Press releases

27.10.2017

Mail.Ru Group Limited Unaudited IFRS results for Q3 2017

October 27, 2017. Mail.Ru Group Limited (MAIL.IL, hereinafter referred as "the Company" or "the Group"), one of the largest Internet companies in the Russian-speaking Internet market, today releases unaudited IFRS results and segment financial information for the three and nine months ended 30 September 2017.

Performance highlights*

Three months ended 30 September 2017

- Q3 2017 Group aggregate segment revenue grew 39.1% Y-o-Y to RUR 13,577 million.
- Q3 2017 Group aggregate segment EBITDA grew 1.1% Y-o-Y to RUR 4,260 million.
- Q3 2017 Group aggregate net profit declined 0.5% Y-o-Y at RUR 2,918 million.

Nine months ended 30 September 2017

- 9m 2017 Group aggregate segment revenue grew 35.2% Y-o-Y to RUR 39,905 million.
- 9m 2017 Group aggregate segment EBITDA grew 9.0% Y-o-Y to RUR 14,106 million.
- 9m 2017 Group aggregate net profit grew 12.0% Y-o-Y to RUR 9,730 million.

Net cash position as of 30 September 2017 was RUR 9,718 million.

Key Recent Developments

- VK released major updates of iOS and Android apps: a new design with simplified navigation, new Explore section (for personalized content discovery) and flexible notifications.
- VK introduced an algorithm called “Prometheus”, which finds trending or potentially trending authors and promotes their content in Explore section, and announced the roll out of a platform for long-form journalism with the ability to format text and use multimedia attachments.
- A new tool for VK communities: a community can join the ad network and receive its share of promo posts’ sales on community pages and in the newsfeed.
- VK Admin is a new app on iOS and Android letting administrators of groups communicate with group members/customers, take orders, add/edit goods and services, monitor statistics etc.
- VK launched Direct Games, a platform for HTML-5 games, which can be launched directly from within VK mobile apps.
- OK Live for Android was updated with the Full HD live streaming feature.
- Delivery Club introduced a VK built-in ‘mini-app’, on desktop and mobile.
- Delivery Club multiple updates: food takeaway, favorite restaurants, personalized promo codes and reordering.
- New content for Warface, War Robots, HAWK, Juggernaut Wars and Skyforge console.
- Warface eSport Final Atlas of War matches (over 2.5m views, 33k stream concurrent viewers).
- Am.ru listings are now available on Youla.
- Youla launched Real Estate section enabling a sale process from posting a listing to completion of the transaction.
- Youla introduced promoted listings.
- Mail.Ru email service introduces money transfers to any email address of any email service and supports embedded CSS and responsive email design.
- myMail and Mail.Ru email apps received new Smart replies function, suggestions for quick responses based on machine learning.
- Cloud Mail.Ru introduced face recognition and grouping of photos by recognized faces in mobile apps.
- VK held a 3-day Hackaton that attracted over 300 talented programmers, designers and other IT specialists.

Commenting on the results of the Company, Dmitry Grishin, Chairman of the Board, and Boris Dobrodeev, CEO (Russia) of Mail.Ru Group, said:

“We are pleased to report our results for the third quarter and first nine months of 2017 where we have continued to see strong growth. Q3 revenue, including all acquisitions on a pro forma basis, grew 39.1% Y-o-Y to RUR 13,577m. As we have stated previously, 2017 remains an investment year for us and we continue to put significant resources behind a number of our new projects which, at this stage, are not contributing to EBITDA. As such, EBITDA grew 1.1% Y-o-Y to RUR 4,260m. For the first nine months, revenues have grown on a pro-forma basis 35.2% Y-o-Y to RUR 39,905m and EBITDA 9.0% Y-o-Y to RUR 14,106m.

Advertising revenue growth remained strong in Q3, with the trends in both budget allocation and pricing that we have seen over the last years continuing. As in H1 we continue to boost our new mobile products, thus limiting the inventory available for sale.  Despite this, advertising revenues in Q3 grew 32.5% Y-o-Y to RUR 5,821m. As in previous periods, the fastest growing advertising revenues remained in-feed promo posts across the social networks including video. We continue to see advertising budgets shift to mobile and hence we benefit from our leading position in the Russian mobile space. A lot of traditional offline brands are allocating larger parts of their media spend to the social networks, and are adopting mobile and in-feed video ad formats. We have also released many new creative promotions with the brands, such as chatbots, masks, gifts and stickers.

