Kaspi.kz AO (KSPI) 2024 Q2 法說會逐字稿

Hello, and welcome to the Kaspi.kz second quarter first half financial results conference call. My name is Elliot, and I'll be your coordinator today. (Operator Instructions) I'd like to turn the call over to David Ferguson. Please go ahead.

Thanks, Elliot. Good afternoon, good morning, everybody. I'm David Ferguson from Kaspi, welcome to our 2Q first half 2024 financial results. As usual, joining me on the call, I have our CEO and Co-Founder, Mikheil Lomtadze; our CFO, Tengiz Mosidze; and our Head of Capital Markets, Yuri Didenko;

Standard sort of procedure for the call. Mikheil will take you through the strategic product updates. I'll run you quickly through the financials and guidance for the remainder of the year, then we'll open the call up to Q&A.

So on that note, handing over to Mikheil. Over to you.

Hello everyone. So please to report our 2Q results performance. So we have done pretty well in the second quarter and for the first half year 2024, pretty much see the growth across all our businesses and the new services showing a remarkable growth. Obviously, all that is a result of our teams historically known execution capabilities.

Our consumers continue sort of strong engagement, so we have a 72, monthly in transactions per active consumer. And that's an important as we build on this engagement of the platforms and individual services and this is really driving our innovation.

So the payments TPV is up 32% year-over-year, shows the growth is strong on top of a really sort of a big business. Revenue up 23% and the net income up 22%. Marketplace has been showing a very strong performance and now is our fastest growing business.

GMV is up 62% year-over-year and revenue 96% and net income 68%. And again, marketplace is something which is really excites us because that's a business where we add the value of connecting the sellers and merchants. And most of the innovations from us actually will be coming from our marketplace business.

Fintech, growing nicely on the TFV 43% year-over-year, revenue 23% and net income plus 2%. As TFV, which is basically the volumes of our origination are growing very nicely. You would actually see in the 3Q and the rest of the year, quite rapid acceleration of our net income. And on top of it, the interest costs and interest rates have been going down. And as a result, you will see profits going through our P&L and the net income growth accelerating.

Our consolidated revenue, consolidated financials showing very strong performance. So our revenue, 36% up year-over-year, and the net income is 25% up.

We have been historically sort of diversifying across our three platforms and happy to report, they're more or less equal now in size. So 68% comes from payments in the marketplace and the marketplace -- and the payments had been historically growing faster than fintech and now marketplace is the one that grows fastest from all three. So we're really excited about this diversification, if from all three and really excited about the new services, which actually also driving our growth.

In terms of the e-grocery, which we just started a couple of years ago. We're really excited about this business. Execution skills are top quality from our team across operations, marketing, the product, and the user experience. So you can see that active consumers now reached 639,000 consumers in the 2Q almost doubled the GMV, 99% growth and average ticket remains very high of KZT14,000, which is basically the weekly purchase. So it's not a quick commerce sort of small-ticket transactions.

And then the in terms of number of purchases, we bypassed 2 million purchases in the second quarter and up 83% from the last year, we are expanding our existing dark stores, which means just adding more capacity. We always work on two fronts.

Number one, is increase the capacity, which means increase the size of existing dark stores, but also work on the efficiency, which means throughput rate of dark stores and both are giving us have very good results, but demand is so high from our consumers that we are now investing into building another large dark store in Almaty. And as a result, we'll be able to basically support the growth and the demand we have from consumers.

We are now present in the three largest cities, Almaty, Astana, and Shymkent, and those cities representing roughly about half of the total food retail trade in the country. So for the remaining of this year, those cities would be our priority. And again, we'll just continue to execute it. Consumers are delighted. Demand is extremely strong. So we are just scaling in terms of the capacity, building the new dark stores, but also expanding the capacity of existing dark stores.

So really excited about this business and the growth rates that we're achieving. Again on the back of the consumers loving the service. And we have a very strong demand in this vertical.

We have been also scaling from last year, another new service which is vacation packages, incredible growth 644% from last year. This is the business when our consumers basically can book their vacations across several countries and now we are going into the season and the growth is really due to the fact that we have a very strong seasonal offering, pretty much from every tour operator in the country.

The good thing about this service is not just that it gives us volumes and consumers love it, but also it's a high take rate business for our travel. So it's really enhancing the take rate and that business in the 2Q is showing 7.9% take rate.

So we're really excited. We're still going into the season. So summer will be strong because, differently from many other countries, our consumers actually don't plan their vacations sort of six months ahead. So they usually plan in a month, several weeks before actually taking vacation. So there is a very good season in front of us, really excited about this business.

We are continue scaling and innovating across the value-added services. So as you can see, we have increased dramatically the size of that business. That's advertising, classifieds, and delivery. So almost more than four times increase from last year.

And now out of 9.5% of total take rate on the marketplace, 1.6% is actually coming from the added-value services and that compared to 0.6% of last year. Again, added-value services in our case is the services which we develop for merchants so they can promote their products. They can deliver their products across the country and the reason why we call them value-added because actually they generate additional sales.

