QIWI plc
Q4 2014 Earnings Call Transcript

Published: 12 Mar 2015

[Operator:]

Greetings and welcome to the QIWI Fourth Quarter and Full Year 2014 Earnings Conference Call. At this time all participants are in a listen-only mode. A 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 Mr. Yakov Barinskiy, Head of Investor Relations. Thank you, Mr. Barinskiy. You may now begin.

[Yakov Barinskiy:]

Thank you, operator and good morning everyone. Welcome to the QIWI fourth quarter and full year 2014 earnings call. I am Yakov Barinskiy, 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, March 19, 2015. Access information for the replay is listed in today's earnings press release, which is available in our Investor Relations website at investor.qiwi.com. For those listening to the replay this call was held and recorded on March 12, 2014. 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 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 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. Our fourth quarter results remained strong despite the general macro situation in our core markets which once again proves the value of our integrated network of physical and virtual distribution channels to our merchants, consumers and partners. In 2014 we continue to strengthen our market positions, establish new strategic partnerships and further increased our product awareness across both physical and virtual distributional channel. Our total payment volume increased by 15% to reach RUB 645 billion while payment volume in three key market verticals grew even faster by 35% to reach RUB 335 million. Our results demonstrate the resilience of our business model to the macroeconomic slowdown in Russia. We continue to see new opportunities to gain market share in the existing markets by executing new partnerships and introducing new products and services to fuel growth in the future. As of December 31, we had 17.2 million Visa Qiwi Wallet accounts, a growth of 1.8 million as compared to the prior year. Also we have further broadened the coverage of our physical distribution network reaching more than 181,000 kiosks and terminals, which adds to our dominating position in this channel. Turning to the numbers, in the fourth quarter total adjusted net revenue increased 45% to RUB 2.5 billion. Payment adjusted net revenue was up 41%, driven by strong payment volume and net revenue yield growth in our e-commerce and money remittances verticals. In financial services vertical we continue to suffer from difficulties in the Russian banking sector which resulted into a decrease in payment volumes. Telecom vertical trends remained largely the same with slightly decreased payment volume and net revenue yield dynamics driven by over a month [ph] period compression. Adjusted EBITDA grew 24% in the quarter predominantly affected by disproportionate large marketing and advertising expenses. Adjusted net profit grew by 5% largely driven by the same factors as adjusted EBITDA. For full year 2014 our adjusted net revenue, adjusted EBITDA and adjusted net profit were RUB 8.8 billion, RUB 4.8 billion and RUB 3.5 billion rubles respectively, thus demonstrating growth of 43%, 62% and 61%. Our Board of Directors decided to refrain from paying out the dividend this quarter primarily due to the difficult situation in the banking sector, which forces us to maintain a buffer in order to secure our relationship with large merchants. We view this decision as temporary and seek to return to our usual dividend distribution pattern once the situation stabilizes. Now I’d like to walk you through some important recent developments. In November we opened up our network to Russian eBay Shoppers. We view this partnership as truly unique and highly important given the eBay brand and position in international ecommerce space. We feel it serves as recognition of the success QIWI has achieved to-date and will benefit us in establishing relationships with international players in the future. Also in November we acquired Money.Mail.Ru, a payment to the eCom service and Omni advertiser group [ph] project. With that deal happening we now have direct access to suitable platforms [indiscernible] as well as other new advertiser [ph] services, primarily online games. We believe that this deal will allow us to leverage the channel to drive increase awareness of our products and attract new users to our network. Additionally we have announced a strategic partnership with MegaFon, which we see as big achievement and the first step in rolling out our mobile network model [ph]. We work for most of the year in a responsible structure. I am very happy with the results. I'm sure that these additions to our services will be fully appreciated by the users and will drive their growth. 