QIWI plc
Q2 2018 Earnings Call Transcript

Published: 16 Aug 2018

[Operator:]

Good day, everyone, and welcome to the Qiwi Second Quarter 2018 Earnings Conference Call. This conference is being recorded. At this time, I would like to turn the call over to Mrs. Varvara Kiseleva, Head of Investor Relations. Please go ahead.

[Varvara Kiseleva:]

Thank you, operator, and good morning, everyone. Welcome to the Qiwi second quarter earnings call. I'm Varvara Kiseleva, Head of Investor Relations, and with me today are Sergey Solonin, our Chief Executive officer; and Alexander Karavaev, our Chief Financial Officer. A replay of this call will be available until Thursday, August 23, 2018. Access information for the replay is listed in today's earnings press release, which is available on our Investor Relations website at investor.qiwi.com. For those listening to the replay, this call was held and recorded on August 16, 2018. 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. Qiwi cautions 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 statement to reflect the events that occur after this call. Please refer to the company's most recent annual report on Form 20-F filed with 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 adjusted 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 Sergey Solonin, our Chief Executive Officer.

[Sergey Solonin:]

Thank you, Varvara, and good morning, everyone. Thanks for joining us today. I'm excited to share our second quarter results and robust performance in the first half of 2018 with you. Our core Payment Services business demonstrated solid performance with 28% segment to net revenue and 22% segment net profit growth. Our growth this quarter was mainly driven by the development of our payment ecosystem and implementation of our B2B2C strategy, as well as certain external drivers that I will mention later. On top of that, we continue to develop our key products and use cases in order to offer our clients convenient solutions in our focused market verticals. We are preceded to invest in scaling up our Consumer Financial Services segment, which is represented by SOVEST project, as well as building up our SME segments through Tochka and multi-banking platform. Given all of the above, we believe that our performance serves a solid foundation for our future growth. We achieved strong financial results in our Payment Services business in the first half of 2018, building up a firm foundation for investing in the development and scaling of a new business lines and projects. We believe, we are well positioned to grow our Payment Services segment in our business order. In order to achieve this goal and generate substantial operating cash flows to support our investments in the new project, we will focus on executing our strategy through building a wider digital infrastructure, creating new enriching existing client use cases and expanding the ecosystem of our business through offering our consumers the widest use of services and expanding the consumer life cycle. Now on some operating highlights. Payment Services segment volume increased by 21%, to reach RUB263 billion, driven by significant growth in e-commerce and Money Remittances verticals, which grew 48% and 42%, respectively, over the second quarter 2017. We are pleased with the dynamics in both verticals, and believe that such growth was largely driven by the development of our peer-to-peer ecosystem, secular growth in our core market, as well as the rollout of the products we deployed together with our partners, such as [Indiscernible] or Taxi company, as part of our B2B2C and self-employed focus. The increase in ecommerce market vertical was also driven by the sports bearing volumes, elevated by the Football World Cup 2018. As of 30th of June, we had 20.5 million Qiwi Wallet accounts, an increase of 2 million as compared to the prior year, resulting from our continuous efforts to grow and leverage our ecosystem, and implementation of our B2B2C strategy. Our total Consumer Financial Services segment, payment volume reached RUB3.2 billion for the second quarter of 2018. We also see positive dynamics across key operating metrics of the project. Moreover, the second quarter, we have significantly enlarge the capabilities of the product, introducing several new options for our consumers, which make the product even more attractive and useful, while improving user monetization. We continue to develop our products and enhance our business model with the aim to start testing the multi-banking model for SOVEST by the end of the year. And we see substantial interest over the installment card projects from other players in the banking sector. We believe that we have entered an interesting niche with a significant potential and have built a robust infrastructure, including best-in-class distribution and partner networks. Our SME segment, which we develop through Tochka, continue to demonstrated robust operating performance in the second quarter of 2018. We currently operate Tochka as a multi-bank service that provides its customers with the opportunity to open accounts with either Qiwi Bank or Otkritie Bank. As we have disclosed earlier, this June, we signed a partnership agreement with Otkritie and management team of the Tochka, launching our during development of this business. Under our agreements, we have established a joint venture Tochka, which will serve as a technological partner and service provider for banks, members of the multi-bank platform. We're very excited about Tochka business and our partnership with Otkritie in SME segment. We believe that Tochka is one of the best solutions for SME business in Russia, that is offering entrepreneurs broad range of Financial Services, distinguished by unique quality of client experience. Moreover, in August, we have had a first meeting of Tochka supervisory board, where we adopted the strategy and business plan of Tochka. As we discussed earlier, we will be financing the development of the project in equal parts. 50% each with Otkritie, with aim to reach breakeven in the first half of 2019 and reach the target of 1 billion net profit in 2021. Positive volume dynamics in our key market verticals converted into strong Payment Services segment net revenue growth and together with our SME segment contributed to our overall robust performance in our business. Alexander will walk you through the second quarter numbers in more detail, just -- in a just a moment, while I would like to walk you through some recent developments. We have also recently finalized our negotiations with Otkritie in respect of the Rocketbank project. In accordance with these agreements, we aim to transfer Rocketbank customers personal and business processes to Qiwi by the end of 2018. We believe that apart from unique proprietary product offerings that Rocketbank possess, there is a profound potential for synergies between our core products and use cases in Rocketbank offering. We're currently working on our strategy in respect of this line of business and will provide an update once we finalize the transition of the business. And now I would like to add a personal point. Starting from tomorrow, I will embark on around the world trip, with my family that will last next nine months. At the same time, I remain fully committed to Qiwi and will continue to serve as a CEO and be actively involved in the executive management of Qiwi, while I'm on the journey. During the last decade, we have created a unique modern best-in-class and self-sustainable management team and structure, that has been and will continue to lead Qiwi. So my trip will not effect, the day-to-day operations and management of Qiwi. With this, I will turn the call over to Alexander, who will take you through our financial results in more detail. Alexander?

