QIWI plc
Q3 2015 Earnings Call Transcript

Published: 10 Nov 2015

[Operator:]

And welcome to the QIWI PLC Third Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host today Mr. Yakov Barinskiy, Head of M&A and Investor Relations. Thank you, sir. You may now begin.

[Yakov Barinskiy:]

Thank you, operator and good morning everyone. Welcome to the QIWI third quarter 2015 earnings call. I am Yakov Barinskiy, the Head of M&A and Investor Relations and with me today I have Sergey Solonin, our Chief Executive Officer and Alexander Karavaev, our Chief Financial Officer. A replay of this call will be available until Tuesday, November 17, 2015. Access information for the replay is listed in today's earnings press release which is available on our Investor Relations Web site at investor.qiwi.com. For those listening to the replay of this call was held and recorded on November 10, 2015. 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, the 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 will begin by turning the call over to Sergey Solonin, our Chief Executive Officer.

[Sergey Solonin:]

Thank you, Yakov and good morning everyone. Thanks for joining us today. The third quarter of 2015 was solid despite the challenging economic situation in Russia and decreasing consumer disposable income. We’ve fully consolidated new businesses of Contact and Rapida, continue to gain market share, strengthened our strategic relationships and launched new products. Our total payment volume increased by 65% to reach RUB271 billion, while payment volume in money remittance and e-commerce market verticals grew even faster by 275% and 81% to reach RUB63 billion and RUB34 billion respectively. As of September 30th we had 16.7 million Visa Qiwi Wallet accounts and around 150,000 kiosks and terminals reflecting a 20% decrease into number of kiosks in Russia due to the regulatory one-off effect on our agents. There are certain verticals that are continuously pressured by the economic situation in Russia this affect is partially effect by persisting growth in others, primarily e-commerce vertical. In these circumstances we see many opportunities to strengthen our position and gain market-share in the existing markets by executing new partnerships and introducing new products and services, as well as entering into new market segments which are complementary to our core business. I am also glad to see that the e-commerce vertical continues to be the largest vertical in terms of net revenue. This makes us believe that we continue to execute our strategy well and penetrate the diverse and technological market by offering our highly useful and convenient solutions to our customers and merchants. Now I would like to walk you through some important recent developments. Our kiosks market in Russia significantly decreased as a result of the enhanced controls by the Central Bank of Russia towards our agents. We can see that other marketplaces are experiencing similar trends and we are expecting the number of kiosks to grow throughout 2016. Although these matters currently have a negative effect on our physical distribution network, we believe that the increased transparency of the kiosk market will ultimately benefit QIWI and allow us to improve our share in this market. With this, I will turn the call over to Alexander Karavaev who will take you through our financial results in more detail. Alexander?

[Alexander Karavaev:]

Thank you, Sergey and good morning everyone. I will now walk you through the detailed financial results of the quarter that Sergey just described. First of all I would stress that from now on we present the financial results including acquired businesses of Contact and Rapida in accordance with IFRS. That means that we consolidate the entire volumes, revenues and cost of the acquired businesses starting from the acquisition date which is June 01, 2015. Total adjusted net revenue increased by 6% to reach RUB2.5 billion, up from RUB2.4 billion in the third quarter of last year. Payments adjusted net revenue increased 5% to RUB1.8 billion, as a result of net revenue growth in our money remittance and e-commerce verticals, which grew 128% and 29% respectively. It was offset by a significant decrease in financial services’ net revenue by 61%. We see considerable pressure in the Russian retailer repayment market, which does not allow us to demonstrate better, results overall. Net revenue yields across three key verticals decreased as a result of the consolidation of Contact and Rapida which operates on significantly lower net revenue yields than QIWI legacy business, with the effect being more pronounced for financial services. Telecom vertical trends remains mostly unchanged with a slight increase in volumes and decrease in yield driven by the same factor. Average blended payment net revenue yield was 0.68%, down 39 basis points from the prior year, with Contact and Rapida generating a payment net revenue yield of 24 basis points. Our total average net revenue yield was 0.93%, down 51 basis points from the prior year. Other adjusted net revenue increased 11% to RUB693 million, up from 626 million in the prior year mainly driven by growth in the activity fees interest income and agent overdrafts. Moving on to expense, adjusted EBITDA decreased 12% to RUB1.3 billion, down from RUB1.5 billion in the prior year. Adjusted EBITDA margin was 53% compared with 64% on the prior year. Adjusted EBITDA margin compression primarily resulted from higher better expenses, as well as increased rent, office maintenance and professional fees expenses. Adjusted net profit decreased 3% to around RUB1.1 billion, down from RUB1.2 billion in the prior year. The adjusted net profit was largely affected by the same factors as adjusted EBITDA, though significantly mitigated by operational foreign exchanges gains due to higher ruble volatility. Finally as we continue to pursue our M&A strategy and consider the market favorable for deals, our Board of Directors recommended refraining from paying a dividend for this quarter, as well as for the next few quarters. Now on to our guidance, we are committed to fulfilling the same full year guidance that we provided together with the second quarter results. We expect both adjusted net revenue and adjusted net profit increase by 18% to 22% over 2014. We feel it is crucial to strengthen our market position this year in order to be prepared for driving future growth, once the consumer confidence is back. With that operator, please open up the call for questions.