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. As Sergey described we delivered strong financial and operating performance in the quarter and the year. I will start with a discussion of our fourth quarter and full year financial results in more detail and then continue by providing the guidance for 2015. Total adjusted net revenue increased by 45% to reach RUB 2.5 billion, up from RUB 1.7 billion in the fourth quarter of 2013. Total adjusted net revenue growth, excluding revenue from fees for inactive accounts increased 46% compared to the prior year. Payment adjusted net revenue increased 41% to RUB 1.8 billion, up from RUB 1.3 billion in the prior year, as a result of the strong revenue growth in our ecommerce, financial services and money remittances verticals, which grew 73%, 45%, and 104% respectively. Revenue performance was driven by solid payment volume growth and growth in ecommerce and money remittances verticals. Our financial services vertical continued to suffer from the situation in the Russian banking sector, which resulted in flat volume decrease as compared to the fourth quarter 2013. Net revenue yields across three key verticals continued to grow, partly because of currency conversion revenue growth, partly due to a decreased agency for Visa Qiwi Wallet top up which took place mid-year 2014. Telecom vertical trends remained unchanged with a slight decrease in volumes and yields driven general yield compression in this market. Other adjusted net revenue increased 60% to RUB 630 million, up from RUB 395 million in the prior year. Other adjusted net revenue, excluding inactivity fees, increased 73%, mainly driven by growth in the interest income, cash and settlement services, and new revenue stream coming from sale of kiosks, partially offset by decline in operating revenues and our ongoing investment in call center which we include in other net revenue. Moving to expenses, adjusted EBITDA increased 24% to RUB911 million, up from RUB733 million in the prior year. Adjusted EBITDA margin was 37% compared with 43% in the prior year. Adjusted EBITDA margin compression primarily resulted from our normal high marketing advertising expenses, which disproportionately affected fourth quarter numbers. Adjusted net profit increased 5% to RUB 597 million, up from RUB 567 million in the prior year. Adjusted net profit was largely affected by the same factors as adjusted EBITDA as well as increase in depreciation and amortization expenses due to our ongoing investment in security and IT infrastructure. Moving towards full year results; total adjusted net revenue reached RUB 8.8 billion, an increase of 43% as compared to RUB 6.2 billion in the prior year. Payment adjusted net revenue increased 51% to RUB 6.5 billion from RUB 4.3 billion in the prior year. Other adjusted net revenue increased 26% to RUB 2.3 billion, up from RUB 1.8 billion. Adjusted EBITDA for the full year was RUB 4.8 billion 62% [ph] growth year-over-year. The adjusted EBITDA margin was 54.5% which we see as a normal margin level going forward. Adjusted net profit was RUB3.5 billion as compared to RUB2.2 billion in the prior year. The adjusted net profit excluding inactivity fees was RUB3 billion, a growth of 71% year-over-year. Now onto our guidance, despite difficult macroeconomic situation and lower visibility on the potential market environment changes we're providing the following guidance for 2015; both adjusted net revenue and adjusted net profit to increase by 12% to 16% over 2014. As already noted on the two previous earnings calls, our financial services vertical is most affected by the slowdown. And you might see further input on this throughout the year. With that and certain other factor beyond our control, we reserve the right to revisit our guidance in the course of the year. We would like to stress that our 2015 guidance does not imply any substantial affect [ph] in the bottom line as a result of our ongoing investments in our key verticals, which includes acquisition of consumers, marketing and promotion campaigns and launch of new products. We feel this 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:]

