VK COMPANY LIMITED
VK Company (VKCO)
VK Company Limited unaudited results for Q1 2022
April 28, 2022. VK Company Limited (LSE, MOEX:VKCO, hereinafter referred to as "the Company" and together with its subsidiaries "VK" or "the Group"), today releases unaudited IFRS results and segment financial information for the three months ended 31 March 2022.
Performance highlights* Results for the three months ended 31 March 2022:
* This release presents Adjusted revenue, Adjusted EBITDA, Adjusted net profit/loss, which are non-IFRS financial measures.
VK's net debt position excluding lease liabilities at the end of March stood at RUB 54,387m (RUB 70,689m including lease liabilities). Net Debt (including lease liabilities) to LTM Adjusted EBITDA was 2.46x as of the end of March.
Due to the ongoing suspension of trading of VK's GDRs on the London Stock Exchange, a "De-listing Event" for VK convertible bonds has occurred. The Company is developing a proposal to the bondholders to address the event and possible alternatives to the put option exercise together with the appointed advisors. The Company has also announced a number of changes to the Board of Directors as well as the management team in year-to-date. The Board of Directors was enhanced with additions of a number of Russian Scientific Community Members, along with appointments of a number of senior leaders in areas such as AI,Information Security, Investments and Business Development, Marketing and others within the management team. VK has also added a new position of a dedicated ESG Manager as a reflection of its ongoing focus on the sustainable development agenda. Given the still limited visibility and high level of uncertainty, the Company refrains from providing forward guidance and outlook at this stage. While there will be no regular results call at this time, VK welcomes any queries from its stakeholders using the Investor Relations contact details below and remains available for individual incoming call requests.
In our effort to further enhance our reporting quality, we transformed Group's aggregate segment financial information previously presented in the form of management (CODM) accounts starting from Q1 2022 results. In addition to IFRS-based disclosure, we will report adjusted metrics, which are used in the management decision making process, with a clear transition between IFRS-based results and adjusted metrics to be provided, including within segmental disclosure.
In 2022 the Company changed its approach to allocation of corporate service expenses. Previous period (2021) was restated accordingly for comparison basis with related reference file available on the VK website:https://vk.company/en/investors/materials/. The Company analyzed functionality of key services and defined appropriate drivers to allocate expenses for each service. Previously the Company applied a single driver in allocation of all such expenses based on the share of each segment in direct costs.
Segmental highlights
Communications and Social segment
The segment's Adjusted revenue was up 9% YoY to RUB 14.6bn in Q1 2022, with advertising revenue and Community IVAS being the largest revenue components. The segment's IFRS revenue was up 10% YoY to RUB 14.6bn in Q1 2022. Adjusted EBITDA declined by 13% YoY to RUB 4.9bn in Q1 (with a margin of 34% vs 42% a year ago) due to higher personnel expenses and investments into music content.
Communications and Social Segment Performance - Q1 2022
VKontakte
VKontakte maintains its lead among social networks in Russia with an average MAU of 73.4mn (+1.3% YoY) and DAU of 47.2mn in Q1. March marked several new records, including Russia MAU of 75.8mn, peak Russia DAU of 50mn, along with global MAU exceeding 100mn for the first time (100.4mn, +2.4% YoY). As of March, mobile time spent on VKontakte was at 44.2 minutes per day and as high as 57.1 minutes per day for the most engaged age group, 12-24 y.o*.
The number of VK Mini Apps rose by 43% YoY in March to 42,000, with an average MAU of 41.8mn in Q1 (+8.4% YoY). In the meantime, in-app ad revenue of mini apps and games on the VK Mini Apps platform grew by 89% YoY in Q1.
VK Video (rolled out in October 2021) reached an all-time high of 2.45bn daily views in March with average daily views at 2.11bn for the quarter. In March, VK Video was scaled to Smart TVs. VKontakte saw growth in video views on the social network itself, with 957mn (+20% YoY) in average daily views in Q1, peaking at >1.3bn views in March.
VKontakte is seeing an increase in content creation and consumption in Russia. In March, the number of created communities increased by 68% YoY, while the number of confirmed friend requests was up 30% YoY. The number of newly registered users also rose by 63% YoY, and news feed views increased by 16% YoY.
Creators using VK Donut earned over RUB 67mn in Q1 (+25% QoQ), with the number of public pages using VK Donut up 1.6x YoY and the number of paid community subscribers up 2x YoY in Q1.
The total number of active businesses on VKontakte reached 2.4mn in March.
* Source: Mediascope, March 2022, Russia (all cities, age 12+), Mobile.
