REG-VK Company VK Company Limited unaudited results for Q2 2022
11/08/2022 07:15
============
VK Company (VKCO)
VK Company Limited unaudited results for Q2 2022
11-Aug-2022 / 09:00 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 results for Q2 2022
August 11, 2022. VK Company Limited (LSE, MOEX: VKCO, hereinafter referred to as "the
Company" and together with its subsidiaries “VK” or "the Group"), today releases unaudited
IFRS results and segment financial information for the three and six months ended 30 June
2022
Performance highlights*
Results for the three months ended 30 June 2022:
• Q2 2022 Group Total Adjusted revenue grew 4% YoY to RUB 31,160mn. Total IFRS revenue
was up 11% YoY to RUB 32,836mn.
• Q2 2022 Group Total Adjusted EBITDA declined 37% YoY to RUB 4,206mn
• Q2 2022 Group Total Adjusted net loss was RUB (3,435mn), compared to Q2 2022 Total
Adjusted net loss of RUB (2,232mn), including the following contributions from the
major strategic associates and joint ventures:
◦ O2O JV: RUB (2,649mn) in Q2 2022 vs RUB (3,903mn) in Q2 2021;
◦ AER JV: RUB (0mn) in Q2 2022 vs RUB (489mn) in Q2 2021;
◦ Uchi Group: RUB 43mn in Q2 2022 vs RUB (25mn) in Q2 2021;
◦ Umschool: RUB 11mn in Q2 2022 (the Group acquired the 25% stake in October 2021)
• Q2 2022 Group Total IFRS net profit was RUB 3,616mn, compared to Q2 2021 Total IFRS net
loss of RUB (4,977mn), including the following contributions from the major strategic
associates and joint ventures:
◦ O2O JV: RUB (3,831mn) in Q2 2022 vs RUB (4,114mn) in Q2 2021;
◦ AER JV: RUB (0mn) in Q2 2022 vs RUB (1,127mn) in Q2 2021;
◦ Uchi Group: RUB (26mn) in Q2 2022 vs RUB (97mn) in Q2 2021;
◦ Umschool: RUB 27mn in Q2 2022 (the Group acquired the 25% stake in October 2021)
Results for the six months ended 30 June 2022:
• H1 2022 Group Total Adjusted revenue grew 6% YoY to RUB 62,062mn. Total IFRS revenue
was up 10% YoY to RUB 63,413mn.
• H1 2022 Group Total Adjusted EBITDA declined 44% YoY to RUB 7,167mn
• H1 2022 Group Total Adjusted net loss was RUB (10,805mn), compared to H1 2021 Total
Adjusted net loss of RUB (3,230mn), including the following contributions from the
major strategic associates and joint ventures:
◦ O2O JV: RUB (7,753mn) in H1 2022 vs RUB (7,216mn) in H1 2021;
◦ AER JV: RUB (828mn) in H1 2022 vs RUB (967mn) in H1 2021;
◦ Uchi Group: RUB 80mn in H1 2022 vs RUB 21mn in H1 2021;
◦ Umschool: RUB 80mn in H1 2022 (the Group acquired the 25% stake in October 2021)
• H1 2022 Group Total IFRS net loss was RUB (51,291mn), compared to H1 2021 Total IFRS
net loss of RUB (7,434mn), including the following contributions from the major
strategic associates and joint ventures:
◦ O2O JV: RUB (13,132mn) in H1 2022 vs RUB (7,609mn) in H1 2021;
◦ AER JV: RUB (1,228mn) in H1 2022 vs RUB (1,768mn) in H1 2021;
◦ Uchi Group: RUB (60mn) in H1 2022 vs RUB (51mn) in H1 2021;
◦ Umschool: RUB 63mn in H1 2022 (the Group acquired the 25% stake in October 2021)
RUB millions Q2 2021 Q2 2022 YoY, % H1 2021 H1 2022 YoY, %
Adjusted revenue 29,991 31,160 4% 58,281 62,062 6%
Revenue 29,688 32,836 11% 57,423 63,413 10%
Adjusted EBITDA 6,662 4,206 -37% 12,733 7,167 -44%
Adjusted net loss (2,232) (3,435) (3,230) (10,805)
Net (loss)/profit (4,977) 3,616 (7,434) (51,291)
* This release presents Adjusted revenue, Adjusted EBITDA, Adjusted net profit/loss, which
are non-IFRS financial measures.