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]. Our first question is from Georgios Mihalos of Credit Suisse. Please go ahead.

[Georgios Mihalos:]

Great, thanks for taking my questions guys. Wanted to start off, Alexander on the margins. Obviously you're looking for revenue growth and EBITDA growth in '15 to sort of converge, be inline. Can you maybe parse down for us some of the expenses that you've think are going to be temporary to '15 or elevated in '15, and how we should be thinking about perhaps those expenses anniversaring at the end of the year and not being in the '16 expense flow.

[Alexander Karavaev:]

Yeah, thanks for the question, Georgios. On the kiosk [ph] in '15 what we really expect to do is actually in that shaken market environment to invest in our market share, especially in key verticals where we see the more potential. And those expenses primarily will be concentrated around the marketing and advertising expenses, so we'll continue to launch the promotion campaigns as well as advertiser services across all the channels that we believe our efficient to gain more markets, more consumers in e-commerce, financial services and money remittance. As for all other expenses we do not really expect any substantial change in trends in 2015.

[Georgios Mihalos:]

Are there expenses built in there and perhaps not corresponding revenue tied to the telco deal, the MegaFon deal that you announced, meaning sort of upfront investments that you’re laying now that perhaps will go away or you don’t have corresponding revenue stream right now to offset it?

[Alexander Karavaev:]

It is partially true. I mean so far once we enter the MegaFon deal we have to say that with that project expenses are not that crucial. And as we told the public previously that project indeed will not bring any substantial revenues at least from the start of the project. So we expect the revenues to be visible in several months as soon as we prove the model. And again, we really would concentrate around the verticals. I mean in marketing spend, the advertising around the verticals where we see the more potential. And you see in those growth in money remittance and ecommerce in 2014. We expect the trend to continue in this year and beyond.

[Georgios Mihalos:]

Okay. Just last question for me, the net revenue yield continuous to be very, very healthy on the ecommerce side, that continuous to increase anything north of 3% this quarter. How should we be thinking about that playing out in ‘15 meaning? Should we be thinking that there some pressure on the yield as forms [ph] of volume come up or come into the system?

[Alexander Karavaev:]

Yeah, I mean generally speaking yes. We would really see the net revenue yields across all categories. And on e-commerce are kind of close to the ceiling. So we would not really expect any further substantial expansion in 2015. And as well would not really expect any substantial reduction in the yield. So I think the level we reach so far, is kind of a normalized for each of the categories.

[Georgios Mihalos:]

Okay, great. Thanks guys.

[Alexander Karavaev:]

Thank you.

[Operator:]

Thank you. Our next question is from Bob Napoli of William Blair. Please go ahead.

[Robert Napoli:]

Thank you and good afternoon, in Russia, good morning. Here, just on your 2015 guidance some thoughts around maybe, Alexander the growth of the financial services vertical in your guidance. Obviously the growth slowdown and you highlighted that would -- again is the biggest risks area on the banking side. In your guidance, are you expecting substantial declines from that vertical?

[Alexander Karavaev:]

We would not really expect a substantial decline, but we obviously would expect the slowdown in growth. We, on a conservative side we would really expect that the volumes there would be kind of flat. So we will not see any substantial growth in 2015.

[Robert Napoli:]

Okay, and then you suggest now that you -- what acquisition did you make during the quarter? I wasn’t clear to me what it sounds like you had acquire, made an acquisition but I didn’t see that announced?

[Alexander Karavaev:]

Yeah, it wasn’t really huge acquisition; we acquire a project called Money Mail.Ru from Mail.Ru.

[Robert Napoli:]

Yeah, right.

[Alexander Karavaev:]

It’s in house payment system and we reported that separately.

[Robert Napoli:]

Okay. And then are you seeing anything different on the competitive front in the -- currently?

[Sergey Solonin:]

Well no, hi Bob.

[Robert Napoli:]

Hey Sergey.

[Sergey Solonin:]

We don’t see any really big changes or any pressure, more of it we see that, we are still increasing the quantity of terminal. So we are quite bullish and aggressive in terms of the market share.

[Robert Napoli:]

Okay and then on MegaFon, what is the game plan with the MegaFon Qiwi Visa Wallet?

[Sergey Solonin:]

MegaFon gives access to their customers. So to really monetize this success, you have to either cross-sell to their customer some of the services that Qiwi already has or we’ll find new partnerships or increase old partnerships on the merchant side. So this is two sided equation. So first of all we by this contract we solve the equation on the customer side partially. So we have access to much bigger customer base and then it depends how we execute with merchants and how we give value to those customers. So that they start to use all other services and we are quite conservative right now on that. So we are trying to figure out the formula how it will be in the future and then we will be able to tell you exactly what will be happening.

