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spk07: Good day, everyone, and welcome to the Kiwi second quarter 2021 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the call over to Mr. Dmitry Kovalenko, head of investor relations of Kiwi. Please go ahead, sir. You may begin the presentation.
spk04: Thank you, operator, and good day, everyone. Thank you for joining us to discuss Kiwi's operating and unaudited financial results for the second quarter of 2021. With me to review the results are Andrey Prototopov, our Chief Executive Officer, and Yelena Nikonova, Imperium Chief Financial Officer. The replay of this call will be available until Thursday, September 2, 2021. Access information for the replay is listed in today's earnings press release. The announcement and presentation are available on our investor relations website at investor.kiwi.com. For those listening to the replay, this call was held and recorded on August 19, 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 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. Keep cautious. that these statements are not guarantees for future performance. All forward-looking statements made today reflect our current expectations only, and we undertake no obligation to update any statement to reflect these events, the events that occur after this call. Please refer to the company's most recent annual report on Form 20A, filed with the Securities and Exchange Commission for factors that could cause or actual result to differ materially from any forward-looking statements. During today's call, management will provide certain good information that will constitute non-IFRS financial measures, such as total net revenue, adjusted EBITDA, adjusted net profit, and adjusted net profit per share. Reconciliation to IFRS measures and certain additional information are also included in today's earnings press release. After our remarks, we look forward to taking your questions. I will now turn the call over to QCO, Andrei Protopov. Andrei, please.
spk05: Good day everyone and thanks for joining us today. This is my first earning call in the position of chair of the group. So I would like to start with the priority set for the team and myself. We are customer-centered and return-driven in all our decisions. We are all united under clear mandates to deliver profitable and sustainable growth while maintaining superior service level for our clients and partners. To achieve that, we keep our focus on the key areas of our expertise, namely payment services segment with the digital entertainment, self-employed, digital commerce, and money remittance directions as the main drivers of growth, and ambition to develop SME propositions through factoring projects. To deliver it, we already have the essential parts in place, the talented team of professionals, required IT infrastructure, and broad product portfolios knowledge of our customers, and countless opportunities emerging around gig economy underpinned by overall digitalization of payments. Historically, we managed to navigate in the rapidly changing regulatory environment and find new niches. From where I stand, I just have to do it once again. With no doubt, we are looking into the future, ready to take current challenges. And now to our second quarter results. I am pleased with the strong numbers we delivered. Although we have lost a significant share of our volume and revenue in the wake of CBR restrictions, we managed to compensate it by the development in our key niches, resulting in net revenue growth of underlying business by 3% year-on-year. Our core payment service segment showed remarkable results with payment service payment volumes growth of 32%. and payment service payment net revenue increasing by 7% year-on-year. In terms of volume, this quarter was the second highest quarter in our history. At the same time, we demonstrated superior profitability level with adjusted EBITDA margin of 64% and adjusted net profit margin reaching 45% on the back of optimization initiatives and diversification of loss-making projects. Then the Board of Directors approved interim dividend payment of $0.30 per share in line with the target payout ratio of 50% of group adjusted net profit announced earlier. I will now add some color to the key quarter development and operating results while Yelena will cover financial rights after. Payment service payment net revenue increased by 7% as strong volume growth compensated every net average net revenue yield decline. Our volume in the second quarter shows sound growth of 32%, which helped offset net revenue yield decline by 25 basic points. Volume growth was largely driven by the exceptional performance of the money remittance market vertical, adding over 100 billion of rubles year-on-year, representing 71% growth. Payouts to the self-employed from KiwiBullet account holders increased by 109% year-on-year. In the second quarter, we connected to our platform 653 taxi companies and basically doubled number of taxi companies versus last year. We onboarded 6 scrap metal companies and 46 new partners working with the self-employed in other industries. We observed significant increase in winning payouts by 59% year-on-year built on overall strong super growth. Contact money remittance system demonstrated volume increase by 29% year-on-year as we continue to develop our partnership model reaching out to Zoom, selling Zolotaya