Nebius Group N.V. (NBIS) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by and welcome to the Yandex conference call. [Operator Instructions] I must advise you, the call is being recorded today, Wednesday, the 24th of June 2020. I would now like to hand the conference over to your first speaker today, Yulia Gerasimova. Please go ahead.

Hello, everyone, and welcome to Yandex' call to discuss the transactions we announced yesterday. You can find our press releases and related documents on our IR website as well as the news wire services. On the call today, we have Tigran Khudaverdyan, our Deputy Chief Executive Officer; Greg Abovsky, our Chief Operating and Chief Financial Officer; Arkady Volozh, our Founder and Chief Executive Officer; Vadim Marchuk, our VP of Corporate Development; and Maxim Grishakov, Chief Executive Officer of Yandex.Market, will be available on the Q&A session. The call will be recorded. The recording will be available on the IR website in a few hours. We have prepared a few supplementary slides, which are currently available on the website. Now I will quickly walk you through the safe harbor statement. Various remarks that we make during this call about our future expectations, plans and prospects constitute forward-looking statements. These include statements regarding the expected timing, effects, costs and anticipated benefits of our proposed transactions with Sberbank and the other transactions we have announced today. Our actual results may differ materially from those indicated or suggested by these forward-looking statements as a result of various important factors, including our ability to complete this transaction and the impact of the ongoing COVID-19 pandemic as well as those discussed in the Risk Factors section of our annual report on Form 20-F dated April 2, 2020, and the prospective supplement we have filed today, both of which are on file with the SEC and available online. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. Although we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change. During the call, we will be referring to certain non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with U.S. GAAP. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is provided on the prospective supplement we have filed today. And now I'm turning the call over to Tigran.

Thank you, Yulia, and thank you all for joining our call. We made 2 important announcements. One is about the reorganization of our holdings in joint ventures with Sberbank and another about capital raise. As a result of the transactions with Sberbank, we will become the sole owner of the fast-growing Yandex.Market business and will sell our stake in Yandex.Money to Sberbank. We are very excited about the growth potential of e-commerce in Russia. The recent pandemic has further accelerated the shift from off-line to online, and we believe that many of these changes in consumer behavior are here to stay. Yandex.Market has made impressive progress over the last 2 years. It has transformed from a price-comparison website into one of Russia's leading e-commerce players. We are now beginning the next stage of Yandex.Market development which will focus on deeper integration with other parts of the Yandex ecosystem. I believe this will unlock significant synergies in multiple areas. For example, last-mile delivery via collaboration with Lavka, Eats and Taxi, or improved traffic generation and savings on marketing or customer acquisition costs due to tighter integration with Porto and Zen. I'm confident that the consolidation of Yandex.Market will allow us to substantially expand the scale of our e-commerce operations and accelerate the path to the profitability. With that, I'm turning the mic to Greg, who will walk you through today's presentation.