In Q3 VK continued to perform strongly with further growth in engagement. A recent study by Mediascope reiterated VK as a leader among Russian mobile apps in terms of both daily and monthly audience (in cities with 100k+ population, August 2017). In Q3, VK revenues grew 60.3% Y-o-Y to RUR 3,417m. Advertising continued to be the bulk of the revenues, and as in previous periods, while IVAS increased in Q3, advertising revenues grew faster than total revenues. VK team continues to make improvements to the platform and the user experience. In Q3 VK introduced major updates of its mobile apps that now include new features and sections. VK announced a number of initiatives to introduce new content creation, distribution and monetization. We believe these product updates will further drive user engagement and benefit the wide VK ecosystem.

For the rest of 2017 and into 2018 the focus will remain on native, and especially mobile advertising. As previously commented we expect the ad load and pricing to continue to grow. We continue to see significant further opportunities for VK with both engagement and the improvement of the platform.

In Q3 2017 on a pro forma basis our MMO games revenue grew 82.8% Y-o-Y to RUR 4,392m. International revenues also continued to grow and in Q3 accounted for 56% of total MMO revenues. Q3 growth was driven by a broad base with ongoing success in both established and recently released titles. Warface and War Robots continue to perform well and are our two largest games. HAWK gained traction since global launch on Android in late Q2. We have further releases in Q4 and a full pipeline for 2018.

In Q3 2017 IVAS revenues grew 6.7% Y-o-Y. Much of mobile IVAS remains challenging but we are pleased with the initial results of the new cross-platform IVAS initiatives specifically the subscription service and the VIP services on OK. However at this point they are not growing fast enough to offset the declines in the legacy desktop IVAS revenues. We will be further exploring new mobile products, but continue to expect IVAS revenues to decline as a percentage of revenues.

During Q3 Delivery Club continued to show very strong growth in all operating metrics. ZakaZaka integration is ongoing and should be finished by the end of the year. In Q3 2017 the average monthly orders for the combined Delivery Club business grew 84% Y-o-Y to 735,000, and the number of restaurants exceeded 6,200. We continue to make a number of improvements to the product to make it both easier for the user to order, and easier for the restaurants to manage and process orders. Based on the current trend lines we anticipate that Delivery Club Q4 2017 revenues will continue to experience very strong growth. Delivery Club will clearly remain in investment phase for the rest of 2017 as it consolidates its market leading position. While this business does not, at present, contribute to EBITDA we have already started the process of marketing channel optimization in Q3 and hence continue to expect Delivery Club to move into profitability during 2018.

Since its launch around 2 years ago our location-based marketplace Youla has seen consistent and strong user growth. This has continued in Q3 2017 with a new high of 22m monthly active users and 4.5m daily active users on all platforms. The app remains consistently in the Top-5 Overall in Russia in the App Store and Google Play combined (according to App Annie). With the integration of Am.ru and the launch of our real estate offering on both desktop and mobile, we continue to expand the reach of Youla. We started monetization experiments with promoted listings in October 2017 and plan to increase monetization during 2018. User feedback and engagement remain very positive and hence we anticipate further user growth through 2017.

During Q3, our long distance ride sharing service BeepCar saw strong growth in mobile app installs which reached 4.2m by the end of September. In the near term, we are focused on building user numbers and hence BeepCar currently is not a revenue contributor.

In Q3, the cash generating capacity of our business remained unchanged and cash conversion was as expected. As a result net cash, post M&A related payments, at the end of Q3 was RUR 9,718m.

Over the last year, we have made a number of acquisitions, all of which fit well with the core strategy and mobile assets of the Group and present significant opportunities for the future. With a strong balance sheet and unchanged cash generation capabilities, we will continue to examine further similar-sized acquisition opportunities in the future.

We had a strong first nine months of 2017 with very strong contributions from advertising and games. Delivery Club continues to show very good growth and while IVAS still has challenges with the mobile transition, it is progressively becoming a smaller part of revenues. We continue to believe we are well positioned to benefit from the ongoing structural trends in advertising, and are encouraged by the ongoing progress in games. We continue to see great potential in our ecommerce initiatives and hence continue to believe we are well positioned.

Based on current visibility, we are pleased to increase our FY 2017 revenue guidance for the third time this year from previous guidance of 23–26% Y-o-Y pro-forma revenue growth to pro-forma revenue growth of 30-31% Y-o-Y to RUR 55.6-56.0bn. 2017 remains a year of significant investment in the new products and given the significant potential that we see in them we will continue to aggressively invest in our new initiatives. We do not expect them to contribute to EBITDA this year. We also continue to not anticipate any meaningful revenue contributions from BeepCar or Youla in 2017 but wish to use most of the further revenue upside to invest in the new products. Even taking this investment into account, we are pleased to increase our FY 2017 EBITDA guidance from RUR 20.0bn to around RUR 20.5bn.”

