Joint Stock Company Kaspi.kz

Hello everyone and welcome to the Kaspi KZ 4Q FY23 Financial Results Conference Call and thank you for standing by. My name is Daisy and I'll be your operator today. If you would like to ask a question on Zoom, please use the raise hand button to ask an audio question or if you've joined us via the phone, please press star followed by one on your telephone keypad. I would now like to hand the call over to your host, David Ferguson from Kaspi to begin. So David, please go ahead.

Hey, hi, everybody. Thank you, Daisy. So welcome to our full year 2023, a results call. As usual, the full team are on the call. We've got Mikheil Lomtadze, Tengiz Mosidze, and Yuri Didenko. I'm David Ferguson from Kaspi. We'll do the usual format. Mikheil will run you through the strategic update. I'll take some of the financial slides and then we'll open the call up to Q&A and the whole team is available for your questions. So on that note, I'll pass the call over to Mikheil. Mikheil, over to you.

Hello, everyone. So it's our first call since we last listed on Nasdaq, so it's exciting to report our and some of the strategic updates from me and some of the priorities which we're working on. So we can go through the presentation. I mean, first of all, you know, our main goal really to Western and NASDAQ was also to Achieve the high liquidity. So as you can see from this slide, the average daily volumes are 12 times of London Stock Exchange. So we believe that's great for the company and its shareholders. And as we made an announcement also that we'll be approaching to the lease from London Stock Exchange to consolidate liquidity. Our mission to remind everyone, I think that's really important for us, our entire team is to develop the products which are highly relevant. They are world-class mobile services, high quality, but also innovate in order to improve people's lives. And we innovate through two sides of our sort of targets. customer that would be on the one hand would be the merchant and on the other hand would be a consumer and the merchant is the Kaspi.pay mobile app and the consumer is Kaspi.kz and both mobile apps are the super apps what we call them and our definition of the super app is all these different services which are in a single mobile application and those services are highly diverse and integrated around the regular needs of the consumers and the merchants. So if we go to look into some of the services that we have in our apps, I'm not going to go through them, but I think, you know, as you might appreciate, very few companies have had such a range of the services for both consumer and the merchant. So on the one hand, we have, you know, consumer super app where we are Serving 14 million monthly users and here we have everything from e-commerce and grocery to travel and fintech financial services and buy now pay later or general purpose loan the QR which is the backbone of our proprietary payment network so pretty much everything around shopping and the payments and moving money between the users on the one hand of the Thank you very much. We are kind of the initial stage actually of the wave of innovations for the merchants. So on the one hand, you have everything around the daily needs and the regular needs of the consumer. And then on the other hand of our value chain, you have the merchants that are actually selling the items to those consumers or accepting the payments from those consumers. And those two super apps are not... and many more. is the foundation for that proprietary payment network. And we just move money between the consumers and merchants and also between the merchants themselves and between the consumers themselves. The marketplace enables, if the payment enables to accept the payments or pay, the marketplace enables the merchants to sell their goods and items and services and consumers to actually buy. and the goods. Then we have the logistics platform, which also connects again. Merchants can onboard to our platforms through their KaspiPay functionalities, and then consumers have the variety of the logistic sort of delivery options, you know, from Postomat, which is the automated personal machine sort of locker functionality into door delivery. And then advertising, which we are also scaling and I will talk a bit about these services later. You know, it's actually an ability for the merchants to advertise those services to reach the right buyers at the right time with the right offer. And that's a very nice functionality which also is useful for the consumers because it's highly personalized, but also for the merchants to increase their sales. So those two apps are connected to this sort of what we would call four platforms, you know, the The Payments Network Marketplace platform, logistics, delivery, and the advertising services. And they're seamlessly working between them. Our priority historically has been always to drive the engagement, to drive the transactions. And as you can see, just a reminder, we are one of the highest engaged app compared to some other global apps, which you might know. So 65% is actually the share of the monthly users which visits our app daily. So 65 people out of 100 monthly visitors would come daily to our app and that's really the result of all these different services around regular needs of the consumer which are in a single mobile application and that's probably one of the most important metrics just to underline how relevant our services are. and as we're continuously adding the new services, the new verticals, and the new businesses, you know, if you look at our business, we have been constantly innovating. We drive the transactions and transactions are important just because that is actually our ability to deliver the value to the merchant and the