REG-VK Company VK Company Limited unaudited IFRS results for Q3 2022
10/11/2022 07:15
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VK Company (VKCO)
VK Company Limited unaudited IFRS results for Q3 2022
10-Nov-2022 / 10:00 MSK
Dissemination of a Regulatory Announcement that contains inside information in accordance
with the Market Abuse Regulation (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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VK Company Limited unaudited IFRS results for Q3 2022
November 10, 2022. VK Company Limited (LSE, MOEX: VKCO, hereinafter referred to as “VK”
or "the Company" or “the Group”) today releases an unaudited IFRS report and segment
financial information for the three and nine months ended 30 September 2022.
VK key results in Q3 2022:
• Q3 2022 Revenue was up 21% YoY to RUB 24,119 mn due to higher sales of online
advertising, up 29% YoY. The sector’s main drivers were:
◦ Performance formats, up 71% YoY
◦ Advertising revenue from small and medium size businesses (SMBs) grew 128% YoY
◦ Video ad revenue increased by 16% YoY
• Q3 2022 Adjusted EBITDA was up 16% YoY to RUB 9,807 mn. EBITDA margin increased by 3
percentage points (p.p.) YoY to 30.6% mostly due to expanding margins in
Communications & Social and EdTech segments (+3p.p. and +34 p.p. respectively).
• Q3 2022 Total Net profit was RUB 41,197 mn, compared to Q3 2021 Total Net loss of RUB
2,354 mn.
• VK’s largest asset, VKontakte continued to strengthen its leadership position among
social networks in Russia with daily audience increasing by 7.1% to a record of 49.4
mn, while the social network’s monthly active users grew 6.9% YoY to a record of 76.9
mn. The growth in audience and engagement led VKontakte to increase its adjusted
revenue by almost 34% YoY in Q3.
• The EdTech segment showed Q3 revenue coming in at RUB 2.6 bn, up 20.3%. The segment
posted positive adjusted EBITDA of RUB 459 mn with a margin of 16%.
• B2B projects’ revenue expanded 28% YoY in Q3. The highest growth rates in Q3 were
seen by corporate communications services and by the VK Tax Compliance, up 343% and
129%, respectively.
• Youla (classifieds platform) showed positive adjusted EBITDA in Q3 2022 for the first
time since its launch.
• On September 12, VK closed the deal to purchase content platforms Dzen and News from
Yandex in exchange for a 100% stake in Delivery Club, ready-to-eat and e-grocery
service, and ceased to be a shareholder of O2O Holding. VK continues to enhance its
focus on content services and develop its business based on Company’s core products:
social networks, communication services and online education platforms.
• On September 27, VK announced sale of MY.GAMES to Alexander Chachava, the managing
partner of LETA Capital. VK continues to develop its own local gaming services under
the VK Play brand. Since its launch in April, VK Play has already become the largest
video game platform in Russia.
• VK has significantly moved forward in restructuring of its Convertible Bonds. As at
the date of this financial report’s publication, VK has bought back ~55% of all Bonds
outstanding with a nominal value of ~$220 mn. The Company continues to look at
opportunities to purchase the bonds that remain outstanding.
Growth of the key operating and audience metrics was achieved due to strategic focus on
enhancement of VK’s leadership position among content, entertainment and education
IT-services, as well as further development of innovative business solutions.
Segmental highlights
Communications and Social segment
The segment’s revenue was up 24.3% YoY to RUB 18.5 bn in Q3 2022 with online advertising
revenue being the largest revenue component. VKontakte was the main driver with growth of
its adjusted revenue approaching 34% YoY in Q3.
The segment’s revenue includes revenue from Dzen and News since their acquisition in
early September.
Adjusted EBITDA was up 30.4% YoY to RUB 9.2 bn in Q3 (with a margin of 49% vs 47% a year
ago) driven by higher revenue, reduced remuneration to agents/partners and received IT
benefits.
Communications and Social Segment Performance – Q3 2022 & 9M 2022
RUB millions Q3 Q3 2022 YoY, % 9M 2021 9M 2022 YoY, %
2021
Revenue 14,917 18,536 24% 42,350 50,612 20%
Adjustments:
Changes in deferred revenues 55 (21) 155 (212)
Adjusted revenue 14,972 18,515 24% 42,505 50,400 19%
External revenue 14,910 18,407 42,283 50,253
Intersegment revenue 62 108 222 147
Operating expenses (7,950) (9,358) 18% (24,280) (29,125) 20%
Adjusted EBITDA 7,022 9,157 30% 18,225 21,275 17%
Adj. EBITDA margin, % 47% 49% 3pp 43% 42% -1pp
VKontakte
VKontakte has further strengthened its leading position among the social networks in
Russia with a new peak in quarterly average MAU at 76.9 mn (+6.9% YoY) and record-high
DAU of 49.4 mn (+7.1% YoY) in Q3 2022. In Q3, the average total time spent on VKontakte
stood at 45.2 minutes per day*. VKontakte was reaching 85% of the Russian-speaking
internet audience in September, with 54% visiting the platform daily**.
A major update of the VKontakte mobile app was launched in Q3, with maximum focus on
content. Updated newsfeed design and user profile were already rolled out.
The number of VK Mini Apps continues to grow, up 73% YoY in September to 63,800, with MAU
reaching 38.4 mn in Q3 (+15% YoY). In-app ad revenue of mini apps on the VK Mini Apps
platform rose by 45% YoY in Q3. VKontakte increasingly invested in key mini-apps Health
and Dating, with their MAU at 7.6 mn and 1.9 mn respectively in Q3. The number of titles
in the VKontakte Mobile Games catalog grew by 160% YoY, with 59% YoY growth in in-game
purchases on mobile in Q3.
Our Key video technology platforms (VK Video and VK Clips) reached a new record of 2.41
bn in average combined daily views in Q3. VK Video (1.69bn daily views) launched
monetization of live streams for content creators as well as the beta version of the
content creator cabinet. It has also further enhanced its content recommendation system.