Conference call

The management team will host an analyst and investor conference call at 9.00 UK time (11.00 Moscow time), on Friday 27th October 2017, including a Question and Answer session.

To participate in this conference call, please use the following access details:

Confirmation Code: 8900979

Participant Toll Free Telephone Numbers:

From Russia 8 800 500 9283
From the UK 0800 358 6377
From the US 866 548 4713

For further information please contact:

Investors
Matthew Hammond
E-mail: hammond@corp.mail.ru

Press
Olga Zyryaeva
E-mail: o.zyryaeva@corp.mail.ru

Cautionary Statement regarding Forward Looking Statements

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.

*Performance highlights on page 1 are based on the Group aggregate segment financial information, which is different from IFRS accounts. See "Presentation of Aggregate Segment Financial Information" below.

About Mail.Ru Group

Mail.Ru Group, international brand My.com (MAIL.IL, listed since November 5, 2010) is the largest internet business in Russia in terms of mobile daily audience (Mediascope Mobile Index, population aged 12-64 in the cities 100,000+, August 2017, Russia).

In line with the communitainment (communication plus entertainment) strategy, the company is developing an integrated communications and entertainment platform. The company owns Russia’s leading email service and one of Russia’s largest internet portals, Mail.Ru. The company operates three of the major Russian language social networks, VKontakte (VK), Odnoklassniki (OK) and Moi Mir (My World), and Russia's largest online games, including such gaming titles as Warface, Armored Warfare, Skyforge and Perfect World. The сompany’s portfolio also includes a leading OpenStreetMap-based offline mobile maps and navigation service MAPS.ME, auto classifieds service Am.ru, instant messaging services ICQ, Agent Mail.Ru and TamTam, a mobile location based marketplace Youla, and a ride-sharing service BeepCar.

The Company owns 100% of mobile games developer Pixonic, and 100% of Delivery Club and ZakaZaka, two largest food delivery companies in Russia. Mail.Ru Group also holds equity stakes in a number of small venture capital investments in various Internet companies in Russia, Ukraine and Israel.

Filing Interim Condensed Consolidated Financial Statements for Q3 2017

The Company's interim condensed consolidated financial statements for the three and nine months ended 30 September 2017 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 Services Authority and can be accessed at http://corp.mail.ru/media/files/mail.rugroupifrsq32017.pdf.

Group Aggregate Segment Financial Information*

RUR millions

Three months ended 30 Sep

Nine months ended 30 Sep

 

2016

2017

YoY, %

2016

2017

YoY, %

Group aggregate segment revenue (1)

     

 

 

 

Online advertising

4,393

5,821

32.5%

12,506

16,087

28.6%

MMO games

2,403

4,392

82.8%

7,529

12,226

62.4%

Community IVAS

2,688

2,869

6.7%

8,798

10,152

15.4%

Other revenue**

276

495

79.4%

677

1,440

112.7%

Total Group aggregate segment revenue

9,760

13,577

39.1%

29,510

39,905

35.2%

Group aggregate operating expenses

     

 

 

 

Personnel expenses

2,036

2,614

28.4%

6,233

7,288

16.9%

Office rent and maintenance

508

539

6.0%

1,525

1,586

4.0%

Agent/partner fees

1,638

2,700

64.8%

4,575

7,495

63.8%

Marketing expenses

634

2,400

278.8%

1,851

6,321

241.5%

Server hosting expenses

448

462

3.1%

1,455

1,339

-8.0%

Professional services

98

72

-27.0%

325

231

-28.9%

Other operating (income)/expenses, excl. D&A

182

530

191.8%

601

1,539

156.1%

Total Group aggregate operating expenses

5,544

9,317

68.0%

16,565

25,799

55.7%

Group aggregate segment EBITDA (2)

4,216

4,260

1.1%

12,945

14,106

9.0%

margin, %

43.2%

31.4%

 

43.9%

35.3%

 

       

 

 

 

Depreciation, amortisation and impairment (3)

718

918

27.8%

2,059

2,638

28.1%

Other non-operating income (expense), net***

181

146

-19.4%

16

338

2012.5%

Profit before tax (4)

3,679

3,489

-5.2%

10,902

11,806

8.3%

Income tax expense (5)

745

571

-23.4%

2,218

2,076

-6.4%

Group aggregate net profit (6)

2,934

2,918

-0.5%

8,684

9,730

12.0%

margin, %

30.1%

21.5%

 

29.4%

24.4%

  


Note 1: Group aggregate segment financial information for the three and nine months ended September 30, 2016 has been retrospectively adjusted to include pro-forma consolidation of Pixonic, Delivery Club, ZakaZaka and Am.ru from January 1, 2016.
Note 2: Group aggregate segment financial information includes effect of exemption from VAT on Russian MMO games revenues from October 1, 2016 and effect of exemption from VAT on Russian Community IVAS revenues from January 1, 2017; the exemption from VAT affects both the revenue and the cost sides.
(*) The numbers in this table and further in the document may not exactly foot or cross-foot due to rounding.
(**) Including Other IVAS revenues.
(***) Including interest expenses of RUR 13 million and 0 in Q3 2016 and Q3 2017 and RUR 752 and 14 million in 9m 2016 and 9m 2017 respectively. 

