically are expecting a reacceleration search and portal on a if you look at growth on a 2 year basis, right, in the next quarters? Yes, that is correct. Thank you so much. We will now take our next question from Vladimir Bespalov from VTB Capital. Please go ahead. Hello. Thank you for taking my questions. My first question would be on Fintech. You haven't commented about this area, but previously you have mentioned a lot of times that this is 1 of the key focuses. Maybe could you update us where do you stand now and what should we expect from this? And the second question will be on your net profit and adjusted net profit. As far as I understand, this was pressured by some nondeductible expenses. Maybe you could provide more color on that and how should we look at this going forward for this year? And also how the change of the tax treaty between Russia and the Netherlands will affect your bottom line and your taxes and whether there will be a 1 off effect, whether it's going to be extended over a certain period of time from this or no effect at all? Thank you. Valeria, hi. This is Vadim speaking. So let me take this 1. So essentially 3 questions. Let me start with the first 1, the FinTech. Look, I mean, it's pretty much what we said before. It's the work in progress. We do believe we made a decision for ourselves that we will enter the financial services market. It is a rather competitive and crowded space in Russia. And we believe that investing more time to prepare is the proper way to proceed and it will pay off in the future. We are working on obtaining all the relevant and required licenses. And the only thing, frankly, what I can say at this moment, just stay tuned for more updates that will be coming shortly. Moving on to the adjusted net income. The impact on adjusted net income that you see in our reported results is essentially a combination of couple of factors. Search and Portal, ride hailing and classifieds performed better than they actually they've increased their profitability in absolute terms. However, that was offset by our investments in our other businesses, such as, for example, whether it's going to be FoodTech, whether it's Media Services and Yandex. Market in particular. So this is the overall mix of the impact as well. Now moving to the 3rd question related to the double taxation treaty between Netherlands and Russia. So look, 1st and foremost, the situation is still rather unclear and uncertain at this stage. What we do understand is that the likelihood of denunciation of the tax agreement with Netherlands is relatively high. However, we also do hope that the negative consequences of such development would be addressed at the legislative level in Russian Federation. But in any case, what you do need to keep in mind is that we have planned liquidity at the Dutch level as of now, because this is where we keep our convertible debt proceeds and equity rates proceeds done in 2020. And on top of that, we do generate all our cash in Russia. And given the fact that we have quite a few highly rewarding and promising project to reinvest our net income in Russia, we do not expect to be upstreaming any cash in the kind of call it in the near future. Okay. Thank you very much. We will now take our next question from Kirill Panarin from Renaissance Capital. Please go ahead. Hello, everyone. Thanks for taking my questions. Firstly, on your investments at Yandex. Market, you mentioned quite a lot of initiatives in Q1, including assortment expansion, lower commissions, fulfillment, delivery, marketing. Could you comment on which of these areas are more efficient in driving faster GMV growth? And so presumably will be the largest focus for you. And it would also be helpful if you shared your thoughts on the midterm growth and margin outlook for the price comparison business given the conversion of merchants to the marketplace? That's the first 1. Thank you. Kirill, hi. This is Vadim speaking. So let me take this 1. Look, all the initiatives that we kind of mentioned and highlighted during our last call in February, namely the expansion of the our fulfillment and sortation center capacity, the expansion of the delivery capabilities, including the last mile expansion of assortment, improving the take rates for our partners, for our merchants and improving the delivery accuracy. I mean, all of those things we essentially view as equally important because at the end of the day, what is important is overall experience of the platform, both for the buyers and for the sellers. We do believe and as we measure our progress in our e com initiative, we actually take stock in pretty much at the same level of importance and allocate the same way to all of those initiatives. So overall, if you go 1 by 1 there, the expansion of our fulfillment and sortation centers actually increased from 100, 000 square meters to 170, 000 square meters. We also expanded our delivery capabilities and added 1, 300 pickup points and more than 1, 000 lockers. And I think we added approximately 1 1, 000 cargo, the small ones that actually do intra city deliveries, the last mile deliveries. As Tigran mentioned in his opening remarks, we expanded our assortments quite significantly. We went from 2, 000, 000 SKUs at the end of 2020 up to 6, 000, 000 SKUs in April. And all of those pieces, right, I mean, the kind of the build, the overall experience, again, for the buyers and the sellers. When we think about the commission levels that we lowered in January February of 2020, if you look at the overall experience for our sellers on our platform and it has to work in balance. Now moving to CPC, the CPC business will obviously be affected by the merchant transition to CPA model. You will see great results in from that transition on our marketplace side. That would potentially lead to somewhat slower growth in CPC revenues. And but overall, we'll look at this at 1 whole experience in e commerce for Yandex. Great. Thanks a lot. And just to follow-up on media services, if I may. Can you share your thoughts on the sustainable long term market structure in online video? And how far do you think the market leaders are from breakeven? That's it for me. Thanks a lot. All right. So good question, right? And frankly, I mean, this is a question that we probably could spend the next 45 