VKontakte also saw growth in video views on the social network itself with 1.16 bn (+45%
YoY) in average daily views in Q3.
VKontakte is seeing an increase in content creation and consumption. In Q3, the number of
communities created in Russia increased by 28% YoY, while the number of confirmed friend
requests up 34% YoY. The number of news feed views increased by 45% YoY. Among the Q3
highlights was the launch of vmoji, a tool to create personal virtual avatars using
facial recognition technology and VKontakte’s proprietary generative ML models. Since
launch, 6 mn users have launched their digital avatars as of 7 November. VKontakte also
launched instant chat translation with multiple language support to help users from
different countries and cultures communicate.
In Q3, the total earnings communities made using official VKontakte monetization tools
(video monetization, partnership program, and VK Donut) grew by 88% YoY. Creators using
VK Donut earned over RUB 126 mn in Q3 (+205% YoY), with the number of communities using
VK Donut up 48% YoY and the number of subscribers making payments through VK Donut up
107% YoY in Q3.
Monetization capabilities for communities and content creators are expanding. In Q3 a
beta of an updated version of the partnership program for communities was launched,
providing access to additional revenue through utilization of new formats inside
VKontakte, including by publishing stories or short videos.
In Q3 the number of SMB advertisers in VKontakte increased by 65% YoY, while SMB
promotion spending grew twice YoY.
* Source: Mediascope, Q3 2022, Russia (all cities, age 12+), Mobile and Desktop.
** Source: Mediascope, September 2022, Russia (all cities, age 12+), Mobile and Desktop.
Odnoklassniki (ОК)
Average Russia MAU for OK stood at 38 mn in Q3, with the best seasonal audience metrics
dynamics for the past several years registered in September. Audiences demonstrated
strong engagement sending more than 6.4 bn virtual gifts, 325 mn postcards and 490 mn
stickers during the quarter. The number of new user registrations in September grew
+8.3% YoY, driven by the 25-45 y.o. age group, with new users demonstrating above average
engagement. The number of created communities grew by 66.3% YoY in Q3.
Moments MAU reached 28.4 mn in Q3 (+8.8% YoY). The number of views increased by 32% YoY
and reached 497 mn.
Advertising revenue from small and medium size businesses (SMBs) grew 26.5% YoY in Q3,
with the number of unique paying SMBs increasing by 12.9% YoY. Total number of business
communities publishing content on OK grew by 44.5% YoY in Q3.
In Q3 OK announced its new positioning as a social network centered around hobbies and
interests. A key service called “Hobbies” went live on September 1 for all OK users. The
social network’s mobile app were also updated, with enhanced navigation with a
personalized user menu based on interests. OK has also overhauled its content
recommendation system and added monetization for communities featuring video content.
Recommendation platforms (Dzen, Pulse, Relap, News)
Pulse DAU (including vendor audiences) reached 11.2 mn (+24.8% YoY) in Q3 while MAU was
92.8 mn (+7% YoY). Relap’s DAU in Q3 grew to 7.3 mn (+14.9%), MAU reached 107 mn (+26%
YoY). Combined Adjusted revenue reached RUB 434 mn in Q3 (+26% YoY). Time spent per
active user increased by 49.8% YoY to 19.3 minutes in Q3.
On September 12, VK closed the deal to purchase content platforms Dzen and News from
Yandex in exchange for Delivery Club. More information on the deal is available on our
website: 1 https://vk.company/en/investors/info/11262/
Games segment
On September 27, VK announced sale of MY.GAMES. The deal has incorporated all MY.GAMES
assets including its studios and game products. The total deal value stood at USD 642mn.
More information on the transaction can be found in the related press release:
2 https://vk.company/en/investors/info/11276/
Games Segment Performance – Q3 2022 & 9M 2022 (For reference)
RUB millions Q3 2021 Q3 2022 YoY, % 9M 2021 9M 2022 YoY, %
Revenue 10,127 8,602 -15% 32,022 30,076 -6%
Adjustments:
Changes in deferred revenues (47) (934) 139 (1,628)
Bookings (Adjusted revenue) 10,080 7,668 -24% 32,161 28,448 -12%
External revenue 10,054 7,665 32,083 28,371
Intersegment revenue 26 3 78 77
Operating expenses (7,108) (6,327) -11% (23,990) (26,334) 10%
Adjusted EBITDA 2,972 1,341 -55% 8,171 2,114 -74%
Adj. EBITDA margin, % 29% 17% -12pp 25% 7% -18pp
EdTech segment
The segment’s revenue rose by 20.3% YoY to RUB 2.6 bn. EdTech delivered a positive
Adjusted EBITDA of RUB 459 mn in Q3 compared to a loss of RUB 455 mn in Q3 2021 due to
optimized expenses and the effect of IT benefits.
EdTech Segment Performance – Q3 2022 & 9M 2022
RUB millions Q3 2021 Q3 2022 YoY, % 9M 2021 9M 2022 YoY, %
Revenue 2,177 2,619 20% 5,930 8,065 36%
Adjustments:
Changes in deferred revenues 369 175 941 (199)
Adjusted revenue 2,546 2,871 13% 6,871 7,866 14%
External revenue 2,545 2,909 6,869 7,866
Intersegment revenue 1 (38) 2 -
Operating expenses (3,001) (2,412) -20% (8,398) (8,201) -2%
Adjusted EBITDA (455) 459 n/a (1,527) (335) -78%
Adj. EBITDA margin, % -18% 16% 34pp -22% -4% 18pp
As at the end of September, our consolidated platforms reached 12.0 mn in combined
cumulative registered students, which is 1.4x higher YoY, with 0.7 mn in new
registrations during the quarter. Cumulative number of paying students reached 465,000
(+1.7x YoY), with almost 45,000 new paying students joining during the quarter.