Corona in Tajikistan and Huma in Korea. Moreover, B2B2C and peer-to-peer transactions attributed to the KiwiMaster product and other use cases contributed to overall growth of money limiters. E-commerce vertical volume also increased by 4%, partially due to weaker base of last year, but also thanks to recovery of tourism and increasing interest in Russian betting streamlines, which offset the negative impact of CBR restrictions active till June 2021. We enjoyed exciting matches at Euro 2020. The team did an amazing job with promo activities, which paid off dozens of times, resulting in volume and net revenue uplift. This quarter, we also have substantially reduced onboarding time for our partners, connected TikTok to our payment network, and launched SoftPulse product. Payment service payment net revenue yield declined by 25 basis points year-on-year, driven by the temporary restrictions imposed on high-yielding cross-border payments, which affected the e-commerce market vertical. Corporate and other net revenue decreased by 25% year-on-year, mainly driven by TOCHCA, while factoring and flock-tree projects continued to grow. Factoring plus net revenue adjusted for one-off increased by 17% year-on-year. Factoring portfolio increased by 59% and reached 5.3 billion of rubles with number of active clients going up by 39% to 492. Digital bank guarantees portfolio increased by 87% to 24.8 billion of rubles. Number of deals increased by 44% to over 8,000. On top of active portfolio growth and expansion of customer base, we have launched our credit product for contract execution and started to provide loans via marketplaces via our platform, excelplus.ru. Please note the demand for factoring services is seasonal and is expected to be significantly higher in the second half of the year. TorchConnect revenue declined 56% year-on-year, due to switch of some Tochka customers from Kiwi to Adcritia Bank. We have announced earlier that we are going to sell our stake in Tochka for 4.95 billion of rubles, which resulted in about 2.5x return on our total investment, or IRR of 35%. The deal amount is subject to certain performance adjustments depending on Tochka fiscal year 2021 audited results. In the next quarter, the impact on operating results from Tochka is expected to cease. Now let me pass the floor to Elena and walk you through our financial results.
spk06: Thank you, Andrei. Profitability was robust and adjusted EBITDA margin of 64% and adjusted net profit margin reaching 45%. Thanks to the cost optimization measures successfully implemented in 2020, we have significantly increased the overall efficiency of our operations. And our margins went up year-on-year by 6.6 percentage points for EBITDA and 4.4 percentage points for adjusted net profits. The divestiture of Soviet and Rocket Bank compensated negative operating leverage effect driven by the temporary restrictions imposed by the CBR on cross-border payments. In absolute terms, adjusted EBITDA and adjusted net profit declined by 1.4% and 1.9% year-on-year, respectively, primarily driven by total net revenue decline by 12%. Payment services net profit decreased by 6.2% year-on-year, driving by margin decrease of 6.5 percentage points. First of all, we continue to see negative implications on margin due to cross-border payment restrictions. We are also reviewing compensation our employees allowing into market level. Corporate and other category net loss adjusted to one-off decrease by 23% or 99 million of rubles year-on-year. Net revenue decline by 126 million of rubles was more than offset by low forex loss by 82 million of rubles. Decrease in personal costs by 116 million of rubles and 40 million rubles one-off impact on factoring net profit due to reverse of agents' expenses accrued in the second quarter of 2020. We continue to optimize our operations and monitor margins and office-to-net revenue ratio in order to sustain healthy financial performance of the group and ensure its sustainable and profitable growth. I will now give a few highlights on our upgraded guidance. Our outlook reflects our current views and expectations only and is based on the trends we see as of the day of this earning call. In such trends, we're subject to change The impact on our business and operations could deviate more than currently expected. I would like to note that at the moment, there still remains significant uncertainty in 2021, primarily related to the long-run effect of the CBR restrictions and our ability to recover or replace previously restricted cross-border operations, as well as our ability to define our place in the new betting industry landscape. Our guidance reflects expected changes in the betting industry landscape, conservative projections on recovery of cross-border operations and sale of stake in TOCHCO projects, which eliminates contribution in net revenue and net profit in the second half of the year. Having said that, we upgraded our guidance in respect of 2021 outlook. We expect total net revenue to decrease by 10% to 20% over 2020. Payment services segment net revenue to decrease by 10% to 20% over 2020, while adjusted net profit is expected to decrease by 15% to 30% over 2020. We remain cautious and reserve the right to revise the guidance in the course of the year when the scope and extent of factors impacting our results become clear. And now I will give a call back to Andrew for some closing remarks.