[Operator:]

At this time, we will conduct a question-and-answer session. [Operator Instructions] Our first question comes from Vladimir Bespalov with VTB Capital. Please proceed with your question.

[Vladimir Bespalov:]

First I have a question on your fully guidance. It basically implies a very good acceleration in the fourth quarter, could you provide some color maybe you see some improvement in the growth of kiosks after disrupts in the third quarter and basically what’s going to drive this growth? And the second question that I have is on your dividend guidance, at some point Russian media quoted Sergey saying that you’ll have good visibility on your M&A activity by the end of this year, but now it looks like you're going to pursue M&A opportunities for several more quarters. Could you comment on this what has changed since then? Thank you.

[Alexander Karavaev:]

Thank you for question it is Alexander on the full year guidance -- so we really deliver in Q4 we will be performing slightly better than in Q3 and this is primarily due -- first of all on the bottom-line, due to the fact that we will be much more careful with the expenses. So we have already the program how to keep the expenses under control especially in that time. On the revenue side, we believe that generally seasonality works in a way that in December we are gauging a lot of income, a lot of revenues as compared with other markets like in e-commerce and then there is another segment. So we do not really feel that something really unusual will happen in December. But we still expect some spike in revenues. And I pass over to Sergey for second part of your question.

[Sergey Solonin:]

Yes, well I do reiterate that we are looking for -- we’re discussing few M&A opportunities right now. The problem we face is uncertainty about what’s happening in the economic situation of Russia and uncertainty on some verticals that we look at and we are waiting a little bit to see if the market stabilizes and if we can deal with that. As I said if we do not lose the deal then we will -- next year we will distribute the dividend.

[Operator:]

Thank you. Our next question comes from Bob Napoli with William Blair. Please proceed with your question.

[Bob Napoli:]

The growth of e-commerce, the acceleration and growth in e-commerce I mean I know that some of that is from the acquisition. But is there underlying an acceleration in growth? And then what is your outlook, what is driving that and what is the outlook for that segment?

[Alexander Karavaev:]

Hi Bob it’s Alexander so it’s primarily the continued trend of switch offline to online so we still see a substantial growth of the let’s say classical e-commerce meaning the online health is good as we are starting to feel certain anti-cyclical effects of the virtual goods like the gaming and so unusually what would be happening is that in a crisis time the people they have the usage and the gaming usage and the usage of virtual depend on increasing Russia and we’re generally benefiting from that trend in Q3.

[Bob Napoli:]

And that would you not -- is there enough stabilization, is there stabilization in your business at this point from a regulatory and economic standpoint? Any stabilization and what are your thoughts on 2016 growth?

[Sergey Solonin:]

As we can see right now we see that September was actually the month where we saw full exposure of regulatory changes for our agents so we see that we’re recovering right now. So generally it usually takes quite a lot of time to renegotiate the rental fees for our agents with the landlords et cetera, but it seems that they managed it in a shorter period but still I think that there will be some of the contracts are long-term so it will take maybe up from a year to fully recover. So my outlook for 2016 is quite tightly connected to what will happen in our macroeconomic environment. So we still see that banks on longer payment side and on deposit side are quite weak. So we think that we will still experience some problems on the banking side which will be offset by I would say e-commerce segment. But generally the biggest worries are, my worries the personal worries are around still around banking segment and about banking payments longer payments segment. So we think that there is some capacity to fall still in that segment looking forward.

[Bob Napoli:]

And then just as would rather I guess our clients would rather see you not paying such a big dividend and retain capital whether it’s for M&A and especially if you are weak to possibly over the course of next year to buy back stock. So just food for thought that they’re other thoughts out there versus just paying a very big dividend, and I’ll pass it on for the next questioner, thank you.

