Oct 27, 2015
Executives
Katya Zhukova - Director of IR Arkady Volozh - CEO Alexander Shulgin - COO Greg Abovsky - CFO
Analysts
Edward Hill-Wood - Morgan Stanley Cesar Tiron - Bank of America Ulyana Lenvalskaya - UBS Alexander Vengranovich - Otkritie Capital Vladimir Bespalov - VTB Capital Mitch Mitchell - BCS
Operator
Good day and welcome to Yandex’s 2015 Earnings Call. Today’s call is being recorded.
At this time, I would like to turn the call over to Katya Zhukova, Director of Investor Relations.
Katya Zhukova
Hello, everyone, and welcome to Yandex’s third quarter 2015 earnings call. We distributed our earnings release earlier today.
You can find a copy of the press release on the company’s Investor Relations website and on Newswire services. On the call today, we have Arkady Volozh, our Chief Executive Officer; Alexander Shulgin, our Chief Operating Officer; and Greg Abovsky, our Chief Financial Officer.
Our call will be recorded. Recording will be available on Yandex’s IR website in a couple of hours.
We’ve also put together a few supplementary slides, currently available on our IR website. And 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. Our actual results may differ materially from those indicated or suggested by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our annual report on Form 20-F dated April 30, 2015, which is on file with the SEC and is 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.
Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today. During this 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 in the earnings release we issued today. And now, I am turning the call over to Arkady.
Arkady Volozh
Thank you, Katya, and hello, everyone. Thank you all for joining our quarterly earnings call.
The first quarter was an important turning point for the company for a number of reasons, starting from mid-summer we reversed our search share trend in view our share on the Russian market. We also successfully switched to the VCG auction and the new ranking rules for paid search.
We increased our market share in Turkey, we signed a strategy corporation with Microsoft to offer Yandex as the default search for Windows 10 in Russia, Ukraine and several other markets including Turkey. And then just specifically grateful to our excellent legal team for their hard and professional work, we achieve that positive decision from the Russian antimonopoly service that we hope will return fair competition to the market.
On the financial front, in Q3 we grew our total revenues by 18% year-over-year and now we are increasing our revenue growth outlook for 2015, previously we were expecting revenue growth of 11% to 13%. Now we expect that our consolidated revenues in 2015 will grow in the range of 14% to 16% compared to previous year.
Our search share in Russia increased approximately 70 basis points from June to 57.3% in September. Mostly due to the growth of Yandex browser across all platforms and improvements of our search share on Android phones.
We estimate that in Q3, our share on Android was 40% compared to 39% in Q2. Our search share on iOS devices averaged, 45% in Q3 compared to 46% a quarter earlier.
Share of mobile in our overall search traffic in Q3 was 26%, 2.5 percentage points up from Q2. In terms of revenues, mobile generated 21% in Q3 compared to 20% of our search revenues a quarter earlier.
During the quarter, we added approximately 2 percentage points to our market share in Turkey. Our share there reached 7% according to comp score.
We are on track with our initial targets for this year and we are cautiously optimistic about our business in Turkey. Another important milestone for the company was the newly signed deal with Microsoft to become the default search on Windows 10.
The [indiscernible] extends to Russia, Ukraine, Turkey and several other markets. Windows 10 has always proven to be a success globally and has significant growth potential.
We will be promoting Windows 10 on our websites. With this, I am turning the call over to Sasha, who will take you through the implementation of business reduction, the results of the antitrust case in Russia and several other achievements of the past quarter.
Alexander Shulgin
Hello everyone. On September 1st we reached to a new VCG auction for advertising on Yandex Search and implemented the new relevant ranking formula of paid search in our website as well as on the websites of our partners for whom we follow paid search.
The main goals of the switch from the generalized second price auction was to provide our advertising clients with a simpler and easier to manage bidding process and to reward bidding for higher positions by charging premiums for incremental clicks only, while driving more highly quality products to advertisers websites. The results of this implementations were different for different advertisers, for those clients who have been carefully watching the quality of their ads, and the relevancy of their landing pages, CPC decreased significantly.