And we are -- again, I would like to emphasize, we are carefully scaling those services because we want to make sure they add value to our merchants, but even with such a careful scaling, it's showing a remarkable result. So we're really excited about innovations, which coming from us and for our merchants in those spear --

Example of the recent launch is the brand advertising so this is the service, which would just basically launched. That's service for the brands or the merchants that have their own brands and advertising agencies.

So, you can increase the brand awareness by launching the service, you can sort of go from very simple steps. You basically create the campaign, you sort of select the products, which you would like to promote. You select the sellers, which you believe should be participant of your promotional campaign, then you upload your materials, which are banners to be shown in different locations of our Kaspi.kz super app and then you can see our ads in our mobile application.

So that's a service which we like because we are actually going after different revenue stream. We're going after digital and online marketing services, which come from the global brands, local brands and some of the merchants that actually are promoting their own brands.

And just to remind everyone, that's the second service, because our initial service, which we have launched for merchants was to promote their own products. So that's the different segments. If I'm the merchant, I want to increase the sales. I want to increase sales of a specific product. I use product advertising.

However, if I'm a brand, advertising agency or the merchants with my own brand, then I use brand advertising. And that really is all about top of mind promoting brand awareness views and things like that. So really excited about this addition and perception has been really good. So hopefully, that's another service which we will continue sort of scaling successfully and developing innovations around it over time.

Okay. So moving on to the financials, I'll start with the payments platform. So transactions, transaction trends remain very strong, up 46% in the second quarter of 44% year-on-year in the first half so slightly stronger in the second quarter. Despite again the services as Mikheil said, a pretty large business. The growth is being driven by all products led by Kaspi Pay QR, B2B booked with bill payments still very, very robust.

Strong volume growth translates into therefore, strong TPV growth, albeit with a lower average ticket size as consumers use us more frequently for more of their everyday needs. TPV of 32% in the second quarter of 34% for the first half of the year.

Take rate broadly stable albeit with the impact of lower take rate Kaspi Pay QR visible at the margin and that is a trend we've talked about over several years. B2B payments is the first remains the fastest growing component of a payments platform up to 5% of the TPV from 0% just 2.5 years ago, both with a long runway ahead, both in its own right and in terms of the other products and services that can naturally open both.

Strong transactions, strong TPV drops through to good revenue growth. Just keep in mind here that as interest rates fall, liquidity revenue grows at a slower rate than transaction revenue. So transaction revenue in the second quarter up 26% year-on-year versus liquidity, revenue up 12% year-on-year, overall payments revenue for the quarter up 23% year-on-year and up 24% for the first half of the year.

Take -- top take cost control is ensuring that that strong top line drops through to the bottom line. So I think overall the message on payments platform is that it is comfortably on track for delivering on the full year guidance.

So moving on to the marketplace platform. As with payments, marketplace transactions remain or purchases remain strong and consistent, up 38% in the second quarter up 36% for the first half of the year. The difference versus payments is higher ticket size of that translates into faster GMV growth up 62% year-on-year for both the second and first half of the year.

E-commerce is the fastest growing component of marketplace now almost half of marketplace GMV, 45% in the first half of the year. And take rate moving up on the back of promotional events, namely Kaspi Juma, but also the value added services that Mikheil talked about. So take rate of 100 bps, both in the quarter, second quarter and for the first half of the year.

Looking at the individual components, e-commerce, e-commerce GMV up 113% in the second quarter, a similar number for the first half of the year. So e-commerce demand very, very strong driven by number one, e-grocery, number two, general goods and the promotional campaigns that are running and the value added services, delivery and advertising driving take rate of 30 basis points in the second quarter and up 60 basis points for the first half of the year.

Well, just flagging here, we talked about we introduced Kaspi Postomats around two to three years ago as a key strategic initiative and just flagging now, we've sort of passed that milestone, 50% of e-commerce orders delivered via Postomats.

So this is important because the initiative is proved extremely popular from a consumer perspective, consumers like the convenience of a Postomats and important for merchants because it's more efficient. It's bringing the cost of last mile delivery down. So adoption is being highly successful. We're targeting 7,000 Postomats by the end of this year. So there's still more we can do with this initiative.

Kaspi Travel, decent GMV growth during both the quarter and the half of 33% and 38%, respectively. Tours are now up to 8% of GMV in the first half. And tours are not only GMV growth enhancing, but also take-rate enhancing as well.

And then moving on to m-commerce. M-commerce in the first half of this year has seen very, very strong GMV momentum, particularly as a result of the promotional campaigns that have driven higher ticket size, GMV ahead of purchases, and it also driven a higher take rate, 100 bps, both in the second quarter and in the first half of the year.