spk05: Thanks, Lena. I would like to give you a brief update on the current situation with the CBR restrictions and changes on the betting market. The restrictions imposed by the CBR on cross-border payment in December 2020 have expired. Unfortunately, the impact from restrictions will have a long-lasting negative effect on our operations, primarily in the e-commerce market vertical. We have started to onboard foreign merchants, but the recovery process is highly dependent on changed customer behavior. It cannot be accurately estimated, as well as may never be restored. We are conservative in our assumptions, which is also reflected in our guidance. Update on the betting industry regulation. We have made a proposal to serve as a YouTube pursuant to the new regulatory regime. However, there can be no assurance that our bid will be successful. By the end of September 2021, the newly appointed YETSUK will take over operations of both existing SUPIS providers. If we are not able to secure an active role in the new industry landscape, we may lose the ability to generate volume and income directly related to SUPIS businesses in Russia and most likely it will negatively affect acquiring services and winning payouts provided to the sports betting company in a bundle with our SUPIS operations. For the first half of 2021 SUPIS businesses and related acquiring services as well as winning payouts accounting 23% or 2.1 billion of rubles of payment services payment net revenue. 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 represents betting accounts top-ups and winning payouts, about 14% of payment services' payment net revenue. I strongly believe in my team and our resilient and consumer-oriented payment ecosystem. We will further develop our product proposition for key niches and areas of expertise. There are many opportunities ahead, and we will pursue our ultimate goal of securing the sustainable and the profitable growth of the company. Thanks for listening. We are ready to take your questions.
spk07: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. you may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question comes from the line of Chris Kennedy with William Blair. You may proceed with your question.
spk01: Hey, guys. Thanks for taking the question. Andre, at the top of the call, you gave a little bit of your question,
spk05: core focus for kiwi can you just kind of give a little bit more details on your three to five year vision for where kiwi will sit in the uh in the ecosystem in in russia hello chris thank you for your question so um we continue to focus on our key niches uh in the payment services including the digital entertainment self-employed minor remittance and digital commerce We believe that in those niches there are good growth opportunities because the market is still, in many cases, unsearched, and the market themselves will be growing for at least several years to come. Moreover, we are focused on our proposition for SME services with factoring tools, And as well, we see quite a strong growth opportunities for the year to come. At the same time, the current situation with Yitzhuk is a certain difficulty for us as we are not clear yet how big volume and revenue we will be able to keep. And because of that, while we are working on those segments and niches that I told about, we are looking for other opportunities to grow, to compensate potential loss in the YET soup. And as soon as we together with the board of directors will be ready, we will be informing you on the strategy updates.
spk01: Great. Appreciate that. And then on that contract, it's the last question. What type of cost initiatives, if you were to lose that contract, the sports betting one, are there costs you could take out of the business or how would that impact net income?
spk11: Thanks a lot, guys.
spk05: Okay, so for the cost side, the biggest impact in the second quarter was related to discontinued businesses with primarily Soviet and Rocket Bank and some smaller projects as well that we stopped last year. On top of that, we are constantly looking at our cost level and in the end of 2020 and beginning of 2021, the digital situation with severe restrictions and yet super uncertainty would need some, I would say, cost cutting in core business as well.
spk11: Great. Thank you.
spk07: Our next question comes from the line of Andrei Mikheil with FOVA Capital. You may proceed with your question.
spk13: Hello, thank you very much for the call. I have several questions. I'll ask them one by one. The first question relates to the restrictions by CBR that were lifted in June. And you noted that you started to onboard foreign merchants. So my question is, are you only basically allowed to onboard foreign merchants that are new to you? Or can you re-onboard the merchants the payments to whom were essentially prohibited during those six months. And I have other questions. Thank you.
spk05: Hello, Andrei. Thank you for your question. So yes, in June 2021, the term of restrictions imposed by central bank expired. So we really restarted onboard foreign merchants, including old and new one as well. At the same time, in July 2021, certain amendments to the regulations, cross-border regulations were introduced. And we are still analyzing the terms and additional KYC procedures required based on those regulations. So following this more stringent KYC procedures and due regulatory requirements, the recovery process is moving quite slowly. And on top of that, what is also important is that customer behavior has changed in the last six months, which is not helping as well. So that's why we are not able to provide some estimates how long this process will take and if we will be able to actually reconnect all the merchants and partners at all. So we don't provide any guidance on this one.