This decrease was driven not only by the more efficient approach to pricing, but also by the new [relevant ranking] formula that allows clients with high quality apps to pay lower CPCs and still get to higher positions within the ad-block. For some advertisers CPCs increased in September.
We think that the new auction will incentivize this group to more closely monitor the quality of their ads as well as the quality of their landing pages, pushing up their ads to higher positions and paying lower CPCs. In aggregate, these implementations leads to monthly sequential decrease of our average cost per click on search, sale on a year-over-year basis CPCs still grew slightly compared to September 2014.
Today, we also see evidence of increased interest from clients [begin] for higher positions in our paid search results, including those clients, who are using minimum business strategies before. The number of advertisers, who are begin upward grew 24% over the last eight weeks.
All-in-all, we believe that the new implementations will lead to more robust business activity, improve advertiser ROIs and will generally increase the attractiveness of search advertising in the long-term. Our sales did an amazing job in [calling] the benefits of this changes to our advertisers for the launch.
As a result, the switch went smoother than we expected and it took only around two weeks for advertisers to adjust their principle business strategies. Now touching upon our non-search businesses.
Auto.ru continues to focus on its [non-executive] revenues which grew nicely with best and [indiscernible] now representing roughly 50% of Auto.ru revenues. I am also excited about the user growth.
In Q3 average monthly audience of Auto.ru grew over 30% year-over-year. While number of mobile users almost doubled.
Yandex.Taxi business is doing great. For example, the number of license in [indiscernible] our second largest city grew more than 70% from June to September.
Moscow our largest and most mature city also continues [to about] growth. Overall, Yandex.Taxi is now up and running in 12 cities within Russia.
We also launched the new version of [indiscernible] with integrated online video streaming of legal, high quality movies supplied by online cinemas and television companies. The new version is available in better and we will gradually roll it out to a wider audience while enterprising user feedback.
And now let me turn to the recent groundbreaking decision by the Russian Antimonopoly Service as FAS relating to Google's anti-competitive practice on Android. We view this decision as a huge step toward leveling the playing field allowing developers to compete on the quality of their products rather than through contractual restrictions.
As we have mentioned many times before, we believe that Google has been using its [indiscernible] position in the Android app stores market to obtain an unfair distribution advantage favoring its own apps to the determent of its competitors. For a several years our Android distribution efforts have been inhibited by the restrictions imposed by Google on Android device manufactures.
Last year, the impact of this practice reached the pinnacle where our long-term distribution partner ceased to do business with us because of contractual restrictions imposed by Google long term. At this point we felt we had no alternative but to seek a legal resolution of the matter.
And in February, we filed the complaint with FAS, we quested them to investigate these practices. We were encourage to now submission to FAS that others in the industry will object into Google's practices in Android as well.
Those objections ultimately led the European Union Commission to grow then its investigation of Google to cover this alleged anti-competitive practices. In September, after several months of thorough investigation involved in many [adherent] and review of thousands of pages of evidence FAS announced its decision in the case against Google.
We’re very pleased by the decision because all of the practices that we objected to were condemned by FAS as violating Russian competition laws. FAS concluded that Google was illegally abusing its market dominant by imposing conditions on OEMs access to the markets Google Play App store.
These conditions required OEMs to bundle Google Play with the suite of other apps and services, make Google the default search, give placement preference to Google’s apps and refrain from dealing with Google’s competitors. In this decision, FAS ordered Google to stop these practices and not engage in them in the future.
As part of the decision, FAS has instructed Google to remove offending restrictions from its agreements with OEMs by November 18, 2015. FAS has also requested Google to provide a note as directly to the mobile devices of Russia based Android users, essentially informing them about the possibility to deactivate, reinstall Google Apps, change the default search in Google Chrome, replace Google search widget and other apps that are part of GMS suite and change the arrangement of icons on the screen.