Thank you, Tigran, and hello, everyone. As Tigran mentioned, there are a number of important news items that we're announcing today, and I'll walk you through them in some detail. First of all, we've signed a binding agreement with Sberbank to purchase from them their 45% interest in Yandex.Market for RUB 42 billion. Secondly, we've also agreed to sell to Sberbank our 25% stake in Yandex.Money for RUB 2.4 billion. Importantly, as part of the sale, we will also terminate all existing noncompete obligations between us and Sberbank. Thus, Yandex will be free to pursue opportunities in financial services and payments once this deal closes. Thirdly, we're also launching an $800 million equity raise, consisting of the $200 million public offering and a $600 million private placement. The $800 million equity sale consists entirely of our Class A shares. The fund raise is aimed at strengthening our balance sheet and providing us with significant financial flexibility to fund our strategic priorities. Finally, we've also preannounced our preliminary Q2 financial results, and I believe that they demonstrate that our various businesses are weathering the current environment very well. During this call, I'll run you through the key points of these announcements and also provide a bit more color on our e-commerce strategy. We posted a presentation on our website, which I'll be talking to. I'll start from Page 4 of the presentation. As we stated in our press release, we have signed a binding agreement, according to which we'll acquire 45% of Yandex.Market from Sberbank for RUB 42 billion in cash, while Sberbank will acquire our minority stake in Yandex.Market for a total consideration of RUB 2.4 billion. Both transactions are interdependent, and we expect to complete them in the third quarter of this year, subject to antitrust approvals for the Yandex.Market transactions. Upon completion of these transactions, any noncompete obligations between Yandex and Sberbank relating to e-commerce and to financial services will be terminated, which will allow us to explore new opportunities in the financial services and payment space, which we're very excited about. Turning to Page 5. There are 3 key reasons why we're considering Yandex.Market -- consolidating Yandex.Market. Firstly, we believe that this is an opportune time to capitalize on a secular shift in the highly attractive Russian e-commerce market. Yandex.Market is a fast-growing and sufficiently funded platform, perfectly positioned to realize our ambitions in the e-commerce space. Secondly and in line with what we previously communicated, we're interested in increasing ownership and achieving operating control in our key strategic assets. E-commerce is definitely one of them. Thirdly, we see numerous benefits and synergies from the deeper integration of our e-commerce business within the Yandex ecosystem which should help us to grow faster and improve the unit economics of Yandex.Market. Now let's turn to the overview of the capital raise, which we summarized on Slide 6. We're issuing $800 million of new Class A shares. In total, these newly issued shares will represent just under 5% of total shares outstanding. Of the $800 million raised, $200 million will be raised via public offering and $600 million via concurrent private placement to 3 investors: one, VTB Capital; two, an investment vehicle that -- whose ultimate beneficiary is Roman Abramovich; and three, an investment vehicle, the ultimate beneficiaries of which are Alexander Abramov and Alexander Frolov. Each of the private investors will invest $200 million into new Class A shares. The most important point to note are the following: the purchase price for the private placement will be determined by the public offering. Private investors will be subject to a 2-year lockup. During the same 2 years, each of these private investors will be restricted from increasing their stake above 3.99% of shares outstanding. And lastly, the private investors will have certain participation rights in future potential capital raises in Yandex.Market, if we were to decide to go down that path. The purpose of this capital raise is to maintain strategic financial flexibility to be able to invest in future opportunities across various sectors. These include investments in development of existing businesses, such as media services, Food Tech, self-driving, cloud and e-commerce; investments into new businesses, such as delivery and fintech; as well as opportunities to restructure our ownership in the Yandex.Taxi JV with Uber. We want to have sufficient dry powder in case an opportunity to present itself and to be able to react quickly. On Slide 9, you can see a snapshot of the Russian e-commerce market. As many of you know, the penetration of e-commerce here is low compared to other markets. The Russian e-commerce market is also one of the fastest-growing globally, with an expected 18% CAGR through '23 and over 20% CAGR if cross-border e-commerce is excluded. What's interesting is that before 2018, cross-border was the key driver of the market, while today, domestic e-commerce is the main driver of growth. The consolidation of the market around large, high-quality and well-funded players is another important trend, and we expect the Yandex.Market will continue to benefit from it. Turning to Slide 10. The Yandex.Market team has made very good progress over the last 2 years. Back in 2017, we only had a price comparison website, and there were significant uncertainties about the launch costs and the execution risks around building a marketplace from the ground up. Now Yandex.Market consists of a price comparison service, which generates almost 80% more revenue and over 2x more in EBITDA than it did in 2017, with EBITDA margins of over 40%. Also, an e-commerce marketplace, which we built from the ground up, which generates almost RUB 45 billion in run-rate GMV, with third-party sales accounting for 56% of that total amount and which offers around 1 million SKUs on the platform. Both the price comparison and the marketplace segments benefited strongly from secular market changes. Marketplace GMV increased 2.8x in Q1 2020, and then the growth accelerated to 3.6x in Q2 2020 on a year-over-year basis. The price comparison business has also performed well, with revenue growth accelerating to 30% in Q2 to-date from 27% in Q1. Turning to Page 11. As a next step in Yandex.Market's development, we want to grow this business into a top 3 domestic e-commerce business, materially expand our offering to 5 million SKUS, while achieving positive adjusted EBITDA, all by the end of 2023. There are 3 key strategy pillars which should enable us to achieve our targets. First, expansion of our fulfillment infrastructure by adding a new automated fulfillment center in Moscow region in 2021 as well as launching 15 new sorting centers in the next 12 months. This should allow us to further increase the share of third-party sales, provide greater flexibility to merchants and expand our offering to over 2 million SKUs in the next 12 months. Secondly, enhancement of last mile delivery capabilities, which we plan to achieve via expanding the reach of our own branded carrier platform as well as by leveraging the expertise and capabilities of Yandex's businesses such as Lavka, Eat and Taxi to reduce delivery costs and improve the customer experience. Third, deeper integration with the Yandex ecosystem. As you can see on Slide 14, there are multiple areas of synergies that full operating control of the Yandex market can help us unlock, achieving savings and delivery and customer acquisition costs, improving customer retention and cross-selling between different platforms within the Yandex ecosystem. As I said, one of our strategic targets is to achieve positive adjusted EBITDA for the Yandex.Market business by the end of 2023. We plan to achieve this by improving gross margins, a key driver which will be increasing the blended take rate on the back of volume growth as well as better purchasing power and positive category mix effect. More improvements should come from optimization of logistics costs, both delivery and fulfillment. And finally, the rest will come from customer acquisition costs. And here, greater integration of the rest of the Yandex ecosystem should help a lot. So overall, we're very excited about the transaction opportunities to build a more integrated e-commerce platform, which we see as an important part of Yandex's long-term vision. Now let me give you a quick update on the latest trends we're seeing in Q2 2020. These are obviously subject to what happens to the end of the month and our normal quarter end closing processes. Currently, we estimate that the dynamic of our total group revenue in Q2 will be from minus 2% to plus 1% year-over-year, essentially flat. The adjusted EBITDA for the group will be in the range of RUB 7.5 billion to RUB 8 billion compared to RUB 13 billion in 2Q '19. The year-over-year decline in EBITDA is primarily driven by the slowdown in revenue growth and changes in segment mix brought on by the pandemic. Significantly, we expect our adjusted net income to remain in positive territory for the quarter and be in the range of RUB 1.3 billion to RUB 2.5 billion, which is a solid achievement in such a challenging environment during the quarter. For search and portal, we expect our revenue ex TAC to decline between 12% and 8% on a year-over-year basis, with improving trends that we're seeing over the course of the quarter. We expect our adjusted EBITDA for Search and Portal to be in the range of 41% to 43%. Finally, on the Taxi side, we're very pleased with the rate of recovery in the ride-hailing market and with the continuing solid performance in our Food tech businesses, which we believe will allow us to grow the segment revenue in Q2 by 35% to 40% on a year-over-year basis. In terms of adjusted EBITDA, we estimate that we will finish 2Q somewhere between RUB 500 million loss and a breakeven level of EBITDA. I would note that these estimates include between RUB 700 million and RUB 750 million of losses related to our self-driving group. So excluding the spend related to self-driving, our Taxi and Food Tech segment continues to generate positive adjusted EBITDA. More details are available in the Slide 18 through 20 of the presentation. Just note that these are preliminary numbers, and we report- final Q2 2020 financial results as usual at the end of July. Thank you for your attention. And now we're ready to take your questions.