- Group aggregate segment revenue is calculated by aggregating the segment revenue of the Company's operating segments and eliminating intra-segment and inter-segment revenues. This measure differs in significant respects from IFRS consolidated net revenue. See "Presentation of Aggregate Segment Financial Information" below.

- Group aggregate segment EBITDA is calculated by subtracting Group aggregate segment operating expenses from Group aggregate segment revenue. Group aggregate segment operating expenses are calculated by aggregating the segment operating expenses (excluding the depreciation and amortisation) of the Company's operating segments including allocated Company’s corporate expenses, and eliminating intra-segment and inter-segment expenses. See "Presentation of Aggregate Segment Financial Information".

- Group aggregate depreciation, amortisation and impairment expense is calculated by aggregating the depreciation, amortisation and impairment expense of the subsidiaries consolidated as of the date hereof, excluding amortisation and impairment of fair value adjustments to intangible assets acquired in business combinations.

- Profit before tax is calculated by deducting from Group aggregate segment EBITDA Group aggregate depreciation, amortisation and impairment expense and adding/deducting Group aggregate other non-operating incomes/expenses primarily consisting of interest income on cash deposits, interest expenses, dividends from financial and available-for-sale investments and other non-operating items.

- Group aggregate income tax expense is calculated by aggregating the income tax expense of the subsidiaries consolidated as of the date hereof. Group aggregate income tax expense is different from income tax as would be recorded under IFRS, as (i) it excludes deferred tax on unremitted earnings of the Company's subsidiaries and (ii) it is adjusted for the tax effect of differences in profit before tax between Group aggregate segment financial information and IFRS.

- Group aggregate net profit is the (i) Group aggregate segment EBITDA; less (ii) Group aggregate depreciation, amortisation and impairment expense; less (iii) Group aggregate other non-operating expense; plus (iv) Group aggregate other non-operating income; less (v) Group aggregate income tax expense. Group aggregate net profit differs in significant respects from IFRS consolidated net profit. See "Presentation of Aggregate Segment Financial Information". 

Operating Segments

We identify our operating segments based on the types of products and services we offer. We have identified the following reportable segments on this basis:

- Email, Portal and IM;
- VK (VKontakte);
- Social Networks (excluding VK);
- Online Games;
- E-Commerce, Search and Other Services.

The Email, Portal and IM segment includes email, instant messaging and portal (main page and verticals). It earns substantially all revenues from display and context advertising. 

The VK segment includes the Group’s social network VKontakte (VK.com) and earns revenues from (i) commission from application developers based on the respective applications’ revenue, (ii) user payments for virtual gifts and stickers, and (iii) online advertising, including display and context advertising.

The Social Networks (excluding VK) segment includes the Group’s two other social networks (OK and My World) and earns revenues from (i) user payments for virtual gifts, (ii) commission from application developers based on the respective applications’ revenue, and (iii) online advertising, including display and context advertising. 

The Online Games segment includes online gaming services, including MMO, social and mobile games. It earns substantially all revenues from (i) sale of virtual in-game items to users and (ii) royalties for games licensed to third-party online game operators. 

The E-commerce, Search and Other Services segment primarily consists of search engine services earning substantially all revenues from context advertising and e-commerce services (including O2O). This segment also includes a variety of other services, which are considered insignificant by the CODM for the purposes of performance review and resource allocation.

Each segment's EBITDA is calculated as the respective segment's revenue less operating expenses (excluding depreciation and amortisation and impairment of intangible assets), including our corporate expenses allocated to the respective segment. 