[Robert Napoli:]

Great, thank you.

[Operator:]

Thank you. The next question is from Alexander Vengranovich of Otkritie Capital. Please go ahead.

[Alexander Vengranovich:]

Yes hi, a couple of questions from my side. So first a follow up on your profitability guidance. So basically you expect the same profitability in 2015 but going forward, should we also look -- should we also expect some sort of a strong operating leverage from your side. As far as I understand you will invest little bit more into the promotion of sourced products next year -- so this year in 2015, but after 2015 in case the crisis is over, should we expect that the share of SG&A to your net revenue on the normalized, a bit lower levels? So this is the first question. And the second question about dividend cancellation, is there anything like specific behind it. Of course I understand that the economic situation is not so good and but at the same time you don’t have any leverage and you have quite a good cash cushion. I mean what’s behind the conservative policy regarding the decision not to pay dividend, maybe you are preparing for some acquisition or whatever, any details would be helpful? Thank you.

[Sergey Solonin:]

Okay, thank you for the question. On margins going forward yes that is exactly right. So generally speaking that business we are running is very scalable. So we really expect 2015 being let’s say year of investment, as we started to invest in the consumer base and the product heavily in 2014. Generally as soon as we believe the crisis is over consumer confidence is back then we would expect further expansion of margins. So we obviously would expect a potential scale effect to kick in again. On the dividend look we do not really have anything specific in mind. We are just let’s say monitoring daily the liquidity of the company and what we see on the market is that basically most of the banks in Russia as well as larger businesses they already try to limit their credit risk and that is leading to a liquidity crisis, so to say meaning that the businesses would not usually tolerate large account receivable, credit risk and so on. And that I think we have been quite good in managing that so far. We really have a good relationship with all the merchants but in certain cases to secure our relationship with the large merchants they would require larger prepayments to secure their credit risk, which is kind of usual and we just like to have for next couple of quarters probably the cash cushion to manage those type of things.

[Alexander Vengranovich:]

Okay, thank you.

[Operator:]

Thank you. The next question is from Ulyana Lenvalskaya of UBS. Please go ahead.

[Ulyana Lenvalskaya:]

Thank you, and good afternoon gentlemen. My first question will be about money remittances segment, could you please comment where you see the market dynamics currently and your share?

[Sergey Solonin:]

Okay. I don’t think that we kind of publicly report our understanding of the market share. So we I think you may find the researches or kind of the report of Central Bank and their estimation of the market, and if you take that research into consideration then we would see our market share something between 3% and 4% of total money remittance. That share has grown quite substantially, through last year, I mean 2013 our share was less than 2% and we’ve seen quite substantial expansion of the market share in 2014. Again let’s see how that market develops? We, based on the statistics we have so far would not see any substantial changes in the dynamic and we would tend to continue executing our strategy to gain market share in that segment.

[Ulyana Lenvalskaya:]

Thank you. My second question is about your current and net cash position. Could you please identify what should we take as the company’s net cash position currently given the amount you receive from the most recent SPO?

[Alexander Karavaev:]

Essentially we have not actually spent anything substantial out of the proceeds from SPO. So we still keep that amount as a cash cushion, that we potentially reserve for potential M&A and/or investments in new product. On top of that the good way to look at our net cash position would be to basically look at the fourth quarter net profit that we decided not to distribute as a dividend kind of additional cash cushion to what we have on top of that SPO proceeds.

[Ulyana Lenvalskaya:]

Fine. So I should take the fourth quarter net income and add the SPO proceed, right?

[Alexander Karavaev:]

Correct, correct, that is more or less, correct.

[Ulyana Lenvalskaya:]

And are you currently considering the buyback because I still don’t quite get the virtue of not paying dividend and not doing buybacks and just sitting on the cash.