spk13: Thank you very much. My second question is on the estimates for sports betting-related revenues in particular. The ones that are related to two-piece and acquiring, you provide the estimates that they comprise 2.1 billion approximately in the first six months of this year. Do you understand correctly that These are those revenues that relate to operations that you could lose the right to process if you do not become this new centralized operator for sports betting payments.
spk05: Yes, that's correct. So basically we divide our revenue here that we are getting from Russian betting into two parts. The first one, the $2.1 billion, is related to 2-piece operations themselves and online acquiring and winnings payout to card operations, which can be done by other market participants, I would say. And the second half is KiwiWallet operations, where we are obviously only providing all this type of operations. we believe that we will be able to keep this KiwiWallet operations in any case for a certain extent. And for the first one, 2.1 billion, it can be much more easily replicated if we are not part of the new regulation landscape.
spk13: Thank you. Thank you for this. And a follow-up question on that. The new setup should come into force again in September, but would you say that the announcement on who becomes the semi-centralized operator, when would you expect such an announcement to be made, if you have any expectations for this?
spk05: No news so far, so we are waiting for the official update that will be, I think, available for the whole market, but no news so far. We are waiting as well.
spk13: Thank you. My next question relates to the card-to-card money transfers from Kiwi Wallets to banking cards whose volumes double year-on-year in Q2. And my question is how much of that, of those operations, of those volumes, is represented by customers actually leaving Kiwi, just making their transfers out of Kiwi wallets to never return. Thank you.
spk05: Andrey, sorry, I didn't get the last half.
spk13: What portion of those volumes... Yeah, what portion is represented by customers completely withdrawing their funds from Kiwi and closing their Kiwi wallets?
spk05: No, it's actually a small one. I don't have the direct number, but the majority of these volumes is, let's say, with active wallets that continue the operation. To give you some of the color on this, it's usually part of some bigger use case. It either can be, let's say, self-employed person that is getting paid by other customers via peer-to-peer transaction for the certain goods or services provided. And then when he or she has accumulated money on the Kiwi wallet, then one of the ways how to use them is to transfer it to other bank cards or accounts to actually spend it because they're not using Kiwi Wallet for their, let's say, daily banking in most of the cases. They more use it for this specific self-employed, let's say, payment type of operation. So it's kind of they're getting their revenue and then putting it to their bank account. That would be one of the big use cases here.
spk13: Thank you very much, Andrei. My final question is on Kazakhstan. I would be grateful if you could provide some color on the operations there, and in particular on the growth rates in operations in Kazakhstan versus Russia. Thank you.
spk10: Andrei, can you repeat, please?
spk05: The sound is not good, unfortunately.
spk13: Yeah, sorry about that. Operations in Kazakhstan, how well Are they developing, especially compared to Russia?
spk05: Yeah, I get you. Kazakhstan is growing, I would say, and this is different from the Russian market. We don't have, obviously, any type of restrictions there, so Kazakhstan's volumes and revenues are growing versus last year.
spk04: And here I also would like to add that we have added a lot of taxi companies in Kazakhstan in the second quarter, over 600 of them. So volumes are growing.
spk02: Any specific comments on the growth rate? Any estimates?
spk10: Probably not.
spk03: Okay, okay, thank you. That's all for me, thank you.
spk07: Thank you all. Our next question comes from the line of Alex Vasilkov with Mouse Investments. You may proceed with your question.
spk08: Good morning. My question is regarding the competitive advantage of Kiwi. It seems that the recent emphasis to be on developing tailor-made solutions for targeting markets such as taxi drivers, air travelers, etc. And over here Kiwi is competing with established international players such as Uber for taxi drivers, Expedia for travel markets. So my question is what is Kiwi's competitive edge over those established international players?
spk05: I would say that we are not really competing with Uber, Expedia or other international players. When Uber was operating in Russia, Uber was actually one of our first partners in the taxi business, so they were distributing our prepaid cards, and we proceed with the payout. And as well, different international players will be proceeding with the payout, for example, Airbnb to the Russian landlords. We are connected TikTok this quarter for the payout as well. So I would say that for the international players that are in need for either payouts or payments, specifically with the Kiwi Wallet as a payment method, we are kind of one of the payment gateway to the Russian market and to a certain extent to Kazakhstan as well.