All-in-all we are happy with the decision and we look forward to working with device manufactures in this new environment to surface trends and redistribution of our products, services and apps to Russian users. With this I’m turning the microphone over to Greg.
Greg Abovsky
Thank you, Sasha and thank you all for joining our call today. While the overall economic and geopolitical environment remain challenging, we continue to see signs of stabilization that I discussed with you in the last call.
In the quarter, our consolidated revenues grew 18% year-on-year and reached RUB15.4 billion, tax based advertising accounted for 92% our total revenues, and increased 18% year-on-year. Yandex’ own operated websites, constituted 68% of total revenues and grew 13% year-on-year accelerating nicely compared to Q2, despite facing tougher comps.
Our tax based industry mix remains diversified, Q3 trends were mostly unchanged compared to the first half of the year. We continue to see weakness in ads spend in auto and financial services.
Both of these categories are still shrinking year-over-year although at a much lower rate than we saw in the first half of the year. Excluding these two segments, our tax based revenues would have grown in the mid-20s.
Our ad network grew 35% year-on-year, as we added new partners and improved targeting capabilities. Contribution of ad network revenues to total increased 300 basis points compared to Q3 of last year, but remain fairly stable compared to the previous quarter.
Display advertising revenue decreased 1%, contributing 5% of our total revenues, display revenues from our own websites decreased 11% year-on-year, please note that this quarter we reclassified some of the display network revenue. If not for this one-time re-class, our network of display revenue would have grown 13%.
In Q3, the number of advertisers served by Yandex continue to increase growing 18% year-over-year. Other revenues increased 2.6 times and comprised over 2% of total revenues, the main driver of growth for this segment was Yandex Taxi.
Traffic acquisition cost related to partner advertising network grew 28% slightly slower than our tax based partner network revenue. Partner TAC as a percent of partner tax based revenue with 62.4 compared to 65.8% in Q3 of last year, a decrease was mostly due to the change in our partner mix.
Distribution TAC increased 1% year-on-year and constituted 9% of tax based revenues for our website, compared to 9.7% in Q2 of 2015 and 10.1% a year before. Total TAC increased 19% year-on-year in line with our overall revenue growth.
Paid clicks grew 15% while cost per click increased 3%. Turning to our cost structure, our total OpEx excluding TAC in G&A grew 45% in Q3 versus the previous year, excluding stock based comp expenses grew 40%, growth is primarily driven by increase in office rent, salary increases, as well as by growth in advertising and marketing expenses.
Personnel costs still remain our largest cost item. In Q3, our headcount declined by 46 people versus June 30th, however we continue viewing the current economic situation as good opportunities to add talent, as we mentioned before we’re focusing on strengthening the mobile team, as well as the team working on Yandex browser.
In Q3, our personnel costs were 20% of revenues while during the first nine months of the year, it totaled 23%. Stock based comp which is part of personnel expenses, increased 121% due to ForEx, new grants in the RSU exchange program that we executed in Q2 and Q3 of this year.
G&A expense for the quarter increased 97% due to ruble depreciation as well as increases in our data center spend. Our adjusted EBITDA increased 2% year-on-year, adjusted EBITDA margin was 39% which is down approximately 6 percentage points from previous year.
This quarter the impact from ForEx was a gain of RUB1.9 billion related to dollar-denominated assets and liabilities in our balance sheet. Our effective income tax rate was 24.6% on U.S.
GAAP basis, generally in line with the effective tax rate in Q3 2014. Adjusted net income was down 10% and adjusted net income margin was 22.7%.
Our CapEx was RUB2.5 billion or 16% of Q3 revenues, this compares with CapEx of 34% of sales in the first half. As I mentioned in the previous calls, our CapEx this year is very much weighted towards the first half of the year.
As you know, a significant part of our CapEx is denominated in U.S. dollars therefore adversely impacting the CapEx revenue ratio.
We continue to buy back convertible bonds that were issued in December 2013. In Q3 we bought back another 42 million face value of the bonds.