[Alexander Karavaev:]

Thank you, Sergey, and good morning, everyone. Second quarter 2018 total adjusted net revenue increased by 54% to reach RUB4.5 billion, up from RUB2.9 billion in the second quarter of 2017. The increase was mainly driven by Payment Services and Small and Medium Enterprises segment net revenue growth. Payment Services segment net revenue increased 28%, to reach RUB3.8 billion compared to RUB3 billion in the second quarter of 2017. Payment Services, payment adjusted net revenue increased 36% to RUB3.4 billion, up from RUB2.5 billion in the prior year. As a result of the net revenue growth in our e-commerce and Money Remittances verticals, which grew 62% and 22%, respectively, offset by a decline in trend of Financial Services vertical by 11%. Our financial results in this segments are driven both by increase in volume, as Sergey just described, and the improvement of the payment average net revenue yield by 14 basis points year-over-year, as a result of change in category and product mix. Payment Services other adjusted net revenue decreased 10% to RUB470 million as compared to RUB522 million in the prior year, mainly because of the decrease in revenue from advertising, as well as revenue from overdrafts provided to agent. Payment Services segment net revenue, excluding revenue from fees for inactive accounts and unclaimed payments increased 32% compared to the same period in the prior year, primarily as a result of growth in Payment Services payment adjusted net revenue, as discussed earlier. Consumer Financial Services segment net revenue was RUB58 million for the second quarter of '18, as compared with the net revenue loss of RUB68 million in the second quarter of the prior year, showing the development of our SOVEST project as well as the effect of the introduction of new consumer focused option. Net revenue of the Small and Medium Enterprises segment was RUB597 million for the second quarter 2018 compared with 0 in the prior year. Small and Medium Enterprise, a segment that shall include mostly Tochka revenues, recognized from information and technology service agreements with Otkritie Bank, for providing services to Tochka clients that have their accounts with Otkritie Bank. Net revenue of the Corporate and Other category was RUB23 million for the second quarter 2018 compared with RUB7 million in the prior year. Moving onto expenses. Strong operating performance of our Payment Services business that continue to generate substantial cash flows, supported our investments in the development of our new projects, most notably, SOVEST and Tochka. These being said, adjusted EBITDA increased 1% to RUB1.39 billion, from RUB1.38 billion in the prior year. Adjusted EBITDA margin was 31% compared to 47% in the prior year. Adjusted EBITDA margin contraction primarily results from the increase in compensation for employees and related taxes, excluding effects of share based payment, higher SG&A [Indiscernible] expenses both incurred in connection with service in Tochka project as well as client acquisition and advertising expense, incurred due to investments in the scaling up of service project and Tochka projects. Adjusted EBITDA was also affected by the increase in other administrative expense. Group adjusted net profit decreased 19% to RUB872 million, down from RUB1.1 billion in second quarter of the prior year. Adjusted net profit was largely affected by the same factors as adjusted EBITDA, as well as increase in net foreign exchange loss as compared to the same period in the prior year. Payment Services segment net profit increased 22% to RUB2.3 billion compared with RUB1.8 billion in the prior year, primarily driven by Payment Services segment net revenue growth. Consumer Financial Services segment net loss was RUB702 million in the second quarter 2018, as compared to a net loss of RUB576 million in the prior -- in the same period of the prior year, resulting from the expansion of the operation of SOVEST project and this cost mostly related to the consumer acquisition. Small and Medium Enterprises segment net loss was RUB263 million, resulting mostly from client acquisitions and marketing costs. Corporate and Other category