New Initiatives segment
The segment’s revenue has returned to growth, up 6.6% to RUB 3.1 bn in Q3. Main growth
drivers were B2B services (including Cloud), VK Play, and VK Clips. Adjusted EBITDA burn
in Q3 amounted to RUB 1.0 bn (vs. the loss of RUB 0.9 bn in Q3 2021) which implies a
margin of -32% vs -31% a year ago. Losses are driven by the ongoing investment into VK
Play, VK Clips, and other new initiatives.
New Initiatives Segment Performance – Q3 2022 & 9M 2022
RUB millions Q3 2021 Q3 2022 YoY, % 9M 2021 9M 2022 YoY, %
Revenue 2,926 3,119 7% 7,494 7,717 3%
Adjusted revenue 2,926 3,119 7% 7,494 7,717 3%
External revenue 2,909 3,037 7,464 7,590
Intersegment revenue 17 82 30 127
Operating expenses (3,834) (4,131) 8% (10,563) (13,446) 27%
Adjusted EBITDA (908) (1,012) 11% (3,069) (5,729) 87%
Adj. EBITDA margin, % -31% -32% -1pp -41% -74% -33pp
B2B (including Cloud)
B2B revenue exceeded RUB 1 bn in Q3, with 28% YoY growth. VK Cloud remains the largest
contributor. The fastest growing products in Q3 were Corporate Communication Services
(+343% YoY) and tax monitoring platform VK Tax Compliance (+129% YoY).
VK Clips (short video)
Daily views of VK Clips averaged 717 mn (+152% YoY) in Q3. The number of new Clips
published rose by 312% YoY, and the number of content creators increased by 122% YoY.
Youla (classifieds)
Average MAU reached 31 mn in Q3, with the service showing positive EBITDA for the first
time.
VK Calls
In Q3 VKontakte opened its API for video call control, added call planning, launched the
beta-version of its app for meeting rooms and conference halls, and launched its first
large-scale promo campaign.
VK Play
VK continues to develop its own local gaming services under the VK Play brand following
the sale of MY.GAMES. Since its launch in April, VK Play has already become the largest
video game platform in Russia offering a catalog of games, cloud gaming, the VK Play Live
streaming platform, a tournament platform, and news media. VK Play has already above 7 mn
registered accounts. As at the end of Q3, VK Play had more than 13,000 titles on its
platform (including more than 350 games available through cloud gaming). By the end of
the year, the service is planning to add more features for players to fulfil its primary
near-term goal of expanding the platform’s audience.
RuStore
Since the beta launch of RuStore (the Russian app store for Android), more than 1,700
apps have been added to its catalog, generating more than 4 million downloads. The
service offers an app developer account, app listing, integration with the security
system, and more. In Q3 RuStore opened access to private developers and expanded its
features, adding app categories, reviews and ratings, in-app purchases, and promotion
tools. By the end of the year the app store plans to add marketing tools and analytics.
Joint ventures
VK has exited the O2O Holding joint venture in Q3. The respective deal was closed on
September 29.
In Q3 VK recognized its share of loss in O2O Holding in amount of RUB (2,291mn) vs RUB
(3,868mn) in Q3 2021. Due to sale of the entire stake in the O2O JV, VK recognized a
revaluation gain in the amount of RUB 24,186mn;
This release presents Adjusted revenue, Adjusted EBITDA, Adjusted net profit/loss, which
are non-IFRS financial measures
Adjusted measures for 2021 and 2022 also include contribution from discontinued
operations (MY.GAMES). IFRS measures exclude contribution form MY.GAMES, according to
the IFRS 5 requirement due to the disposal of the asset at the end of Q3 2022.
RUB millions Q3 2021 Q3 2022 YoY, % 9M 2021 9M 2022 YoY, %
Adjusted revenue 30,418 32,018 5% 88,699 94,080 6%
Revenue 19,914 24,119 22% 55,442 66,058 19%
Adjusted EBITDA 8,426 9,807 16% 21,159 16,974 -20%
Adjusted net profit/(loss) (1,429) 704 (4,659) (10,101)
Net profit/(loss) (2,354) 41,197 (9,788) (10,094)
RUB millions* Q3 2021 Q3 2022 YoY, % 9M 2021 9M 2022 YoY, %
Online advertising Revenue 11,163 14,455 29% 30,408 37,597 24%
Adjustments:
Discontinued operations 1,066 728 3,542 3,036
Barter revenues - - - (15)
Changes in deferred revenues (1) (15) (1) (15)
Online advertising Adjusted revenue 12,228 15,168 24% 33,949 40,603 20%
Users payments (Community IVAS) 4,326 3,992 -8% 13,075 12,838 -2%
Adjustments:
Discontinued operations 8,987 7,871 27,890 26,836
Changes in deferred revenues 7 (934) 226 (1,791)
Users payments adjusted (Community IVAS & 13,320 10,929 -18% 41,191 37,883 -8%
MMO games)
Education Technology services Revenue 2,173 2,634 21% 5,924 8,034 36%
Adjustments:
Changes in deferred revenues 373 270 941 (181)
Education Technology services Adjusted 2,546 2,904 14% 6,865 7,853 14%
revenue
Other Revenue 2,252 3,038 35% 6,035 7,589 26%
Adjustments:
Discontinued operations 74 3 590 204
Changes in deferred revenues (2) (24) 69 (52)
Other Adjusted revenue 2,324 3,017 30% 6,694 7,741 16%
* Figures in the table above include contribution from discontinued operations (MY.GAMES)
For further information please contact:
VK IR team
3 ir@vk.team
VK PR team
4 pr@vk.team
Cautionary Statement regarding Forward Looking Statements and Disclaimers
This press release contains statements of expectation and other forward-looking
statements regarding future events or the future financial performance of the Group. You
can identify forward looking statements by terms such as "expect", "believe",
"anticipate", "estimate", "forecast", "intend", "will", "could", "may" or "might", the
negative of such terms or other similar expressions including "outlook" or "guidance".