[Alexander Karavaev:]

Well we want to keep the cash cushion as until the situation resolves in the banking segment. So we are -- we want to be on the safe side and prepare for the worst, say so we will see in the first two quarters I think what is going to happen, the situation will not be worse, dramatically worse I mean then we will come back to our normal distribution policy.

[Ulyana Lenvalskaya:]

Okay, thank you. And the last question for me, what should we expect in terms of the number of turnoff [ph] this year? Do we expect any new addition?

[Alexander Karavaev:]

A number of [indiscernible].

[Ulyana Lenvalskaya:]

Yes, yes.

[Alexander Karavaev:]

Well, we expect that we will grow in this area so, right now do plan conservatively, but still it is substantial growth and we have seen that this growth has already started in 2014. So we think that this growth will more or less continue.

[Ulyana Lenvalskaya:]

Thanks, very helpful.

[Alexander Karavaev:]

Thank you.

[Operator:]

[Operator Instructions]. The next question is from Rob Napoli of William Blair. Please go ahead.

[Robert Napoli:]

Thank you. I had just a follow-up; I would like to understand a little bit more the remittance business which is growing so well. I think if the other remittance companies that work with Russia MoneyGram and Western Union have been -- talked about a slowdown in that market and you continue obviously to gain share. I was wondering what percentage of that business is it all done from the kiosk, is it, so it’s sent I mean what is the mix of send and receive and do you have a kind of mobile money transfer remittance strategy that you are working on?

[Alexander Karavaev:]

Thank you, Bob. Well yes, we do have some strategies that are on the mobile side of course. So we think this year we will introduce some products in this area. But generally it is of course driven by a very low market share. So having this amount of terminals, of course we think our normalized market share should be much bigger than we have today. So we think that we will develop this market share in 2015 and all of this of course on the same side. So we are not on the recipient side yet. So we are managing this sender side in this business.

[Robert Napoli:]

And which quarter was the most active for you, can you, can you tell us that?

[Sergey Solonin:]

So actually quite of those. They would be pretty much usual to what we would see in the key money remittance in Russia for let's say the, approximately half of them, a bit less than half would be Russia-to-Russia, and then the rest would be from Russia to CIS countries. So those are two -- I mean the players you just mentioned in the beginning of your question, so MoneyGram and Western Union they are primarily doing their business in the Russia to the western countries. And that part was never particularly large in Russia.

[Robert Napoli:]

Okay. And then your other sector the payment volume, what is -- do you have some investment businesses, do you have the payment volume in other shares becoming meaningful. So just wondering, if that due to -- is there anything in there was that we should be aware of.

[Sergey Solonin:]

No, generally these verticals that we show are the focus verticals still for us. So there are no new verticals that we would emphasize on.

[Robert Napoli:]

And then ecommerce. Who are -- I think you work with Alibaba and you mentioned also you signed a partnership with eBay. What is -- who are your bigger partners, what are -- is it all virtual goods yet today and is there -- what is the strategy on building out the e-commerce portion?

[Sergey Solonin:]

Well, physical goods are growing actually very fast. So small physical goods and mostly the eastern direction. So we think that our business with Alibaba will increase this year. So we have a very high growth figures today. We don't have that the growth figures on the physical goods on the western direction so. And mostly it happens because of the big average checks I think. So the average check on the eastern direction is very small, it's like $10 or something like that. And this segment was not affected by the crisis actually, we see that the increased proportion into the devaluation of the ruble and increase -- so we think that people will more likely to go for Chinese purchases, more Chinese purchases or eastern purchases.

[Robert Napoli:]

Great, thank you.

[Alexander Karavaev:]

Thank you.

[Operator:]

Thank you. The next question is from Anna Lepetukhina of Sberbank. Please go ahead.

[Anna Lepetukhina:]

Yeah hello. I have several questions. First of all I want to talk about other net revenue which is growing very fast, especially if you exclude fees for inactive accounts. Just, can you probably walk us through what is driving this growth and what should we expect going forward. You mentioned sale of kiosks and maybe you can elaborate on this. I also wanted to ask to which extent in fourth quarter you benefitted from exchange rate volatility and whether you continue to benefit from it. And can you maybe could provide more color in which segment if possible.