Since inception of the buyback program we bought approximately 244 million face value of the bonds. We ended the quarter with approximately 832 million of US dollars and equivalence using the exchange rate as of September 30th.
The currency split was approximately 40% rubles and 60% dollars and euros. Now turning to guidance, as Arkady's mentioned in his remarks we're now increasing our outlook for revenue growth to a range of 14% to 16% on a year-over-year basis.
This compares to our previous guidance of 11% to 13%. And with this I'll turn the call over to the operator for the Q&A session.
Operator
Thank you, [Operator Instructions], we will take our first question from Edward Hill-Wood from Morgan Stanley, please go ahead.
Edward Hill-Wood
Hi, good afternoon everyone, I've got three questions by me, firstly on the guidance. You've issued revenue guidance but no margin guidance, I was wondering if that's linked to the antitrust ruling in a sense that you have the opportunity, where you have a relative variable rate of potential OpEx depending on how successful you are in renegotiating contracts, if you could just discuss that, that phenomenon.
Secondly the mobile monetization rate seems to have reduced fairly significantly Q2 to Q3, [indiscernible] wasn't the Q1 level. Could you just discuss that as how the unbundling is going and whether or not it's been sort of a broadening of the dynamic there?
And thirdly just on the taxi service. Obviously there's three players, three main players in the market.
There's two local players, do you think that there is the logic potentially in the long term of some form of consolidation with potentially with local partners, thank you.
Greg Abovsky
Hey Ed, it's Greg; I'll try to take all three if I can. On the question of guidance as you know we've never issued EBITDA guidance in the past and this quarterly call is no exception.
I think as you've heard me sort of talk about our EBITDA outlook over the course of this year, if you recall we started the year off saying that we think our margins could be down as much as 900 basis points. When we spoke again on the Q2 earnings call I mentioned that you know as we brought our cost structure closer in to line with the current economic environment and reduced our spending we think that EBITDA margins could be around 700 basis points lower than previous year.
I think as we look out today we think we should be able to do slightly better than that 700 basis point bogey and I think that's kind of where we are. On the question of mobile monetization I would say that there's nothing incrementally different from the previous quarter.
Last quarter there was sort of significantly abnormal month in terms of monetization and things are sort of now back on track and there's no real differences. I think most of the stuff that you guys observe is rounding and that's basically it.
And then on the question of taxi, yes there are three players, all of them provide excellent service and all of them strive to improve the service that they provide to their customers. I think each one will ultimately be judged on the time that it takes to get a car delivered to you, the availability of cars within various parts of Moscow I think some of our competitors concentrate just on the very inner city whereas we have much broader coverage than they do with excellent prices, and you know very short time for arrival.
So I don't know how the market will evolve but we're just focusing on serving the consumer and I think that covers all the questions right.
Edward Hill-Wood
Just to my first question again, just on the OpEx issue around the antitrust ruling. Would you expect that if there was any sort of formal or shift in negotiations with handset manufacturers any of that, any potential OpEx will fall into 2015.
Or are we sort of broadly talking about 2016 as a time frame for anything meaningful to occur from a OpEx perspective.
Greg Abovsky
Yes, I think it's highly unlikely that the impact of that will show up in 2015. As you can imagine negotiating agreements with OEMs takes some time and then it takes a further time for devices to be rolled out, purchased, used and so on, so it's a slightly longer process.
It doesn't impact 2015 numbers.
Operator
We will now take our next question from Lloyd Walmsley from Deutsche Bank, please go ahead.
Lloyd Walmsley
Thanks, so you guys saw a nice growth [indiscernible] search reaccelerating despite the harder comp, can you kind of give us your best sense as to whether the strong results in outlook is a reflection of an improved macro environment in Russia, and how much of it is a function of things you're either doing at the auction level, or to drive click-through rates with that quality kind of parse out the impact of [indiscernible] --
Greg Abovsky
Hey Lloyd its Greg again. Look I think the overall economic situation is still challenging.