Is probably whack at this point, just flagging that on marketplace particularly promotional events, Juma. Juma, will take place three times this year. It took place in Q1. It took place in Q2, and it will take place in Q4. Last year, it took place two times in Q3, in Q4. So what that means for Q3 is the only quarter of this year without Juma number one.

And number two, the comp is tough because it's up against the Juma map events that took place in the third quarter of last year. The implications of that for the third quarter will be GMV growth at a lower rate and lower profitability before then strong rebound in the fourth quarter.

The decision to hold Juma three times a year is just a reflection. The assortment on marketplace has expanded dramatically over the last couple of years. That includes items with high seasonality, like, for example, our package tours and by holding the events at three times during the year, it gives us the opportunity to focus on the right seasonal assortments at the right time package tours, for example, a big focus in the Juma.

So this is something that is reflected in the full year guidance. But when you're trying to think about the phasing between Q3 and Q4, it's something to keep in mind, I suppose it's also worth saying that for fintech in TFV, which is a big component of the Juma promotional campaigns, that also means you'll see lower TFV growth in the third quarter. But again, then the strong rebound in the fourth quarter and as we go into 2025.

For the second quarter, what you see is that the strong volume trends, higher ticket size, faster GMV growth with take rate expansion translates into even faster revenue growth from marketplace of 96% in the second quarter, over a 100% for the first half of the year and even with rapid growth from 1P e-grocery, and e-cars net income up 68% in the second quarter and up 72% for the full year. So again, here for the full year guidance that we've provided, marketplace very, very much on track.

Finally, moving on to the fintech platform. A strong TFV origination has been a theme for the last two years. That continues to be the case, driven by strong growth in marketplace and specifically linked to buy now pay later and merchant financing. So TFV growth of 43% in the second quarter, 45% in the second half -- in the first half of the year.

Portfolio conversion stable, so that tells you the customer behavior is normal. They are repaying quickly and in a consistent manner, average loan term just over five months. And going forward, we still think that merchant financing, whilst it's now sizable at 17% of our TFV origination. It's the fastest growing component, and the backdrop is still an underpenetrated market opportunity. So there's a lot more we can do there.

In the first half of this year, for the first time in several years, net loan portfolio grew faster than deposits. In the second quarter loan portfolio up 42% versus deposits of 26% similar trends for the first half of the year. What that's meant is that the loan to deposit ratio has moved up from 74% to 85%. The implication of that will be particularly from Q3 and again, in Q4, you'll see a step-up in the profitability of the fintech platform. And again, that will be a run rate going into when you're thinking about 2025 growth.

Fintech yield is lower as a result of BNPL merchant financing growing share within the mix and again, that's something that we've talked about as a long-term trend that's been playing out over several years.

In terms of risk metrics, whether you look at defaults, losses, collections I think the message here is very simple that the trends are low and consistently stable and again, now mirrors itself in cost of risk metrics, broadly stable year-on-year at 0.6% on track for around 2% this year.

And BNPLs again, broadly stable versus the beginning of the year, 5.6% versus 5.5% at the beginning of the year and down from 6% this time 12 months ago. BNPL coverage is lower in the second quarter, but over the course of the year should trend consistently with what you've seen in previous years. So around 98%, 99%.

The combination of strong origination over the last two years, albeit with slightly lower yield translates into decent healthy fintech revenue growth of 23% and 25% for second quarter and first half, respectively.

We lowered interest rates for the first time at the end of February, the deposit base takes 12 months to reprice fully. So at this stage in Q2, you don't see the rebound in net income and fintech profitability. But you will see that in Q3 and again, you'll see it to a greater extent in Q4.

So again, you've got those moving parts in Q3, for marketplace, you've got lower GMV growth, lower profitability rebounding in Q4. For fintech, you've got lower TFV limited near term P&L implications of that where you'll see the strong rebound in fintech profitability kicking in. So again, sort of as I said, different parts moving in different directions, but overall fintech also comfortably on track for the full year guidance that we've provided.

So here is the consolidated performance. I think the summaries -- the divisional platform summaries that have given sort of a clear dividend of KZT850 declared. Just the message here remains consistent, whilst we have excess capital, we're happy to return it to our shareholders. In the press release, we do say that we're working hard to expand Kaspi outside of Kazakhstan and when we think both the time and opportunity is right, we won't hesitate to deploy capital in that way. So that's just to sort of preempt any questions around higher dividends, buybacks versus sort of the message on capital allocation priorities.

Here is the guidance for the remainder of the year, so each of the respective platforms on track. Kaspi.kz on track for 25% net income growth for 2024. So overall, we expect to deliver another strong year, albeit that we'll be facing the growth in the second half will be Q4 weighted.

With that said, so maybe, Elliot, we can open the call up to Q&A. Please.

(Operator Instructions)

Darrin Peller, Wolfe Research.

Guys, thanks. Some of these initiatives are great to see the momentum on. But I just wanted to first touch on a financial question. And I mean, I know you kind of hinted or touched on that a little bit just at the end there, but you're reiterating your fiscal year expectations. Obviously, the underlying assumptions call for us is somewhat of a deceleration in second half relative to first half just given the guide on the segment level detail, relative to first half growth rate.