The forward-looking statements in this release are based upon various assumptions that
are inherently subject to significant uncertainties and contingencies which are difficult
or impossible to predict and may be beyond the Group's control. Actual results could
differ materially from those discussed in the forward looking statements herein. Many
factors could cause actual results to differ materially from those discussed in the
forward looking statements included herein, including competition in the marketplace,
changes in consumer preferences, the degree of Internet penetration and online
advertising in Russia, concerns about data security, claims of intellectual property
infringement, adverse media speculation, changes in political, social, legal or economic
conditions in Russia, exchange rate fluctuations, and the Group's success in identifying
and responding to these and other risks involved in its business, including those
referenced under "Risk Factors" in the Group's public filings. The forward-looking
statements contained herein speak only as of the date they were made, and the Group does
not intend to amend or update these statements except to the extent required by law to
reflect events and circumstances occurring after the date hereof.
About VK
VK is one of the largest technology companies in Russia. Its products help millions of
people with their day-to-day needs online. More than 90% of the Russian internet audience
use VK services, which enable people to keep in touch, play video games, master new
skills, listen to music, watch and create video content, buy and offer goods and services
and fulfill wide range of other needs. The company provides a number of solutions for
digitizing business processes, from online promotion and predictive analytics to
corporate social networks, cloud services and enterprise automation.
Interim Condensed Consolidated Financial Results for Q3 and 9M 2022
RUB millions
Q3 2021 Q3 2022 YoY, % 9M 2021 9M 2022 YoY, %
Revenue
Online advertising 11,163 14,455 29.5% 30,408 37,597 23.6%
Community IVAS 4,326 3,992 -7.7% 13,075 12,838 -1.8%
Education technology services 2,173 2,634 21.2% 5,924 8,034 35.6%
Other revenue 2,252 3,038 34.9% 6,035 7,589 25.7%
Total revenue 19,914 24,119 21.1% 55,442 66,058 19.1%
Adjustments
Revenue from discontinued opperations 10,127 8,602 -15.1% 32,022 30,076 -6.1%
Barter revenues - - n/m - (15) n/m
Changes in deferred revenues 377 (703) n/m 1,235 (2,039) n/m
Total adjusted revenue** 30,418 32,018 5.3% 88,699 94,080 6.1%
Operating expenses
Personnel expenses (6,010) (6,550) 9.0% (18,926) (27,167) 43.5%
Agent/partner fees (5,439) (5,025) -7.6% (16,234) (16,408) 1.1%
Marketing expenses (2,038) (3,430) 68.3% (6,024) (8,306) 37.9%
Server hosting expenses (136) (244) 79.4% (390) (517) 32.6%
Professional services (257) (263) 2.3% (793) (751) -5.3%
Other operating income 178 243 36.5% 494 761 54.0%
Other operating expenses, excl. D&A (1,143) (953) -16.6% (2,879) (3,207) 11.4%
Total operating expenses (14,845) (16,222) 9.3% (44,752) (55,595) 24.2%
Adjustments
OPEX related to discontinued (7,108) (6,327) -11.0% (23,990) (26,334) 9.8%
opperations
Share-based payment transactions (27) 277 n/m 711 4,687 n/m
Other (12) 61 n/m 491 136 -72.3%
Adjusted EBITDA** 8,426 9,807 16.4% 21,159 16,974 -19.8%
Adjusted EBITDA margin, % 27.7% 30.6% 23.9% 18.0%
Net profit/ (loss) (2,354) 41,197 n/m (9,788) (10,094) 3.1%
Net profit/ (loss) margin -11.8% 170.8%
Adjusted Net profit/ (loss) (1,429) 704 n/m (4,659) (10,101) n/m
Adjusted Net profit/ (loss) margin -4.7% 2.2% -5.3% -10.7%
(*) The numbers in this table and further in the document may not exactly foot or
cross-foot due to rounding.
(**) Please refer to “Presentation of Segment Financial Information“ for reconciliation
of non-IFRS measures (Adj.revenue, Adj EBITDA and Adj. net income/(loss) to IFRS
Operating Segments
In order to assess operational performance and allocate resources, the Chief Executive
Officer of the Group, who is the Group’s Chief Operating Decision Maker (CODM), reviews
selected items of each segment’s income statement, assuming 100% ownership in all of the
Group’s key operating subsidiaries, based on management reporting.
In our effort to further enhance our reporting quality and transparency, the Group’s
aggregate segment financial information previously presented in the form of management
(CODM) accounts has been transformed starting from Q1 2022. In addition to IFRS-based
disclosure, we have reported adjusted metrics, which are used in the management decision
making process, with a clear transition between IFRS-based results and adjusted metrics
to be provided, including within segmental disclosure.
Revenue in Segments Performance correspond with revenue according to IFRS. To supplement
the financial information prepared and presented in accordance with IFRS, we have
presented the following non-IFRS financial measures: Adjusted revenue, Adjusted EBITDA,
Adjusted Net profit.
The composition of the reporting segments reflects the Group’s strategy, the way the
business is managed and units’ interconnection within its eco-system. The Group has
identified the following reportable segments on this basis:
• Communications and Social;
• Games (the segment is presented as a discontinued operation as of September 30,
2022);
• Education Technologies (EdTech); and
• New initiatives.
The Communications and Social segment includes email, instant messaging, News and
Dzen.Platform (hereinafter - ‘Dzen.Platform’; News and Dzen.Platform are being
consolidated from September 2022), recommendation platforms (Pulse and Relap), as well as
portal (main page and media projects). It earns substantially all revenues from display
and context advertising. This segment also aggregates the Group’s social network
Vkontakte and two other social networks (OK and My World) and earns revenues from (i)
commission from application developers based on the respective applications’ revenue,
(ii) user payments for virtual gifts, stickers and music subscriptions and (iii) online
advertising, including display and context advertising. It also includes Search and music
services. These businesses have similar nature and economic characteristics as they are
represented by social networks and online communications, common type of customers for
their products and services and are regulated under a similar regulatory environment.