I think I would sort of echo the comments that I made on the Q2 earnings call that we are seeing signs of stabilization. I don't think we are seeing growth yet or sort of return to normalcy, is kind of how I would describe it.
We are aren’t there unfortunately but things are starting to stabilize. I mean if you look at sort of our industry mix, by categories, we still have the same two industry categories declining on the year-over-year basis we had in the first and second quarter and that is auto and financial services.
However the magnitude of the decline is lower than it was in Q2 and considerably lower than it was in Q1. So I would say that, yes the economic situation is stabilization, and if you were to exclude those two categories from the base, you’d see that all the other categories combine a growing sort of in the mid to low 20s, which is pretty robust.
I think our results are sort of a combination of some of the benefits of the VCG auction, I think stabilization in the overall environment, and sort of good work from our engineers in terms of helping stabilize our market share, I think all of those things are to be taken together.
Lloyd Walmsley
And I guess just second if I may, you talked about in terms of market share stabilization, seeing nice gains in the Yandex browser, you are also seeing stabilization within the Chrome browser, can you just give us a sense for what’s behind some of that stabilization and kind of how sustainable you think that is outside of the new deal with Microsoft and the anti-trust victory?
Greg Abovsky
Sure I’ll pass the mic to Sasha to answer that.
Alexander Shulgin
Hi Lloyd, this is Sasha speaking. So to give some background to our market share, on desktop we gained about 30 basis points of share compared to previous quarter, we also gained share about 100 basis points on Android, our browser became the clear number two in the Russian market with 15% combined share on desktop.
And we are also gaining share across all mobile platforms. So I guess it speaks both to quality of our products and also our market activity that we are running, we are supporting our Yandex browser with promotional campaigns.
Lloyd Walmsley
Great thanks guys.
Greg Abovsky
Let me just jump in with sort of one more thing, which is -- I don't know if you noticed or not, but we recently launched a new feature of Yandex browser called Protect, which helps protect our users from various dangers out in the internet such as Wi-Fi theft which is the interception of your stream by Wi-Fi points, antivirus and so on and so I think that's helping, that product differentiation is helping us as well.
Operator
We will now take our next question from Cesar Tiron from Bank of America. Please go ahead.
Cesar Tiron
Yes, hi everyone. I have the question on the implementation of the tough decision especially for existing Android users, Am in right in believing that for example if I have an Android phone then, for example the way to apply the decision would be that the -- I would need to have an application install that would be force, and then I would need -- I would be able to select for example the Yandex browser into Google Chrome and if that happens and if I select it on my own, am in right in believing that you would not incur any acquisition cost on those people moving to the Yandex browser -- to the Yandex search engine, sorry?
Alexander Shulgin
Hi Cesar, thank you for the question. This is Alexander speaking.
So talking about the existing users of Android phones, FAS has requested Google as I said to provide a note as directly to the users, to the phone screens of the users of Android in Russia informing them that they can do certain changes in their operating system, like deactivating Google apps, change in the default browser and replacing the Google search widget with another widget. It doesn’t mean that this decision for the existing users gives us possibility to somehow upload our apps on the phones, for the existing users who gives our [market channels] to communicate them and kind of give them to download our apps, [and] search browser and other applications.
But now for the new phones that will be sold from 2016 and on FAS decision gives us an opportunity to make deals with OEMs to preinstall our applications on the phones that we produce for the Russian market, and this is very important. Because we know that we monetize well and based on the marketing and revenue sharing deals and the promotional support we can provide to OEMs for their equipment in Russia from our website, we can increase our market share on Android.
Just to be also clear on the process of going forward, I have to say that Google still can appeal the decision of FAS and the deadline for appeal is December 18, we don't know if Google will decide to do so, but technically they have a right to do so. Yes basically that's it.
Operator
We will now take our next question from Ulyana Lenvalskaya from UBS. Please go ahead.
Ulyana Lenvalskaya
Thank you and good afternoon gentlemen, congratulations on good numbers. Firstly, I have a follow-up question on Lloyd’s question on the top-line growth.