Operating Segments Performance – Q3 2017

 

Email, Portal
and IM

Social Networks (ex VK)

Online Games

VK

E-Commerce, Search and other

Eliminations

Group

RUR millions

 

 

 

 

 

 

 

               

Revenue

             

External revenue

1,174

3,531

4,450

3,403

1,019

 -

13,577

Intersegment revenue

 -

1

 -

14

97

 (112)

 -

Total revenue

1,174

3,532

4,450

3,417

1,116

 (112)

13,577

Total operating expenses

721

1,447

3,389

1,254

2,618

 (112)

9,317

EBITDA

453

2,085

1,061

2,163

 (1,502)

 -

4,260

EBITDA margin, %

38.6%

59.0%

23.8%

63.3%

-134.6%

 

31.4%

Net profit

           

 2,918

Net profit margin, %

 

 

 

 

 

 

21.5%

Operating Segments Performance – Q3 2016

 

Email, Portal
and IM

Social Networks (ex VK)

Online Games

VK

E-Commerce, Search and other

Eliminations

Group

RUR millions

 

 

 

 

 

 

 

               

Revenue

             

External revenue

 1,148

 3,255

 2,507

 2,126

 724

 -

 9,760

Intersegment revenue

 1

 3

 -

 6

 95

 (105)

 -

Total revenue

 1,149

 3,258

 2,507

 2,132

 819

 (105)

 9,760

Total operating expenses

 714

 1,033

 2,143

 864

 895

 (105)

 5,544

EBITDA

 435

 2,225

 364

 1,268

 (76)

 -

 4,216

EBITDA margin, %

37.9%

68.3%

14.5%

59.5%

-9.3%

 

43.2%

Net profit

           

 2,934

Net profit margin, %

 

 

 

 

 

 

30.1%

Operating Segments Performance – 9m 2017

 

Email, Portal
and IM

Social Networks (ex VK)

Online Games

VK

E-Commerce, Search and other

Eliminations

Group

RUR millions

 

 

 

 

 

 

 

               

Revenue

             

External revenue

 3,511

 11,607

 12,630

 9,248

 2,909

 -

 39,905

Intersegment revenue

 3

 32

 -

 135

 290

 (460)

 -

Total revenue

 3,514

 11,639

 12,630

 9,383

 3,199

 (460)

 39,905

Total operating expenses

 2,163

 4,144

 9,363

 3,468

 7,121

 (460)

 25,799

EBITDA

 1,351

 7,495

 3,267

 5,915

 (3,922)

 -

 14,106

EBITDA margin, %

38.4%

64.4%

25.9%

63.0%

-122.6%

 

35.3%

Net profit

           

 9,730

Net profit margin, %

 

 

 

 

 

 

24.4% 


Operating Segments Performance – 9m 2016

 

Email, Portal
and IM

Social Networks (ex VK)

Online Games

VK

E-Commerce, Search and other

Eliminations

Group

RUR millions

 

 

 

 

 

 

 

               

Revenue

             

External revenue

 3,285

 10,408

 7,725

 5,926

 2,166

 -

 29,510

Intersegment revenue

 3

 10

 -

 19

 288

 (320)

 -

Total revenue

 3,288

 10,418

 7,725

 5,945

 2,454

 (320)

 29,510

Total operating expenses

 2,257

 3,262

 6,483

 2,561

 2,322

 (320)

 16,565

EBITDA

 1,031

 7,156

 1,242

 3,384

 132

 -

 12,945

EBITDA margin, %

31.4%

68.7%

16.1%

56.9%

5.4%

 

43.9%

Net profit

           

 8,684

Net profit margin, %

 

 

 

 

 

 

29.4% 

Note 1: Group aggregate segment financial information for the three and nine months ended September 30, 2016 has been retrospectively adjusted to include pro-forma consolidation of Pixonic, Delivery Club, ZakaZaka and Am.ru from January 1, 2016.
Note 2: Group aggregate segment financial information includes effect of exemption from VAT on Russian MMO games revenues from October 1, 2016 and effect of exemption from VAT on Russian Community IVAS revenues from January 1, 2017; the exemption from VAT affects both the revenue and the cost sides. 

Liquidity

As of 30 September 2017, the Company had RUR 9,718 million of cash and no debt outstanding. 

Presentation of Aggregate Segment Financial Information

The Group aggregate segment financial information is derived from the financial information used by management to manage the Company's business by aggregating the segment financial data of the Company'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 Company's consolidated financial statements in accordance with IFRS. In particular:

- The Company'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, deferred tax on unremitted earnings of subsidiaries, share-based payment transactions, disposal of and impairment of investments, business combinations, fair value adjustments, amortisation and impairment thereof, net foreign exchange gains and losses, share in financial results of associates, 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.

- The segment financial information is presented for each period on the basis of an ownership interest as of the date hereof and consolidation of each of the Company's subsidiaries, including for periods prior to the acquisition of control of the entities in question. The financial information of subsidiaries disposed of prior to the date hereof is excluded from the segment presentation starting from the beginning of the earliest period presented.

- 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 and social network revenues under IFRS.