The Games segment contains online gaming services, including MMO, social and mobile
games, games streaming and platform solutions operated by the Group under the MY.GAMES
brand and within the MY.GAMES ecosystem. It earns substantially all revenues from (i)
sale of virtual in-game items to users (f2p) or sale of digital copies of the games
(b2p), (ii) royalties for games and gaming solutions licensed to third party online game
operators (iii) in-game advertising and (iv) revenues from streaming services and gaming
platform services. The Games segment is presented as a discontinued operation as of
September 30, 2022
The EdTech segment includes the Group’s online education platforms with educational
courses and programs (such as GeekBrains, Skillbox and Skillfactory) and earns
substantially all revenue from individuals for education technology services.
The New initiatives reportable segment represents separate operating segments aggregated
in one reportable segment for their similar nature of newly acquired or newly launched
and dynamically developing businesses. This segment primarily consists of VK Clips with
potential to become a major separate product, B2B new projects including cloud along with
other services, as well as of Youla classifieds that earns substantially all revenues
from advertising, listing fees and other services that are considered insignificant by
the CODM for the purposes of a performance review.
Since Q1 2022 the Group has changed its approach to allocation of corporate services
expenses. The Group has analyzed the functionality of key services and defined
appropriate drivers to allocate expenses of each service. Previously the Group applied a
single driver in allocation of all corporate services expenses, based on the share of
each segment in direct costs.
Non-allocated items - Allocations exclude services that are mostly related to general
group issues, as well as expenses that cannot be tied to a particular BU, such as PR,
Investor Relations, Government Relations, and other services.
Operating Segments Performance – Q3 2022
RUB millions Communications Games EdTech New Not Eliminations Group
and Social initiatives allocated
Revenue 18,536 - 2,619 3,119 - (155) 24,119
Adjustments
Revenue of the
"Games" - 8,602 - - - - 8 602
segment
Changes in
deferred (21) (934) 252 - - - (703)
revenues
Adjusted 18,515 7,668 2,871 3,119 - (155) 32,018
revenue
External 18,407 7,665 2,909 3,037 - - 32,018
revenue
Intersegment 108 3 (38) 82 - (155) -
revenue
Total
operating (9,358) - (2,412) (4,131) (476) 155 (16,222)
expenses
Adjustments
Expenses of
the "Games" - (6,327) - - - - (6,327)
segment
Share-based
payment - - - - 277 - 277
transactions
Other - - - - 61 - 61
Adjusted 9,157 1,341 459 (1,012) (138) - 9,807
EBITDA
Adjusted
EBITDA margin, 49.5% 17.5% 16.0% -32.4% 30.6%
%
Group Adjusted net loss 704
Adjusted profit margin, % 2.2%
Including Share of loss of equity
accounted associates and joint
ventures:
Aliexpress -
Russia JV
O2O JV (1,471)
Umschool (28)
associate
Uchi.ru 54
associate
Other (6)
Operating Segments Performance – Q3 2021
RUB millions Communications Games EdTech New Not Eliminations Group
and Social initiatives allocated
Revenue 14,917 - 2,177 2,926 - (106) 19,914
Adjustments
Revenue of the
"Games" - 10,127 - - - - 10,127
segment
Changes in
deferred 55 (47) 369 - - - 377
revenues
Adjusted 14,972 10,080 2,546 2,926 - (106) 30,418
revenue
External 14,910 10,054 2,545 2,909 - - 30,418
revenue
Intersegment 62 26 1 17 - (106) -
revenue
Total (14
operating (7,950) - (3,001) (3,834) (166) 106 845)
expenses
Adjustments
Expenses of
the "Games" (7,108) (7,108)
segment
Share-based
payment - - - - (27) - (27)
transactions
Other - - - - (12) - (12)
Adjusted 7,022 2,972 (455) (908) (205) - 8,426
EBITDA
Adjusted
EBITDA margin, 46.9% 29.5% -17.9% -31.0% 27.7%
%
Group Adjusted net loss (1,429)
Adjusted profit margin, % -4.7%
Including Share of loss of equity
accounted associates and joint
ventures:
Aliexpress (1,212)
Russia JV
O2O JV (3,882)
Uchi.ru (113)
associate
Other (58)
Operating Segments Performance – 9M 2022
RUB millions Communications Games EdTech New Not Eliminations Group
and Social initiatives allocated
Revenue 50,612 - 8,065 7,717 15 (351) 66,058
Adjustments
Revenue of
the "Games" - 30,076 - - - - 30,076
segment
Barter - - - - (15) - (15)
revenues
Changes in
deferred (212) (1,628) (199) - - - (2,039)
revenues
Adjusted 50,400 28,448 7,866 7,717 - (351) 94,080
revenue
External 50,253 28,371 7,866 7,590 - - 94,080
revenue
Intersegment 147 77 - 127 - (351) -
revenue
Total
operating (29,125) - (8,201) (13,446) (5,174) 351 (55 595)
expenses
Adjustments
Expenses of
the "Games" - (26,334) - - - - (26,334)
segment
Share-based
payment - - - - 4,687 - 4,687
transactions
Other - - - - 136 - 136
Adjusted 21,275 2,114 (335) (5,729) (351) - 16,974
EBITDA
Adjusted
EBITDA 42.2% 7.4% -4.3% -74.2% - - 18.0%
margin, %
Group Adjusted net loss (10,101)
Adjusted profit margin, % -10.7%
Including Share of loss of equity
accounted associates and joint
ventures:
Aliexpress (828)
Russia JV
O2O JV (9,224)
Umschool 52
associate
Uchi.ru 134
associate
Other (123)
Operating Segments Performance – 9M 2021
RUB millions Communications Games EdTech New Not Eliminations Group
and Social initiatives allocated
Revenue 42,350 - 5,930 7,494 - (332) 55,442
Adjustments
Revenue of
the "Games" - 32,022 - - - - 32,022
segment
Changes in
deferred 155 139 941 - - - 1,235
revenues
Adjusted 42,505 32,161 6,871 7,494 - (332) 88,699
revenue
External 42,283 32,083 6,869 7,464 - - 88,699
revenue
Intersegment 222 78 2 30 - (332) -
revenue
Total
operating (24,280) - (8,398) (10,563) (1,843) 332 (44,752)
expenses
Adjustments
Expenses of
the "Games" - (23,990) - - - (23,990)
segment
Share-based
payment - - - - 711 - 711
transactions
Other - - - - 491 - 491
Adjusted 18,225 8,171 (1,527) (3,069) (641) - 21,159
EBITDA
Adjusted
EBITDA 42.9% 25.4% -22.2% -41.0% - - 23.9%
margin, %
Group Adjusted net loss (4,659)
Adjusted profit margin, % -5.3%
Including Share of loss of equity
accounted associates and joint
ventures:
Aliexpress (2,179)
Russia JV
O2O JV (11,098)
Uchi.ru (92)
associate
Other 640
Liquidity
As of 30 September 2022, the Group had RUB 14,688 million of cash and cash equivalents
and short-term time deposits and RUB 70,625 million of debt outstanding (excluding lease
liabilities). The Group’s net debt position was RUB 55,937 million.