So if you could just help us understand if it's just comps, maybe building in some element of conservatism given how strong some of the trends have been in first half. So we understand the second half cadence if there's any nuances on a per segment basis we should keep in mind. Thanks.

All right, Darren. I think sort of really I'd just reiterate what I've said. So I think the key thing you need to be aware of when you're thinking about Q3, Q4 is the Juma promotional event, it's important. What's different this year is it's taking place three times. It only took place two times last year.

And the phasing of marketing campaigns can always vary. This year, those campaigns are taking place in Q1, Q2 and Q4. Last year, those campaigns took place in Q3 and Q4. So the point really is that Q3 is the quarter without that sort of big important promotional event.

It manifests itself in a number of ways. It manifests itself in lower GMV growth, lower marketplace profitability, lower TFV growth, although the nature of TFV, it feeds into the P&L over a longer period of time. So from a P&L implication, it's not material in the third quarter.

You've also got the added dynamic not related to Juma or just the rebound in profitability in the fintech division starting from the third quarter of this year. Both the takeaway ultimately is you will see lower growth, across the board, across payments, -- sorry, across marketplace and for the group as a whole in the third quarter, significantly higher growth in the fourth quarter.

And that's important because that gives you a sense of the run rate going into 2025. But the full year guidance that you have, that's the right number that you should be working to. So to your point about conservatism, news, that is your number hits realistic guidance.

All right, thanks David. Just one quick follow-up on the international efforts and aspirations. I know last time we spoke there was a hope that it could come as early, as maybe even the end of this year into next year in terms of some sort of momentum on any of those fronts. Any update there in terms of progress or just the sense of opportunities you're looking at in regions, you're seeing the most opportunity in?

Mikheil?

Yeah, sure, hi Darrin. Thank you for your question. I mean, in general, I would say that we'll be and we'll continue working on this just to reinforce basically our really the desire and capability to bring this business outside of Kazakhstan.

As some people are saying during our discussions, basically bring the Kaspi magic to other markets. And the good news is that we are passing -- basically we're not pursuing some opportunities just to tell you that how selective we are and there is a healthy pipeline of some of the companies we're working on.

I wouldn't speculate about a region or a specific target that we would like to work on and we're working on at the moment. But yeah, but we are clearly sort of working on this putting our resources at the time mostly and working with advisors and different opportunities basically.

So but we are again, we're careful, we want to make sure that we get it right, we want to make sure that the company and the market we look at, there is added value from us, again, from knowledge technology experience perspective. But I think we are at the at this stage when we're also lucky that some of the companies and the targets we look at are really high-quality companies, and high quality targets, which means we're looking at how we can complement to those companies', management teams to become even better considering Kaspi's unique experience technology and the business model.

So again, really excited. We're working on it. At the moment, can't really tell you any specifics of any project that we're executing.

Thanks, Mikail, thanks David. Nice job guys.

Thank you Darrin. Thank you.

Reggie Smith, J.P. Morgan.

Hey, good morning. Thanks for taking the question. I appreciate the color on the brand advertising launch. I was hoping to get a little bit more. Did guys, say exactly when that went live, most of curious about how many brands are on the platform today. Maybe talk a little about the process of adding brands I'm sure if you've got a outreach program, sales like that. I'm curious how that actually -- how that plays out. Thank you. I've got a follow-up.

Sure, Reggie. Thanks for your question. Basically we are in a really interesting position as a company, in a sense that some of the ideas are really coming from the use cases that we already have. And there’s almost requests from our merchants or the brands whether we could launch the services. So that's something which is really exciting to be in the type of position as we are because well, basically what that means when we launched the service, there is already a market for it. So that's why it's exciting.

The brand advertising, we are -- at the moment it's at the scaling stage, already have FMCG brands working with us just because we have become one of the largest groceries in the country and not just in Almaty with the fastest growth compared to anyone on the market. So the brands on the FMCG side basically are working with us on the advertising. Again, they already have the contracts in place with them. So you will see a very healthy growth on the side of the brands, which are selling grocery through us.

On the other hand, general goods, the same brands. I mean, I've just shown the [Samsung] as an example, it actually one of the brands that is working with us as we speak. And on the general goods if there are pretty much either the brands which are sort of global or the merchants which have their own, -- which have their own brands like locally selling, basically they want to promote awareness.

In terms of the size of this opportunity, I would say that's something which and another -- it's a good question that you asked because another thing you need to keep in mind, we are launching the product when most of the brands have allocated budgets to this type of advertising, especially the global players. They make these decisions end of the year. So in even in this environment, we're able to successfully scale.

So opportunity is -- in my sort of opinion, probably equal to the size of the -- if not more of the opportunity when merchants are promoting their own goods. So yeah, so it's a big, it's really a big opportunity, and we're just sort of scaling it. And it's not reflected in the numbers which you see in advertising. The numbers at the moment are not material, but there will be growing really fast the second half of the year. Because we have contracts in place already with those brands. So a highly predictable business.