RUB millions Q2 2021 Q2 2022 YoY, % H1 2021 H1 2022 YoY, %
Online advertising Revenue 11,250 14,344 28% 21,721 25,450 17%
Adjustments:
Barter revenues - - - (15)
Online advertising Adjusted revenue 11,250 14,344 28% 21,721 25,435 17%
MMO games Revenue 9,362 9,220 -2% 18,761 18,726 0%
Adjustments:
Changes in deferred revenues 160 (1,181) 186 (694)
MMO games Adjusted revenue 9,522 8,039 -16% 18,947 18,032 -5%
Community IVAS Revenue 4,532 4,192 -8% 8,891 9,085 2%
Adjustments:
Changes in deferred revenues (84) (138) 33 (163)
Community IVAS Adjusted revenue 4,448 4,054 -9% 8,924 8,922 0%
Education Technology services 2,011 2,578 28% 3,751 5,400 44%
Revenue
Adjustments:
Changes in deferred revenues 156 (338) 568 (451)
Education Technology services 2,167 2,240 3% 4,319 4,949 15%
Adjusted revenue
Other Revenue 2,533 2,502 -1% 4,299 4,752 11%
Adjustments:
Changes in deferred revenues 71 (19) 71 (28)
Other Adjusted revenue 2,604 2,483 -5% 4,370 4,724 8%
Due to the suspension of trading of VK’s GDRs on the London Stock Exchange, a “De-listing
Event” for VK’s unsecured convertible bonds with a nominal value of $200,000 and in the
total amount of $400mn maturing in 2025 has occurred in March. Since then the Company has
been negotiating with the bondholders in order to find restructuring options. In July
together with its advisors the Company submitted settlement offers in Rubles to holders
inside the Russian Federation. As of the reporting date, the Group has repurchased a
proportion of the Bonds as a result of several agreed market transactions. This buyback is
made in order to reduce VK's financial liabilities and provide liquidity to the holders of
the Bonds. The Group intends to continue the buyback of the Bonds in the Russian
Federation. The issues and the procedure around the restructuring of the Bonds sitting
within the International Clearing systems are being actively studied and discussed, taking
into account the evolving conditions, including around foreign currency restrictions.
Given the current level of visibility and uncertainty, the Company refrains from providing
forward guidance and outlook. While there will be no results call, VK welcomes any queries
from its stakeholders using the Investor Relations contact details below and is available
for individual incoming call requests.
Segmental highlights
Communications and Social segment
The segment’s Adjusted revenue was up 22% YoY to RUB 17bn in Q2 2022, with advertising
revenue and Community IVAS being the largest revenue components. The segment’s IFRS revenue
was up 23% YoY to RUB 17bn in Q2. Adjusted EBITDA increased by 29% YoY exceeding RUB 7bn in
Q2 (with a margin of 42% vs 40% a year ago) due to higher revenue growth and lower
Agent/partner fees.
Communications and Social Segment Performance – Q2 2022 & H1 2022
RUB millions Q2 2021 Q2 2022 YoY, % H1 2021 H1 2022 YoY, %
Revenue 14,132 17,432 23% 27,433 32,076 17%
Adjustments:
Changes in deferred revenues (17) (157) 100 (191)
Adjusted revenue 14,115 17,275 22% 27,533 31,885 16%
External revenue 14,011 17,269 27,373 31,846
Intersegment revenue 104 6 160 39
Operating expenses (8,526) (10,066) 18% (16,330) (19,767) 21%
Adjusted EBITDA 5,589 7,209 29% 11,203 12,118 8%
Adj. EBITDA margin, % 40% 42% 2pp 41% 38% -3pp
VKontakte
VKontakte is strengthening its leading position among the social networks in Russia with an
average MAU of 75.7mn (+5.5% YoY) and DAU 49.1mn (+4.5% YoY) in Q2 2022. In Q2, the average
time spent on VKontakte stood at 47.1 minutes per day and as high as 61.7 minutes per day
for the most engaged age group (12–24 year olds)*. According to Mediascope, VKontakte
reached 83% of the Russian internet audience in June, with 53% visiting the platform
daily**.
The number of VK Mini Apps continues to grow, up 56% YoY as of June to 53,300, with an
average MAU of 45.4mn in Q2 (+15.5% YoY). In-app ad revenue of mini apps on the VK Mini
Apps platform rose by 189% YoY in Q2. The ability to monetize mini apps on Odnoklassniki
was also introduced. The VKontakte Mobile Games catalogue grew by 65% YoY, with 57% YoY
growth in in-game payments on mobile in Q2.
VK Video (rolled out in October 2021) reached a new record of 2.35bn in average daily views
in Q2. Product enhancements continue, including the launch of watch history and timestamps,
automatic increased resolution and frame rate of up to 60 FPS based on proprietary NeuroHD
neural network technology, personalized video covers, instant video processing and the
ability to limit data consumption. VK Video has implemented data transfer technology based
on the new HTTP/3 Internet Protocol to speed up the delivery of video content. The VK Video
SDK was also made available to third-party developers. Most notably, VKontakte saw growth
in video views on the social network itself, with 1.07bn (+43% YoY) in average daily views
in Q2.