A reconciliation of Group aggregate segment revenue to IFRS consolidated revenue of the Company for the three months ended 30 September 2016 and 2017 is presented below: 

RUR millions 

Q3 2016

Q3 2017

Group aggregate segment revenue, as presented to the CODM

9,760

13,577

Adjustments to reconcile revenue as presented to the CODM to consolidated revenue under IFRS:

   

Effect of difference in dates of acquisition and loss of control in subsidiaries

 (636)

 -

Differences in timing of revenue recognition

 (287)

 (41)

Barter revenue

19

8

Dividend revenue from venture capital investments

15

 -

Consolidated revenue under IFRS

8,871

13,544

A reconciliation of Group aggregate segment EBITDA to IFRS consolidated profit before income tax expense of the Company for the three months ended 30 September 2016 and 2017 is presented below:

RUR millions 

Q3 2016

Q3 2017

Group aggregate segment EBITDA, as presented to the CODM

4,216

4,260

Adjustments to reconcile EBITDA as presented to the CODM to consolidated profit before income tax expenses under IFRS:

   

Effect of difference in dates of acquisition and loss of control in subsidiaries

 (29)

 -

Differences in timing of revenue recognition

 (287)

 (41)

Net loss on venture capital investments

 (566)

 -

Dividend revenue from venture capital investments

15

 -

Share-based payment transactions

 (571)

 (450)

Other

9

1

EBITDA

2,787

3,770

Depreciation and amortisation

 (1,841)

 (2,281)

Share of loss of equity accounted associates

 -

 -

Finance income

175

115

Other non-operating income

2

35

Net loss on derivative financial assets and liabilities at fair value through profit or loss

 (168)

 (102)

Impairment losses related to equity accounted associates

 -

 (28)

Net foreign exchange gain

41

97

Consolidated profit before income tax expense under IFRS

996

1,606 

A reconciliation of Group aggregate net profit to IFRS consolidated net profit of the Company for the three months ended 30 September 2016 and 2017 is presented below:

RUR millions

Q3 2016

Q3 2017

Group aggregate net profit, as presented to the CODM

2,934

2,918

Adjustments to reconcile net profit as presented to the CODM to consolidated net profit under IFRS:

   

Share-based payment transactions

 (571)

 (450)

Differences in timing of revenue recognition

 (287)

 (41)

Effect of difference in dates of acquisition and loss of control in subsidiaries

 (14)

 -

Amortisation of fair value adjustments to intangible assets and impairment thereof

 (1,126)

 (1,363)

Net loss on financial instruments at fair value through profit or loss

 (734)

 (102)

Net foreign exchange gain

41

97

Share of loss of equity accounted associates

 -

 -

Impairment losses related to equity accounted associates

 -

 (28)

Other

2

4

Tax effect of the adjustments and tax on unremitted earnings

244

398

Consolidated net profit under IFRS

489

1,433

A reconciliation of Group aggregate segment revenue to IFRS consolidated revenue of the Company for the nine months ended 30 September 2016 and 2017 is presented below: 

RUR millions 

9m 2016

9m 2017

Group aggregate segment revenue, as presented to the CODM

29,510

39,905

Adjustments to reconcile revenue as presented to the CODM to consolidated revenue under IFRS:

   

Effect of difference in dates of acquisition and loss of control in subsidiaries

 (1,022)

 -

Differences in timing of revenue recognition

 (778)

 (2,335)

Barter revenue

47

25

Dividend revenue from venture capital investments

28

9

Difference in classification of revenue  (Note 11.2)

 -

 (565)

Consolidated revenue under IFRS

27,785

37,039

A reconciliation of Group aggregate segment EBITDA to IFRS consolidated profit before income tax expense of the Company for the nine months ended 30 September 2016 and 2017 is presented below:

RUR millions 

9m 2016

9m 2017

Group aggregate segment EBITDA, as presented to the CODM

12,945

14,106

Adjustments to reconcile EBITDA as presented to the CODM to consolidated profit before income tax expenses under IFRS:

   

Effect of difference in dates of acquisition and loss of control in subsidiaries

194

 -

Differences in timing of revenue recognition

 (778)

 (2,335)

Net loss on venture capital investments

 (782)

 (27)

Dividend revenue from venture capital investments

28

9

Share-based payment transactions

 (1,586)

 (1,686)

Other

 (48)

 (4)

EBITDA

9,973

10,063

Depreciation and amortisation

 (5,609)

 (6,641)

Share of profit of equity accounted associates

42

16

Finance income

738

349

Finance expenses

 (718)

 (15)

Other non-operating income/(loss)

40

 (7)

Net (loss)/gain on derivative financial assets and liabilities at fair value through profit or loss

11

 (20)

Impairment losses related to equity accounted associates

 -

 (273)

Net (loss)/gain on disposal of shares in subsidiaries

8,712

 (15)

Net foreign exchange gain/(loss)

 (576)