Got it. How are we thinking about, -- sounds like a really good business. How are you thinking about KPIs for that segment? I know it's early days, you may not have anything that, but anything you can share there. And I had one follow-up after that. Sorry.

It's -- I mean this is really different. I mean, for the KPI which we are, let's say, the targets that we have sort of on the quality level, on the merchant, when merchants are advertising their goods directly, this is their own listings on our marketplace here, we are making sure that it's efficient, so they get the sales and they not overspend. So that's something which is a very important for us on the goods advertising side of things.

And the revenue stream there comes from the merchants themselves, as a part of the GMV which they sell for us. So for example, you know just the one example, if we see the merchants exceeding sort of 5% of their GMV in advertising investments on that piece, we're sort of work with the merchants to make sure that this is something which they really want, because then, the profitability of their business has to be respected, right, right in the 5%, not many merchants can really afford to or to invest into marketing and advertising.

So we just need to make sure they understand the product and if anything, we can improve. So that's on the side when actually merchants are launching their own listings in this called sort of product advertising.

When we're talking about the brands that's actually has a different service altogether because that's brands they actually want to promote the brand awareness, whatever the global FMCG players or the local brands. And that means they're not necessarily looking just for sales straightaway, but they are looking for people to know the brand and the monetization there is really more on the reviews rather than on the sales. And they have budgets allocated also globally. So, that's basically is the big difference.

And also from a consumer perspective, it's a different product. Read the goods advertising. It's like Amazon or so Google when you have the product in the listings when you search in our app and the brand advertising is visual, we started from banners, when you see the item, you see the brand sort of and then you go to the products after you click the banner, it's a different objects, different real estate of the app. And therefore, it's a different pricing and it's a different revenue stream. And it's a different payers, -- brands payers so advertisers engages.

So from that perspective, we are -- we just need to make sure that our, on the side of the brand advertising, we are more efficient and we are competitive. So we are competing with platforms like Instagram, for example, at the moment, which are providing this type of capabilities and the first tests show us were number multiple times more efficient than Instagram, and the brands are happy to move their budgets to us. So that's why we're excited about this opportunity.

Now that sounds it sounds exciting. If I can squeeze one more in on Juma. I guess you always have to be careful about later fatigue there, but it is a product or an experience that you see that could happen for us and real like once every quarter.

And then last piece on that. What do you tend to see post Juma, you see a lift in engagement and usage on the app in general, like I was curious, is there any positive benefits do you guys see after Juma, in terms of engagement and things like that. Thanks.

Yeah, you think about Juma in general, you can compare this to like national sort of shopping events which happened in other countries. I mean, it would be Black Friday or Amazon Prime and the things like that. So the this is really like a nationwide event. And pretty much there is nothing else. So there is no other event, there is no other Black Friday. So it's Kaspi Juma were thousands of merchants really participate. So that's number one.

Number two is, Juma is right in a sense that it gives us -- as you said, it's an opportunity to get uplift on the engagement. It's a concentrated three day shopping festival, which basically give us an ability to introduce some of the new categories we've launched, some new merchant products. So it's really sort of the opportunity for consumers in a very highly concentrated three-day period. So basically acquire some of the items and the and therefore for us to promote these new categories, which would like to promote because it's quite big.

It's also big in terms of moving consumers from offline to online. So for example, I would say the vast majority on electronics are now being bought online rather than off-line, just because we have been able to change this sort of consumer and the merchant experience. So all of that is below basically Juma, is has been quite a success.

As David said, again, the number one reason why we are moving into the seasonal because different categories just have different seasonality. You move from one type of clothing to another during the spring and then you move back to another closing during the winter. So from summer and autumn to the winter clothing or the travel. So the variety of products is such a -- I mean, it's unmatched.

There is no other company in the world that has such an assortment of different goods and services which have such a high seasonality. And therefore, we basically reply to our consumer needs in the merchants. And this year it will be a bit, I would say, unfair comparison to last year, quarter on quarter, but in general we think that three years is good.

Answering your question, we will see because we have the another promotion, which happens in August September, which is the back to school. So it's not Juma, but that's something which is also big. And that's why we're not really launching the fourth one, sort of end of this summer, beginning of autumn because we want to see how consumer demand will be shifting as a result of this multiple Juma’s during the year.

But once we get all these learnings, then next year will be both much easier to compare, but also it will be from our side just much more, I would say -- it's not the word predictable, but much more comparable year over year.

But Juma it's might sort of is it just shows an incredible results really on all fronts. During the Juma and after Juma. Shoppers continue to shop basically.

James Friedman.

Hi, Jamie, maybe you're on mute. We can't hear you.

Oops, sorry about that, David.