Presentation of Aggregate Segment Financial Information
The Group aggregate segment financial information is derived from the financial
information used by management to manage the Group's business by aggregating the segment
financial data of the Group's operating segments and eliminating intra-segment and
inter-segment revenues and expenses. Group aggregate segment financial information
differs significantly from the financial information presented on the face of the Group's
consolidated financial statements in accordance with IFRS. In particular:
• The Group's segment financial information excludes certain IFRS adjustments which are
not analysed by management in assessing the core operating performance of the
business. Such adjustments affect such major areas as revenue recognition,
share-based payment transactions, disposal of and impairment of investments, fair
value adjustments, amortisation and impairment thereof, net foreign exchange gains
and losses, as well as irregular non-recurring items that occur from time to time and
are evaluated for adjustment as and when they occur. The tax effect of these
adjustments is also excluded from segment reporting.
• Segment revenues do not reflect certain other adjustments required when presenting
consolidated revenues under IFRS. For example, segment revenue excludes barter
revenues and adjustments to defer online gaming, social network and education
revenues under IFRS.
A reconciliation of group adjusted EBITDA to IFRS consolidated loss before income tax
expense of the Group for the three months ended 30 September 2021 and 2022 is presented
below:
RUB millions Q3 2022 Q3 2021
Group adjusted EBITDA 9,807 8,426
Group adjusted EBITDA related to discontinued operations (1,341) (2,972)
Changes in deferred revenues (231) (424)
Share-based payment transactions (277) 27
Other (61) 12
Depreciation and amortisation (4,413) (4,036)
Impairment of intangible assets (43) -
Share of loss of equity accounted associates and joint ventures (2,353) (5,451)
Finance income 1,779 339
Finance expenses (1,909) (987)
Other non-operating income/(loss) (82) 47
Goodwill impairment (425) -
Net (loss)/gain on financial assets and liabilities at fair value (1,602) 753
through profit or loss
Gain on remeasurement of previously held interest in equity accounted 24,186 305
associate
Impairment of equity accounted associates and joint ventures (792) -
Loss on remeasurement of financial instruments (94) (92)
Expected credit loss allowance on restricted cash (97) -
Net foreign exchange gain (3,924) (228)
Profit before income tax expense from discontinued operations 21,847 2,432
Consolidated profit/(loss) before income tax expense under IFRS 39,975 (1,849)
A reconciliation of Group adjusted net loss to IFRS consolidated net loss of the Group
for the three months ended 30 September 2021 and 2022 is presented below:
RUB millions Q3 2022 Q3 2021
Group adjusted net loss 704 (1,429)
Group adjusted net loss related to discontinued operations (878) (2,441)
Changes in deferred revenues (231) (424)
Share-based payment transactions (277) 27
Other non-operating income/(loss) (82) 47
Goodwill impairment (425) -
Impairment of intangible assets (43) -
Net (loss)/gain on financial assets and liabilities at fair value (1,602) 753
through profit or loss
Gain on remeasurement of previously held interest in equity accounted 24,186 305
associate
Impairment of equity accounted associates and joint ventures (792) -
Loss on remeasurement of financial instruments (94) (92)
Expected credit loss allowance on restricted cash (97) -
Net foreign exchange gain (3,924) (228)
Amortisation of fair value adjustments to intangible assets (780) (970)
Net loss on financial liabilities at amortised cost 1,532 (227)
Differences in recognition of net share in loss of equity accounted (902) (186)
associates and joint ventures
Other (23) (29)
Tax effect of the adjustments 3,078 294
Net profit from discontinued operations 21,847 2,246
Consolidated net profit/(loss) under IFRS 41,197 (2,354)
A reconciliation of group adjusted EBITDA to IFRS consolidated loss before income tax
expense of the Group for the nine months ended 30 September 2021 and 2022 is presented
below:
RUB millions 9M 2022 9M 2021
Group adjusted EBITDA 16,974 21,159
Group adjusted EBITDA related to discontinued operations (2,114) (8,171)
Barter revenue 15 -
Changes in deferred revenues 411 (1,096)
Share-based payment transactions (4,687) (711)
Expected credit loss on consideration receivable - (473)
Other (136) (18)
Depreciation and amortisation (13,302) (11,836)
Impairment of intangible assets (1,052) -
Share of loss of equity accounted associates and joint ventures (16,827) (14,181)
Finance income 2,299 715
Finance expenses (10,210) (2,891)
Other non-operating income/(loss) (37) 25
Goodwill impairment (9,681) -
Net (loss)/gain on financial assets and liabilities at fair value (9,079) 2,078
through profit or loss
Gain on remeasurement of previously held interest in equity accounted 24,186 305
associate
Impairment of equity accounted associates and joint ventures (13,617) -
Loss on remeasurement of financial instruments (119) (390)
Expected credit loss allowance on restricted cash (2,162) -
Net foreign exchange gain 9,164 (89)
Profit before income tax expense from discontinued operations 19,742 6,462
Consolidated loss before income tax expense under IFRS (10,232) (9,112)
A reconciliation of Group adjusted net loss to IFRS consolidated net loss of the Group
