QIWI plc

Good day, everyone, and welcome to the Kiwi Third Quarter 2020 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Mrs. Varvara Kisileva, Interim Chief Financial Officer of Kiwi. Please go ahead.

Thank you, Operator, and good morning, everyone. Welcome to the Kiwi Third Quarter Earnings Call. I'm Varvara Kisileva, Interim Chief Financial Officer And with me today are Boris Kim, our Chief Executive Officer, and Andrei Protopopov, Chief Executive Officer of the Payment Services segment. A replay of this call will be available until Thursday, December 3, 2020. Access information for the replay is listed in today's earnings press release, which is available at our Investor Relations website at investors.kivi.com. For those listening to the replay, This call was held and recorded on November 19, 2020. Before we begin, I would like to remind everyone that this call may contain forward-looking statements if they are defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements about our expectations for future performance are subject to known and unknown risks and uncertainties. Give you caution. that these statements are not guarantees of future performance. All forward-looking statements made to date reflect our current expectations only, and we undertake no obligation to update any statements to reflect the events that occur after this call. Please refer to the company's most recent annual report on Form 20F filed for the Securities and Exchange Commission for factors that could cause our actual results to differ materially from any forward-looking statements. During today's call, management will provide certain information that will constitute non-IFRS financial measures, such as total net revenue, adjusted EBITDA, adjusted net profit, and adjusted net profit per share. Reconciliations to IFRS measures and certain additional information are also included in today's earnings press release. With that, we'll begin by turning the call over to Boris Kim, our Chief Executive Officer. Boris.

Thank you, Barbara, and good morning, everyone. Thanks for joining us on this call today. I'm glad to share our third quarter 2020 financial results. This quarter, we continued to demonstrate robust performance in our payment services segment, as well as in our other projects. Our payment services segment showed solid results and delivered 11% net revenue and net profit growth. This growth was largely supported by several factors, including abnormally high density of sport events in the third quarter, as well as growth in our strategic self-employed streams. This quarter, we also successfully closed the sale of Solvist and concluded the wind-down of RocketBank. This helped us to refocus on our core payment business, as well as on projects that can be synergetic to our key products, consumer niches and competence. This being said, we also continue to optimize and improve the efficiency of our operations across all projects. Moving further, I would like to share with you our several trends that I believe are currently important for our business. Today, we see increasing uncertainty related to the spread of coronavirus. Moreover, as a result of several other factors, we may expect further deterioration of the consumer patterns, and disposable incomes in Russia. We have not yet seen any substantial effects of the decrease of the purchasing power of the population on our operations. Our diversified portfolio of services and circular growth in our key markets cushioned the negative trends so far. However, we may expect certain negative effects to be visible going forward and into 2021. Secondly, We have noted in the past and are likely to continue to see in the future constant defaults of our governmental bodies to adopt more robust and stringent regulations in respect of our key products and markets. This may include, without limitations, more elaborate wallet KYC requirements, establishing certain limits for the digital wallet transactions, both in respect of their types and maximum amounts, specific rules and regulations in respect of the cross-border transactions and regulation of the sport betting market. As of today, a number of legislative initiatives have been discussed by different legislative bodies, formally or informally, that can eventually become legislative proposals or laws and impose additional pressure on our operations. As of now, we cannot make any reliable assessment of the impact that these trends may have on our 2021 results of operations, but we continue to closely monitor the situation and will provide our 2021 guidance in due course. Despite uncertainty and challenging economic and operating environment, we see diverse opportunities for growth in mid- and long-term, including through general digitalization trends, new niches and services for self-employed, as well as certain B2B products and services. I do believe that we are well positioned to continue developing our business and strengthening our ecosystem to provide our clients with the best in-class digital solutions. Now, on some operating highlights. Third quarter 2020 total net revenue increased 11% to reach 6.6 billion rubles, up from 6 billion rubles in the third quarter of 2019. The increase was mainly driven by payment services segment and corporate and other category net revenue growth, as well as by positive contribution of RocketBank, as opposed to negative effect on total net revenue for the same period of the prior year. Andrei will discuss the performance of our payment services segment in a minute while I walk you through the results of our other projects and segments. Corporate and other category net revenue was 449 million rubles as compared to 268 million rubles in the third quarter of the prior year. Net revenue growth in other category was primarily driven by factoring plus net revenue growth. Factoring plus net revenue grew to 182 million rubles as compared to 55 million rubles in the third quarter of the prior year. Factoring net revenue growth was driven by the scaling of the projects, including the expansion of bank guarantees and factoring portfolios. In the third quarter of 2020, factoring portfolio increased by 15% to reach 3.8 billion rubles. Bank Guarantee portfolio grew by 26% to reach 16.7 billion rubles. Both products performed well and continue to maintain low NPL level. Given the results of the project and the trends we currently see, we aim to further develop these products by scaling our current products as well as by expanding Factoring Plus product propositions. Deutsche Knet revenue for the third quarter 2020 was 126 million rubles compared with 199 million rubles in the third quarter of the prior year. Deutsche Knet revenue decline primarily resulted from a decrease in revenue generated from cash and settlement services due to low number of active clients in KiwiDeck. At the same time, the consolidation of the FluxTree project starting from December 2019 also contributed to the net revenue growth. As I already mentioned, in the third quarter, we successfully completed the sale of service projects and concluded the Rocket Bank wind-down process. Thanks again to the team for an outstanding job done. Further, I'm happy to share that in October 2020, we placed the first-ever TV rubble-denominated bond entering Russia's debt market. Barbara will give you more details shortly, but I would like to mention that the placement enjoys a strong interest from both institutional and retail investors, which we believe is a good sign that general market as well as Kiwi customers value our story and believe in our business. Moving on, I'm glad to announce that following the determination of the third quarter 2020 financial results, 34 cents per share. We remain committed to the target dividend payout ratio of at least 50% of the adjusted net profit for 2020, approved by the Board in March. The Board of Directors reserves the right to distribute the dividends quarterly as it deems necessary so that the total annual payout is in accordance with the target provided. However, The payout ratios for each of the quarters may vary and may be above or below the provided target. Finally, I would like to announce the appointment of Pavel Korsh as the Chief Financial Officer of Kiwi effective December 1, 2020. Pavel has over 20 years of experience in finance. He joined Kiwi in August this year and has served as the CFO of KiwiBank incident. Given Pavel's extensive financial knowledge, impressive background, and strong focus on delivering results, I'm convinced that Pavel will be able to support our further growth, strategy execution, and help us extend our business further. With this, I will turn the call over to Andrey for an update on our payment services business. Andrey.