[Sergey Solonin:]

Thank you. Well, I’d say this if we’re not decided with M&A activity then there will be options for us either to pay the dividend or to buy back so we will review this option as soon as we make a final decision on our M&A activity.

[Operator:]

Thank you. Our next question comes from Zach Shafran with Waddell & Reed. Please proceed with your question.

[Zach Shafran:]

Two questions, one Sergey how would you suggest people think about the number of kiosk in the coming year or so? And two, how should one think about given that you had to increase commissions, what that’s going to look like and how much further you might have to go in the coming year?

[Sergey Solonin:]

Well, I believe that we will gradually increase the number of kiosks so it will be not a quick increase because we already have some effect from this regulatory and we understand that this is some kind of a minimum amount that we got in September. And I expect that throughout 2016 we will increase this number, so it will be increased, I wouldn’t commit on the percentage but we see that the dynamic is positive. I don’t believe that we will completely forget the same volume of kiosks that we had a year ago, but I think that we will come maybe halfway to that within a year. So, on the yield side we believe that we increased our market share quite significantly in this year and partially this affects we have on our decreased yields in the third quarter. So, we think that we have potential for the yield increase if you see our volumes are quite good, so we are generally thinking about being positioned more stronger in the market so getting a little more share on the market. But for 2016 maybe from the second quarter of ’16, I believe that we will start the campaign for slow increase on the yields, and so you’ll see that.

[Operator:]

Our next question comes from Igor Gerasimov with Goldman Sachs. Please proceed with your question.

[Igor Gerasimov:]

I have several questions. I will go for them one by one. My first question is on your amortization of fair value adjustments. Could you please elaborate a little bit more on nature of that item and say whether it's recurring or not?

[Sergey Solonin:]

So amortization of fair value adjustment comes from the recent, the size lease event, amortization of fair value adjustment comes from the recent acquisition of Contact and Rapida. So it is the special treatment under IFRS where you basically allocate the expense of the purchase price over the net assets of the acquired business, to various intangible assets. This is obviously recurring until the time when fully amortized which usually happens within five to 10 years from now. Thought that item is non-cash publically in stock, so this more a special treatment under IFRS rather than declaration of the metric that we’re seeing.

[Igor Gerasimov:]

My second question is on your preliminary outlook for 2016. I heard that you already shared partially your outlook and what you expect with regard to Financial Services. But maybe you can go through some other segments of yours? Thank you.

[Sergey Solonin:]

Well, we unfortunately I am not here in a position to guide on the call, so we are now let's say in the middle of our budgeting exercise where the management and the Board of Directors has involved that will be finalized as usual in December. So what they might say is that obviously we see 2016 as a tough year if at all if the economic macro situation will not change as compared to what we have now then we are positive. So we are expecting certain growth next year though above the -- above the exact numbers we will tell you on the next call.

[Operator:]

[Operator Instructions] Our next question comes from Svetlana Sukhanova with Sberbank. Please proceed with your question.

[Svetlana Sukhanova:]

It's Svetlana Sukhanova from Sberbank. Thank you very much. And my question would be on Telecom volumes. I was pretty much surprised to see Telecom volumes growing while I was originally expecting that given 20% reduction of your payment of your terminal network in Russia, I would have expected Telecom volumes falling even by larger extent. Can you please elaborate on that?

[Sergey Solonin:]

So the growth first of all is primarily due to the acquisition of Contact and Rapida. So we have not really seen any substantial shift in that as such, so is just the acquired volumes.

[Svetlana Sukhanova:]

But as per your earlier guidance, you were not saying that Contact and Rapida got Telecom payment volumes so you were talking pretty much about E-com, financial services, volume.

[Sergey Solonin:]

Yes that volume is not that substantial in Contact and Rapida, but still it's like few persons, given that their volumes of Contact and Rapida launch as such that is certain percentage to our total consolidated volumes.

[Svetlana Sukhanova:]

My second question, I would be when will be we see standalone financial, the financial to Contact and Rapida? Earlier you were talking about...?

[Sergey Solonin:]

Yes so we’re in the final stage of preparing those. So hopefully we’re going to be publishing those within a month from now, this is our plan.

[Svetlana Sukhanova:]

And my next question would be about if you can disclose yields at Contact and Rapida. It looks like when I was comparing actual reported results in my estimates, I overestimated financial services yields at Contact and Rapida and other lines as well. Can you give us any guidance? What do you mean by significantly lower yields compared to?