Given VCG auction has been just launched in September, would it be fair to assume that September was the strongest month within the quarter?
Greg Abovsky
Hi Ulyana, this is Greg. That’s not necessarily the right assumption, because there's also question of comping.
We’re actually, in September we’re comping a strongest growth of the quarter from a year ago.
Ulyana Lenvalskaya
Got it, thanks. Greg, could you please also update us on Yandex's market this summer and what would be the topline growth without Yandex market if possible?
Greg Abovsky
Sure. I think overall on Yandex market, the rate of growth is similar to the overall rate of growth.
Although, it seems to be doing slightly better off recent and I think that holiday season will be a very telling quarter for Yandex's market and we’ll report back to you on that in Q4. And I think, if your question is what is the impact of VCG and what is the implication of your guidance for the rest of the year, I just want to sort of remind people that Q4 is the largest quarter that we have in terms of revenue, and obviously forecasting it is often most difficult and so revenue guidance attempts to be prudent and conservative as we sort of look out.
Clearly VCG auction as well as other changes that we implemented, such as the ranking changes do benefit our advertisers in terms of driving higher ROIs to them. In terms of encouraging and to bid more aggressively for higher positions and so all those things should get reflected in the numbers.
But, we just want to be cautious obviously, given that the economic situation is not completely recovered and we're still kind of in the period of stabilization.
Ulyana Lenvalskaya
Makes sense, thank you. And a question to Arkady probably.
What were the drivers behind the improvement of market share in Turkey? Was it the agreement with the football club or agreement with Microsoft or anything else?
Arkady Volozh
As usual any improvement in market share first derives from the protocol achievement, you understand. This quarter, yes there was this unique deal with the football club.
Microsoft has not materialized yet, it’s only in the months to come. And on the football club, as you know we made a unique deal with Fenerbahce, one of the most popular clubs in Turkey.
And this is I think maybe one of the real, maybe the first deal in history of sports sponsorship which is performance based, which means that the more Fenerbahce funds are converted to Yandex, they won’t pay to the club. And we see a lot of growth from that deal.
Ulyana Lenvalskaya
Thanks. And on the Microsoft, is it possible for you to provide any kind of estimate of potential market share improvement purely on account of Windows 10 update?
Greg Abovsky
Sure, Ulyana. Let me try to take a stab at that.
First of all, in terms of timing, while the deal was announced a little while ago, it actually doesn’t rollout in terms of the new version of Windows, the patch to Windows 10 until sometime in November. That’s why you kind of don’t see it show up in the numbers yet, it'll start showing up in the numbers from that point on.
In terms of potential impacts on us, it will clearly depend on the rate of uptake of Windows 10, so far the rate of uptake of Windows 10 has been very good. It also depends on the usage of various browsers inside of Windows 10, sometime that we obviously cannot control to the extent that people choose to use a native Windows 10 browsers such as Internet Explorer or Edge, that should benefit us more to the extent they choose to use Yandex browser, that will benefit us as well.
So I think it’s kind of hard to predict, but at any rate it’s not a large impact, but it’s definitely observable. And I think it will take probably six to nine months for that effect kind of roll through and become kind of observable to the naked eye.
Ulyana Lenvalskaya
Thank you.
Operator
[Operator Instructions] We will now take our next question from Alexander Vengranovich from Otkritie Capital. Please go ahead.
Alexander Vengranovich
Yes, hi. First question is a follow-up on negotiations with OEMs.
So can you please update us on the status and did you make any progress with any of the OEMs you’ve been talking. And in case you have -- I know you had some agreements before the whole situation of this Google started.
And looks like for these OEMs it got easier. But are there any new smartphones producers which are also interested in cooperating with Yandex going forward?
Is there anything changed for last year? So any information that could be interesting.
And then second, actually I see that the Yandex text-based ad network revenue growth accelerated for a second quarter in a row, from 24% last quarter to 35% this quarter. And you said that reasons for this growth was like some additions of the new partners.