spk08: All right, so it's basically what you're saying that... when international players try to enter Russian market, they actually come into Kyiv and ask to provide support in terms of financial services. Is this correct?
spk05: Yeah, it's the case. We're obviously not the only player on this one, and there are other players like Humani, for example, but we are obviously one of those and we are working with a lot of international players as well.
spk08: I have a couple of related questions. How secure and reliable is Kiwi's financial solutions versus competitors? Could you elaborate a bit on how reliable... You provide financial solutions in terms of payments. So how reliable and how secure are those solutions?
spk05: We are operating on the market for a long time and we believe that our solutions are reliable. We have no major issues with any of our products and with any of our customers for a very, very long time. Our clients, including majority of our key customers, have been working with us for a long time. No data links are We have no data leaks for, I don't know, how many years, I don't remember, if we have any of those at all. So we believe that we are a very reliable payment company, financial services.
spk08: So would it be fair to state that those solutions are as reliable as credit card solutions?
spk11: I believe so.
spk08: All right. And my last question is, if anonymous wallets remain an important feature for Kiwis customers, it seems to be in the last quarter at least was a significant decrease of Kiwis wallet accounts, which primarily was related to anonymous wallets.
spk05: Yes, there are actually several reasons why the number of Kiwi wallets decreased over time. There were some trends for a certain period of time already that is related to the changes of how we work with anonymous wallets and some procedures. At the same time, the bigger impact, of course, this quarter was related to the CBR restrictions and payments with international merchants. Because, obviously, many of our clients were doing the payments to a lot of different international merchants. And as soon as those payments were not available, some of those wallets were not active.
spk08: I understand. Thank you very much.
spk05: And I would just add on the anonymous wallets as well that more than 90% of Kiwi wallets volumes are going through wallets with KYC, either simplified KYC or full KYC. So anonymous wallet is more like a page of the product lifetime. So usually people starting to use the wallet as anonymous and as soon as they need to do some operations that requires KYT or they need to to spend more money that also requires KYT, they either simplify the full KYT for the wallet. That's why majority of the wallets are not with anonymous wallets.
spk08: I understand. And it looks like number of wallets is still decreasing. Is there any expectation that the trend will change in the coming months or quarters?
spk05: We believe that because it's kind of longer trends, I believe that the trend will continue the same. At the same time, as we mentioned already, for those use cases that are important for us, like self-employed, for example, and related payment volumes of the wallet, we actually... We are able to demonstrate quite significant growth, like the one that was mentioned in one of the previous questions related to the payments to the cards from Kiwi Wallet. So while, let's say, the number of wallets is decreasing, at the same time, the operations in certain important use cases for us are growing.
spk04: Yes, in the press release, you may know that actually the payment services payment volume per ActiveKey Wallet account is increasing almost 80%. It is currently about 30,000 approvals, while in the quarter last year, it used to be about 17,000. So utilization or volume is growing per ActiveKey Wallet account, and that is what we are targeting.
spk08: Mm-hmm. And what's the fraction? Just a follow-up on a statement you made that typically customers join as anonymous and then they transfer into a full solution. So what's the current fraction of anonymous wallets?
spk05: as I said the number the volumes that volumes anonymous wallets are generated 8% of the total volumes of Kiwi wallets we are not disclosing the number of anonymous wallets thank you very much for taking my questions thank you
spk07: Our next question comes from the line of Vladimir Bestelov with VTB Capital. You may proceed with your question.
spk09: Hello, thank you very much for taking my questions. First of all, I would like to ask a question about your guidance. You increased the guidance for total adjusted net revenues, but left the guidance for net profit growth unchanged. Even if we adjust for Tochka, it still looks very conservative because like the contribution from the growth from higher net revenues should exceed the potential losses related to not losses I mean the part of net profit attributable to Tochka and if we look at the guidance for example like at the lower bound for the second half of this year it would be something like 2.5 billion of adjusted net profit, which is way, way low even if you lose a lot of betting streams because it's lower than the second quarter. So maybe could you elaborate a little bit what is behind all these assumptions?