[Sergey Solonin:]

Yes so we -- yes, we actually feel they never published their yields separately in our press release and it amounted to 24 basis points in Q3.

[Svetlana Sukhanova:]

In financial services?

[Sergey Solonin:]

No, for the whole company, but it pretty much resembles, it's pretty much -- looking at financial service, I mean we are not able to provide to you the base, but given that they are -- it's a blended yield is 24 basis points. So the volumes depreciate that with the volumes would usually be having a higher net revenue probably around twice as high as 24 basis points, and that would good effect to the NIM that the financial services not revenues would be lower than that amount but we’re not really able to provide the breakdown.

[Svetlana Sukhanova:]

My just very last question on this point would be was this 24 basis points for Q3, have I got you right in terms of quarter?

[Sergey Solonin:]

Yes, correct.

[Svetlana Sukhanova:]

And my last question would be about bottom. You already discussed why you expect hike in December. But overall in terms of these regulatory changes can you see a bottom or you think if you strip out the seasonality in Q3 bottom would be in Q4? If you strip out seasonality in Q4, when would it bottom Q3 or Q4 again if you strip out seasonality of this regulatory crisis?

[Sergey Solonin:]

We believe that from a regulatory point of view Q3 is probably the bottom I mean again it’s really difficult to segregate those effects I mean obviously but December in Q4 historically was the best quarter of the Company from a seasonality point of view so that’s we expect slight increase. But I mean I certainly said so in Q3 we really would believe that we hit the bottom in terms of the number of kiosks in Russia and I would say the November seasonality in December for example is higher than October and in November we usually have slightly lower seasonality. So it’s really difficult to say. But generally yes Q3 was the lowest I believe, yes.

[Operator:]

Thank you. Our next question comes from Faiyaz Alamu with Janus. Please proceed with your question.

[Faiyaz Alamu:]

I have a few questions and I am going to go with them one by one. My first one is just want to clarify one point you just mentioned when you said if the macro situation doesn't change you will still be positive. I'm just wondering what do you mean by that given that consensus expectations for GDP for 2015 are around negative 4% while for 2016 they are around zero to 1%. So when you're saying you'd be positive, you mean under a negative 4% GDP growth scenario in 2016?

[Sergey Solonin:]

No, we will be -- hi Faiyaz. We’ll be positive on the zero case scenario so it’s nothing really will go for in the next year than we have a positive outlook. If the economy will fall then depending on how much it falls we may think about this differently. But if it is zero and we believe that it may be as you said 0% to 1% then we will experience positive growth.

[Faiyaz Alamu:]

The second question is on the regulation, can you give us more color on the state of the competition in the terminal business given that you guys have been impacted by around 15% and given that none of the competitors are public so we don't have real color on what's happening? But how do you describe the state of the industry now versus where do you think it's going to go through like how many players are right now in the terminal business versus how much do you expect to be over the next few months or a year? And I'll ask my third question after that answer.

[Sergey Solonin:]

As far as I know, the general flow overall flow of the volumes in terminal network was down around 30% to 35%. Our volumes fell a little lower. So, I can say that some of the competitors just closed down recently I know about few such cases. So, generally we now at QIWI we are a little better than the overall market I would say and for the future I believe that in this regulatory environment it will be very-very difficult for small terminal networks to survive. So I think that we will have maybe one or two competitors who are big and the small players should be joining or merging into one player others they will face bankruptcy that’s my personal point of view.

[Faiyaz Alamu:]

So effectively you believe there are going to be three or four players in the industry in the future? Can you tell us how many players are there now in the industry?

[Sergey Solonin:]

There are around 20.

[Faiyaz Alamu:]

So, you think that the industry is going to consolidate down to four?

[Sergey Solonin:]

Yes.

[Faiyaz Alamu:]

Another question I have is can you talk to us a little bit about the long-term strategy of QIWI and what's the ultimate goal from all these acquisitions that you're doing like where do you see the Company in three to five years? How do you visualize the Company because this is something we don't really discuss much?

[Sergey Solonin:]

Well, I would really like to postpone for the acquisition because it will be a little -- it may get a little lite on what we are doing and I would not like to really say about that. So I can say that our core business as payment company will be our focus anyway, so we are talking about different companies that will increase I would say that will -- it will give us much better market position for the future. So it is either increasing market shares in at some point or having a more solid outlook for the future. So it is more -- you can say that it's kind of protective strategy more protective, so we’re trying to get much bigger -- much better market position together with bigger importance for the market. So that is as much as I can say if we do the acquisition or we will cancel the deal then I will be able to elaborate much more on that.