Odnoklassniki (OK) Average Russia MAU stood at 38mn in Q1, with high engagement reflected in more than 8.9bn virtual gifts, 580mn postcards and 545mn stickers sent during the quarter. The number of new user registrations in March grew +17.8% YoY and the number of restored profiles grew +30.5% YoY, driven by the 25-45 y.o. age group, with new users demonstrating above average engagement.
Moments MAU reached 28.5mn in March (+1.7x YoY). The number of views stood at 450mn (+2.2x YoY) and reactions at 41mn (+2x YoY) in Q1.
Payments to game developers for advertising in their projects increased by 2.2x YoY in Q1.
Pulse and Relap (recommendation platforms) In Q1, Pulse DAU stood at 7.6mn (+32% YoY), with MAU of 86.8mn (+40% YoY). Relap DAU stood at 7.4mn (+0.1% YoY) in Q1, with MAU of 100mn (+0.3% YoY). Combined Adjusted revenue reached RUB 559mn in Q1 (+224% YoY). Timespent per active user increased by 17% YoY to 13.5 minutes.
Games segment (represented by MY.GAMES)
MY.GAMES Bookings (Revenue adjusted for changes in deferred revenue or Adjusted revenue) increased by 5.3% YoY to RUB 11.5bn. ~94% of Bookings came from F2P games, with mobile share at 76% of the total in Q1 (versus 78% in Q1 2021).
The Games segment Adjusted EBITDA declined to RUB 0.2bn (versus RUB 2.1bn in Q1 2021) due to heavy user acquisition (UA) investments.
Average MAU stood at 27.9mn in Q1 (+33.6% YoY). The share of monthly paying users declined to 3.8% given the higher exposure to the hyper casual genre.
Games Segment Performance - Q1 2022
EdTech segment (represented by Skillbox Holding Limited), which includes Skillbox, Geekbrains, Skillfactory, Mentorama, Lerna
Adjusted revenue rose by 27% YoY to RUB 2.7bn in Q1 2022, while the segment's IFRS revenue was up 62% YoY to RUB 2.8bn. EdTech delivered an Adjusted EBITDA loss of RUB 0.4bn in Q1 compared to a loss of RUB 0.1bn in Q1 2021 due to weaker demand in March and accrued tax reserves in 1Q.
EdTech Segment Performance - Q1 2022
The platforms reached 10.8mn in combined cumulative registered learners as of the end of March, up 1.5x YoY, with 0.5mn in new registrations during the quarter. The cumulative number of paying learners approached 383,000, up 1.9x YoY, with nearly 34,000 of new paying learners added during Q1.
New Initiatives segment
The segment's Adjusted revenue was up 15% to RUB 2.1bn in Q1, with B2B (including Cloud) being the main growth contributor. New Initiatives Adjusted EBITDA loss amounted to RUB 1.7bn (vs. the loss of RUB 1.3bn in Q1 2021), which implies a -78% margin.
New Initiatives Segment Performance - Q1 2022
VK Clips(short video) Daily views of VK Clips averaged 471mn (+111% YoY) in Q1, with a new record of 1bn daily views reached on 3 April. Content creators posted more than 4mn new Clips in Q1 (+154% YoY). In March, VK Clips launched a RUB 100mn grant program to support content creators.
Youla (classifieds) Average MAU grew by 27% YoY reaching 42mn in Q1, stimulated by the ongoing rollout of VK Classifieds - 196,000 Groups in VKontakte are now able to show relevant listings via VK Classifieds.
Joint Ventures
O2O JV (equal 45.01% ownership between Sber and VK: Delivery Club 98%, Samokat 85%, r_keeper 99%, Local Kitchen 85%, Citymobil 97%, Citydrive 77%) GMV of O2O JV reached RUB 56bn (+39% YoY) in Q1, with +84 YoY growth excluding Citymobil*. Adjusted EBITDA?burn stood at minus RUB 6.4bn with e-grocery being the main investment area. At the same time, continuous focus on operational efficiency resulted in an Adjusted EBITDA margin of minus 11% (as % of GMV), an improvement versus minus 16% in Q1 2021.
Key-asset highlights Delivery Club generated RUB 4.8bn in revenue (+75% YoY) in Q1, with a 71% YoY growth in orders (to 30.2mn). 1P orders stood at 67% of total platform orders in Q1 (versus 59% in Q1 2021), while e-grocery orders amounted to 29% of total (versus 11% in Q1 2021), with a new milestone of 120,000+ in daily delivered orders from retail stores reached in March. Delivery Club's partner network reached almost 56,900 in March (+31% YoY), including around 9,500 retail stores.