consumer because transaction is all about buying something, you know, paying for something and as you can see on the GNV side of things with We've grown very nicely last year, 38%. And we've grown also nicely on the payment transactions, 38% as well. So we processed 4.2 billion payments last year and almost 165 million purchase transactions. And at the same time as we sort of continue driving all those services and they grow individually. They contribute to the highest sort of transactional engagement for the consumers. As you can see now, we are doing 71 monthly transactions per active consumer. So that's up 17% from 60 transactions a month per consumer in 2022. And that just basically tells you that, you know, consumers are, you know, transacting through our platforms, you know, and more times a day. And that's really a remarkable number. And again, the transactions are important because this is how we monetize directly through the value of the acquiring fees, the seller fees and now advertising and delivery, but also indirectly because this type of engagement really enables us to personalize highly the consumer experience and make sure that our business is constantly, you know, and many more. Thank you. Our revenue increased 51% to reach $4.2 billion, equivalent of 1.9 trillion tenge in 23. Net income grew 44%, so to $1.9 billion. And then the earnings per share have grown to $9.6 per share, which is 45% growth. and we are also happy to announce that there will be a dividend proposed to the subject to the shareholder approval for the fourth Q of 23 of about 850 Tenge per share dividend payment. As we continue growing different services, the payments and marketplace are the fastest growth. So here we're also happy to report that we're sort of becoming the increasingly diversified business, very unique in its nature, but also these different revenue sources and different net profit sources, which we constantly create by entering the new verticals. So as you can see, 66% of our net income in 23 now comes from the payments in the marketplace. And those are the businesses which grow the fastest. And actually they are, you know front end of the consumer relationship and they will continue growing faster than the fintech and we'll be taking increasing share of our bottom line and also in 20 through and in 24 and beyond. This is cohorts, so we show cohorts in our annual numbers so that basically is another indication of our growth so you can see that we have been growing nicely our are showing a very nice sort of similar growth year over year. And 62% of our consumer base comes from the four recent years. So those consumers will continue transacting also in the future. And again, you can see the years you know we're sort of in the five years consumers transacting you know we increase the tpv per consumer 12 times and if you look at pretty much every cohort they are behaving in a very similar way so which means there is more opportunity to do you know sort of volumes of the business around the consumer needs and uh yeah and we're continuing adding the more reasons for consumers to pay for um another cohort is for our marketplace so here you see You know, the same strong growth. 50% of our consumers are coming from the last four years. And then the marketplace continues, you know, growing very nicely. We are probably one of the few marketplace platforms which continue continuously, you know, grew through after the COVID environment. And, you know, that's really the reason and all the added value services like delivery or advertising. also helping and driving the growth because they're convenient for consumers and they're increasing sales of the merchants. This is the slide about the penetration of some of our existing services that we have. So as you can see, you know, we have services which are sort of lower penetrated, especially on the marketplace side of things. And again, that's pretty natural, right? The consumer, the step number one for consumer to onboard is and they pay through our payment network and the QR transactions and then after payment what comes is actually they can buy things and they can buy things which are e-commerce or the travel or the grocery and all of that is really helping the merchants to first accept the payments then they are listing their items and we're helping with the delivery and other services to increase their sales So that's a natural evolution of the consumer journey and some of the lower penetrated services that would be growing much faster than everything else would be on the penetrated ones like grocery or e-commerce, for example, the travel. So all those services have the very good potential for the growth. And then some of the new services which we have been scaling and launched like online car finance, for example, which we're scaling as we speak and that would be the also the foundation for the car marketplace which we intend to create. So all of those services which you have now, basically some of them will continue delivering the short growth just because they are under-penetrated, but even the penetrated services that we have are going fast like QR payments as you can see, TPV has grew 43%. On the merchant services, it's kind of another and many more. Thank you very much. and many more. Thank you. We are in the weekly purchase. That is why we have, you know, sort of 11,000 SKUs and average ticket around $25, sort of $29. And then the delivery is sort of same day delivery and it's largely free of the basket above, you know, 5,000 Tenge. So, and then delivery speed, you know, is and we're delivering the orders from the one central location which actually carries those 11,000 SKUs. So I have been showing a very strong growth as a grocery business itself. When you look on the screens you can actually