Nebius Group
Nebius Group(1) Announces Second Quarter 2024 Financial Results
AMSTERDAM, the Netherlands, August 1, 2024 - Yandex N.V. (to be renamed to Nebius Group), a Nasdaq-listed tech company building AI infrastructure businesses, today announced its unaudited financial results for the second quarter ended June 30, 2024.
(1) Yandex N.V. (the "Company" or the "Group") is to be renamed to Nebius Group N.V. subject to shareholders approval at the Annual General Meeting on August 15, 2024.
Q2 2024 Financial and Operational Highlights
Nebius Group is a technology company based in Europe that is seeking to build one of the largest commercially available AI infrastructure businesses. The company's core business is an AI-centric cloud platform built for intensive AI workloads, which offers full-stack infrastructure, including large-scale GPU clusters, cloud platforms and tools and services, for AI developers.
In addition to our core Nebius AI infrastructure business, we are developing three other businesses that operate under their own distinctive individual brands:
Nebius AI
Toloka AI
TripleTen
Avride
Consolidated Results (2), (3), (4)
(2) The following measures presented in this release are "non-GAAP financial measures": adjusted EBITDA/(loss) and adjusted net loss. Please see the section "Use of Non-GAAP Financial Measures" below for a discussion of how we define these measures, as well as reconciliations at the end of this release of each of these measures to the most directly comparable U.S. GAAP measures.
(3) Following the completion of the divestment of the Russia-based businesses, the Group changed the reporting currency from the Russian Ruble to the United States Dollar, which better reflects the geography of operations and key focus markets of the remaining businesses. Financial statements for the prior periods have been restated as if the change had occurred on January 1, 2022.
(4) On February 5, 2024, the Group announced the binding agreement with a purchaser consortium to sell all of the Group's businesses in Russia and certain international markets. The transaction (the "Sale") was approved by our Shareholders in early March and implemented in two closings (first closing was completed on May 17, 2024, and the final closing completed on July 15, 2024). In light of this Sale, in this quarter's financial report, we have classified the scope of the Group's businesses that was sold as discontinued operations, in line with ASC 205-20, Discontinued Operations criteria. As such, the assets, liabilities, and results of discontinued operations preceding the completion of the Sale are presented separately in the unaudited condensed consolidated balance sheets and statements of operations. For Q2 2024 such results of discontinued operations are presented only till the date of the first closing of the divestment when the Group sold its controlling stake in the businesses to be divested and deconsolidated the disposed businesses.
Additional financial information:
Corporate and Subsequent Events
Loss from operations
Loss from operations amounted to USD 122.4 million in Q2 2024 compared to USD 78.4 million in Q2 2023. This dynamic was mainly associated with the growing scale of the operations for the remaining businesses as well as one-off transaction expenses directly related to the divestment of the Russia-based businesses and deal related payments.
Other income/(loss), net for Q2 2024 amounted to a loss of USD 14.7 million compared to other income of USD 6.4 million in Q2 2023. Other income/(loss), net includes foreign exchange losses of USD 13.8 million in Q2 2024 and foreign exchange gain of USD 6.8 million in Q2 2023.
Net loss from continuing operations (includes all businesses that were retained after the completion of the divestment of the Russia-based and certain other international businesses) was USD 39.3 million in Q2 2024, compared with net loss of USD 74.3 million in Q2 2023. The reduction of losses is primarily explained by a gain from revaluation of the remaining interest in the divested businesses between the first closing and June 30, 2024 in amount of USD 88.7 million, which more than offset an increase in operating expenses (as a result of expansion of the remaining businesses) and one-off transaction related costs.
A significant portion of the consideration for the divested businesses was received in the form of the Company's Class A Shares. The acquisition of such shares by the Company is treated as a repurchase by the Company of its own shares for Dutch tax purposes, which would be subject to withholding tax at a 15% rate. However, we anticipate that all or substantially all of the shares so acquired will qualify as "temporary investments", given our intention and plan to use such shares for our employee equity incentive program and for further financial purposes. Qualification of shares as temporary investment provides the Company exemption from withholding tax liability. As of the end of June, the Company requested from the Dutch tax authortities the ruling in respect of the "temporary investment" position. In Q2 2024 financial statements the Company did not recognize any tax liability in respect to the shares received in the first closing of the Sale. The accounting position may change leading to the recognition of tax liability in the next periods depending on the new facts and circumstances.
The total number of shares issued and outstanding as of June 30, 2024 was 293,850,159, including 258,151,485 Class A shares and 35,698,674 Class B shares, and excluding 68,190,785 Class A shares held in treasury. The number of Class A shares received in the first closing as a part of consideration for the divestment is 67,632,122 Class A shares, which are held in treasury pending use under the Company's equity incentive plans and for financing purposes. Following the final closing of the divestment on July 15, 2024, the total number of shares issued and outstanding decreased to 198,996,556, including 163,297,882 Class A shares and 35,698,674 Class B shares, and excluding 163,044,388 Class A shares held in treasury.
There were also outstanding employee share options to purchase up to an additional 2.2 million shares, at a weighted average exercise price of $38.39 per share, 1.9 million of which were fully vested; equity-settled share appreciation rights (SARs) for 0.1 million shares, at a weighted average measurement price of $32.85, all of which were fully vested; restricted share units (RSUs) covering 1.2 million shares, of which RSUs to acquire 1.0 million shares were fully vested. In addition, we have outstanding awards in respect of our Avride business for 2.0 million shares (representing 5.9% of the fully diluted shares in Avride), 1.9 million of which were fully vested.
More information on Nebius Group can be found on https://nebius.group.
FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking statements that involve risks and uncertainties. All statements contained in this press release other than statements of historical facts, including, without limitation, statements our future financial and business performance, our business and strategy and expected financial results, are forward-looking statements. The words "anticipate," "believe," "continue," "estimate," "expect," "guide," "intend," "likely," "may," "will" and similar expressions and their negatives are intended to identify forward-looking statements. Actual results may differ materially from the results predicted or implied by such statements, and our reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted or implied by such statements include, among others, competitive pressures, technological developments, and our need to expend capital to accommodate the growth of the business, as well as those risks and uncertainties related to our continuing businesses included under the captions "Risk Factors" and "Operating and Financial Review and Prospects" in our Annual Report on Form 20-F for the year ended December 31, 2023, filed on April 26, 2024, and "Risk Factors" in the Shareholder Circular filed as Exhibit 99.1 to our Current Report on Form 6-K dated February 8, 2024, which are available on our investor relations website at https://nebius.group/sec-filings and on the SEC website at https://www.sec.gov/. All information in this release and in the attachments is as of August 1, 2024, and the Company undertakes no duty to update this information unless required by law.
USE OF NON-GAAP FINANCIAL MEASURES
To supplement the financial information prepared and presented in accordance with U.S. GAAP, we present the following non-GAAP financial measures: Adjusted EBITDA/(loss) and Adjusted net income/(loss). The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP financial measures to the nearest comparable U.S. GAAP measures", included following the accompanying financial tables. We define the various non-GAAP financial measures we use as follows:
These non-GAAP financial measures are used by management for evaluating financial performance as well as decision-making. Management believes that these metrics reflect the organic, core operating performance of the company, and therefore are useful to analysts and investors in providing supplemental information that helps them understand, model and forecast the evolution of our operating business.
Although our management uses these non-GAAP financial measures for operational decision-making and considers these financial measures to be useful for analysts and investors, we recognize that there are a number of limitations related to such measures. In particular, it should be noted that several of these measures exclude some recurring costs, particularly certain share-based compensation. In addition, the components of the costs that we exclude in our calculation of the measures described above may differ from the components that our peer companies exclude when they report their results of operations.
Below we describe why we make particular adjustments to certain U.S. GAAP financial measures:
Net income from discontinued operations
Net income from discontinued operations represent the results of the divested business, net of tax, net income from discontinued operations attributable to noncontrolling interests and the result of divestment. Result of the divestment is calculated as fair value of consideration received plus fair value of the remaining interest in the divested businesses and accumulated other comprehensive loss related to the sold perimeter less net assets of the disposed business as of first closing of the divestment. We present Adjusted net loss ex?luding any effects of our discontinued operations.
Certain SBC expense
SBC is a significant expense item and an important part of our compensation and incentive programs. As it is highly dependent on our share price at the time of equity award grants, we believe that it is useful for investors and analysts to see certain financial measures excluding the impact of these charges in order to obtain a clearer picture of our operating performance. However, because we settled the RSU equity awards of our employees in cash during 2023 and H1 2024, we no longer eliminate the relevant SBC expense corresponding to the cash payment from adjusted EBITDA/(loss) and adjusted net loss.
Foreign exchange gains/(losses)
Because we hold certain assets and liabilities in currencies that differ from the United States Dollar, the Company's current reporting currency, and because foreign exchange fluctuations are outside of our operational control, we believe that it is useful to present adjusted EBITDA/(loss), adjusted net income and related margin measures excluding these effects, in order to provide greater clarity regarding our operating performance.
One-off restructuring and other expenses
We believe that it is useful to present adjusted net income, adjusted EBITDA/(loss) and related margin measures excluding impacts not related to our operating activities. Adjusted net loss and adjusted EBITDA/(loss) exclude certain expenses related to the divestment and other similar one-off expenses.
The tables at the end of this release provide detailed reconciliations of each non-GAAP financial measure we use from the most directly comparable U.S. GAAP financial measure.
Gain from revaluation of investment in the divested businesses Following the first closing of the divestment the Company held a remaining interest of approximately 28% in businesses to be divested. This investment was subject to revaluation due to RUB / USD exchange rate fluctuations. Gain from revaluation of investment in these businesses in Q2 2024 was excluded from Adjusted net loss.
Nebius Group Unaudited Condensed Consolidated Balance Sheets (in millions of U.S. dollars)
* Derived from audited consolidated financial statements and adjusted for the presentation of discontinued operations and change in reporting currency Nebius Group Unaudited Condensed Consolidated Statements of Operations (in millions of U.S. dollars)
* Derived from audited consolidated financial statements and adjusted for the presentation of discontinued operations and change in reporting currency (1) These balances exclude depreciation and amortization expenses, which are presented separately, and include share-based compensation.
(2) Net income from discontinued operations represent the results of the divested businesses, net of tax. For Q2 2024 such results are presented only till the date of the first closing of the divestment when the Company sold its controlling stake in the businesses to be divested and deconsolidated the disposed businesses.
(3) Loss from disposal represents both the impairment of the held-for-sale component in Q1 2024 and the result of the deconsolidation as of the date of the first closing of the divestment. Such effects include the reclassification of the accumulated other comprehensive loss from equity to earnings which resulted from the change in reporting currency and attributable to the divested businesses.
Nebius Group
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES TO THE NEAREST COMPARABLE U.S. GAAP MEASURES
Reconciliation of Adjusted EBITDA / (loss) to U.S. GAAP Net Income / (loss)
Reconciliation of Adjusted Net Income / (loss) to U.S. GAAP Net Income / (loss)
Contacts:
Investor Relations askIR@nebius.com
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1958173 01-Aug-2024