Good evening. It's Jamie at Susquehanna. I wanted to ask -- by the way good results here, but I had two questions about take rates, I'll just ask them upfront.

So first on slide 11, when you -- this is about the payments take rate. When you have this outsized growth in QR code and I think B2B, are those deflationary to take rates? Because I know you talked about this in the past you talked about today even, but wanted to perspective of take rates for payments.

And then I'll just ask the other one two, which is about e-commerce take rates. So how should we think about the unpacking the components of take rates in e-commerce between, say, e-grocery and general goods. So slide 11 and slide 16. Thank you.

David, do you want me to pick it up?

Well, I will start with the payments and then you can jump in, right? So James, thank you for your questions. In terms of the payments, what you -- we have been a I sort of say historically that the QR payments, which is sort of increasing network, basically the service of accepting the payments. It's a 0.95% basically that's the fee.

So what you would see that, simply over time, this is something which we'll be getting closer to that number. We have been lucky or not lucky, I mean, because we have been diversifying the services and entering into different verticals. The take rate has been quite sustainable in general around 1.2%, but we've decided to provide this more details, not just 1.2%, but basically what it is, 1.19%, 1.18% to 1.24% which we had last year, just to give you that it's slightly sort of gets towards bigger share of the QR payments. So that's basically how to think about the payments.

There are couple of -- yeah, there are new things we're working on, which will be added value, which will be higher take rate. But those things on the payment side, probably will come from us later in the year. So we'll be excited to share with you, but seems like a very exciting services.

On the e-commerce side of things, the take rate that you have is basically on the 3P. So the 1P is e-grocery. That's not in the take rate. So that's basically a gross profit net income business. And we basically are -- yeah, the e-grocery it's not part of the take rate. That's a simple answer.

The e-grocery itself, continuous extremely strong performance, even though we're investing, it's still 7%, 8% I think a margin business. And our gross margin is growing in excess of 30% just because there is more demand from a consumers, but also the type of assortment strategy and relationship with the suppliers really enables us to also increase the gross margin. But e-grocery, it's not part of the take rate. Take rate is only on 3P.

David, anything you want to add?

Yeah. I mean, just overall, I think the message on payments take rate is that it's broadly stable. We've shown you in extra decimal point today, but I wouldn't read anything too dramatic into that. Take rate is broadly stable.

Got it. Thank you both. I'll jump back in the queue.

Thank you, James.

Soomit Datta.

Yeah, hi there. It's Soomit Datta from New Street Research. Thanks very much for call and the extra detail. A couple on fintech if I could, please. Firstly, in terms of the improvement in fintech net income through the second half, that seems to be predicated on deposit renumeration dropping back down. Can you just talk through the phasing of that, how many -- is that sort of rolling process with depositors kind of rolled back over time. Has that sort of -- will that have played out in Q3, Q4? Anything on the phasing of that?

And as a follow up, how do you see the mid-term loan to deposit ratio for the fintech businesses, as you say, it's moved around a little bit this quarter. Just curious how you see that over time?

And then if I could just on the same vertical, just Mikheil, interested in your perspective on tax increases in Kazakhstan, which I think if they go through will impact fintech business rather than the other businesses. Just curious what your take was on the likelihood of that happening in potential timing? Thank you.

All right, Soomit, thanks for the question. Maybe I'm just trying to expand on the fintech question. Fintech profitability and then hand over to Mikheil for regulations.

I'd say it's two things. It's one, rates coming down. So whilst the MBK rates have been coming down since the autumn of last year. Our first cut in deposit rates was at the end of February. So that's the first thing. And then there's the second thing, is it the balance sheet being used more effectively or the loan to deposit ratio moving up, because we're loaning more money because people are spending more money and saving less or a mix of both of those factors, so that's why.

In terms of phasing, deposit customers are repriced at maturity, it takes 12 months to work through that process, if you think that the first rate cut was in February and it was end of February this year, it starts to be visible immediately, but it only becomes more pronounced with each month that goes by.

So in Q3 for the first time, the combination of those factors, loan-to-deposit ratio, moving up, cost of funding moving down and I think it will be visible to you. And you'll see -- I mean, you can yourself just simply work out what is implied by the guidance for fintech net income growth in the second half of the year. Q4 will be more than Q3, but that sort of tells you -- a longer term, there's sort of no reason why the loan deposit ratio can move up to maximize use of all of the 10 [gag] liquidity that we have.

Yeah, and David, -- so thank you for your questions. I'll let a bit more color in terms of our strategy and the way the products work. So in our -- I mean, our in our business always consumer comes first, right, so we are very unusual compared to some traditional banks with the traditional savings deposit accounts, which means when we have the -- when we are increasing the rate we're increasing the rate for everyone.

So basically, we reprice deposits upwards and everybody gets benefit of it. And when we reduce the rates, the rates are reduced overtime at the maturity. So what that means in terms of the numbers in February with decrease that take rate by around 1%. And as a result, the full savings portfolio, which includes both new saving accounts and existing saving accounts, there will be reprice at this reduced rate by the February of next year.