[Faiyaz Alamu:]

My next question is the yield in or on Contact and Rapida volumes are significantly lower, which I believe is what brought your total average yield lower. How easy or difficult is it to start applying higher yields to these businesses and where are you in the revenue synergy cycles?

[Sergey Solonin:]

Well right now as I said we are I think in the third quarter you’ve seen the yields that are quite stable, so we’re not in a position to increase the yields in falling market for Money Remittances in the bank. So we think as soon as the market stabilizes and we believe that this is -- this will happen in the second quarter of the next year. So from that point we will start to moderately increase slowly increase yields. Again I am not, I think that it will be a very slow process and it took us three years in our core business to increase yield. So I think that it will take few years to bring up yields of Contact and Rapida closer to our numbers. But I believe that in say three-year time it is absolutely possible. And we will start around second quarter if the economy will not be falling as we talked to with you before.

[Faiyaz Alamu:]

Also another question also on yields, the commissions paid to agents have increased significantly this quarter if I'm correct. Can you first of all tell us how much did they increase and can you draw us a path where do you see this going? Do you expect this commission to decrease in the future or to increase to keep your agents network? Can you explain as much as possible about this specific point?

[Sergey Solonin:]

Well we really increased a little bit -- just a little we increased commission for our agents to support them on this regulatory change. So we thought that it will be a right way to do for our partners, who are working and have managing all this terminals, networks and rental agreements. So we think that we think that this is pretty enough so we don’t expect that we will do it anymore and maybe we’re doing something back in next year depending on the economic situation again, depending how the outlook will be in the next year. So it is really dependant, if our agents will be say if not worse than now then it will be stable, if it is better than I think we can decrease.

[Faiyaz Alamu:]

Final question I have, which is a softer question. You're growing basically around 20% in a negative GDP growth environment and given what you just mentioned multiple times about the correlation of the GDP growth with QIWI do you believe that it is still possible for QIWI to grow at rates that you delivered in 2013 and 2014 of more than 40% growth, if GDP growth was above 2%? Is this possible?

[Sergey Solonin:]

Well if you give me 3.5, I would commit, yes.

[Faiyaz Alamu:]

To over 50% or over 40%, okay. Thank you very much. I'm done.

[Operator:]

Our next question comes from Igor Bob Napoli with William Blair. Please proceed with your question.

[Bob Napoli:]

Just a question on your remittance business, historically before you made the acquisitions, I think you were primarily all send. With the acquisitions, what is the mix of your business versus sending and receiving remittances?

[Sergey Solonin:]

Look it is, I mean the -- probably the proper angle to look at that I mean we just acquired additional sender side and additional revenue processor so the recipient side is anyway is kind of controlled by the recipient side bank, so that’s…

[Alexander Karavaev:]

Yes and we are mostly on the sender side of course from sending from Russia to the west it may happen that this proportion can change a bit towards recipient side because some people are going out now of Russia but we still believe that majority of course will be on the sender side.

[Bob Napoli:]

And I guess I mean the send side of the market is down pretty hard because of weakness in the ruble, the receive side seems to be up quite a bit. So are you seeing the pressure from the sends being down?

[Sergey Solonin:]

Well, the proportion will change a little bit to the recipient side because more money will come in so some people because we think it’s not businesses it’s people who are spending money. So, there is now a little growth on the recipient side and some fall on the sender side because of the macro.

[Bob Napoli:]

You mentioned some new products in your remarks, Sergey, anything that you could point out of new products that you've launched?

[Sergey Solonin:]

Well, we are continuously working on a lot of new projects so we would recently the launched the payments with VISA, we are currently launching a lot of small things and add-ons in our interfaces. And we did launch a few interfaces in the wallet for Money Remittances, so you can remit money now in the telegram and in different social networks. So, we just started with that so we are -- you can already try -- there is a trial and the growth there is very impressive on messengers right now. And also I would say that the wallet with operators so we are a little bit thinking how to re-launch and how to renegotiate something on the wallet, so that we can still do some marketing expense maybe in the next year and they’re increasing so it is not stable there generally increasing. If you look at the quarterly base on the wallets you will see that our loyal customers are increasing and we’re quite happy on that. So we are in this we are on the right track.