[Alexander Karavaev:]

Okay yeah. Thank you for the question. On the other net revenue I mean the substantial increase in net revenue is not only due to let’s say, revenue growth but we introduced the new revenue line there. So we actually incorporated the new business this year. The business that is essentially with reduction [ph] of self-service kiosk and the reparation, the repairing of self-service kiosk. So that part of revenue was not present in 2013 and then that is major reason why you would see such increase in other adjusted net revenue. Other than that the growth would be more or less in line with the volume growth, clearly growth volume. And then there is something that we actually can expect going forward. On the ForEx volatility, yes we benefited to certain extent in Q4, especially in December. So the reason was that we obviously -- it was not really intention to increase the net revenue to really limit our exposure towards currencies. Of course we are funded let’s say by rubles and we have to pay to the large merchants like eBay and Alibaba in hard currency. So that’s why we were keeping hard currencies products quite wide, and we had some extra income in Q4. We are continuing to benefit from that to certain extent in January. Now we see that the volatility is not that high. So we do not really see any abnormal gains in that respect and the guidance that we provided actually does not imply any substantial ForEx gains, that may cure [ph] the high volatility.

[Anna Lepetukhina:]

And can I just also ask about mail money, do I understand that you started to consolidate but basically if I look at the number of active awarded [ph] accounts net addition in fourth quarter was inline with third quarter. So I mean what was the organic growth let’s say without Mail Money eWallet?

[Sergey Solonin:]

I mean that’s been primarily again Money Mail, so that transaction did not imply a lot of new consumers for that project, obviously that have active wallets let’s say that are migrated to our system but their number is not that significant, so you would not see that as a huge factor.

[Alexander Karavaev:]

And generally the deal itself is not about acquisition of the customers, more about acquisition of the territories where we can have advertisement and where we are -- the method of payment on Mail.Ru and contacting I think. So it’s expanding the territory of QIWI towards the segments.

[Anna Lepetukhina:]

Thank you. And one last question can you disclose the size of marketing expenses in 2014?

[Sergey Solonin:]

I’d say it should be around RUB0.5 billion. So you can we I think we are publishing the 20th Annual Report today as well so in the footnote to the financial statements you will see the full detail of marketing expenses.

[Anna Lepetukhina:]

Thank you.

[Operator:]

Thank you. The next is from Matt Lipton of Autonomous Research. Please go ahead.

[Matthew Lipton:]

Hi guys. Good evening. It hasn’t come up on the call yet, so thought I would ask about it, the [indiscernible] legislation from over a year ago, now that obviously impacted some of the wallet registration requirements. Is that having any impact on your business now that you -- it’s obviously been in the market for that? And then I have another follow up.

[Sergey Solonin:]

Hi, Mike. Thanks for your question. Yes well, we think that it really slowed down our customer acquisition in 2014. Now we are adjusting to new regulations and we are already collecting some of the data from our partners. So we think that generally the effect has already passed. So we had this effect in 2014 so if we wouldn’t have these regulatory requirements we would have grown faster. So it’s already embedded into our growth.

[Matthew Lipton:]

Got it. And then this has also been talked before, it seems like competition is obviously potentially picking up with some of the other banks like Sberbank and things [ph]. So is that requiring you to spend more on developers or just given the economic situation in Russia is it actually -- do you think your personnel expenses will be a little softer in 2015?

[Sergey Solonin:]

It’s actually quite the opposite so we do not really feel any competitive pressure from the standpoint of labor cost, and again, let’s see how the labor market develops in 2015. I mean especially given that the IT engineers were really scarce resources in the Russian market but now we feel like we are, let’s say one of the best employers in that area, especially. So we let’s say feel that we may have some benefits in that market to really gain the best talent.