spk06: Hi Vladimir, this is Yelena. I can start, maybe Andrey will add some additional comments. Usually we are quite cautious about our guidance and maybe a bit conservative, but yes, firstly, it's touch corporations that affect net profit and that's why we decided not to upgrade guidance in respect of net profit by something like three or five percentage points. And, of course, we have some uncertainties in the second half of the year that we also included in the guidance, and probably this is the case why we are a bit more conservative in respect of net profit, and we are more confident in net revenue. That's why we upgraded guidance only in respect of net revenue.
spk09: But could you elaborate a little bit about these uncertainties? Are these betting related, because as far as I understand, those are in this way in your previous guidance, or there is something new coming up?
spk06: I would say that uncertainties are mostly the same. We still do not know how it will go with the new hitsuits and all the betting operations. This is probably the most uncertainty that includes in our guidance.
spk10: Okay, thank you very much.
spk09: My second question will be on the potential use of proceeds from the sale of Tochka. First of all, when are you expecting to get those proceeds and how are you going to spend? Can we expect, for example, more dividend distribution so you have some other plans? Thank you.
spk06: Yeah, thank you for the question. I will also try to cover it. We are expecting the most part of the consideration in the third quarter, as we said prior in our press release related to Tochka. Also, we will have final adjustment to the deal when the audited financials of Tochka will be issued. So it will be somewhere in the first, second quarter of 2022. And only then we will understand the real cash consideration, the real price for this deal. Also, I would like to highlight that it is a decision of the Board of Directors to decide how to distribute, what amount of dividends to distribute. Prior, we decided and we did in 2020, we paid 20% of our adjusted net profit and for this year, it was also agreed by the Board of Directors to distribute at least 20% of the adjusted net profit and this will be done for sure. In respect of the Tochka payment, we firstly need to consider our budget for the next year and investments in the project that we are right now working on and considering these at the year-end board of directors there will be a decision whether to invest this money in development of current and new projects or whether partly to distribute this part to the dividends and of course our highest priority is to Expand with a strong focus on our returns and create value for our shareholders. And of course, if we will have any extended cash, of course, we will distribute it if it will be a decision of board of directors.
spk10: Thank you very much.
spk09: My next question is on Sectoren Plus. As far as I remember, during some previous calls, we discussed with the management that this could be a very important part of your business in the medium to longer term. But looking at the numbers for this quarter, even adjusted for someone else in the second quarter of 2020, it looks like the growth performance is not that impressive in general. Are there any changes in your views on this part of your business and in general what you expect from it in the medium term?
spk05: Thank you for your question. I will give the overall remarks and probably will give more color on the numbers. Generally, while URI's revenue is not growing versus last year, which is mostly related to the certain one-off adjustments, if we are looking at the growth of the numbers, including the, for example, bank guarantees portfolio, which is growing close to doubling year-on-year, and factoring portfolio is growing quite nicely as well, together with the number of clients on top of that team was adding two new products on top of this bank guarantees and factoring so we believe that it still have a quite strong potential for the growth I would also mention that due to seasonality specifics the majority of the growth and the volumes is coming from the second half of the year so Lena if you can add some colors on this adjustment one of adjustment last year that is kind of confusing the results of the second quarter I would say that in prior year factoring operations were not too significant for the company and yes there was some
spk06: maybe not too significant for the group, adjustment related to deferral of agent commission that had effect if you will count year over year. If you will take it off, you will also see that they are growing and the operations are much better and increasing compared to prior year. I would also add to Andrei's words that we also should consider economy scale, like When you will see increase in portfolio, if we will consider bank guarantees, we will see more profits. The same as to the factoring operations. We see that both projects are growing quite well, and we see the three years plans that also have good growth rates.
spk10: Thank you very much.
spk04: And just a couple of figures here also on the portfolio itself. The factoring portfolio increased by 59% year-on-year. The digital bank guarantees portfolio increased 87% year-on-year. And this comes along with the active client growth by 39% in factoring and number of deals growing over 40% in the digital bank guarantees. So the operating results are quite impressive here.
spk09: Thank you very much. But in terms of the medium-term growth, what do you think is kind of a normalized growth rate for this kind of business?
spk06: Well, probably we would not like to comment right now on the medium growth rates of this project.
spk05: Yeah, I believe that there is a market potential to to continue the same level of growth of business for the next couple of years but obviously we'll need to see how it goes further but currently it's growing quite well Thank you very much and my last small question is purely technical on the betting related revenues is my understanding correct that those revenue streams which are at risk
spk09: go to e-commerce, while those which you, I mean, in the worst case scenario, that you're not going to be an operator for the industry, and that the revenues you're going to retain are a part of money remittances.
