14.8% Revenue Growth in 2014 for Mail.Ru

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Mail.Ru recently provided the following preliminary unaudited segment financial information and key operating highlights for the full year ended 31 December 2014.

FY 2014 Performance Highlights

  • FY 2014 Group aggregate segment revenue grew 14.8% Y-o-Y to RUR 35,778 million
  • FY 2014Group aggregate segment EBITDA grew 13.5% Y-o-Y to RUR 18,297 million
  • FY 2014 Group aggregate net profit grew 11.4% Y-o-Y to RUR 12,518 million
  • The above revenue and growth rates are based on a full pro-forma consolidation of VK from the beginning of 2013
  • VK FY 2014 revenue growth was 12.9% to RUR 4,319 million and EBITDA growth of 54.9% to RUR 1,603 million. VK Q4 2014 revenue growth was 22.6% to RUR 1,348 million
  • Net debt position as of 31 December 2014 was RUR 16,987 million (excluding interest payable of RUR 147 million)

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

In 2014, the Company achieved aggregate segment revenue growth of 14.8% Y-o-Y to RUR 35,778 million with H2 2014 Y-o-Y revenue growth of 10.2%. This revenue and growth rates are based on a full pro-forma consolidation of VK from the beginning of 2013. VK generated revenue of RUR 4,319 for the full year and RUR 2,315 million in H2. Ex-VK like-for-like revenue growth for FY 2014 would have been 15.0%. Through the year our MMO games and community IVAS revenues remained broadly on budget, but advertising revenues and our Headhunter business continued to face challenging conditions as a result of the ongoing economic and geo-political environment. As in H1 this continued to have a negative effect on our advertising revenues, and in particular the display advertising revenues which during Q4 saw similar declines to the previous two quarters. Our other revenue stream also remains sensitive to the underlying economic environment and hence grew at 5.4% in H2. Including VK from the beginning of the year EBITDA margins were 51.1% in FY 2014 and 51.5% in H2 2014. Ex-VK FY 2014 margins would have been 53.0%.

We continued to be encouraged by the traction of My.com which was launched in November 2013 as part of the wider My.com launch. In Q4 this remained the most downloaded alternative email client on both iOS and Android globally. The US is the largest market followed by UK, France, Germany and Brazil and in January 2015 we had over 2.5m MAU and over 1.0m DAU. In 2015 we have begun some monetization experiments inside of the myMail product.

Key recent developments

  • New versions of myMail apps optimized for iOS 8 and Android 5 with support for offline actions with messages
  • Two-factor authentication (password + SMS code) across most of Mail.Ru projects and mobile apps
  • Conversation view (threads) as an opt-in feature in Mail.Ru email service
  • “Clean up your mailbox” – a handy tool to sort incoming messages into folders “Promotions”, “Social Networks” and “Newsletters”
  • Ability to unpack and view archived files attached to emails directly in web and mobile web
  • Cloud.Mail.Ru moves from beta to production, introduces shared folders and updates apps for iOS and Android with additional security features
  • Launch of mobile advertising in VK
  • ICQ for iOS and Android updated with advanced search, new push notifications, new UI of audio and video calls, faster photosharing

Motivation programme

  • The board has approved a new long-term incentive plan based around restricted stock units; up to 5% of total shares outstanding to be issued subject to a members resolution

Operating Segments Performance FY 2014


(*) The USD numbers represent a convenience translation. The RUR amounts have been translated into USD using FY 2014 average exchange rate of 38.4217 RUR/USD

Operating Segments Performance – FY 2013


(*) The USD numbers represent a convenience translation. The RUR amounts have been translated into USD using FY 2013 average exchange rate of 31.8480 RUR/USD

Operating Segments

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

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

The Social Networks (excluding VK) segment includes our two social networks (OK and My World) and earns revenues from (i) user payments for virtual gifts, (ii) revenue sharing with application developers, 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 almost 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 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, and (ii) online advertising, including display and context advertising.

The E-Commerce, Search and Other Services segment primarily consists of search engine services earning almost all revenues from context advertising, e-commerce and online recruitment services and related display advertising. This segment also includes a variety of other services, which management considers insignificant 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.

You can see the full report here. Nely Bonar