for the nine months ended 30 September 2021 and 2022 is presented below:
RUB millions 9M 2022 9M 2021
Group adjusted net loss (10,101) (4,659)
Group adjusted net loss related to discontinued operations (522) (6,584)
Changes in deferred revenues 411 (1,096)
Share-based payment transactions (4,687) (711)
Expected credit loss on consideration receivable - (473)
Other non-operating income/(loss) (37) 25
Goodwill impairment (9,681) -
Impairment of intangible assets (1,052) -
Net (loss)/gain on financial assets and liabilities at fair value (9,079) 2,078
through profit or loss
Gain on remeasurement of previously held interest in equity accounted 24,186 305
associate
Impairment of equity accounted associates and joint ventures (13,617) -
Loss on remeasurement of financial instruments (119) (390)
Expected credit loss allowance on restricted cash (2,162) -
Net foreign exchange gain 9,164 (89)
Amortisation of fair value adjustments to intangible assets (2,398) (2,993)
Net loss on financial liabilities at amortised cost (4,094) (659)
Differences in recognition of net share in loss of equity accounted (6,838) (1,452)
associates and joint ventures
Other (71) (168)
Tax effect of the adjustments (82) 924
Net profit from discontinued operations 20,685 6,154
Consolidated net loss under IFRS (10,094) (9,788)
Consolidated IFRS Statement of Financial Position
September 30, December 31,
RUB millions 2022
2021
ASSETS
Non-current assets
Investments in equity accounted associates and joint ventures 4,776 48,921
Goodwill 151,205 138,414
Right-of-use assets 14,274 14,843
Other intangible assets 20,686 18,324
Property and equipment 18,018 15,798
Financial assets at fair value through profit or loss 4,055 6,903
Deferred income tax assets 2,128 5,157
Long-term loans issued 367 69
Advance under office lease contracts 488 462
Total non-current assets 215,997 248,891
Current assets
Trade accounts receivable 15,371 20,688
Accounts receivable from the sale of a subsidiary 29,315 -
Prepaid income tax 1,122 359
Prepaid expenses and advances to suppliers 1,963 2,353
Loans issued 1,200 109
Inventories 380 157
Other current assets 4,432 1,445
Cash and cash equivalents 14,688 23,737
Assets held for sale 4,175 -
Total current assets 72,646 48,848
Total assets 288,643 297,739
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Issued capital
Share premium 81,383 79,397
Treasury shares (1,039) (1,044)
Retained earnings 80,566 89,985
Foreign currency translation reserve 808 1,578
Total equity attributable to equity holders of the parent 161,718 169,916
Non-controlling interests (2,185) 346
Total equity 159,533 170,262
Non-current liabilities
Deferred income tax liabilities 1,737 1,228
Deferred revenue 590 1,455
Non-current lease liabilities 10,798 11,327
Non-current financial liabilities at fair value through profit 1,450 879
or loss
Long-term interest-bearing loans and bonds 28,102 50,810
Other non-current liabilities 434 522
Total non-current liabilities 43,111 66,221
Current liabilities
Trade accounts payable 12,270 14,541
Income tax payable 2,495 3,208
VAT and other taxes payable 4,507 4,391
Deferred revenue and customer advances 6,141 17,794
Short-term portion of long-term interest-bearing loans and 35,488 7,078
bonds
Current lease liabilities 4,925 4,121
Current financial liabilities at fair value through profit or 5,585 -
loss
Other payables and accrued expenses 10,276 10,123
Liabilities directly associated with assets held for sale 4,312 -
Total current liabilities 85,999 61,256
Total liabilities 129,110 127,477
Total equity and liabilities 288,643 297,739
Consolidated IFRS Statement of Comprehensive Income
RUB millions Q3 2022 Q3 2021 9m 2022 9m 2021
Continuing operations
Online advertising 14,455 11,163 37,597 30,408
Community IVAS 3,992 4,326 12,838 13,075
Education technology services 2,634 2,173 8,034 5,924
Other revenue 3,038 2,252 7,589 6,035
Total revenue 24,119 19,914 66,058 55,442
Personnel expenses (6,550) (6,010) (27,167) (18,926)
Agent/partner fees (5,025) (5,439) (16,408) (16,234)
Marketing expenses (3,430) (2,038) (8,306) (6,024)
Server hosting expenses (244) (136) (517) (390)
Professional services (263) (257) (751) (793)
Other operating income 243 178 761 494
Other operating expenses (953) (1,143) (3,207) (2,879)
Total operating expenses, net (16,222) (14,845) (55,595) (44,752)
Depreciation and amortisation (4,413) (4,036) (13,302) (11,836)
Impairment of intangible assets (43) - (1,052) -
Share of loss of equity accounted associates and (2,353) (5,451) (16,827) (14,181)
joint ventures
Finance income 1,779 339 2,299 715
Finance expenses (1,909) (987) (10,210) (2,891)
Other non-operating gain/(loss) (82) 47 (37) 25
Goodwill impairment (425) - (9,681) -
Net (loss)/gain on financial assets and liabilities (1,602) 753 (9,079) 2,078
at fair value through profit or loss
Impairment of equity accounted associates and joint (792) - (13,617) -
ventures
Gain on remeasurement of previously held interest in 24,186 305 24,186 305
equity accounted associate
Loss on remeasurement of financial instruments (94) (92) (119) (390)
Expected credit loss allowance on restricted cash (97) - (2,162) -
Net foreign exchange gain (3,924) (228) 9,164 (89)
Profit/(loss) before income tax expense from 18,128 (4,281) (29,974) (15,574)
continuing operations
Income tax expense 1,222 (319) (805) (368)
Net profit/(loss) from continuing operations 19,350 (4,600) (30,779) (15,942)
Discontinued operations