As a result of the expanding offer and the ongoing improvements in the service level (with an average delivery time of 29.6 minutes in Moscow in March), the average frequency increased QoQ and YoY, with ~5.4 orders/active user in Q1 and the number of active customers up 19% YoY to 5.6mn.
Samokat grew revenue by 2.6x YoY (to RUB 15.3bn) in Q1, with 28.5mn in orders (+2.6x YoY), including up to 317,000 in daily orders in March. Samokat launched operations in 9 new cities in Q1, now available across 49 Russian cities with access to ~32% of the local population.
Samokat's dark store base reached 1,092 in March (+2.2x YoY), being among the largest globally.
The category base continues to expand with an addition of ready-to-eat food and Beauty in Moscow. The private label SKU base reached 764 and contributed almost 20% of revenue in Q1.
Citydrive grew rides by 1.8x YoY in Q1 through its 9,375 car park with GMV more than doubling to RUB 1.3bn.
*O2O JV has signed legally binding documents on the sale of Citymobil assets on April 15th. The deal is scheduled to be closed in Q2 2022.
For further information please contact: Investors Tatiana Volochkovich Phone: +7 495 725 6357 extension: 3434 E-mail: t.volochkovich@vk.team
Press Alina Fedorova
Cautionary Statement regarding Forward Looking Statements and Disclaimers This press release contains statements of expectation and other forward-looking statements regarding future events or the future financial performance of the Group. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "forecast", "intend", "will", "could", "may" or "might", the negative of such terms or other similar expressions including "outlook" or "guidance". The forward-looking statements in this release are based upon various assumptions that are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and may be beyond the Group's control. Actual results could differ materially from those discussed in the forward-looking statements herein. Many factors could cause actual results to differ materially from those discussed in the forward looking statements included herein, including competition in the marketplace, changes in consumer preferences, the degree of Internet penetration and online advertising in Russia, concerns about data security, claims of intellectual property infringement, adverse media speculation, changes in political, social, legal or economic conditions in Russia, exchange rate fluctuations, and the Group's success in identifying and responding to these and other risks involved in its business, including those referenced under "Risk Factors" in the Group's public filings. The forward-looking statements contained herein speak only as of the date they were made, and the Group does not intend to amend or update these statements except to the extent required by law to reflect events and circumstances occurring after the date hereof.
About VK VK develops the ecosystem helping millions of people with their day-to-day needs online. More than 90% of the Russian internet audience use it every day. The ecosystem enables people to keep in touch (using social networks OK and VKontakte, messaging apps and email service), play video games (via MY.GAMES), get and offer items and services (via Youla), order food and grocery delivery (via Delivery Club, Samokat and Local Kitchen), get a ride (with Citydrive), master new skills (at GeekBrains, Skillbox and other educational services), buy and sell at AliExpress Russia and fulfill other needs. The VK ecosystem features a number of shared elements bringing the services together. Users can sign in to different services with a single VK ID account, pay and earn cash back with the VK Pay platform, get discounts and deals with VK Combo, access their favorite services via the VK Mini Apps platform - and the Marusya voice assistant can help with any task. The company offers enterprises to employ its dynamic ecosystem to digitize their business processes, providing a range of solutions from online promotion and predictive analytics to corporate social networks, cloud services and enterprise automation. THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY THE COMPANY TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (REGULATION 596/2014/EU) AS IT FORMS PART OF UK DOMESTIC LAW PURSUANT TO THE EUROPEAN UNION (WITHDRAWAL) ACT 2018, AS AMENDED. UPON PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
Filing of the Annual Report for FY 2021 and Interim Condensed Consolidated Financial Statements for Q1 2021 The Group's Annual Report and audited consolidated financial statements for the year ended December 31, 2021 prepared in accordance with IFRS and accompanied by an independent auditor's report have been filed on the National Storage Mechanism appointed by the Financial Conduct Authority and can be accessed at https://data.fca.org.uk/#/nsm/nationalstoragemechanism or on the Group's website at https:// vk.company/media/files/vkarfy2021.pdf
The Group's interim condensed consolidated financial statements for the three months ended 31 March 2021 prepared in accordance with IFRS and accompanied by an independent auditor's review report have been filed on the National Storage Mechanism appointed by the Financial Conduct Authority and can be accessed at https://data.fca.org.uk/#/nsm/nationalstoragemechanism or on the Group's website at http:// vk.company/media/files/vkifrsq12022.pdf.