net loss was RUB413 million, an increase of 123% compared with a net loss of RUB185 million from the prior year. The net loss was primarily driven by expenses incurred in connection with the Rocketbank project, as well as several other individual insignificant project. Finally, as you saw in our earnings release, our Board of Directors defined from refrain from distributing the dividend, while we are incurring significant investments in connection, we're launching a lot of new projects. We expect that throughout the 12 months, starting from the first quarter of 2017, we will concentrate on investing into our future growth. While long term we remain committed to distributing all the excess cash to our shareholders. Now onto our guidance. We increase our Payment Services segment net revenue guidance and expect Payment Services segment net revenue to increase to 18% to 22%, driven by the strong performance of our Payment Services business in the first half of 2018. We increased our total adjusted net revenue guidance to incorporate the increase of our Payment Services segment net revenue guidance, as well as over performance of net revenue recognized in connection with our Tochka project in the first half of 2018 and our expectations regarding SME net revenue for the second half of the year. Thus, we expect our total adjusted net revenue to increase by 26% to 32% over 2017. We increase our Payment Services segment net profit guidance to incorporate the increase of our Payment Services segment net revenue guidance, and expect Payment Services segment net profit to increase by 12% to 17% over 2017. At the same time, we divide group adjusted net profit and expect it to decrease by 15% to 25% over 2017. The revision of our guidance is driven by the incorporation of Tochka project and Rocketbank cost for the second half of 2018. We expect that the additional net loss for second half of 2018, after shares with Tochka project, will amount for around RUB0.5 billion. The cost of share with the transfer in rollout of focus bank operations in Qiwi, I expect that the amount roughly RUB600 million for the second half of the year. Although, we see our first half 2018 results as a solid foundation for our future growth, certain other factors remain beyond our control, and hence, [indiscernible] right to revise guidance in the course of the year. With that, operator, please open up the call for questions.

[Operator:]

[Operator Instructions] Our first question comes from the line of Bob Napoli with William Blair. Please proceed with your question.

[Bob Napoli:]

Couple of questions. First on the e-commerce growth, the World Cup, you pointed out the World Cup, and the addition to sports gambling on -- can you give what would the growth of E-commerce have been without the World Cup? And can you give some feel for the segment mix under E-commerce? What verticals or make up the majority of that business today?

[Alexander Karavaev:]

Yes, so in terms of World Cup growth, World Cup effect on the sport betting growth. So actually it's something that we are still testing. So we believe that at least the part of the gamers and participants that used to make sports betting during the World Cup, which probably stay within the ecosystem. But generally, the good way to look at it as full, so if you take the Q1 growth in that category, Q1 to Q1 of last year, then that would be approximately the same in Q2. So everything was -- that would be kind of related to World Cup.

[Bob Napoli:]

And vertical mix, can you some feel what percentages -- fiscal goods versus sports gambling -- versus sports versus other…

[Alexander Karavaev:]

So look, yes, well, I mean, it's more or less unchanged, but I -- still sort of vast majority in E-commerce would be virtual, of which, like the half approximately would be like all types of gambling, I mean not gambling but sports betting and gaming, social and more PGL kind of things and then the rest would be like other virtual goods like social networks and [indiscernible]. So given that World Cup affect, I think the share of classical online E-commerce probably dropped slightly in Q2, but again, we see that it's a temporary effect generally.