Profit and other comprehensive income from 21,847 2,246 20,685 6,154
discontinued operations
Net profit/(loss) 41,197 (2,354) (10,094) (9,788)
Other comprehensive income
Other comprehensive income that may be reclassified
to profit or loss in subsequent periods
Effect of translation to presentation currency of - - 1,002 -
Group’s joint ventures
Exchange difference on translation of foreign 1,424 202 (1,765) (322)
operations
Total other comprehensive loss that may be 1,424 202 (763) (322)
reclassified to profit or loss in subsequent periods
Total other comprehensive loss net of tax effect of 1,424 202 (763) (322)
0
Total comprehensive loss, net of tax 42,621 (2,152) (10,857) (10,110)
Net profit/(loss), attributable to:
Equity holders of the parent 41,515 (2,096) (9,419) (9,424)
Non-controlling interests (318) (258) (675) (364)
Total comprehensive loss, net of tax, attributable
to:
Equity holders of the parent 42,939 (1,894) (10,182) (9,746)
Non-controlling interests (318) (258) (675) (364)
Profit/(loss) per share, in RUB:
Basic profit/(loss) per share attributable to 184 (9) (42) (42)
ordinary equity holders of the parent
Diluted earnings per share attributable to ordinary 1840 n/a n/a n/a
equity holders of the parent
Profit/(loss) per share from continuing operations,
in RUB:
Basic profit/(loss) per share attributable to 86 (18) (127) (68)
ordinary equity holders of the parent
Diluted earnings per share attributable to ordinary 85 n/a n/a n/a
equity holders of the parent
Profit/(loss) per share from discontinued
operations, in RUB:
Basic profit/(loss) per share attributable to 97 9 85 26
ordinary equity holders of the parent
Diluted earnings per share attributable to ordinary 95 9 83 26
equity holders of the parent
Consolidated IFRS Statement of Cash Flows
Nine months ended Nine months ended
RUB millions
September 30, 2022 September 30, 2021
Cash flows from operating activities
Loss before income tax from continuing operations (29,974) (15,574)
Profit before income tax from discontinued 19,742 6,462
operations
Loss before income tax (10,232) (9,112)
Adjustments to reconcile loss before income tax to
cash flows
Depreciation and amortisation 14,991 13,405
Impairment of intangible assets 1,052 -
Share of loss of equity accounted associates and 16,827 14,181
joint ventures
Finance income (2,405) (716)
Finance expenses 10,219 2,910
Expected credit loss allowance on trade receivables 213 326
Expected credit loss allowance on restricted cash 2,934 -
Goodwill impairment 9,681 -
Net loss/(gain) on financial assets and liabilities 9,659 (2,023)
at fair value through profit or loss
Net gain on disposal of subsidiaries (20,178) -
Impairment of equity accounted associates and joint 13,617 -
ventures
Gain on remeasurement of previously held interest (24,186) (305)
in equity accounted associates
Loss on remeasurement of financial instruments 291 414
Net foreign exchange gain (8,620) (7)
Сash settled and equity settled share-based 1,991 711
payments
Other non-cash items 406 25
Change in operating assets and liabilities
(Increase)/decrease in accounts receivable (1,876) 134
Increase in prepaid expenses and advances to (2,562) (971)
suppliers
Increase in inventories and other assets (3,202) (1,202)
Increase in accounts payable and accrued expense 7,390 2,587
(Increase)/decrease in other non-current assets (26) 208
(Decrease)/increase in deferred revenue and (2,269) 1,535
customer advances
Increase in financial assets at fair value through (558) (3,724)
profit or loss
Operating cash flows before interest and income 13,157 18,376
taxes
Interest received 767 36
Interest paid (4,175) (2,347)
Income tax paid (1,204) (2,234)
Net cash provided by operating activities 8,545 13,831
Cash flows from investing activities
Cash paid for property and equipment (8,119) (7,331)
Cash paid for intangible assets (5,806) (4,057)
Dividends received from equity accounted associates - 883
Loans issued (8,280) (15,962)
Loans collected 175 139
Cash paid for acquisitions of subsidiaries, net of 10,627 (1,762)
cash acquired
Cash outflow from sale of subsidiary (1,577) -
Cash paid for investments in equity accounted (2,600) (4,717)
associates and joint ventures
Net cash used in investing activities (15,580) (32,807)
Cash flows from financing activities
Payment of lease liabilities (3,520) (2,714)
Loans received 25,255 -
Loans repaid (20,968) (1,960)
Proceeds from bonds issued - 15,000
Cash received from disposal of non-controlling - 655
interests in subsidiaries
Cash paid for non-controlling interests in - (20)
subsidiaries
Dividends paid by subsidiaries to non-controlling (85) (215)
shareholders
Net cash provided by / (used in) financing 682 10,746
activities
Net decrease in cash and cash equivalents (6,353) (8,230)
Effect of exchange differences on cash balances (1,063) (247)
Change in expected credit loss allowance on (1,382) -
restricted cash
Change in cash related to asset held for sale (251) -
Cash and cash equivalents at the beginning of the 23,737 39,297
period
Cash and cash equivalents at the end of the period 14,688 30,820
═════════════════════════════════════════════════════════════════════════════════════════
ISIN: US5603172082
Category Code: QRT
TIDM: VKCO
LEI Code: 2138009IXUP41SPL5B50
Sequence No.: 200000
EQS News ID: 1483689
End of Announcement EQS News Service
══════════════════════════════════════════════════════════════════════════
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