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(*) The numbers in this table and further in the document may not exactly foot or cross-foot due to rounding. (**) Please refer to "Presentation of Segment Financial Information" forreconciliation of non-IFRS measures (Adj.revenue, Adj EBITDA and Adj. net income/(loss) to IFRS
Operating Segments In order to assess operational performance and allocate resources, the Chief Executive Officer of the Group, who is the Group's Chief Operating Decision Maker (CODM), reviews selected items of each segment's income statement, assuming 100% ownership in all of the Group's key operating subsidiaries, based on management reporting. In our effort to further enhance our reporting quality and transparency, the Group's aggregate segment financial information previously presented in the form of management (CODM) accounts has been transformed starting from Q1 2022. In addition to IFRS-based disclosure, we have reported adjusted metrics, which are used in the management decision making process, with a clear transition between IFRS-based results and adjusted metrics to be provided, including within segmental disclosure.
Revenue in Segments Performance correspond with revenue according to IFRS. To supplement the financial information prepared and presented in accordance with IFRS, we have presented the following non-IFRS financial measures: Adjusted revenue, Adjusted EBITDA, Adjusted Net profit. The composition of the reporting segments reflects the Group's strategy, the way the business is managed and units' interconnection within its eco-system. The Group has identified the following reportable segments on this basis:
The Communications and Social segment includes email, instant messaging and portal (main page and media projects). It earns substantially all revenues from display and context advertising. This segment also aggregates the Group's social network Vkontakte and two other social networks (OK and My World) and earns revenues from (i) commission from application developers based on the respective applications' revenue, (ii) user payments for virtual gifts, stickers and music subscriptions and (iii) online advertising, including display and context advertising. It also includes Search and music services. These businesses have similar nature and economic characteristics as they are represented by social networks and online communications, common type of customers for their products and services and are regulated under a similar regulatory environment. The Games segment contains online gaming services, including MMO, social and mobile games, games streaming and platform solutions operated by the Group under the MY.GAMES brand and within the MY.GAMES ecosystem. It earns substantially all revenues from (i) sale of virtual in-game items to users (f2p) or sale of digital copies of the games (b2p), (ii) royalties for games and gaming solutions licensed to third-party online game operators (iii) in-game advertising and (iv) revenues from streaming services and gaming platform services. The EdTech segment includes the Group's online education platforms with educational courses and programs (such as GeekBrains, Skillbox and Skillfactory) and earns substantially all revenue from individuals for education technology services. The New initiatives reportable segment represents separate operating segments aggregated in one reportable segment for their similar nature of newly acquired or newly launched and dynamically developing businesses. This segment primarily consists of Youla classifieds that earns substantially all revenues from advertising and listing fees, VK Clips with potential to become a major separate product with the planned launch of own application and target presence across the various Group's services, B2B new projects including cloud along with other services, that are considered insignificant by the CODM for the purposes of performance review. Since Q1 2022 the Group has changed its approach to allocation of corporate services expenses. The Group has analyzed the functionality of key services and defined appropriate drivers to allocate expenses of each service. Previously the Group applied a single driver in allocation of all corporate services expenses, based on the share of each segment in direct costs. Non-allocated items - Allocations exclude services that are mostly related to general group issues, as well as expenses that cannot be tied to a particular BU, such as PR, Investor Relations, Government Relations, and other services. Operating Segments Performance - Q1 2022
Operating Segments Performance - Q1 2021
Liquidity As of 31 March 2022, the Group had RUB 19,086m of cash and RUB 73,473m of debt outstanding (excluding lease liabilities), therefore the Group's net debt position was RUB 54,387 million. Presentation of Segment Financial Information The Group aggregate segment financial information is derived from the financial information used by management to manage the Group's business by aggregating the segment financial data of the Group's operating segments and eliminating intra-segment and inter-segment revenues and expenses. Group aggregate segment financial information differs significantly from the financial information presented on the face of the Group's consolidated financial statements in accordance with IFRS. In particular:
A reconciliation of group adjusted EBITDA to IFRS consolidated loss before income tax expense of the Group for the three months ended 31 March 2021 and 2022 is presented below:
A reconciliation of Group adjusted net loss to IFRS consolidated net loss of the Group for the three months ended 31 March 2021 and 2022 is presented below:
Interim Condensed Consolidated IFRS Statement of Financial Position
Interim Condensed Consolidated IFRS Statement of Comprehensive Income
Interim Condensed Consolidated IFRS Statement of Cash Flows
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| ISIN: | US5603172082 |
| Category Code: | QRF |
| TIDM: | VKCO |
| LEI Code: | 2138009IXUP41SPL5B50 |
| Sequence No.: | 158116 |
| EQS News ID: | 1337609 |
| End of Announcement | EQS News Service |