[Operator Instructions] The first question comes from the line of Miriam Adisa from Morgan Stanley. [Operator Instructions]

My first question would just be on the financial flexibility that you talked about post this fund raise. Can you just talk a bit about how you think about the balance between organic growth versus M&A when you're talking about investing into existing verticals and new businesses? Yes, that's my first question.

Sure. So obviously, the purpose of the capital raise is to provide the company with significant flexibility in order to go and execute on our vision. I'd say first and foremost on our minds is we'd love to own more of the businesses that we already own, and that specifically would be having a greater stake in our Yandex.Taxi business, which we continue to be extremely excited about. You could see that from the fantastic metrics that the business is putting up, both in terms of revenue growth as well as in terms of profitability. I'd say beyond that, our M&A ambitions are probably slightly more muted, but we are obviously actively evaluating various opportunities that we see out there.

Great. And then my follow-up question would just be on Yandex.Taxi. If you could just talk a bit more about the drivers of growth there between Taxi, Eats and Lavka. And if you could give us an update on rides -- on GMV, if possible.

Sure, Miriam. We'll obviously provide those metrics on the regularly scheduled call. I'd say that, as you would expect, the business was severely impacted by the pandemic. And we saw that, obviously, the volume of rides declined fairly significantly over the course of the quarter. The trough probably happened early in April. At that point, rides were down quite a bit, depending on geographies, they were down as much as 70% year-over-year. Today, those trends are improving and they're improving quite a bit. In the June month-to-date, we're seeing actually growth year-over-year in the number of rides and slight growth in terms of bookings. And so the balance in terms of revenues has come from the rapid growth of our Foodtech initiatives as well as our B2B business, which is recognized on a gross basis. In FoodTech, specifically, we see rapid growth in our food delivery business, Yandex.Eats, which has been executing extremely well. And I think the management team there is very strong and is doing incredibly well. They're working hand-in-hand with the various restaurants in our platform in terms of getting them on board a lot quicker, in terms of being much more responsive to their demands and helping these businesses obviously survive through the shutdown. It's also being driven by the grocery business, Yandex.Lavka, which has scaled very nicely and it continues to expand. We currently have approximately 150 dark stores in Moscow and St. Petersburg. And the service continues to improve. From a personal experience, I can say that it was a real savior to me during the lockdown as I used it continuously rather than venturing out. So I think all of those contributed to the revenue growth.

The next question today comes from the line Cesar Tiron from Bank of America.

First one would be on the -- so on the transaction. And are you going to potentially rebrand all the assets to Yandex? And do you believe that the Yandex brand is somehow what makes taxi, food delivery and then very successful, of course, besides the execution? And if you are going to rebrand it, how long do you think that would take you?