minutes kind of discussing and debating, which we don't have. So I think it's to a certain extent, it's a function of the market size, right? So Russia is sizable enough. We're looking at 140, 000, 000 population overall. So it's definitely large enough to support in our thinking. And again, this is something that's kind of the future will tell us. But it's probably the market of 2 to 3 players. How far are we from getting to breakeven? Well, it's frankly, it's a function of a market share. How the market structure will actually will split between 1st, 2nd and third player. And obviously, it could be I probably would speculate that assuming the 1st player gets a significant market share earlier, they will get to breakeven faster compared to other players. Great. Thanks a We will now take our next question from Anna Koprinoova from Gazprombank. Please go ahead. Good afternoon. Thank you very much for presentation and opportunity to ask question. So my first question will be regarding software pre installation on the gadgets. I understand it's too early to make a final conclusion, so full picture how it goes on. But given it's already started, maybe you can give us some understanding how we can assume impact over your online revenues and your market share in this segment? And my second question will be regarding Yandex market again and a couple of them actually. The first 1, how do you see correlation between Yandex. Plus users and Yandex. Market users? If you can give some maybe share of Yandex. Plus subscribers who are joining Yandex. Market as a result of Q1, for example? And second question on the market will be regarding your change in e commerce GMV end of Q1 versus end of the year, if you could give such number? Thank you. Anna, hi. This is Varin speaking. So let me take it 1 by 1, and let's start with pre installation. So look, so far, we see no impact and overall it is likely to be rather limited at first given that it applies to new devices only. And there is always a few months lag before a newly produced device would actually hit the shelves in the stores and people buy them and start using them. So there is a lag. As Tigran mentioned though, again in his opening remarks, there is an opportunity to increase the actual usage of Yandex apps on iOS devices as we believe the real customer preferences would imply higher market share for us. What we are also doing in addition to at the same time as the pre installation is rolling out, we are making targeted investments to support distribution of our products on iOS devices. That should help us to gain access to a more affluent customer base and to improve monetization overall. Now going to your second question with respect to Yandex. Market and how you should think about Yandex. Plus users and their behavior in Yandex. Market. So look, what we see in Yandex. Market and frankly across some of our other services is that the Yandex. Plus users are typically a higher frequency users and they do generate a higher average check transactions. So when we talk about specifically for Yandex. Market currently somewhat I would say somewhat more than 50% of market GMV comes from Plus subscribers. And Plus subscribers generate on average more than 40% higher GMV and 50% higher frequency in transactions. What we also see that the Plus members show better retention and stronger cohort behavior. And then question number 3, could you repeat it? Thank you. For your answers and my third question was if you could give us some numbers regarding your GMV for e commerce in Q1 of this year versus Q4 of last year. Maybe I missed somewhere, but I have the number for the full year 2020. Now I have Q1 versus Q1. But I'm interested to understand the understand the dynamics versus Q4 of last year. Anna, we did not disclose the breakdown between the different GMVs in our e commerce platform in the 4th quarter. I understand. Okay. Thank you very much again. It appears there are no further questions excuse me, 1 question has just come in. We will now take our next question from Alexey Koryashovko from Prosperity. Please go ahead. Hello, gentlemen. Thank you very much for this granularity and for the call overall. Can you give us some update on your 2021 CapEx? How much do you plan to spend? And how does kind of headquarter also fits into this equation? Alexey, this is Vadim speaking. Look, there is no change to what we guided to previously. Okay. Thank you. We will now take our next question from Anna Kropotova from Alfa Bank. Please go ahead. Yes. Thank you very much. So basically, my question was also with relation to CapEx, but could I formulate in such a way? So there is no change from your earlier guidance in terms of CapEx, But could you maybe give some update on what do you expect in terms of works type of works like engineering, I don't know, construction, etcetera, to start or to continue during this year in relation to new HQ? Thank you. Hi, Anna. This is Wadeem. Look, so the way you should think about our CapEx, the way we typically spend it, it's 2 thirds allocated to our infrastructure and servers and another third is essentially allocated to our other Yes. Thank you. But I just wondered what works you will be what will be your progress in terms of HQ construction project construction this year? So are you still busy with the project documentation? Will you be like starting to destroy that old building on Koffsigena Street? Will you be able to start constructing the new building? So what's going on there? Thank you. Got it. Anna, thank you for the clarification. So look, where we stand with the our kind of new campus construction. We actually demolished the old building, I think, towards the end of last year. We started construction of the foundation. And all the clearly all the paperwork and permits already received and in place. And the construction is fully ongoing. So hopefully, within a reasonable period of time, we all can celebrate, do the housewarming in our new headquarters. Okay. Very helpful. Thank you very much. Thank you. It appears there are no further questions at this time. I will pass the call back over to Julia Jazimova for any additional or closing remarks. Well, thank you very much for all your questions. As usual, if there's any follow ups, please contact IR team. Thank you and have a good