[Bob Napoli:]

And then last question just on your EBITDA margin, 55% this quarter. I mean you've been mostly above that and I understand going through the challenges you are. But any thoughts on the EBITDA margin as we go into 2016?

[Sergey Solonin:]

Well, we don’t really expect any substantial expansion of EBITDA margins as compared to what we had in Q3, so probably a little bit a little increase in Q4. In ’16 we keep that stable so that’s kind of our base case scenario to heavily take cushion to invest in our product and the cash flow. But again we will tell you the proper guidance as soon as we are through the budgeting exercise.

[Operator:]

Thank you. Our next question comes from Dmitry Trembovolsky with Goldman Sachs. Please proceed with your question.

[Dmitry Trembovolsky:]

Just a few follow-ups to what my colleagues were asking. First of all, just on the EBITDA margin. What is the key initiatives that you want to make on the cost side so where do you want to tighten things up a bit?

[Sergey Solonin:]

It’s very significant if basically for the expense item so primarily into some out flow now having contract and I see that we will some room for improvement there. So we may be cutting a certain number of employees it is the first initiative like in the different shareholder plans offered from the office some maintenance and then many other things like it’s kind of we can work that we expect results and a slight decrease in expense in Q4.

[Dmitry Trembovolsky:]

You mean nominal decrease, right?

[Sergey Solonin:]

Correct, yes.

[Dmitry Trembovolsky:]

Now can I just check also you used to give very different timings for potential M&As for which you hold cash. Is there any new guidance which you give on this front like when we should expect something?

[Sergey Solonin:]

Well I believe that we will have in December, we will have a Board meeting where we will discuss the M&A opportunities. So we are preparing some document and deals to that time then depending on how we will talk it through on the Board and what’s agreement we will come to depending on that we will be able to guide you that further on.

[Dmitry Trembovolsky:]

So in December you will already have decisions or once you have the Board's approval you also need to like negotiate with the sellers and do the rest?

[Sergey Solonin:]

Well the main decision will be on the Board of course. But then there could be some details that usually come up may be in the last minutes that we didn’t discuss through on the due diligence process somewhere.

[Dmitry Trembovolsky:]

So, December is the new date. Okay. And can I just ask you so -- sorry?

[Sergey Solonin:]

Yes, we were actually expecting to talk about that in the fourth quarter so it is more legislative at this point.

[Dmitry Trembovolsky:]

Okay. And if you cancel these deals or they won't happen for any reason, how should I think about the dividends? So should I just assume you'll restart paying them from the current net income or shall I also assume you will distribute all of the cash or some of the cash that you keep right now on top of restarting paying from the net income?

[Sergey Solonin:]

Well it depends of course how the Board will react, I will be on the side to distribute everything, but then there are maybe some operational issues in the Company that we have to talk so with Alexander. And then there maybe some ideas on the Board level, but generally if you ask me then if there is no deal I would definitely distribute everything.

[Operator:]

Our next question comes from Olga Naydenova with BCS. Please proceed with your question.

[Olga Naydenova:]

Just a follow-up on dividends and possible redistribution of the M&A resources that you have, did I hear correctly that you said in this call that you refrain from dividend payment for two more quarters so what is the timeline? I'm sorry for asking this again.

[Alexander Karavaev:]

Yes, as Sergey just mentioned so it is we really expect to finalize our view on potential M&A until the end of that year. So it is not -- it doesn’t really mean that we will announce the one this year, but this is a place deciding of the Board is the time perfectly fit for us to really take hold a major decision. If there is no deal then we may start to pay dividend next year, but again it's this is something that we have to discuss internally with the Board.

[Olga Naydenova:]

And my other question is maybe on something different. Today CBR has withdrawn license from Russlavbank, the one that used to own Contact and Rapida for a while. Can we expect any counterparty risks arising from that or you're completely out of that partnership and we can be comfortable?

[Sergey Solonin:]

Yes, as far as we can see you can be comfortable as soon as we acquired the Contact and Rapida we have internal profit to diversify let’s say the number of bank that show Rapida and Contact as a settlement. So as of today we do not have any substantial exposure to Russlavbank. So we actually issued a separate press release that says that we really don’t feel that we’re having exposure with Russlavbank and Contact continues to operate in a normal manner using all the other settlement banks that we have.

[Operator:]

Thank you. At this time, I would like to turn the call back over to management for closing comments.

[Sergey Solonin:]

Okay, so thank you everyone and we will talk to you on our next call. Thank you.

[Operator:]

Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time. And have a great day.