spk05: Yeah, part of this revenue, the bigger one is going to the e-commerce, but the winnings payouts to cards are going to the money remittance, so both verticals will be affected.
spk11: Thank you very much.
spk07: Our next question comes from the line of Hildar Davrishin with Wood and Company. You may proceed with your question.
spk00: Okay, thank you very much for taking my question. Just mostly some follow-ups to the questions that have been already asked. So on the guidance, Would you be able to confirm that this 10% to 20% decline assumes that you have absolutely no role in the new, the regulator, the betting regulator? So that would be my first question.
spk06: Yes, we included all negative effects to this guidance.
spk00: Yeah, that was my understanding as well. Okay. And the second, so on cross-border transactions, so you sounded a little cautious in your comments about kind of current and near-term trajectories, saying that there was some impact or there could be some impact from the restrictions on future performance. So I'm just wondering now that we have one and a half, almost two months in the next quarter, since you reported these numbers. What trends do you see? Is it similar to the second quarter or like let's say June in terms of the cross-border transactions or is there some further continued recovery? So I understand there was some sort of a progress month by month from the start of the year when it was the worst, the biggest impact and then gradual recovery. Is this recovery continuing at this level?
spk06: As of now, we still see... Andrey, do you want to comment? We're still continuing... Yeah, yeah.
spk05: Elena, I will cover you. Elena, I will cover you. Okay. So, yeah, generally, we mostly see, talking about the overall business, the same trends that there are in May and June. I would say that bigger impact on our growth, let's say the growth trend this year in absolute numbers like month after month was driven not by international transactions, though some of operations were able to establish starting from the first month of the year, but more with the growth of super saturation because this year it was quite strong growth here at the same time talking about this quarter I would like to probably give more color on guidance as well I would like to remind that the second quarter of the last year was the worst quarter for us because of the lockdown and cancellation of the majority sports events. And the third quarter of last year was basically the best quarter for us in the last year, because it was kind of a wrap-up after the lockdown was over and a lot of sports events were back. So last year there were very strong results in betting and some other key streams for us. So that's why while absolute numbers currently are kind of continuing the trend in the second quarter, when we are looking versus last year, it's obviously high base and its results will be much worse versus second quarter.
spk00: I see. Okay, thank you. And maybe just two very quick follow-ups. So you mentioned Kazakhstan, which apparently is doing quite well. So I'm curious if you could give us some color in terms of contribution or the scale of this operation, maybe as a percentage of total volumes or revenue, and maybe a broader CIS, like other than Russia, other countries, like what's the percentage of your...
spk05: Only Kazakhstan is somewhat material and you can think about around 5% of payment services.
spk00: That's volumes of revenues.
spk05: Revenues.
spk00: Thank you. And the last one is, there was a question already asked on capital allocation, the use of this process, but maybe more mid-term. So you've been paying around 50, sometimes more percent of your net income, adjusted net income. What do you think, given that you have some still early-stage growth projects, yet many are already becoming profitable, do you think that it could be in the future a higher share of dividend payout ratio, more than 50%, or alternatively, have you thought about the buyback given the current dividend yield, which seems to be over 10% on an annualized basis? Have you thought about buyback at all?
spk05: I will cover the midterms vision here and probably Lena will add on the buyback. It's one of the traditional questions. So I would say it's too early at this stage to say. As we said, for this year, Board of Directors said the minimum dividend payout. Going forward, we will be discussing this one And as I said, answering the strategy question, we are currently looking for other opportunities to grow, given the difficulties and uncertainties that we are facing with two-piece businesses. Those opportunities may require the future investment, and based on those, the decisions on the future dividends will be made. It will depend, I would say, on our strategy and capital needed for its execution.
spk06: Okay, I can cover the second question in respect of buyback. From the technical perspective, it's a bit difficult as we have a holding like mother company QVPLC in Cyprus. and it's a bit difficult to make a buyback through the Cypress entity, but it's possible. I would not say that it's right now on the table what we are discussing, but this is possible.
spk11: All right, thank you very much. Thank you.
spk07: Ladies and gentlemen, we have reached the end of today's question and answer session. This also concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Enjoy the rest of your day.
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