see how the whole value chain is and many more. Thank you very much. Thank you. and many more. Half a million consumers shopped with us in 2023, and the average ticket grew slightly during the year to $29 now. And then we've enabled 5.2 million purchases in 2023, which is 3.3 times growth. There has been a lot of discussion about very few markets where this business has been profitable. So I think we just would like to put this discussion to bed, really. We told you last year that we would be focused on execution, delivering very consistent experience that results in profitability and efficiency. So this is the case study for Almaty. This is where we launched this service last year. And as you can see, in just 12 months, we grew the revenue 164% in a fourth We achieved a net income margin of 6%. Now, fourth Q is a good quarter for any retail, right? Because it's sort of New Year, Christmas shopping. But still, we were already profitable in the third Q. We were profitable in the second Q, as I reported earlier in the middle of last year. So that's basically the extraordinary achievement by itself. and then in the fourth queue we processed 1 million payments orders in the fourth queue and we served 10% of the population. So, you know, around 218,000 consumers made the purchase in Almaty with our e-grocery proposition. So we're very excited about this business and we're scaling now in Almaty and Astana which are and we will be entering the third largest city also during the year so those would be almost half of the total retail trade in the country and yeah we're confident and comfortable that we can grow efficiently this business deliver authentic consumer experience which actually results in the efficiency and profitability for us. Tours, another example of our innovation last year. So we launched the Kaspi Tours vacation packages marketplace basically end of 2022 and we're scaling through 2023. So now what we have is full functioning marketplace. So you can search a vacation The 71% of all destinations, the most popular ones are actually Turkey, Emirates and Egypt. Then you can select the hotel and we have about 6,000 offers of vacation packages in our app. You can read through all the details and again, this is very important to keep in mind that this is a complicated user experience. So you want to make sure that you present the information fairly, the consumers are happy, they make the decision right, but you can also connect to the operators, which are on the ground, which, you know, once you arrive to airport, you will be greeted and meet them, and they will check you in the hotel. So, and the good thing about this business is that it's in excess of 2,000 average ticket, which is very meaningful for household budget, but also, you know, very, yeah, very good for us as an extension for airline and railway tickets. and then it's fully integrated with our payments and FinTech platforms so you can seamlessly pay. And yeah, again, the consumer experience is extremely important, especially the family vacation and almost 90% of consumers rate the service as excellent. So we have been scaling this last year, so happy to report that has been growing very nicely. So we grew during the year 185%, but what is actually important and we achieved 5% of the GFV of the travel business in the fourth year. So we're just sort of starting, but already quite a meaningful contribution. But what is important is also the take rate, right? The take rate of this service on average has been around 8.7%. And that basically is the take rate enhancing business for us. But also again, it's a very, Very natural expansion for the travel value proposition for our consumers. We started with airlines, if you remember, then we joined the train, and now we moved into the vacation packages. So really excited about this business. We continue growing this year. Postomats, that's another innovation which we've built during the last couple of years. Now we're almost 6,000, which was our target, if you remember. We're targeting this year 7,000 by end of 2024. We'll largely build the network. So the network of automated personal machines now is the largest last mile network for e-commerce in the country. We've grew 78% the number of customers and almost 40% of all the deliveries are now done through the lockers, Kaspi customers. And then again, just to remind you, right, that The economics of it are quite simple. Instead of delivering 70 parcels to individual apartments or the houses with a success ratio, actually is not, you know, it's, you know, you can have, you know, person is not there, you know, consumer needs to talk to the courier for comfortable time arrangement and so on and so forth. So it's not really You know, that convenient as a customer where you can actually go anytime you want. And consumers love this experience. We're scaling it. And that is a very important source of our competitive advantage, but also it's important backbone now for our smart logistics platform, which, you know, we're developing. So if we look at the value chain of our logistics platform, we have taken the view is that, you know, In order to deliver the parcels to consumers from merchants, you don't really have to own that many assets and really employ your shelf delivery people, almost the same way like you don't really need to own the taxi and employ the taxi driver in order to provide the riding services. So we took the view that we are building the platform, which manages the entire network. It gets all the people and the entities participating in the value chain actually connect. So we have technology which enables the whole process management. We have labeling, which is basically the entire same label through the process, which is extremely important for the efficiency. And then we