Can you please a little bit elaborate here, are there any big partners added or just the nature of overall improvements, so you're kind of getting new partners which going forward will be also positively impacting your revenue and it's nothing special to report at this stage, thank you.
Alexander Shulgin
Hi Alexander, thank you for the question. This is Alexander Shulgin speaking again.
So on OEMs, we [didn’t] see a change in the attitude and openness to discuss distribution deals with us, [indiscernible] interest in making business with Yandex and [indiscernible] Yandex apps. I cannot this point in time say that we have anything specific to declare on this call, because you know it takes time, big deals cannot happen immediately so fast as we're doing advertising industry.
But yes we see signs of progress there. And on the second question Greg will comment.
Greg Abovsky
Sure, Alexander on your question about the partner network, yes we've added some new partners to the network although those partners were added quite a while ago. So they've been in the base for many quarters not just this one.
I think the acceleration, the rate of growth is a combination of a, higher, better targeting and b, the fact that you do have those partners on the base that are helping you. Partner network is continuing to grow at a good clip and I think our outlook for it is fairly upbeat.
Alexander Vengranovich
Okay, good. And just a quick question also, [you were counting their] headcount for four quarters in a row and will this thing will impact your decision to get back to the hiring trajectory like you had before.
So basically they are driven by the overall market improvements or specific projects you have inside the company?
Alexander Shulgin
Alexander, this is Alex speaking again. So on the headcount I will say that we are rather shift in headcount between different products and our total headcount was much closer to be stable this year rather than decrease.
We were adding people in the key important projects like Yandex browser for example, a mobile search and also in some specific business units, while reducing headcount in other products. So this is my view on the headcount situation.
Alexander Vengranovich
So, if the market recovers fast, you don't need to hire additional big amounts of people, so it's basically driven by your internal process and not by the overall markets improvement.
Greg Abovsky
Look, we always are hiring people and we're always on the lookout for talented engineers, especially anyone who can help our efforts on Yandex browser, on our mobile products or with our business units which are all growing rapidly. Whether it's Yandex Auto, Taxi, Yandex Market or [indiscernible].
I think overall we're trying to be judicious in terms of controlling the overall headcount. But that also means that you shift resources from one to the other as Sasha has said.
So I think you should expect our headcount to increase but very gradually, if the economy does recover and if we feel like we can support sort of a larger headcount base.
Operator
We will now take our next question from Vladimir Bespalov, VTB Capital.
Vladimir Bespalov
Hello and thank you for taking my question. I have a couple of things to ask.
First I'd like to ask you about your project [the way] Yandex with that of the logistics aggregator, we haven't heard for a while about this project, is it abandoned or are you developing it, how are the things are developing here. The second question is on your rent payments, is there still a chance to renegotiate payments into rubles or you are going to [indiscernible] with the situation as it is now where the payments are [still linked] and the last probably question you have a pretty big cash pile if we take cash, and term deposits on your balance sheet.
Are there any plans how you're going to deploy this cash? Thank you.
Greg Abovsky
Hi Vladimir, on the question of logistics, no it's not abandoned at all, in fact we are working closely with a number of smaller merchants to provide them logistic services under the brand of Yandex market so that's very much still intact and ramping but it's still quite small. So nothing to sort of report at this time in terms of actual metrics but it's not abandoned, it is an important area that we believe in and will work to provide those services to smaller merchants.
On your question of clearly we're not terribly ecstatic about our rent situation. And we are trying to do something about it to reduce our payments, to recast them as rubles or whatever else we can.
However it's obviously difficult when you have a commercial agreement and things are as they are. And we've also been trying to reduce our overall square meters wherever we can and kind of getting rid of office space that we think is extraneous both in smaller offices inside of Moscow as well as in regions.
And I think your last question was on -- remind me…
Vladimir Bespalov
On cash on your balance sheet, if we take cash and cash deposits, it's something about 38 billion I guess, so how are you going to stand this cash, what are you going to do with this?