Cesar, so we're obviously developing a solution that leverages the significant value in the Yandex brand without, at the same time, being disruptive with those changes. I think that the Yandex brand value is incredibly high, and we've seen that really benefit us when we, for example, launched the Yandex.Eats business. If you recall, we acquired that business in late 2017, and essentially from a standing start, became the second largest player in the country with very significant share in a very short amount of time. We see that, that increases conversions to installs by approximately 20%. And it improves click-through rates as well. So I would say that we're still evaluating, but we see a lot of value in the Yandex brand, and we will examine how to expand it in the e-commerce business as well.

And if you allow me, just a very quick follow-up on the EBITDA number which you provided -- EBITDA range which you provided for Q2, I think this is probably a bit better than I expected. Do you -- have you taken -- have you delayed costs? Or do you think you've taken some costs out of the business which might be sustainable on a recurring basis? And then when we then start to see revenues growing back again, especially in the core Search, then we might again see some operating leverage?

Yes. So we've -- obviously, as many companies have done the following, we've kind of reevaluated the portfolio of assets that we have, and we made some decisions sort of on an up or out basis. We reevaluated some of our marketing spend and some of our plans for headcount growth and reallocated those plans to the areas which we're -- which we believe are most sustainable and which should benefit the most. So we will continue, obviously, to invest. We see a lot of businesses within the group which should benefit quite a lot both from the pandemic as well as sort of being perfectly positioned to provide value to consumers, things like media services, things like food delivery, things like groceries, ride-hailing, even car-sharing, which is starting to come back now. So I think as we come out, you should see some operating leverage, but we also want to make sure that we do invest in things that are doing well.

The next question comes from the line of Vyacheslav Degtyarev from Goldman Sachs.

Yes. My first question is, how do you see scope of investments in the medium term across your experiments? And are there new initiatives that are currently loss-making? So basically, it looks like after the acquisition of Yandex.Market, the scope of the businesses at the investment phase will be high as a percentage of earnings compared to the historical levels. So do you think you can accelerate those elevated levels in the medium term? I appreciate your thoughts around that.

Yes, of course. So the way to think about new initiatives is, obviously, this is what we use to create value, right? We take assets or business ideas and we materialize them. And if you look at the taxi business, which essentially we grew from nothing 8 years ago to a leading player in Russia; if you look at the food delivery business, which is doing well, we will continue to do that. Obviously, we want to remain prudent, which means that we have in our mind a certain amount that we're willing to allocate to such loss-making new initiatives. But we also see that they create a lot of value. You can also take a look at the example of Classifieds, right, which were in investment mode for quite a while, and today are the leading player in auto classifieds in the country by sort of a large margin. So the initiatives that we will continue to invest in are, obviously, e-commerce, obviously, media services. They're the FoodTech businesses that we talked about, cloud, for sure. So there's quite a lot. And many others that I haven't mentioned. One of the things that we're also quite excited about and we think is in a completely different orbit, if you will, is the Zen news feed product. We are successfully integrating it into our Search app. We're seeing a lot more engagement, a lot more daily average users. We're seeing that they're spending a lot more time per day. Year-over-year, that's growing very nicely. And we're also seeing that we have been able to successfully embed video deeply into that platform. And we're actually seeing quite a lot of usage of video on them.

Okay. And then a follow-up from me. If you can share some recent data points on search trends in June and especially recent weeks, probably after the lockdown was significantly eased in Moscow. Basically, do you see any sequential improvements in advertising in June versus May levels?

Yes, absolutely, we are seeing improvements in May versus June, and we're also seeing the continuation of the same trends we saw before, which is that search is probably the highest ROI asset out there in the advertising space, much higher than social networks, much higher than ad networks and much higher than anything else available out there. And so search is the main beneficiary. Ad network is probably struggling a bit more, but also improving sequentially. And overall, I'd say the trends are looking better and better. We're not in positive territory yet, I want to be clear. But as you can tell from the preannounced results, things are improving significantly.

The next question today comes from the line of Ulyana Lenvalskaya from UBS.

My first one will be on the placement rationale. Greg, given equity is the most expensive source of funding, why try to attract equity now? What other funding options do you consider, if any?

Ulyana, so 2 questions there. Why raise capital at all when we have so much capital on the balance sheet? I think I kind of addressed it in the prepared remarks, but I'll just say it again, which is it is to provide us with strategic flexibility and dry powder to go and execute on our vision of building the leading ecosystem in this country. And then the question of debt versus equity, I think that's a question of how much debt are you willing to take on. We obviously raised $1.25 billion of convertible debt in February of this year. And we wanted to make sure that we are balanced in terms of how much debt we take on. And obviously, the capital that we're raising, we're not raising it just to, sort of, have it sit there, but we would love to be able to deploy it to generate value for our shareholders.