have technology, which is the machines learning AI-driven technology in the middle, which basically makes sure that the routes are selected in the most efficient way. And then we have a front end of relationship with the couriers where we have app which actually manages the courier experience. So all of that really has been providing a very strong result. So we have grown 130% in orders, 88% of those orders free, and we deliver over half of those orders in less than two days. And again, this is probably the largest technology platform for delivery in the region, and we are enabling this without actually owning huge assets or employing directly delivery people, but we create a lot of jobs. So the infrastructure itself, if we go to the next slide, is actually quite impressive. We serve around 60,000 merchants, almost 6,000 posthumous we have across the country. We provide the platform and technology for almost, you know, around 2.5 thousand poor years. You know, we have delivery stations in the cities. We have the pickup points for the merchants, so the merchants also can deliver their items. Consumers can pick up. So yeah, blindfold companies like airlines and big trucking companies. So the whole value chain we manage is actually quite massive. 156 cities we deliver. And the country size is huge, right? And we're still making this efficiently and continuously fueling our marketplace We're excited and we'll continue developing that technology in order to enable even more orders delivered as our marketplace continues growing, in e-commerce specifically, which grew very nicely last year and continues growth this year. As we continue thinking about the merchants, we are also delivering the What we call sort of added value services for merchants. So this is an example of advertising, which we have been carefully designing. So we deliver value for merchants. Merchants actually get the value in the sales increase at the reasonable marketing costs. So merchants can actually, this is auction-based, right? So it's almost like, you know, Google ads or Amazon ads, very similar sort of functionality by nature. Merchants can launch the campaign. Merchants can manage the campaign, select the items which they want to advertise. They have analytics which they can decide on the efficiency of the advertising. And we have been scaling this quite carefully again just to make sure that the merchants get the value for it, for the marketing money they spent. And I'm happy to report that the growth has been... Very nice. David, can I have next slide, please? So growth has been very nice. So as you can see on the advertising and the delivery, we have grown almost three times year over year. So 2.7 times growth on Valuated Services. Another angle to look at is take rate. So take rate is 1.4% additional take rate to seller fees from delivery, 0.5 take rate to advertising. So added value services now contribute 1.9% of the take rate on e-commerce. And yeah, and we're just really at initial stage of the monetizing value-added services and driving the growth. And those are just these two examples of those on top of the B2B payments. The B2B payments now is becoming a meaningful contributor to our business in the bottom line. So as you can see that we have grown B2B to 2.1 times in 23, now 2.4 billion worth of transactions. And then almost 25 million transactions processed in 23. And again, this business is enabling the transaction when guys like You know, Coca-Cola or Pepsi, Nestle, you know, they're delivering their sort of packages, items to the convenience store. You know, we're settling the invoices seamlessly between this convenience store and the brand or its distributor or its wholesaler. So that is extremely, you know, powerful business because we deliver a lot of value. We make these transactions seamless, you know, like almost like P2P payments for businesses. and that is our first service we launched on the B2B side of things. It still continues growing very nicely, but if you combine together the payments and now we're scaling advertising and delivery, all those services for B2B would be also added value services. B2B services would be the first range of innovation from us. But they have delivered already a very nice growth and contributed to the bottom line in 2023. As we got focused on the classifieds, and I've mentioned to you last year that probably buying the car is one of the most important household family decisions after buying the real estate. So we like this fact that now we're thinking about actually organizing the experience around that important household decisions. So we are building the car marketplace where we enable the transaction, which is the dream for any classifier, right? Can you get to the transaction actually from just advertising? And here is an example of where getting this transaction enabled through our seamless online car loan financing. We leverage our FinTech, again, scaling So you can actually search the car, you can select the car, you can immediately get approved, which is an important functionality in our competitive advantage that we can actually approve seamlessly in seconds, high quality financing. And then you can pay all the fees that you need to pay around the car and its registration through our government, the GovTech platform, government services. and then you can pick up the car. So that's the process, which is very seamless, high quality. And yeah, so we are scaling now. The intention is to build the car marketplace. We're also piloting 1P car marketplace with very promising results. And yeah, I will just take the opportunity to talk about it later in the year, but really excited about building the car marketplace and actually different services around the cars that the houseboat can have. Yeah, so you do it now.