[Matthew Lipton:]

Great, and last one from me, the 40 basis points yield in telecom for the quarter is that the run rate that you’re assuming for ’15 or are you expecting to take another step down? Thank you.

[Alexander Karavaev:]

That’s a good question, so again, we believe that there is something that should be stable. So we do not really expect any further decline in telecom net revenues. So our estimate is that 2015 and probably going forward that should be around those levels.

[Operator:]

Thank you. The next question is from Igor Gorasimov [ph] of Goldman Sachs. Please go ahead.

[Unidentified Analyst:]

Hi guys, thanks for your presentation. Your payments volumes were actually quite impressive for this quarter and I just wanted to know your opinion to what extent you attribute your increase in payment volumes and then payment revenues to higher OpEx and higher marketing expense in the fourth quarter of 2014? And I have one more question after that. Thanks.

[Sergey Solonin:]

Yeah, so I mean there is no, let’s say direct correspondence of the marketing expenditure to the volumes. So actually let’s say the big chunk of the marketing spend that we incurred in 2014 and especially in Q4, is let’s say the brand awareness building the confidence of the users, as well as certain promotion campaigns that attract new customers in the system and those campaigns usually would not convert immediately to the increase rewards, so we really expect the effect of that promo advertising to be visible in 2015.

[Unidentified Analyst:]

Very clear, thanks and my other question would be about your expenses, once again your marketing activity accounts for approximately RUB 400 million according to your press release and what was the other sources of pick-up in OpEx in the fourth quarter versus the third quarter? Thanks.

[Alexander Karavaev:]

Yeah certainly it’s kind of use -- inflation of the quarter over the year end and on top of that we actually have certain new line items in 2014, primarily represented by additional costs of let’s say running Qiwi as a public company. So we obviously will first time through to give the Sarbanes Oxley or the [indiscernible] that we will have to implement the system of internal control, higher additional resources in the financial area in the financial reporting department in 2014 and so on, just to comply with the regulation. Those expenses they probably are the second largest larger factor of the increase in OpEx in Q4.

[Unidentified Analyst:]

Very clear, many thanks.

[Alexander Karavaev:]

Thank you.

[Operator:]

Thank you. The next question is from Olga Medamova of BCS [ph]. Please go ahead.

[Unidentified Analyst:]

Hi guys. Have a couple of questions. One again on the money remittances segment. From what I see on CBR statistics the volume of money remittances at least to the -- outside Russia is dropping dramatically more than a third quarter-over-quarter in dollar terms, which translates to almost 20% in rubles. How do you see that market generally penetrated and what do you plan, I hear you plan to increase your market share, but what do you see for the market overall?

[Sergey Solonin:]

Well, we think that the decrease is really a bit lower on the segment of certain [ph] countries, in ruble terms we do not expect very potential decrease but again you can take that information, I think it’s public from the Central Bank or other agencies who can show you that. In our case, we have a very low market share still and we think that we would be expanding this market share. In any case our growth was very high in 2014. So we think that we will continue to grow in terms of the market share as soon as our channel is really cost efficient for the market.

[Unidentified Analyst:]

Okay. And I have one other small question, do you have any proportion of your cost base nominated in FX and if you can share that with us and also same thing on the revenue side?

[Sergey Solonin:]

Look, on the revenue side it’s generally speaking more from the revenue side then the cost side, the expense nominated in U.S. dollars are not that substantial, on the historically on the cost side so we were thinking that those expenses would probably constitute something between 15% to 20%, given that shaky environment, so basically what we did we approached all the key vendors and basically fixed wherever possible the contracts that were previously given and by having all that we substantially decreased the share of U.S. dollar nominated expenses. On the revenue we are not really disclosing that data in detail but generally speaking that should be probably around same percentage and the segments that primarily consist of U.S. dollar payments will obviously be ecommerce especially if they are buying the goods let’s say on eBay, on Alibaba. But from let's say liquidity management we do not really see those expenses as also those revenues as U.S. dollars basically the people primarily are either using our network of kiosks or Qiwi wallet, they would fund their purchases in ruble and basically we convert the currency for them. So generally speaking you will really see let's say the decrease in disposable income in rubles than the behavior would be like as in those revenue streams are really ruble denominated. So the dynamics on revenue side and cost side are a little bit different. Again generally speaking we do not really feel any substantial effects for quality so far.