And just connected to that, why to do the private placement versus offering the entire stake to the market?

So we were responding to, obviously, inbound interest, which the company has been receiving a lot of lately. And what we liked particularly around the private part of this fundraise is that this is long-term capital. If you recall, the investors have agreed to a 2-year lockup agreement and a 2-year standstill agreement. And so having shareholders who are long term and aligned with your vision of trying to build the leading ecosystem in the country, I think, is extremely important.

And if I may, the connected one. You've mentioned interest to increase your stake in the Taxi joint venture with Uber, right? But do you see any inbound interest from Uber to sell a stake?

Look, obviously, we are in regular contact with Uber. They're on the Board of our Yandex.Taxi business. And we're obviously in active dialogue. There's nothing imminent or in the process today. But I think we're very much interested in increasing that stake and taking full control of that asset. And I think it's a question of making sure that we can agree on a price that creates value for our shareholders.

The next question today comes from the line of Catherine O'Neill from Citi. .

I just wanted to ask a bit more detail around the e-commerce business itself. I know you're targeting effectively breakeven by 2023, but how do we think about the path to profitability over the next couple of years and the phasing and the level of investment needed? And I guess linked to that to some degree, could you talk a bit more about the category mix on the platform at the moment and the take rates? And also your thoughts on 3P share and how that will trend?

Sure, Catherine. So last year, our EBITDA loss in Yandex.Market was on the order of about RUB 9 billion. In terms of total cash spent, it was a little bit higher than that as we invested in inventory and CapEx. But let's call it RUB 12 billion in 2019. I think our intention is not to triple that or perhaps even double it. We think that we will continue to invest maybe a little bit more than in 2019, but not crazy amounts more. And we think that the synergies that I outlined around lowering customer acquisition costs, lowering the cost of logistics and then other integrations with Yandex are what's going to allow us to get to that point. Now recall that the business we're buying, buying back Yandex.Market, that has, I think, approximately 19 billion of cash on its balance sheet as of Q1 2020. So we'll have that cash to spend as well. If you look at the various categories that we have, [ C Hack ] is -- so that's consumer electronics and so on, is less than 40%. DIY is probably around 1/3. And then FMCG is about 20% of the total. And the rest is smaller categories.

Okay. And can I just understand, I know you're aiming to be top 3. Where are you now? And what's the gap between Yandex.Market and the top three? I just want to understand just how fragmented the market is currently.

So there's still quite a gap. As you recall, we came from a standing start 2 years ago. Many of our competitors have been at it for many, many years. I think Ozon has been at it for longer than Yandex has been around or thereabouts. Currently, we -- our run-rate GMV is about RUB 45 billion, which is about where Ozon was, which is, I think, the second or third largest player, where it was about 18 months ago. So I think we're doing quite well. I think we have every chance to break into the top 3 by the end of 2023.

Okay, great. And just one -- sorry, one final thing. I know you talked about being very keen on taking ownership of Taxi and off from Uber, is this potentially a precursor to an IPO? Is that idea being sort of shelved in the next sort of 12 months?

Yes. So the IPO of the Taxi business is currently not in the agenda. I'd say that those 2 are kind of separate matters. The reason why we would love to own more of it is just because we think that it's a fantastic business that fits very well within our ecosystem. But at the same time, it's a question of doing it at a price that creates shareholder value.

The next question today comes from the line of Anna Kupriyanova from Gazprombank.

My first question is regarding your fintech business. Given you are exiting from the project with Sberbank, do you plan any other projects in this time? Can you comment on that, please?

Yes. As I mentioned in my prepared remarks, once we close the sale of Yandex.Money, any noncompete obligations with respect to payments and financial services will be lifted. And we are excited about doing more in this space, and we'll hopefully have -- we'll hopefully have more to say about this over the next few quarters.

And my follow-up will be on Yandex.Taxi. Given still IPO plans all align, do you plan any restructuring of Yandex.Taxi assets, I mean, as a business unit? Do you consider any particular changes in the line of the assets which are included on maybe any other assets, maybe Yandex.Market somehow integrates with that?

Yes. So we do think that it makes sense to rejigger the perimeter of the Taxi's asset. The things that make the most sense for us to do are to more tightly link the car-sharing business, Yandex.Drive, together with Yandex.Taxi. If you take a step back, obviously, these 2 businesses are solving the same consumer need, which is how do I get from point A to point B and having them be more tightly integrated in a service makes sense. And at the same time, I would probably imagine that having the self-driving development business in there makes less sense, just because that's a -- obviously, it's a very ambitious project, but it's also one that is very different in its profile from the rest of that business. And I wouldn't be surprised if that's something that's going to wind up outside of the Yandex.Taxi perimeter, just being held directly by Uber and Yandex as opposed to being inside of the Yandex.Taxi group. I think it also will be helpful to investors to see what this business looks like from a ride-hailing and FoodTech side as opposed to having to disclose each time the amount that we're spending on the self-driving efforts.