VKontakte is seeing an increase in content creation and consumption. In Q2, the number of
communities created in Russia increased by 24% YoY, while the number of confirmed friend
requests was up 23% YoY. The number of newly registered users also rose by 12% YoY, and
news feed views increased by 37% YoY. VKontakte launched a support program for streamers
and other creators in Q2 to further stimulate content diversity for its users.
In Q2, total earnings made by communities using VKontakte’sofficial monetization tools grew
by 116% YoY. Creators using VK Donut earned over RUB 101mn in Q2 (+225% YoY), with the
number of communities using VK Donut up 51% YoY and the number of paid community
subscribers up 141% YoY in Q2.
Among some of the major new product launches was the rollout of VK Messenger, a standalone
mobile app for communication, which is now available on both iOS and Android.
* Source: Mediascope, Q2 2022, Russia (cities 0+, age 12+), Mobile and Desktop.
** Source: Mediascope, June 2022, Russia (cities 0+, age 12+), Mobile and Desktop.
Odnoklassniki (OK)
Average Russia MAU stood at 37mn in Q2, with high engagement reflected in more than 7.5bn
virtual gifts, 552mn postcards and 570mn stickers sent during the quarter. The number of
new user registrations in Q2 grew 35% YoY, driven by the 25-45 y.o. age group, with new
users demonstrating above average engagement. The number of created Communities grew by 67%
YoY in Q2.
Moments MAU reached 27.6mn in Q2 (+13% YoY). The number of views stood at 434mn (+7.5% YoY)
with 27mn reactions in Q2, stimulated by further product enhancements such as animated
backgrounds and broader access for Communities.
Payments to game developers for advertising in their projects doubled YoY in Q2.
SMEs continue to invest in advertising on OK. The number of unique paying users through OK
internal ads manager, working based on myTarget technologies, in Q2 increased by 21.8% YoY.
Pulse and Relap (recommendation platforms)
Combined Adjusted revenue reached RUB 341mn in Q2 (+20% YoY). Time spent per active user
increased by 33% YoY to 17.9 minutes.
Games segment
Bookings (Revenue adjusted for changes in deferred revenue or Adjusted revenue) declined by
17% YoY to RUB 9.2bn, driven mainly by stronger RUB. ~94% of Bookings came from F2P games,
with mobile share at 72% of total bookings in Q2 (versus 77% in Q2 2021).
The Games segment Adjusted EBITDA declined to RUB 0.6bn (versus RUB 3.1bn in Q2 2021) due
to the Forex effect, which had a negative impact on the amount of international revenue
denominated in foreign currency, and the lack of new releases.
Average MAU stood at 26mn in Q2 (+24.6% YoY). The share of monthly paying users stood at
3.8% given the higher exposure to the hyper casual genre.
Games Segment Performance – Q2 2022 & H1 2022
RUB millions Q2 2021 Q2 2022 YoY, % H1 2021 H1 2022 YoY, %
Revenue 10,970 10,413 -5% 21,895 21,474 -2%
Adjustments:
Changes in deferred revenues 160 (1,168) 186 (694)
Adjusted revenue 11,130 9,245 -17% 22,081 20,780 -6%
External revenue 11,102 9,208 22,029 20,706
Intersegment revenue 28 37 52 74
Operating expenses (8,010) (8,693) 9% (16,882) (20,007) 19%
Adjusted EBITDA 3,120 552 -82% 5,199 773 -85%
Adj. EBITDA margin, % 28% 6% -22pp 24% 4% -20pp
EdTech segment
Adjusted revenue rose by 4% YoY to RUB 2.3bn in Q2 2022, while the segment’s IFRS revenue
was up 30% YoY to RUB 2.6bn. EdTech delivered an Adjusted EBITDA loss of RUB 0.4bn in Q2
compared to a loss of RUB 0.9bn in Q2 2021. Pressures from the accrued tax reserves and
unfavorable macro factors were partially offset by optimization of marketing expenses.
EdTech Segment Performance – Q2 2022 & H1 2022
RUB millions Q2 2021 Q2 2022 YoY, % H1 2021 H1 2022 YoY, %
Revenue 2,013 2,620 30% 3,753 5,446 45%
Adjustments:
Changes in deferred revenues 160 (351) 572 (451)
Adjusted revenue 2,173 2,269 4% 4,325 4,995 15%
External revenue 2,172 2,245 4,324 4,957
Intersegment revenue 1 24 1 38
Operating expenses (3,121) (2,638) -15% (5,397) (5,789) 7%
Adjusted EBITDA (948) (369) -61% (1,072) (794) -26%
Adj. EBITDA margin, % -44% -16% 27pp -25% -16% 9pp
Segment’s educational platforms reached 11.3mn in combined cumulative registered learners
as of the end of June, up 1.4x YoY, with 0.5mn in new registrations during the quarter. The
cumulative number of paying learners reached 419,000, up 1.8x YoY, with nearly 37,000 of
new paying learners added during Q2.