And as David said, that actually means in the 3Q, it will be more, in the 4Q more, but there will be actually fully replaced in the 1Q of next year.

Our business is -- on a fintech side of things also to put things into perspective, the interest rates increased for the last several years from 8% to 15% on the saving accounts. So that's basically when the saving interest rates will normalize, it might take a bit longer than everybody thought, across pretty much most of the economies. But we'll still see there's natural reduction of interest expense.

But the good thing about us is that we also acquired consumers with the money and we've built the capability and we have become the largest savings institution in local currency in the country during this period. So we are thinking about consumers. Consumer always come first. So that's about the interest expense and how the savings work in our case.

In terms of the loan to deposit ratio, we see a very increased flow of the new savings accounts during the end of this the end of the second quarter and the third quarter. So really excited about that again. But at the same time, the origination is growing, especially on the new products such as merchant financing, power car financing will be the fastest growing in a 3Q now fully online sort of products, which we are number one in car financing in the country as we speak. So that really will be driving our financing volumes. So loan-to-deposit ratio probably would be broadly stable.

So that's basically about your first two questions. In terms of the taxes and the general changes in the regulatory landscape, there has been several changes, which I think might be useful for everyone to know.

So first of all, there was a change on BNPLs, which means the financial -- the banks or microfinance companies cannot sell their BNPLs to collection companies. That was the one change Kaspi even done this so, there is no impact on us, but there has been the change in the regulation regarding selling your portfolios to collection companies.

So no impact on Kaspi at this stage, then there was a change that you cannot accrue the interest after 90 days delinquency on the consumer lending. Kaspi has never been accruing interest after 90 days and already for 10 years. So that has no impact on us as well.

And the third change is an interest rate which is currently discussed. Currently is at 56%. The interest rate, which is suggested is 46% for consumer lending on the both banks and microfinance companies and I think 170% on paydowns or something like that, that segment we're not playing. So but I think it's around 170%. So again, doesn't have really a materially impact on us, but the change has not been in place. It's in the process of a discussion.

In terms of the taxes, I think there are several sort of, projects which and the draft of legislation change which have been put in place and still under the discussion. And I think it's just too early to draw sort of any conclusions and discussion has been -- also a last year. And there is a general discussion also currently, but there is nothing really.

If everything -- if all the other things which I've said, I think there is a either happened or have a realistic chance to happen in terms of the taxes is difficult to say at the moment, I think that a lot of pros and cons and I think different government bodies are involved together with the financial institutions.

The good thing about the tax changes by the way, which I think are important is the reduction and simplification of taxes for SMEs. And that's a really exciting thing because if that taxes are simplified and reduced for small and medium enterprises, which is the majority of our merchants and both on the payments and the marketplace that will fuel another source of the growth. And I think that's an exciting piece of what's happening. In general, there is really nothing major from us to hear that would have material impact on us if there would be something would be the first one to tell you.

Very clear. Thank you.

Thank you.

Gabor Kemeny.

Hello, this is Gabor Kemeny from Autonomous Research. Just two quick follow-ups from me, please. And the first one is on Juma. Are you able to quantify roughly, how much of the GMVs in Q2 came from Juma. Just to give us a sense of how much of the Q2 GMVs could be recurring. And possibly if you have a budget for the Q4, Juma you are planning, please?

And the other question was on cost of risk. I believe is a slightly higher this time. I mean, 2.45% if we annualize I mean, you mentioned resilient asset quality. But is there anything specifically, if you can call out like have you set aside and overlay provisions or any reasons for the slight increase? Thank you.

Okay. So in terms of Juma, we've historically suggested that, in general that's roughly about, 15% sort of 20% of our GMV of that month roughly increase. I think it's difficult to extrapolate for this year, right? Because again, the seasonality has changed. And the GMV is different because again, different seasonal products, assortment is different. So you should really just, sort of bear with us through the year, and we'll give you sort of more details, especially let's see how the third, Q2 fronts.

Because there are changes on all fronts before Juma, basically consumers are waiting for Juma. So they are making more purchases during free days, but afterwards they continue to buying more in the different verticals. And yeah, so I think historic performance has been -- it would be different from what we have this year, basically two Juma’s in the six months of this year, there would be substantially more than one Juma that we had in the summer.

So but again, I think we'll provide you details as we go through. We just, would like to see how the merchant and consumer behavior is changing with our seasonal approach and the strategy.

In terms of cost of risk, I mean, our sort of guidance is and the cost of risk we are, we've seen no indication of having anything really to report. So there is some seasonality on some specific products. Like a merchant financing is already sort of 17% of our business. And so seasonality plays a bit differently. But for the year and especially in the 3Q, we have no reasons to be concerned about the cost of risk. So it's stable, there is -- you will see basically no increase, I mean -- (inaudible).