[Bob Napoli:]

And then, SOVEST, the -- how successful you've been in adding banks, trying to develop that multi-banking model? And do you still target breakeven next year? And at what point would you pull back investment, if you're not able to get the multi-banking model to work for you?

[Sergey Solonin:]

Hi, Bob. For SOVEST, we're working now with only one bank, although, we have few banks in a row, so -- because the integration is not that quick as you would like to see. So one bank would be launched this year and we will test on it the distribution system and multi-bank model in general. So right now, we do have understanding that our model works. So, we have a feasible model and economics on the project. So independently on multi-bank model, if it works or not, because we don't know. We think that it will work, but we still don't have a case. So we will think about pushing this project forward and pressing gas in the next year. So this will be decided I think in the budget on the next board meeting, that will be more by the budget for the next year. So depending on that we either go as we planned, and then we will breakeven as we planned or we will -- want to scale the business and indicates we want to scale the business, it will mean that, next year, we will push for more clients. And then it will mean that, we will spend some money next year which will, I think, in the most aggressive scenario which will be the same as this year.

[Bob Napoli:]

And last question for me is, I think It's nice to see you get a -- the credit rating from S&P, they do one thing, they point out a few times, is an increase and there is a competition. Where are you seeing an increase in competition? Is it from Yandex. Money, Sberbank? Or are there new -- where are you seeing your most difficult competition?

[Sergey Solonin:]

No, the competition is now is coming from SOVKOMBANK, which is one of the banks in the banking system, which made a very similar model and all the other products are not competing with us, as I think.

[Operator:]

Our next question comes from the line of Vladimir Bespalov with VTB Capital.

[Vladimir Bespalov:]

First, I would like some clarification on your guidance and how you going to consolidate, deconsolidate Tochka, Rocketbank, so maybe you could provide some color? Is that correct to assume that you deconsolidate Tochka from the 1st of July? And to reflect from this time only, you're showing net losses of Tochka? Then for Rocketbank, this is the full year consolidation, but would you expect like Rocketbank to move to certain stage to breakeven and so what will be, let's say, the affect of this Rocketbank next year? And in your revenue guidance outside of the core business, there's a pretty good increase in that guidance as well, is that just the effect of, as you mentioned, of the performance of Tochka in the second quarter? Or there might be something beyond just Tochka may be SOVEST, who is going to perform better, and what is behind this?

[Alexander Karavaev:]

So now, first of all, on the accounting treatment. So on Tochka, yes, you are exactly right, so as soon as that new joint venture will go live, we will deconsolidate the Tochka business and the majority of the profits will be picked up through the equity pickup. On the exact date, we're still discussing that with Otkritie, so it's more, shall be decided on the facts and circumstances. So it's likely will not be July 4, but probably slightly later, but this is something that you're going to be discussing with Otkritie for the next kind of reporting period. But, it will not consume the revenue, because the part of the revenues that we actually -- when we sell the book the part of revenue that would relate to the clients, Tochka clients, that shows through the balance sheet of Qiwi Bank. And then we're going to be having approximately same amount, of course. So more or less equal to revenue that we're going to be paying to Tochka for servicing those clients. So from that point of view, the accounting treatment will probably be a slightly more complicated. So we plan for the next quarter to reissue our next quarter results probably spend some time to explain how that's going to be working from the accounting point of view. And, obviously, the guidance, reflects our current understanding of accounting, effects of Tochka as I just described, so we're still going to be having quite business revenue in that segment. So on Rocketbank, Rocketbank will be fully consolidated, so we own all the asset and we're now in the process of migrating all the technology and clients onto the Qiwi Bank, which we believe will probably take around couple of months or so [indiscernible] from us. So we already few thousand clients of Rocketbank, migrated successfully from Otkritie Bank to Qiwi Bank. And again as for the next year losses, we -- unfortunately, I'm not really able to say it as of now. So we basically sort of needs to complete the migration and we, as Sergey said, we plan the budgeting session, the budget board, that will approve the key indicators in November then probably at the formal budget going to be approved in December. Generally, we believe, Rocketbank would require some investments within next couple of years, but that will really depend on our joint project pipelines, which -- what we are trying to achieve is to basically look to a synergies that it may create by using Rocketbank for our users, and based on those kind of conclusions, we will provide the budget for the -- for its development.