New Initiatives segment
The segment’s Adjusted revenue declined by 9% to RUB 2.5bn in Q2. Revenue growth in B2B
businesses (including Cloud services), VK Play, VK Clips was offset by the transfer of
recommendation platforms from the New Initiatives to Communications and Social segment. New
Initiatives Adjusted EBITDA loss amounted to RUB 3.1bn in Q2 2022 (vs. the loss of RUB
0.9bn in Q2 2021), which implies a -124% margin. Increase in losses was due to increased
investments into VK Play, VK Clips and other new initiatives.
New Initiatives Segment Performance – Q2 2022 & H1 2022
RUB millions Q2 2021 Q2 2022 YoY, % H1 2021 H1 2022 YoY, %
Revenue 2,718 2,473 -9% 4,568 4,598 1%
Adjusted revenue 2,718 2,473 -9% 4,568 4,598 1%
External revenue 2,706 2,438 4,555 4,553
Intersegment revenue 12 35 13 45
Operating expenses (3,612) (5,529) 53% (6,729) (9,315) 38%
Adjusted EBITDA (894) (3,056) 242% (2,161) (4,717) 118%
Adj. EBITDA margin, % -33% -124% -91pp -47% -103% -55pp
B2B (including Cloud services)
B2B revenue exceeded RUB 1 bn in Q2, with 43% YoY growth. VK Cloud Solutions remains the
largest contributor, having doubled its revenue YoY in Q2. Corporate communication services
have shown the highest growth at 6.5x YoY in Q2.
VK Clips (short video)
Daily views of VK Clips averaged 688mn (+153% YoY) in Q2. The number of new Clips rose by
337% YoY, and the number of content creators increased by 133% YoY. A standalone VK Clips
mobile app along with an updated recommendation system were rolled out in Q2. Compared to
the previous algorithm, the number of users watching 100+ Clips in a row increased by 33%.
Youla (classifieds)
Average MAU grew by 19% YoY reaching 37mn in Q2, stimulated by the ongoing rollout of VK
Classifieds, with 203,000 Groups in VKontakte now able to show listings via VK Classifieds.
VK Calls
The standalone VK Calls mobile app for unlimited video calls was launched in Q2.
VK Play
In Q2 VK launched VK Play, a single point of access to gaming content in Russia. VK Play
offers more than 12,000 games (including 500 games available via cloud gaming), streaming
and eSports, with plans to add more services and features for the gaming community before
year-end. Platform is currently operating
in the beta version, with 95% revenue share with developers given the focus on audience
growth.
RuStore
In May we launched the beta version of RuStore, a domestic app store for Android devices.
>1,000 of applications are already available, with >1mn in app downloads. Functionality
includes a developer console, listing of applications and integration of the security
system. Payment systems, push notifications, app and developer ratings, tools for analytics
and marketing will be launched before year-end.
For further information please contact:
Investors
Tatiana Volochkovich
Phone: +7 495 725 6357 extension: 3434
E-mail: 1 t.volochkovich@vk.team
Press
Sergey Makarov
Mobile: +7 926 818 9589
E-mail: 2 se.makarov@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, with its products helping millions
of people with their day-to-day online needs. 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, order food and grocery delivery 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, among others.
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY THE COMPANY TO CONSTITUTE
INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (REGULATION 596/2014/EU)
AS IT FORMS PART OF UK DOMESTIC LAW PURSUANT TO THE EUROPEAN UNION (WITHDRAWAL) ACT 2018,
AS AMENDED. UPON PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE THIS
INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
Filing of the Interim Condensed Consolidated Financial Statements for Q2 and H1 2022
The Group's interim condensed consolidated financial statements for the three and six
months ended 30 June 2022 prepared in accordance with IFRS and accompanied by an
independent auditor's review report have been filed on the National Storage Mechanism
appointed by the Financial Conduct Authority and can be accessed at
3 https://data.fca.org.uk/#/nsm/nationalstoragemechanism or on the Group’s website at
http://vk.company/media/files/vkifrsq22022eng.pdf.