Greg Abovsky
Sure, so on the balance sheet right now we have U.S. $832 million equivalent of cash, we’ve been using it to buyback our convertible bonds which we think is an attractive use of capital, we’re also are able to buyback our stock, which we might do from time-to-time and beyond that there are sort of no immediate plans of what to do with that.
Operator
We’ll now take our next question from Mitch Mitchell from BCS. Please go ahead.
Mitch Mitchell
Hi and thank you for the call. I actually want to follow-up on [the] questions that have been asked previously, I mean to start with personnel, as I look back at the trend over the last couple of years, 20% of your revenue going to personnel is significantly lower than we saw at the beginning of the year and I know it's higher year-on-year, but I’m just wondering, you talk about this being a good time to invest in [how], but it seems like you are sort of relentlessly trying to cut personnel cost and I’m just help -- if you can help me reconcile those two comments and -- well let me stop there, and then give you the next question.
Greg Abovsky
I think as we said before we slowed down our overall rate of hiring and we’ve basically kept our overall headcount essentially unchanged, if you look back to a year ago, our headcount is down about a 100, if you look back sort of quarter-to-quarter it's just down very modestly, and our personnel cost as a percentage of sales is actually up year-over-year.
Mitch Mitchell
Okay. It still looks a little strange to me, but I'll take your word for it, and then I just wanted to go back to the negotiations, the potential negotiations with equipment manufacturers, the current status under the FAS ruling is that Google should change the contracts with manufacturers by November 18th, but you said they actually have until mid-December to appeal the case, at what point can you actually sit down and start talking to the manufacturer to a point would it be realistic to sign an agreement with them, could that happen on November 19th, or do you actually in effect have the wait until Google loses the right to appeal the decision?
Thanks.
Alexander Shulgin
Mitch this is Alexander speaking. So of course we have started the discussions with OEMs right now, immediately after the FAS decision and we were contact with them before, but our [indiscernible] so currently we see a lot of interest from OEMs, but are cautious a bit looking forward for what Google’s reaction would be, but still then understand that FAS ruling is here and Google probably could appeal, but yet FAS decision tells that the government is looking into it, and current Google's practice will considered to be being unfair and illegal, so I expect us to have something more concrete to say about potential OEM deals in the call, but of course we are OEM with our partners right now.
Mitch Mitchell
Thank you.
Operator
We will take our next question from [indiscernible] with Sberbank. Please go ahead.
Unidentified Analyst
Yes, good afternoon everyone. May I have please two questions, first question is about your potential dividends, you have quite a pile of cash on your balance sheet, would you consider to announce dividend policy in the coming future and pay [stable] dividends?
Greg Abovsky
Sure, this is probably, obviously much better question for our Board of Directors. Given the fluctuation in the exchange rates, which impact our business both vis-à-vis our office rent as well as vis-à-vis CapEx which is dollar-denominated, we kind of felt like it was a little premature to revisit a policy of dividends.
I think if we were to see some stability in the exchange rate I think we would definitely look back to bringing this issue up with the Board and revisiting it. I think that obviously a good, strong and healthy paying dividends and that's kind of how we feel.
Unidentified Analyst
Thank you very much. That's fair enough.
And my second question would about next year, we are pretty much through the current year and you see that we see some kind of stabilization, what would you expect next year in terms of advertising, in terms of recovery of advertising spend and advertising expense and in terms of topline growth?
Greg Abovsky
Sure, look I think it's obviously premature a comment on next year, and we will leave that for our Q4 earnings call. But as I said before, I do think that the economic situation is starting to stabilize somewhat and hopefully the current trends will continue.
Operator
That will conclude today’s Q&A session. I would now like to hand the call back to speakers for any additional or closing remarks.
Katya Zhukova
Thank you once again for joining us today. We will update you on our Full Year 2015 results in February 2016.
And you know how to reach out to us, please feel free to reach out with your questions. Good bye.
Operator
That will conclude today’s conference call. Thank you for your participation ladies and gentlemen.
You may now disconnect.