[Vladimir Bespalov:]

And on the revenue side, the upgrade of your guidance apart from the core business, was there something else beyond just Tochka's contribution in the second quarter? And have you revised any numbers for full service, for example, anything else?

[Alexander Karavaev:]

We -- No, no, we have not revised, so service numbers for that year, I remind exactly same as we basically used for the guidance that have been provided previously. So the upward [indiscernible] is primarily core business in Tochka.

[Vladimir Bespalov:]

Okay. And another question a little bit broader one, we see a lot of discussion right now in the government about taxing self-employed people, individuals and so on and so forth. What is your view on this? Do you see this as an opportunity for Qiwi? Or you believe that the people merge might just move to cash settlements and things like this? And this might adversely impact your business?

[Sergey Solonin:]

No, we -- Vladimir we definitely believe that it is an opportunity. So we are participating in all these discussions in tax departments. And we think that for Qiwi the platform, this is an opportunity to give an ability for both the government and people who are self-employed, to incorporate and work through a platform. So that it will be easy for both sides, and as far as I know at least for now, the current tax the regimes that they think about for the future for some employed is not difficult, or is not very high, or is not any high -- anyhow high for self-employed. And the only thing that should be in place is automation of the process, which we hope we'll be able to provide for our customers.

[Vladimir Bespalov:]

And may be the last question, you mentioned that Tochka will require some investment from Qiwi and from Otkritie, how much Qiwi is going to invest, let's say, over the next one to two years?

[Alexander Karavaev:]

Vadimir look, we believe for the -- all I think we have provided that we have slightly better results, it's around 700 million to 800 million additional investment from our side this year, and approximately same amount shall come in from Otkritie. And next year, Tochka going to breakeven, so we're pretty sure that, that will happen because it's something that has been already proven. That would be that we believe. So again, we have some interesting new strategic ideas inside Tochka on how we might deploy the assets in broader sense that they have in terms of brand force and brand. But this is something that we want to be discussing next year. So far their core business going to be profitable next year already and hence we not required an additional investment.

[Vladimir Bespalov:]

Okay, and out of this amount which you mentioned for this year, how much is invested already?

[Alexander Karavaev:]

It's -- it's on top of what we have already invested, so that...

[Vladimir Bespalov:]

Okay, this is in for the second half of the year, right?

[Alexander Karavaev:]

Yes, exactly.

[Vladimir Bespalov:]

And this will be cash that you're going to invest or it's going to be some kind of settlement with Otkritie for the past revenues?

[Alexander Karavaev:]

All of this -- this is something that we're discussing, I'm sure, we would have a really good kind of sign, as soon as we agreed with Otkritie, all the specific matters in respect of that joint venture, they eventually settled, the accounts receivable in respect of Tochka for last year RUB 644 million. As for the -- as for this year, we don't know yet, so it might be part cash, part type of settlement, but really in relation to the accounts receivable created in 2018, so this -- again, so it's more or less doesn't matter, because what we agreed with Otkritie in principle is that, starting from January 1, 2018, we basically financed Tochka in equal part, 50-50 each and obviously, have same rights to the economic benefits that Tochka provides and then they have a number of different types of instruments and how we achieve that, it's either contributing the accounts receivable or cash inject from something else or this is something that we are discussing like practically, so to say.

[Vladimir Bespalov:]

And maybe just a few words on developing multi-banking model around Tochka, when we can see progress on that?

[Alexander Karavaev:]

Well, certainly. So it's likely next year, so we have couple of banks that are fairly interested to join that ecosystem, especially, three banks.

[Sergey Solonin:]

Three multi-banks.

[Alexander Karavaev:]

Yes, today, it's already multi-bank with the sales of Qiwi and Otkritie, but if you talk about first...

[Vladimir Bespalov:]

Yes, yes, definitely.

[Alexander Karavaev:]

Yes, yes. So we have three banks in a pipeline, so one bank is already in fairly advanced phase, so to say, two other in more kind of in the strategic type of these cash levels, something in the -- I guess, the preparation cycle and knowledge kind of part of that project is fairly complicated, so we believe, we may be in the position to announce something early next year, not earlier than that I think.

[Operator:]

[Operator Instructions] Our next question comes from the line of Andrey Mikhailov with Sova Capital.