RUB millions
Q2 2021 Q2 2022 YoY, % H1 2021 H1 2022 YoY, %
Revenue
Online advertising 11,250 14,344 27.5% 21,721 25,450 17.2%
MMO games 9,362 9,220 -1.5% 18,761 18,726 -0.2%
Community IVAS 4,532 4,192 -7.5% 8,891 9,085 2.2%
Education technology services 2,011 2,578 28.2% 3,751 5,400 44.0%
Other revenue 2,533 2,502 -1.2% 4,299 4,752 10.5%
Total revenue 29,688 32,836 10.6% 57,423 63,413 10.4%
Adjustments
Barter revenues - - n/a - (15) n/a
Changes in deferred revenues 303 (1,676) n/m 858 (1,336) n/m
Total adjusted revenue** 29,991 31,160 3.9% 58,281 62,062 6.5%
Operating expenses
Personnel expenses (8,209) (11,051) 34.6% (16,173) (24,843) 53.6%
Agent/partner fees (8,628) (8,000) -7.3% (16,460) (17,021) 3.4%
Marketing expenses (5,375) (6,574) 22.3% (11,174) (14,042) 25.7%
Server hosting expenses (207) (222) 7.2% (410) (432) 5.4%
Professional services (386) (337) -12.7% (729) (618) -15.2%
Other operating income 153 233 52.3% 316 518 63.9%
Other operating expenses (1,587) (1,313) -17.3% (2,159) (2,942) 36.3%
Total operating expenses, net (24,239) (27,264) 12.5% (46,789) (59,380) 26.9%
Adjustments
Share-based payment transactions 432 251 -41.9% 738 4,410 n/m
Other 478 59 -87.7% 503 75 -85.1%
Adjusted EBITDA** 6,662 4,206 -36.9% 12,733 7,167 -43.7%
Adjusted EBITDA margin, % 22.2% 13.5% 21.8% 11.5%
Net profit/ (loss) (4,977) 3,616 n/m (7,434) (51,291) n/m
Net profit/ (loss) margin -16.8% 11.0%
Adjusted Net profit/ (loss) (2,232) (3,435) 53.9% (3,230) (10,805) n/m
Adjusted Net profit/ (loss) margin -7.4% -11.0% -5.5% -17.4%
(*) 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;
• Education Technologies (EdTech); and
• New initiatives,
The Communications and Social segment includes email, instant messaging and 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. 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 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 due to the successful launch of own
application and target presence across the various Group’s services, 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 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 – Q2 2022
RUB millions Communications Games EdTech New Not Eliminations Group
and Social initiatives allocated
Revenue 17,432 10,413 2,620 2,473 - (102) 32,836
Adjustments
Changes in
deferred (157) (1,168) (351) - - - (1,676)
revenues
Adjusted 17,275 9,245 2,269 2,473 - (102) 31,160
revenue
External 17,269 9,208 2,245 2,438 - - 31,160
revenue
Intersegment 6 37 24 35 - (102) -
revenue
Total
operating (10,066) (8,693) (2,638) (5,529) (440) 102 (27,264)
expenses
Adjustments
Share-based
payment - - - - 251 - 251
transactions
Other - - - - 59 - 59
Adjusted 7,209 552 (369) (3,056) (130) - 4,206
EBITDA
Adjusted
EBITDA 41.7% 6.0% -16.3% -123.6% - - 13.5%
margin, %
Group Adjusted net loss (3,435)
Adjusted profit margin, % -11.0%
Including Share of loss of equity
accounted associates and joint
ventures:
Aliexpress -
Russia JV
O2O JV (2,649)
Umschool 11
associate
Uchi.ru 43
associate
Other (76)
Operating Segments Performance – Q2 2021
RUB millions Communications Games EdTech New Not Eliminations Group
and Social initiatives allocated
Revenue 14,132 10,970 2,013 2,718 0 -145 29,688
Adjustments
Changes in
deferred (17) 160 160 - - - 303
revenues
Adjusted 14,115 11,130 2,173 2,718 - (145) 29,991
revenue
External 14,011 11,102 2,172 2,706 - - 29,991
revenue
Intersegment 104 28 1 12 - (145) -
revenue
Total
operating (8,526) (8,010) (3,121) (3,612) (1,115) 145 (24,239)
expenses
Adjustments
Share-based
payment - - - - 432 - 432
transactions
Other - - - - 478 - 478
Adjusted 5,589 3,120 (948) (894) (205) - 6,662
EBITDA
Adjusted
EBITDA 39.6% 28.0% -43.6% -32.9% - - 22.2%
margin, %
Group Adjusted net loss (2,232)
Adjusted profit margin, % -7.4%
Including Share of loss of equity
accounted associates and joint
ventures:
Aliexpress (489)
Russia JV
O2O JV (3,903)
Uchi.ru (25)
associate
Other (103)
Operating Segments Performance – H1 2022
RUB millions Communications Games EdTech New Not Eliminations Group
and Social initiatives allocated
Revenue 32,076 21,474 5,446 4,598 15 (196) 63,413
Adjustments
Barter - - - - (15) - (15)
revenues
Changes in
deferred (191) (694) (451) - - - -1,336
revenues
Adjusted 31,885 20,780 4,995 4,598 - (196) 62,062
revenue
External 31,846 20,706 4,957 4,553 - - 62,062
revenue
Intersegment 39 74 38 45 - (196) -
revenue
Total
operating (19,767) (20,007) (5,789) (9,315) (4,698) 196 (59,380)
expenses
Adjustments
Share-based
payment - - - - 4,410 - 4,410
transactions
Other - - - - 75 - 75
Adjusted 12,118 773 (794) (4,717) (213) - 7,167
EBITDA
Adjusted
