QIWI plc

Vlatsova, Acting Head of Investor Relations of Kiwi. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to the Kiwi First Quarter Earnings Call. I'm Tatyana Vlatsova, Acting Head of Investor Relations, and with me today are Boris Kim, our Chief Executive Officer, Andrey Petropov, Chief Executive Officer of the Payment Services segment, and Yelena Nikonova, Interim Chief Financial Officer. A replay of this call will be available until Thursday, the 3rd of June, 2021. Access information for the replay is listed in today's earnings press release, which is available on our investor relations website at investors.kivi.com. For those listening to the replay, this call was held and recorded on May 20, 2021. Before we begin, I would like to remind everyone that this call may contain forward-looking statements. as they are defined under the Private Security Litigation Reform Act of 1995. These forward-looking statements about our expectations for future performance are subject to known and unknown risks and uncertainties. Keep it cautious that these statements are not guarantees of future performance. All forward-looking statements made today 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 20-F files with the Security 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 matters, 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.

Thank you, Tatyana, and good morning, everyone. Thanks for joining us today on this call. I'm pleased to share our first quarter 2021 results with you. Notwithstanding the restrictions imposed by the CBR in December 2020, which have adversely affected and will continue to affect our payment services business. I'm glad to announce that in the first quarter of 2021, our adjusted EBITDA and adjusted net profit increased by 23% and 18% respectively. These growths primarily resulted from cost optimization measures implemented in 2020, as well as the development of our strategic areas in payment services business. namely self-employed and digital entertainment. This year, we will continue to devote particular attention to the development of our factory and factory projects, which would strengthen our future growth and procure greater diversification of the group. Taking this into account, I would like to confirm that we remain committed to investing in our future, our products, and our ecosystem to reach our primary goal of securing the long-term growth of Kivya Group. Now, on to some operating highlights. First quarter 2021 total net revenue was 5.2 billion rubles. The decrease was mainly driven by payment services segment net revenue decline, underpinned by consumer financial services. segment net revenue decrease resulted from the sale of the service project in July 2020. Andrei will discuss the performance of our Payment Services segment in a minute, while I will walk you through the operating results of our other projects. For the first quarter of 2021, Factoring Plus net revenue almost doubled and reached R194 billion compared to R101 million rubles in the corresponding period of the prior year. As of the end of March 2021, Factoring Plus had more than 480 active clients using Factoring Finance with a total factoring portfolio over 4.9 billion rubles. Digital Bank Guarantees portfolio has reached 17.2 billion rubles at the end of March 2021. That's important to know that we closely monitor the risk profile of the growing portfolio of digital bank guarantees. As of the end of the first quarter of 2021, the NPR level of the portfolio was below 0.5%. I would like to highlight that both business lines, factoring and bank guarantee services, characterized by marked seasonality. In general, the demand for such services is significantly higher in the second half of the year. This explains why the size of both portfolios has slightly decreased compared to the first quarter of 2020. In 2021, Factoring Plus aims to focus on enhancing the current services for clients and developing of new products which will strengthen our position in the S&P market. In the first quarter of 2021, we have already launched new products. performance loans for SME clients, which will allow us to attract new clients and increase our penetration on this market going forward. For the first quarter of 2021, Fluctuary Net Revenue was 132 million rubles, increased by 48% compared to the same period of the prior year. In the first quarter of 2021, Fluctuary has attracted 20 new clients in the MarTech stream and launched the new mass mailing model which has broadened the offering personalization products. In the first quarter of 2021, Tochka net revenue declined by 50% to 82 million rubles as a result of a decline in revenue generated from cash and certain services due to low number of active Tochka clients being served by KB. Meanwhile, I would like to highlight that Tochka itself which formed quite well in the first quarter of 2021, with net profit increased by 34% compared to the same period of the prior year. Moving on, I'm glad to announce that following the determination of the first quarter 2021 financial results, our Board of Directors has approved the dividend of $22,000 per share. will remain committed to the target dividend payout ratio of at least 50% of the adjusted net profit for 2021, approved by the Board in February 2021. The Board of Directors reserves the right to distribute the dividends quarterly as it is 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. Now, I would like to give you a brief update on the current situation with CBR restrictions and the upcoming changes in the betting market. As you know, in December 2020, following a routine scheduled audit of the Kiwi Bank, the Central Bank of Russia imposed certain restrictions on Kiwi Bank's operation. At the current moment, the CBR restrictions continue to be in effect. and have a negative impact on our volumes and revenues, primarily in e-commerce market vertical. In spite of the fact that CBR imposed these restrictions for a six-month period starting from December 2020, we cannot be sure that the CBR will ease a part of all these restrictions going forward. We also do not exclude that some of these restrictions may become permanent, including through the adoption of new laws or regulations. The point could be supported by the fact that the new draft bill was recently submitted to the Russian legislature that would prohibit some types of cross-border operations. It's also important to notice here that even if the CBR leaves these restrictions, we probably may not be able to gain back the business we lost because of these restrictions. Andrea will discuss the impact of the CBR restrictions in more detail while I'll move to the changes in the betting industry landscape. As I previously announced, we have made a proposal to serve as a unified, interactive bet accounting center, or HITSU, which started operation in the end of September 2021. However, we cannot be sure that our bid will be successful. At the current moment, the success hasn't been announced yet. We will monitor the situation closely and will notify you regarding any significant updates which could have an impact on our future results. If you cannot become a part of this new industry landscape, we may experience a decrease or complete loss of payment volumes and income related to this. At the same time, we believe that we should be able to retain a part of our revenue generated from KiwiWallet services for the betting industry, which are not directly related to our two-piece, including betting cards, top-ups, and winning payouts. Moreover, we suppose that our profound expertise will be in demand even if we are unable to become the hit soup. I do strongly believe, and we have proved many times before, that our resilient ecosystem is highly adaptive and consumer-oriented, and regardless of all the changes in our operating environment, it will serve as a solid foundation for our future growth. We always strive for innovations and will continue to enhance our business model to better reflect the changing environment, fully serve the needs of our customers, and diversify Kiwi ecosystem. We will further extend our product proposition for key niches and areas of expertise. This being said, we continue to focus on optimizing and improving efficiency of our operation across all projects. We see many opportunities ahead and will pursue all ultimate goal of securing the sustainable growth of the company. With this, I will turn the call over to Andrei for an update on payment services business. Andrei.