[Andrey Mikhailov:]

I had a question on Rocketbank and in particular, on its conversion onto Qiwi. You mentioned that you've booked already 3,000 clients of Rocketbank to your balance sheet. And my first question is, what is your target or estimated conversion rate for the total universe of Rocketbank's clients, so to speak?

[Sergey Solonin:]

Well, our estimation is around 80% that's also due to the increase of the client base that they still experiencing, so it will be more or less the same base that they have in their [indiscernible] quarter.

[Andrey Mikhailov:]

Okay. I have a few more questions on this. Out of the few thousand clients that have already migrated, would they be able to share how many of those have already opened term accounts, term deposits with you?

[Alexander Karavaev:]

I think not much, but usually the term account deposit, they -- at least not something that can be easily migrated. So from a technical and legal point of view, they still keep them in Rocketbank, in Otkritie and they open the current accounts but again based on the consumer service that we basically feel for the it is -- the term account deposits will probably [indiscernible] time, they need to mature. So our estimation that 80% of the term accounts will migrate.

[Andrey Mikhailov:]

All right. And the final question on this, my assumption currently is that, at least for the time being, you invest most of the cash after the conversion into securities -- record securities, bonds these are -- and corporate bonds of that account. Is this a fair assumption to make, and they think, your strategy will change in terms of that, for instance, would you be able to finance service cards with local bank balance.

[Alexander Karavaev:]

Yes, that's for sure, that's for sure. So from that point of view, probably, we'd love to look like a normal bank, for the part at least, the substantial part of the current accounts will be [Indiscernible] So, you already know the result of kind of special kind of norms and the ratios for the banks, that needs to be more important, we [Indiscernible] through are models for the next year and couple of years from now to see how well they are balanced and we are, generally. But, again, our ultimate goal is to move service to multi-banks, from that point of view, we will not be kind of needing a lot of cash deposit, from that point of view.

[Andrey Mikhailov:]

And just to make sure, so if seeking to consolidate a bank model for service, the Rocketbank client balances also been invested mostly in securities in the future, is this correct?

[Alexander Karavaev:]

From -- in different low risk in general so that's historically has been the strategy of [Indiscernible] not assume any risks in investment -- cash investment. This we're going to continue that way.

[Operator:]

[Operator Instructions] Our next question comes from the line of Svetlana Sukhanova with Sberbank.

[Svetlana Sukhanova:]

Can you please explain that why FX loss in Q2 has expanded? And why loss for the corporate segment has expanded? What is included in that loss for the corporate segment?

[Alexander Karavaev:]

So on the ForEx, it's very simple. So we -- one of the legal entities that we have say it -- so to say, it's mostly technical. So it's one of the legal entities that we have in the group, has a functional currency U.S. dollars, this is the company that service our gateway to the merchants that you see [Indiscernible] primarily. And that technically the devaluation of football kind of produce that's ForEx loss. So if we would be having all the companies within the group using ruble in the functional currency, so that we will not be having any loss also. So on the corporate segment, so it's primarily comes from Rocket, so though, we have not on-boarded, so to say that business for the first half of the year, but we were taking some of the cost that actually Otkritie refused to have and it's been fairly important for us not to damage the brand and the person, the client experience. So -- and we basically financed. So the total amount of that course was around RUB150 million, so that's probably the major part of increase of Corporate and other category and then few other smaller projects.

[Svetlana Sukhanova:]

So when you were talking about additional loss of RUB600 million, attributed to Rocket in the second half of this year. Do you understand the [Indiscernible] is -- we'll see through the -- going through the corporate segment or where Rocket would be recorded?

[Alexander Karavaev:]

That's a good question, it's -- there are actually two options, so it might be still the books for Corporate and Other or it might be presented as a separate segment. Now this is again, subject to a analysis of IFRS standard and special circumstance as well. Standard basically require a certain threshold to be kind of math for the kind of segment to be presented separately for the financial statements. We don't yet know, whether rocket will surpass those thresholds. But anyway, even if not, we will try to make it transparent and present a separate numbers in the reporting to come.

[Svetlana Sukhanova:]

Understand, but this RUB600 million, which you mentioned, it's like net loss which you expect for the second half for the Rocket, do I got it right?

[Sergey Solonin:]

Yes, that's right.

[Operator:]

We have reached the end of our question-and-answer session and this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.