EBITDA 38.0% 3.7% -15.9% -102.6% - - 11.5%
margin, %
Group Adjusted net loss (10,753)
Adjusted profit margin, % -17.3%
Including Share of loss of equity
accounted associates and joint
ventures:
Aliexpress (828)
Russia JV
O2O JV (7,753)
Umschool 80
associate
Uchi.ru 80
associate
Other (117)
Operating Segments Performance – H1 2021
RUB millions Communications Games EdTech New Not Eliminations Group
and Social initiatives allocated
Revenue 27,433 21,895 3,753 4,568 - (226) 57,423
Adjustments
Barter - - - - - - -
revenues
Changes in
deferred 100 186 572 - - - 858
revenues
Adjusted 27,533 22,081 4,325 4,568 - (226) 58,281
revenue
External 27,373 22,029 4,324 4,555 - - 58,281
revenue
Intersegment 160 52 1 13 - (226) -
revenue
Total
operating (16,330) (16,882) (5,397) (6,729) (1,677) 226 (46,789)
expenses
Adjustments
Share-based
payment - - - - 738 - 738
transactions
Other - - - - 503 - 503
Adjusted 11,203 5,199 (1,072) (2,161) (436) - 12,733
EBITDA
Adjusted
EBITDA 40.7% 23.5% -24.8% -47.3% - - 21.8%
margin, %
Group Adjusted net loss (3,230)
Adjusted profit margin, % -5.5%
Including Share of loss of equity
accounted associates and joint
ventures:
Aliexpress (967)
Russia JV
O2O JV (7,216)
Uchi.ru 21
associate
Other 698
Liquidity
As of 30 June 2022, the Group had RUB 12,385 million of cash and cash equivalents and
short-term time deposits and RUB 59,109 million of debt outstanding (excluding lease
liabilities). The Group’s net debt position was RUB 46,724 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 June 2021 and 2022 is presented below:
RUB millions Q2 2022 Q2 2021
Group adjusted EBITDA 4,206 6,662
Changes in deferred revenues 1,676 (303)
Share-based payment transactions (251) (432)
Expected credit loss on consideration receivable - (473)
Other (59) (5)
Depreciation and amortisation (4,815) (4,413)
Share of loss of equity accounted associates and joint ventures (3,906) (5,441)
Finance income 341 246
Finance expenses (1,552) (955)
Other non-operating income/(loss) 141 (61)
Net (loss)/gain on financial assets and liabilities at fair value through (3,676) 26
profit or loss
Loss on remeasurement of financial instruments (1) (124)
Expected credit loss allowance on restricted cash 358 -
Net foreign exchange gain 14,436 812
Consolidated profit/(loss) before income tax expense under IFRS 6,898 (4,461)
A reconciliation of Group adjusted net loss to IFRS consolidated net loss of the Group for
the three months ended 30 June 2021 and 2022 is presented below:
RUB millions Q2 2022 Q2 2021
Group adjusted net loss (3,435) (2,232)
Changes in deferred revenues 1,676 (303)
Share-based payment transactions (251) (432)
Expected credit loss on consideration receivable - (473)
Other non-operating income/(loss) 141 (61)
Net (loss)/gain on financial assets and liabilities at fair value through (3,676) 26
profit or loss
Loss on remeasurement of financial instruments (1) (124)
Expected credit loss allowance on restricted cash 358 -
Net foreign exchange gain 14,436 812
Amortisation of fair value adjustments to intangible assets (777) (1,017)
Net loss on financial liabilities at amortised cost - (216)
Differences in recognition of net share in loss of equity accounted (1,235) (921)
associates and joint ventures
Other (10) (20)
Tax effect of the adjustments (3,610) (16)
Consolidated net profit/(loss) under IFRS 3,616 (4,977)
A reconciliation of group adjusted EBITDA to IFRS consolidated loss before income tax
expense of the Group for the six months ended 30 June 2021 and 2022 is presented below:
RUB millions H1 2022 H1 2021
Group adjusted EBITDA 7,167 12,733
Barter revenue 15 -
Changes in deferred revenues 1,336 (858)
Share-based payment transactions (4,410) (738)
Expected credit loss on consideration receivable - (473)
Other (75) (30)
Depreciation and amortisation (10,087) (8,843)
Impairment of intangible assets (1,009) -
Share of loss of equity accounted associates and joint ventures (14,474) (8,730)
Finance income 597 376
Finance expenses (8,309) (1,917)
Other non-operating income/(loss) 56 (22)
Goodwill impairment (9,256) -
Net (loss)/gain on financial assets and liabilities at fair value (8,116) 1,325
through profit or loss
Impairment of equity accounted associates and joint ventures (12,825) -
Loss on remeasurement of financial instruments (151) (298)
Expected credit loss allowance on restricted cash (3,378) -
Net foreign exchange gain 12,712 212
Consolidated loss before income tax expense under IFRS (50,207) (7,263)
A reconciliation of Group adjusted net loss to IFRS consolidated net loss of the Group for
the six months ended 30 June 2021 and 2022 is presented below:
RUB millions H1 2022 H1 2021
Group adjusted net loss (10,805) (3,230)
Changes in deferred revenues 1,336 (858)
Share-based payment transactions (4,410) (738)
Expected credit loss on consideration receivable - (473)
Other non-operating income/(loss) 56 (22)
Goodwill impairment (9,256) -
Impairment of intangible assets (1,009) -
Net (loss)/gain on financial assets and liabilities at fair value (8,116) 1,325
through profit or loss
Impairment of equity accounted associates and joint ventures (12,825) -
Loss on remeasurement of financial instruments (151) (298)
Expected credit loss allowance on restricted cash (3,378) -
Net foreign exchange gain 12,712 212
Amortisation of fair value adjustments to intangible assets (1,618) (2,023)
Net loss on financial liabilities at amortised cost (5,626) (432)
Differences in recognition of net share in loss of equity accounted (5,936) (1,266)
associates and joint ventures
Other (48) (139)
Tax effect of the adjustments (2,217) 508
Consolidated net loss under IFRS (51,291) (7,434)
Consolidated IFRS Statement of Financial Position
June 30, December 31,
RUB millions 2022
2021
ASSETS
Non-current assets
Investments in equity accounted associates and joint ventures 30,629 48,921
Goodwill 129,344 138,600
Right-of-use assets 14,732 14,843
Other intangible assets 14,049 18,324
Property and equipment 18,686 15,798
Financial assets at fair value through profit or loss 4,098 6,903
Deferred income tax assets 4,215 5,157
Long-term loans issued 84 69
Advance under office lease contracts 475 462
Total non-current assets 216,312 249,077
Current assets
Trade accounts receivable 14,707 20,688
Prepaid income tax 300 359
Prepaid expenses and advances to suppliers 3,400 2,353
Convertible loans 114 -
Loans issued 200 109
Inventories 515 157
Other current assets 1,306 1,445
Cash and cash equivalents 12,385 23,737
Total current assets 32,927 48,848
Total assets 249,239 297,925
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Issued capital - -
Share premium 80,867 79,397
Treasury shares (1,039) (1,044)
Retained earnings 39,051 89,985
Foreign currency translation reserve (609) 1,578
Total equity attributable to equity holders of the parent 118,270 169,916
Non-controlling interests (96) 346
Total equity 118,174 170,262
Non-current liabilities
Deferred income tax liabilities 831 1,228
Deferred revenue 1,308 1,455
Non-current lease liabilities 10,884 11,327
Non-current financial liabilities at fair value through profit or 1,130 879
loss
Long-term interest-bearing loans and bonds 21,948 50,810
Other non-current liabilities 404 522
Total non-current liabilities 36,505 66,221
Current liabilities
Trade accounts payable 13,145 14,541
Income tax payable 2,804 3,208
VAT and other taxes payable 4,399 4,391
Deferred revenue and customer advances 16,874 17,980
Short-term portion of long-term interest-bearing loans and bonds 37,161 7,078
Current lease liabilities 5,163 4,121
Current financial liabilities at fair value through profit or loss 4,751 -
Other payables and accrued expenses 10,263 10,123
Total current liabilities 94,560 61,442
Total liabilities 131,065 127,663
Total equity and liabilities 249,239 297,925
Consolidated IFRS Statement of Comprehensive Income
RUB millions Q2 2022 Q2 2021 H1 2022 H1 2021
Online advertising 14,344 11,250 25,450 21,721
MMO games 9,220 9,362 18,726 18,761
Community IVAS 4,192 4,532 9,085 8,891
Education technology services 2,578 2,011 5,400 3,751
Other revenue 2,502 2,533 4,752 4,299
Total revenue 32,836 29,688 63,413 57,423
Personnel expenses (11,051) (8,209) (24,843) (16,173)
Agent/partner fees (8,000) (8,628) (17,021) (16,460)
Marketing expenses (6,574) (5,375) (14,042) (11,174)
Server hosting expenses (222) (207) (432) (410)
Professional services (337) (386) (618) (729)
Other operating income 233 153 518 316
Other operating expenses (1,313) (1,587) (2,942) (2,159)
Total operating expenses, net (27,264) (24,239) (59,380) (46,789)
Depreciation and amortisation (4,815) (4,413) (10,087) (8,843)
Impairment of intangible assets - - (1,009) -
Share of loss of equity accounted associates and (3,906) (5,441) (14,474) (8,730)
joint ventures
Finance income 341 246 597 376
Finance expenses (1,552) (955) (8,309) (1,917)
Other non-operating gain/(loss) 141 (61) 56 (22)
Goodwill impairment - - (9,256) -
Net (loss)/gain on financial assets and liabilities (3,676) 26 (8,116) 1,325
at fair value through profit or loss
Impairment of equity accounted associates and joint - - (12,825) -
ventures
Loss on remeasurement of financial instruments (1) (124) (151) (298)