673

Consolidated profit before income tax expense under IFRS

12,613

4,130

A reconciliation of Group aggregate net profit to IFRS consolidated net profit of the Company for the nine months ended 30 September 2016 and 2017 is presented below: 

RUR millions

9m 2016

9m 2017

Group aggregate net profit, as presented to the CODM

8,684

9,730

Adjustments to reconcile net profit as presented to the CODM to consolidated net profit under IFRS:

   

Share-based payment transactions

 (1,586)

 (1,686)

Differences in timing of revenue recognition

 (778)

 (2,335)

Effect of difference in dates of acquisition and loss of control in subsidiaries

193

 -

Amortisation of fair value adjustments to intangible assets and impairment thereof

 (3,550)

 (4,003)

Net loss on financial instruments at fair value through profit or loss

 (771)

 (47)

Net (loss)/gain on disposal of shares in subsidiaries

8,712

 (15)

Net foreign exchange gain/(loss)

 (576)

673

Share of profit of equity accounted associates

42

16

Impairment losses related to equity accounted associates

 -

 (273)

Other

 (43)

 (5)

Tax effect of the adjustments, tax on unremitted earnings and non-recurring deferred tax asset reversal

1,543

1,057

Consolidated net profit under IFRS

11,870

3,112

Consolidated IFRS Statement of Financial Position

RUR millions

December 31, 2016
(audited)

September 30, 2017
(unaudited)

ASSETS

 

 

Non-current assets

 

 

Investments in equity accounted associates

649

1,013

Goodwill

132,309

133,239

Other intangible assets

29,894

26,322

Property and equipment

3,840

4,485

Financial assets at fair value through profit or loss

403

308

Deferred income tax assets

2,600

3,224

Other non-current assets

2,265

1,632

Total non-current assets

171,960

170,223

Current assets

 

 

Trade accounts receivable

5,089

4,978

Prepaid income tax

49

551

Prepaid expenses and advances to suppliers

2,111

1,630

Financial assets at fair value through profit or loss

105

238

Other current assets

201

304

Cash and cash equivalents

5,513

9,718

Total current assets

13,068

17,419

TOTAL ASSETS

185,028

187,642

     

EQUITY AND LIABILITIES

   

Equity attributable to equity holders of the parent

 

 

Issued capital

-

-

Share premium

51,758

50,831

Treasury shares

 (1,290)

 (500)

Retained earnings

112,415

115,514

Accumulated other comprehensive income

470

188

Total equity attributable to equity holders of the parent

163,353

166,033

Non-controlling interests

64

77

Total equity

163,417

166,110

Non-current liabilities

 

 

Deferred income tax liabilities

3,265

2,724

Deferred revenue

2,710

4,230

Other non-current liabilities

748

169

Total non-current liabilities

6,723

7,123

Current liabilities

 

 

Trade accounts payable

3,355

4,177

Income tax payable

389

277

Financial liabilities at fair value through profit or loss

195

-

VAT and other taxes payable

2,231

1,439

Deferred revenue and customer advances

4,893

5,854

Short-term interest-bearing loans

122

-

Other payables and accrued expenses

3,703

2,662

Total current liabilities

14,888

14,409

Total liabilities

21,611

21,532

TOTAL EQUITY AND LIABILITIES

185,028

187,642

 Consolidated IFRS Statement of Comprehensive Income

RUR millions

Q3 2016
(unaudited)

Q3 2017
(unaudited)

9m 2016
(unaudited)

9m 2017
(unaudited)

Online advertising

4,449

5,829

12,593

16,108

MMO games

1,684

3,427

5,839

9,407

Community IVAS

2,623

3,793

8,599

10,070

Other revenue

115

495

754

1,454

Total revenue

8,871

13,544

27,785

37,039

         

Other operating gain

-

-

-

565

Net loss on venture capital investments

 (566)

-

 (782)

 (27)

         

Personnel expenses

 (2,477)

 (3,064)

 (7,709)

 (8,974)

Office rent and maintenance

 (493)

 (538)

 (1,498)

 (1,586)

Agent/partner fees

 (1,460)

 (2,702)

 (4,201)

 (7,498)

Marketing expenses

 (388)

 (2,406)

 (1,314)

 (6,340)

Server hosting expenses

 (435)

 (462)

 (1,424)

 (1,339)

Professional services

 (87)

 (73)

 (308)

 (236)

Other operating expenses

 (178)

 (529)

 (576)

 (1,541)

Total operating expenses

 (5,518)

 (9,774)

 (17,030)

 (27,514)

EBITDA

2,787

3,770

9,973

10,063

         

Depreciation and amortisation

 (1,841)

 (2,281)

 (5,609)

 (6,641)