And if I may ask, how does Uber support this idea of reshuffling of assets in Yandex.Taxi, given they're still shareholders of the company?

They're very supportive of it. I think they totally agree with the logic that I just outlined, both in terms of being focused on solving a specific consumer problem of getting from point A to point B and, therefore, integrating Yandex.Drive much tighter with Yandex.Taxi as well as the fact that self-driving R&D efforts probably don't belong in there from a strategic standpoint. And you've obviously seen lots and lots of people kind of carve those out. Even Uber, in fact, has carved out their ATG business. So that's something that probably is a better fit being directly owned by Uber and Yandex as opposed to being inside of the Taxi group.

Thank you. And just to understand, maybe I missed in your presentation, if I am correct, that you still plan IPO of Yandex.Taxi as soon as good momentum comes, I mean it may be this autumn or next spring, you don't specify any timing at this stage.

So I would say that it's -- IPO-ing that asset is not something that's on the agenda. I'd say we're seeing a lot of value of being tightly integrated into the Yandex ecosystem. And I just think that there's a lot more value that can be extracted, both to the benefit of our shareholders and to the benefit of consumers from tighter integration of all these assets.

The next question today comes from the line of Maria Sukhanova from BCS.

Yes. If you could comment, among the big deals that you're currently considering, is it only the acquisition of Uber stake in Yandex.Taxi? Or is there something else you're looking at? Like, especially, I'm wondering in fintech, what kind of strategy you're going to pursue there? Is it going to be through acquisition? Or you would probably rather go through partnerships?

I think everything is on the table. I think partnerships are a very good way of exploring potential opportunities. And I wouldn't be surprised if we were to announce more partnerships in the fintech space. And obviously, we're also thinking about if there's any assets out there that makes sense for us to acquire. But I would say there's nothing imminent at this point and everything is fairly exploratory.

Okay. And just a quick follow-up on this consideration regarding Uber stake. Could you tell us if at some point you acquired a stake, won't it lift non-compete from Uber as well? Won't you be able to reenter Russia, if you decide so?

So first of all, I would say that we continue to operate the Uber brands in Russia and other CIS states. And we think that, that's actually -- this was a very good decision on our part to keep that brand. I think it has a lot of appeal to a certain segment of the consumer, and we plan to keep operating those for a good period of time.

[Operator Instructions] The next question today comes from the line of Lloyd Walmsley from Deutsche Bank.

First, maybe for Greg. Curious if you can share your thoughts on what market attributes are at play driving Yandex.Taxi ride back to growth for you all versus still pretty marked decline here in U.S. for companies like Uber and Lyft, maybe some of that is driven by last-mile delivery, anything you can share there? And then second would just be, is there any strategic benefit from partnering with some of the private investors who are raising capital from perhaps on the development of a new money app or anything like that you could share?

Sure. So I'd say the reasons for growth on the Taxi side -- obviously, on the revenue side, I think I'd outlined the reasons for that growth, which is extremely strong performance in our grocery delivery business, our food delivery business, our B2B business. In terms of rides and the reason why rides are coming back faster than perhaps in some of the other places, I think that consumers view that potentially car-sharing or ride-sharing is a safer alternative in a pandemic world than other means of transportation. And so that's perhaps why they're shifting to them. We've actually -- since we've been able to relaunch our car-sharing business, Yandex.Drive, and I would remind you that it was shut in for about 1.5 months during the most severe part of the lockdowns, we've actually seen strong demand for this business. And I think that demonstrates the same underlying trends. Beyond that, I would say that we, structurally, have a much lower share of airport rides than some of our global competitors. We also have a much -- actually, we have no pool business. So the Uber pool, or I forgot what Lyft pooling product is called, but the idea of multiple people sharing a ride is not something that we ever put out in this market. And so that is not something that obviously suffered a lot during the pandemic. So I'd say those are the things that benefited it. And finally, I would also say the fact that generally public transportation infrastructure outside of Moscow is not as well developed. Obviously, Moscow has excellent public transportation, Which is very fast, very efficient. But if you go outside, it's not really there. And so taxis are an important way of how people get around. And so we've seen that regions recovered much faster than Moscow, for example. Sorry. And then on the second part of your question, look, I don't -- I wouldn't say that there's anything per se that we are looking to do with them, such as wallets, but we do want to make sure that we leverage some of the relationships that the investors bring to us. Also leverage some of the assets they may have and potentially partner with them in certain areas. You've seen us do such things in the past, and we may do them in the future as well.