[Unidentified Analyst:]

Okay. Thank you.

[Operator:]

Thank you. The next question is from Igor Gorasimov [ph] of Goldman Sachs. Please go ahead.

[Unidentified Analyst:]

Thanks for taking another question. I just want to confirm your guidance for 2015. When you provide your growth figures you said that you exclude the scale effects from them. This implies that potential growth can be high or lower depending on how your marketing campaign will be developing and how -- what will be the impacts from your partnerships et cetera.

[Sergey Solonin:]

Well the partnerships will not really impact that a lot. So let's say all this is embedded in the guidance. So generally speaking let's put it that way the part of the marketing spend that and the additional investment in the consumer base, that we expect in current 2015, also relates to our partnerships but this is not let's say something that is really strategic to the partnership, just general types of campaigns that allow us to gain the users across the key categories, key verticals.

[Unidentified Analyst:]

Okay so your guidance for adjusted net income already incorporated the marketing expense at more or less comparable level versus 2014 for instance, because you'll need to grow market share and all the stuff.

[Sergey Solonin:]

Yes, that's exactly right.

[Unidentified Analyst:]

Thanks. That’s very clear.

[Sergey Solonin:]

Okay. Thank you.

[Operator:]

Thank you. The next question is from Vladimir Bespalov of VTB Capital. Please go ahead.

[Vladimir Bespalov:]

Hello. Thank you for this presentation and the results. I have a couple of question, one, could you please comment on your CapEx, could you provide your CapEx guidance for this year for example, whether it's affected or not by [indiscernible] one way or another? And the second question is from sort of clarification on dividends, you refrain from paying dividends this time just to have some cushion, but kind of for example if you see them over the next couple of quarters, the situation is more or less stable and you don't need to hold this cash on the balance sheet, can we expect that you increase your payout compared to what we have seen historically. Thank you.

[Sergey Solonin:]

Thanks for your question. Yes, definitely if we see that nothing really bad happens on the banking side, we will return back to our regular dividends payouts and on the CapEx Alexander will…

[Alexander Karavaev:]

Yes, on CapEx so again as you will see in 20-F reports so the CapEx for this year was approximately 400 ruble, let's say in a general case that's been affected by the ForEx trade plus the part of the IT equipment and licenses we buy from the international vendors, though we again, we are trying do all the contract now in rubles to hedge our self, so we don't really expect substantial ForEx effects to kick into the CapEx budget. And going forward we do not really expect any substantial increase of the CapEx spend. So that the level that we have in 2014 it's something that you should see as a normalized level going forward.

[Vladimir Bespalov:]

Okay. Thank you. On dividends, just one more clarification the question was basically would you be ready to distribute more dividends as if in two quarter let’s say for this quarter and for the next if you refrain from paying or you just return to normal which was something like about 100% of your net profit.

[Sergey Solonin:]

Obviously I mean we will obviously return to let's say once -- I mean something so we again on average we were paying something like 85%, 90% of net profit and as soon as we hopefully soon resume that practice again then we obviously will be catching up those net profits that for which we have not distributed the dividends, does that answers the question?

[Vladimir Bespalov:]

Okay. Thank you.

[Sergey Solonin:]

Thank you.

[Operator:]

Thank you. I would now like to turn the conference back over to management for any closing remarks.

[Sergey Solonin:]

Thanks. So given the results of the fourth quarter we think that Qiwi is very well positioned for this shaky economic conditions and we see a lot of opportunities ahead. So thank you very much for joining us on this conference today and goodbye.

[Operator:]

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time and thank you for your participation.