Share of (loss)/profit of equity accounted associates

-

-

42

16

Finance income

175

115

738

349

Finance expenses

-

-

 (718)

 (15)

Other non-operating income/(loss)

2

35

40

 (7)

Net (loss)/gain on derivative financial assets and liabilities at fair value through profit or loss

 (168)

 (102)

11

 (20)

Impairment losses related to equity accounted associates

-

 (28)

-

 (273)

Net (loss)/gain on disposal of shares in subsidiaries

-

-

8,712

 (15)

Net foreign exchange gain/(loss)

41

97

 (576)

673

Profit before income tax expense

996

1,606

12,613

4,130

Income tax expense

 (507)

 (173)

 (743)

 (1,018)

Net profit

489

1,433

11,870

3,112

Attributable to:

       

Equity holders of the parent

485

1,425

11,861

3,099

Non-controlling  interest

4

8

9

13

Other comprehensive income/(loss) that may be reclassified to profit or loss in subsequent periods

 

 

 

 

Exchange differences on translation of foreign operations:

       

     Differences arising during the period

3

 (59)

86

 (295)

Available-for-sale financial assets:

       

Loss arising during the period (net of tax effect of zero)

59

-

 (273)

-

Total other comprehensive loss net of tax effect of 0

62

 (59)

 (187)

 (295)

Total comprehensive income, net of tax

551

1,374

11,683

2,817

Attributable to:

 

 

 

 

Equity holders of the parent

547

1,366

11,674

2,804

Non-controlling  interest

4

8

9

13

Earnings per share, in RUR:

 

 

 

 

Basic earnings per share attributable to ordinary equity holders of the parent

2.32

6.75

56.90

14.72

Diluted earnings per share attributable to ordinary equity holders of the parent

2.08

6.66

54.60

14.49

Consolidated IFRS Statement of Cash Flows

RUR millions

9m 2016
(unaudited)

9m 2017
(unaudited)

Cash flows from operating activities:

   

Profit  before income tax

12,613

4,130

Adjustments to  reconcile profit before income tax to cash flows:

   

Depreciation and amortisation

5,609

6,641

Bad debt expense/(reversal)

 (4)

44

Net loss/(gain) on financial assets and liabilities at fair value through profit or loss

 (11)

20

Net loss/(gain) on disposal of shares in subsidiaries

 (8,712)

15

Net loss on venture capital investments

782

27

Loss on disposal of property and equipment and intangible assets

-

2

Finance income

 (738)

 (349)

Finance expenses

718

15

Dividend revenue from venture capital investments

 (28)

 (9)

Share of profit of equity accounted associates

 (42)

 (16)

Impairment losses related to equity accounted associates

-

273

Net foreign exchange (gain)/loss

576

 (673)

Share-based payment expense

1,586

1,686

Other non-cash items

20

 (44)

Working Capital adjustments:

 

 

Decrease in accounts receivable

511

110

Decrease/(Increase) in prepaid expenses and advances to suppliers

 (651)

628

Increase in other assets

 (44)

 (66)

Decrease in accounts payable and accrued expenses

 (646)

 (124)

Decrease/(Increase) in  non-current prepaid expenses and advances

 (1,694)

534

Increase in deferred revenue and customers advances

933

2,472

(Increase)/decrease in financial assets at fair value through profit or loss

(59)

 (193)

Operating cash flows before interest and income taxes

10,719

15,123

Dividends received from financial investments

25

8

Interest received

674

324

Interest paid

 (728)

 (15)

Income tax paid

 (1,926)

 (2,743)

Net cash provided by operating activities

8,764

12,697

Cash flows from investing activities:

 

 

Cash paid for property and equipment

 (1,414)

 (2,074)

Cash paid for intangible assets

 (660)

 (1,399)

Dividends received from equity accounted associates

64

18

Cash paid for investments in equity accounted associates

-

 (640)

Cash paid for acquisitions of subsidiaries, net of cash acquired

 (306)

 (2,769)

Proceeds from disposal of subsidiaries, net of cash disposed

9,709

 (43)

Collection of short-term and long term deposits

16

-

Issuance of loans receivable

-

 (3)

Net cash (used in)/provided by investing activities

7,409

 (6,910)

Cash flows from financing activities:

 

 

Loans repaid

 (15,299)

 (122)

Cash paid for treasury shares

-

 (1,430)

Dividends paid by subsidiaries to non-controlling shareholders

 (2)

-

Net cash used in financing activities

 (15,301)

 (1,552)

Net increase/(decrease) in cash and cash equivalents

872

4,235

Effect of exchange differences on cash balances

-

 (30)

Cash and cash equivalents at the beginning of the period

8,676

5,513

Cash and cash equivalents at the end of the period

9,548

9,718