Expected credit loss allowance on restricted cash 358 - (3,378) -
Net foreign exchange gain 14,436 812 12,712 212
Profit/(loss) before income tax expense 6,898 (4,461) (50,207) (7,263)
Income tax expense (3,282) (516) (1,084) (171)
Net profit/(loss) 3,616 (4,977) (51,291) (7,434)
Other comprehensive income
Other comprehensive income that may be reclassified
to profit or loss in subsequent periods
Effect of translation to presentation currency of - (440) 1,002 (211)
Group’s joint ventures
Exchange difference on translation of foreign (5,791) (700) (3,189) (313)
operations
Total other comprehensive loss that may be
reclassified to profit or loss in subsequent (5,791) (1,140) (2,187) (524)
periods
Total other comprehensive loss net of tax effect of (5,791) (1,140) (2,187) (524)
0
Total comprehensive loss, net of tax (2,175) (6,117) (53,478) (7,958)
Net profit/(loss), attributable to:
Equity holders of the parent 3,772 (4,863) (50,934) (7,328)
Non-controlling interests (156) (114) (357) (106)
Total comprehensive loss, net of tax, attributable
to:
Equity holders of the parent (2,019) (6,003) (53,121) (7,852)
Non-controlling interests (156) (114) (357) (106)
Profit/(loss) per share, in RUB:
Basic profit/(loss) per share attributable to 17 (27) (225) (35)
ordinary equity holders of the parent
Diluted earnings per share attributable to ordinary 17 n/a n/a n/a
equity holders of the parent
Consolidated IFRS Statement of Cash Flows
RUB millions Six months ended June Six months ended June
30, 2022 30, 2021
Cash flows from operating activities
Loss before income tax (50,207) (7,263)
Adjustments to reconcile loss before income tax
to cash flows
Depreciation and amortisation 10,087 8,843
Impairment of intangible assets 1,009 -
Share of loss of equity accounted associates 14,474 8,730
and joint ventures
Finance income (597) (376)
Finance expenses 8,309 1,917
Expected credit loss allowance on trade 261 345
receivables
Expected credit loss allowance on restricted 3,378 -
cash
Goodwill impairment 9,256 -
Net loss/(gain) on financial assets and
liabilities at fair value through profit or 8,116 (1,325)
loss
Impairment of equity accounted associates and 12,825 -
joint ventures
Loss on remeasurement of financial instruments 151 298
Net foreign exchange gain (12,712) (212)
Сash settled and equity settled share-based 1,475 783
payments
Other non-cash items (80) (17)
Change in operating assets and liabilities
(Increase)/decrease in accounts receivable (1,134) 803
Increase in prepaid expenses and advances to (1,047) (423)
suppliers
Increase in inventories and other assets (1,496) (818)
Increase in accounts payable and accrued 6,357 825
expense
(Increase)/decrease in other non-current assets (13) 219
(Decrease)/increase in deferred revenue and (1,253) 894
customer advances
Increase in financial assets at fair value (532) (3,301)
through profit or loss
Operating cash flows before interest and income 6,627 9,922
taxes
Interest received 527 95
Interest paid (2,357) (1,490)
Income tax paid (884) (1,330)
Net cash provided by operating activities 3,913 7,197
Cash flows from investing activities
Cash paid for property and equipment (6,342) (4,083)
Cash paid for intangible assets (3,024) (2,907)
Dividends received from equity accounted - 877
associates
Loans issued (5,336) (9,565)
Loans collected 78 -
Cash paid for acquisitions of subsidiaries, net - (1,595)
of cash acquired
Short-term time deposits - (3,886)
Cash paid for investments in equity accounted (2,600) (113)
associates and joint ventures
Net cash used in investing activities (17,224) (21,272)
Cash flows from financing activities
Payment of lease liabilities (2,315) (1,577)
Loans received 10,014 -
Loans repaid (3,532) (1,306)
Cash paid for non-controlling interests in - (20)
subsidiaries
Dividends paid by subsidiaries to (85) (211)
non-controlling shareholders
Net cash provided by / (used in) financing 4,082 (3,114)
activities
Net decrease in cash and cash equivalents (9,229) (17,189)
Effect of exchange differences on cash balances (398) (178)
Change in expected credit loss allowance on (1,725) -
restricted cash
Cash and cash equivalents at the beginning of 23,737 39,297
the period
Cash and cash equivalents at the end of the 12,385 21,930
period
═══════════════════════════════════════════════════════════════════════════════════════════
ISIN: US5603172082
Category Code: IR
TIDM: VKCO
LEI Code: 2138009IXUP41SPL5B50
Sequence No.: 180592
EQS News ID: 1418065
End of Announcement EQS News Service
══════════════════════════════════════════════════════════════════════════
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