The next question today comes from the line of Vladimir Bespalov from VTB Capital.

My first question will be on your plans to develop Yandex.Market. Definitely, you have certain assumptions when you mentioned about the EBITDA breaking even by the end of 2023. So my question is, maybe you could provide some color on the GMV growth that you expect for this asset in the coming years. Maybe split among Beru and the price comparison platform. And maybe you could provide some color what are the take rates now and how you're going to increase this to improve EBITDA profitability of this business.

Sure, Vladimir. So we put out some of the trends that we're seeing both in Q1 and in Q2 in -- on the marketplace side as well as on the price comparison side. And those are on Slide 10 of the presentation, I can just remind you of them. Marketplace GMV increased by 2.8x year-over-year in Q1 and by about 3.6x year-over-year in Q2 to date. And then on the price comparison side, those growth rates were 30% in Q2 to date and 27% in Q1. So there's acceleration. We do expect that we will continue to see strong growth. Obviously, it's going to start to slow down as we start to anniversary some of these very strong growth quarters in 2021 and beyond, but we don't obviously provide projections for 2020. I would also say that in terms of our take rates, they're below benchmark rates from our competitors, and so that's good. I think that makes our platform more attractive to sellers and allows us to grow the assortment and selection on our platform. And there was a question earlier that someone asked, and I just want to remind people what the share of 3P is, currently we're above 50% in terms of 3P on the platform.

Okay. And my second question will be on a potential capital raising for Yandex.Market. You mentioned that your private placement investors will have an option to participate in that. So maybe you could specify what are the conditions that would require you to raise capital for Yandex.Market? And how big could be the share that you would be willing to give away to other investors in this business?

Sure. So obviously, that kind of a decision that we haven't made yet. I think we outlined the rationale for why it makes to have full operating control and full ownership of these assets, but we obviously have to have flexibility, and having flexibility is good. The agreement, which is filed or will be filed, outlines that we basically will have an opportunity to give our partners, who are investing as private investors in this round, an opportunity to have a first look at this capital raise. And this is only for external capital, should we decide to go down that path.

But you haven't made any [indiscernible]

Does that answer your question?

On what -- on the -- yes, on the size of the potential stake that you could offer to investors, you haven't made any decision yet, right?

We haven't made any decisions on the size of the stake. In fact, we haven't even made a decision whether or not it makes sense to sell a stake in that business. We like to have the fact that we have partners who are a lined up and are interested in taking it. And we also like the fact that we have the flexibility to make that decision. So -- and just one other thing to remind you is that the business we're acquiring for the balance of Yandex.Market has approximately RUB 19 billion of cash as of Q1 2020, and so that should obviously give it some runway even as we increase investment, as I talked about in my earlier remarks, in e-commerce.

The next question comes from the line of Ildar Davletshin from Wood & Company.

Congratulations with a very timely transaction. So I just want to ask a big picture question. We've been through this lockdown in various parts of the world, like from your perspective, which segment have you identified as new interesting niches that potentially could be big? I think you mentioned logistics before. I also would be curious if you could say any thoughts on cloud and generally like digitalization of -- particularly for enterprises, which seems like in Russia, it's still very far behind. Are you -- do you see any opportunities there?

Yes. So certainly, logistics has been a business that we've been able to scale very quickly in the last 3 to 4 months essentially from a very small business to now a reasonably sized one. And I think we have much grander ambitions here, which the team is executing on. And I think they're doing a really good job there. We've also seen a significant uptick in media services, where our subscription, streaming video product, KinoPoisk HD, has gotten a lot of traction with consumers and is becoming more and more popular. We've also seen very strong trends around Zen, which I talked about; and cloud, which is doing quite well as well. Cloud is continuing to show solid month-on-month growth. And I think as we've talked about on either the Q1 or the Q4 earnings call, we're looking to provide a lot more detail on our Cloud business at the end of the year.

And on Cloud, is it primarily on the consumer side or maybe also on the enterprise side?

No, this is all enterprise. So we really are trying to build a first-class Cloud business. And we're making a lot of progress in terms of selling that to medium-sized enterprises, to some of the larger clients. There's also an SME component there, but it's not that significant. And the idea is not to use some of the off-the-shelf components that some of our competitors have used, but really to bring a full AWS style cloud infrastructure to enterprise clients here.

Right. And maybe just a follow-up, slightly different subject on this. Tax benefits that were promised yesterday and, generally, the government support, I think, around the other regulatory initiatives. Like could you maybe provide some latest update, which part of the business do you think can benefit? Maybe could it impact your capital allocation decision that you will invest in certain parts more because of the regulatory advantages?

