QIWI plc

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.

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.

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.