Sure. So the comments made by the President yesterday around some of the tax benefits for the IT sector, the details of those aren't clear yet. But based on the comments, it appears that we should be benefiting from those. They are not going to be revolutionary benefits, but they will benefit us nevertheless. And I think that they make obviously a ton of sense, in the sense that as you invest in IT space, you're obviously investing in economic growth. And by implementing those tax programs for IT companies, I think we all stand to benefit. There's also other initiatives that should be coming on stream in early 2021 with respect to preinstallation. And while it's hard to determine exactly how they will work, from what we understand, that should be a tailwind for us as well.

The next question today comes from the line of Svetlana Sukhanova from Sberbank.

My question would be about Yandex.Market. You give a guidance that it will break even in 2022. At the same time, you said that its EBITDA margin for Yandex.Market platform is 41%. So my question would be, when would you expect Beru on a stand-alone basis to breakeven?

That's a very keen observation, Svetlana. So first of all, we said we expect it to be breakeven by the end of '23 as a group. So that means that it will take slightly longer for the marketplace business on its own to breakeven. But obviously, the benefit of having both the price comparison and the marketplace is there are synergies between the 2, including, from the point of view of profitability.

So no exact date yet. Okay, fair enough. And if I may have a follow-up question, this time regarding Taxi. You showed impressive growth rates, premier growth rates for Q2 in Taxi, and impressive EBITDA, of course. But we understand since you account for Lavka a bit differently on a gross base in terms of revenue. What would be your growth on a like-for-like basis if you exclude Lavka accounting effect and if you exclude B2B effect in the Taxi accounting?

So I don't think we're ready to provide that level of detail on -- just on the preannouncement call. But you're absolutely right, Lavka is a grocery delivery business where we're the seller of record and so we recognize revenues on a gross basis and that contributed to the revenue growth there. What also contributed to the revenue growth there is the success of our B2B business in ride-hailing and the incredible growth of the food delivery business that we experienced. I'd say outside of that, you would expect that ride-hailing was probably down in Q2, just based on statistics that you've seen out there from the Moscow Department of Transportation, which has talked about taxi rides being down 70% or something like that in April and 50% in May. I'd say despite all of that, we are able to demonstrate positive EBITDA because of some of the cost savings measures we implemented, because of some of the incentive optimization work that we've done and, obviously, because of just the efficiency of that business and how well it's run.

Your EBITDA growth was indeed very impressive despite all kind of headwinds. You -- so very last follow-up on Taxi for me. B2B business in Taxi what is performing -- you said that out -- excluding Lavka tech and excluding all the kind of FoodTech and B2B, except ride-hailing GMV might have been in a negative territory in Q2. Have I understood you right?

You understood me correctly. Ride-hailing revenues were down because of the pandemic year-over-year in Q2. B2B because of the growth of logistics business has done very well. As I mentioned, we see a lot of promise in building a logistics platform within Yandex.Taxi. And I think we've done a great job of executing on that plan during the pandemic of going out and helping businesses in need, deliver goods and services to their consumers.

We have another question here from the line of Kirill Panarin from Renaissance Capital.

Just one from me on the logistics side of Yandex.Market. Greg, you talked about the plans -- expansion plans in this regard over the next 12 months. I'm just wondering longer term, what is your view on how much fulfillment space does a top 3 e-commerce player need in Russia? And in terms of developing the supply chain, are there available high-quality warehouses? Or would you need to build them yourself? Any thoughts on this, please.

Yes, this Max Grishakov, CEO of Yandex.Market. I guess we look at it more as a low footprint expansion, whereas we're targeting to build the hubs, which are the sorting centers, in the large geographies, in the large cities. We so far don't plan to store our goods in those cities. And therefore, we are opening a large warehouse around Moscow area, which will come to life at the end of 2021. But the rest will be done through a drop shipping form which, so far, works very well for us. So we're not, in this case, relying too much on the existing infrastructure.

Yes, that's clear. And maybe just a follow-up then, would you be able to provide similar delivery terms to the largest players in the market?

Yes, we're looking at the market. We're benchmarking the markets so far. Even today, we are mostly on parity. I mean it kind of depends on the categories, and every top player does a little bit of its own thing. But in general, we are on par in terms of delivery terms.

Thank you very much. There are no further questions in the queue at this stage. Yulia, please continue. .

Thank you very much for joining us today. And if you will have any follow-up questions, please direct them to the IR team, and I wish you have a good day. Thank you. Bye-bye.

Thank you very much. That does conclude the conference for today. Thank you for participating. You may all disconnect. Speakers, please stand by.