Thank you Mikheil. Just a quick clarification here. When you said 15% to 20% amongst your previous guidance for Juma, was that -- so should that be like a quarter sorry should that be like the third for the quarter? So is this a monthly number?

Let us give you a details though. I just don't want to tell you something which you wouldn't be right number.

Sure. No, problem. Thank you.

Yeah. Sure.

Mikhail Butkov.

Good day. Thank you very much for the presentation. I have two questions. One, is the clarification on the deposit side, just what is the average duration of your deposits? And also what's -- do you see the other players on the market also reducing the deposit costs right now. What is the competitive landscape on the deposit price, which you see right now? It's the first question.

And the second question we could see in some articles that there were some like investor interest to build large warehouses in Kazakhstan and in Almaty to make it a hub for international deliveries into the Central Asia and into the Europe. Do you see any way how the Kaspi can benefit from this cross border potential deliveries? E-commerce, is it something that you at all consider in your pipeline for the international expansion, the cross-border sales, I mean? Thank you.

So in terms of deposits, I mean our deposit is quite straightforward because an basically an annual deposit, so a very simple product. And at the moment, we have only one product on the market. So we're unusual compared to everybody else because everybody else, they have a -- as you know, they have a different type of deposits and they might have deposit for winter deposit for spring, summer, whatever. And we just had one deposit because we believe people just want to basically make money on the liquidity which they have.

And therefore, we have launched a simple product and everybody is pretty much pricing of our product. So from that perspective, I would say we are more or less in the market, if we reduce the rate than most of the people usually reduce it. So that's regarding the deposits in general.

We're not thinking like traditional institution. We're not thinking just purely in terms of cost of funding. We're thinking in terms of consumers and the quality of the engagement and window that consumers with the money and the ability to shop and buy are the best consumers for our marketplace and the rest of our products.

So that's regarding the savings accounts. Regarding the in general e-commerce infrastructure, I think it's in general, it's a great news because that's something which will be sort of promoting the other wave of the e-commerce growth on the market.

We are having and sort of building the quite a significant size warehouses now for our e-grocery. So that's not something which is new for us. I mean, during some of the investors, we had a trip, we showed some of the operations, which I think are quite impressive and that actually large, it's not like -- it's like basically a big sort of 10,000 square meter kind of warehouses and yeah, so we use that only for the e-grocery at this stage.

In terms of cross border, that's something which is interesting to explore. We are careful about it in a sense that we are in the business to promote the local merchants and we are doing everything to help them to develop. And as a result, that's a central plus part of our strategy.

So for example, if we would be flooding our marketplace with some sort of chip not branded items that would be detrimental to our merchants. And we have been able historically and successfully compete with other and marketplaces and stand our brands but again, we're not standing, it also which were idle or whatever, I don't know how to say English word.

But we are basically working on different ways to support the local merchants and cross border might be interesting from that perspective for us. But we're not going to ourselves directly go into the cross border, at least at this stage.

Okay. Thank you very much.

We will support local merchants. And some of the warehouses which have been built in Kazakhstan, that also for the -- not just for Kazakhstan itself, but for maybe some regional ambitions, I don't know, but this warehouses have been built for a long time already. So when you see -- when you read me, if I have something in the press, you should come and see the warehouses themselves.

Yeah. But yeah, great. Thank you very much for the color provided on this, and thank you.

Thank you.

[Cantomere].

Yes, good afternoon. This is John with Wood & Company. I wanted to ask two questions. Can you maybe describe the e-cars business model and your value add there Mikheil? Because new cars is now a substantial portion of the e-commerce GMV. So I think that would help.

And also in e-grocery, can you describe the business model? It's been a growing a business but I mean, I personally don't know what the business model there exactly.

And do you also offer BNPL for e-grocery purchases? That's the other question about e-groceries. Thank you very much.

Okay. So a bunch of questions about our business model. I will take step back for a second and before going to the specific verticals, I would mention that we are going now, we're really excited about it as we are going into specific verticals and building our use cases on the specific user experience, right?

So basically buying, -- I don't know buying a package vacation, for example, is not the same as buying I-phone for a car or pampers for the kids. So really a different user experience. So we've started that with initial with the travel, then we went into the grocery and then we went into the cars.

And what you would see over time from us and May the second half of this year, really cool ideas about what else we're doing around specific verticals in our marketplace or just pulling, the specific needs of a consumer and merchant, and we are creating the user experience, which is specifically designed for that vertical. So that's the general rule. The way we creating this new wave of innovation across our services, which will continue sort of supporting our growth in Kazakhstan.

In terms of the in terms of the cars, the way you should think about the cars really is if you combine together, -- well, I would take the US market as an example. If you combine together Carvana, CarMax in a certain sense like the biggest sort of one is fully online dealer.

The biggest the after trader, I think is the biggest classified, if I'm not mistaken in the US and then you would combine some platform which sells the spare parts, which I think nobody has been successful in many other countries. And here we are working really hard to crack that. So that's a huge market.

And now you're thinking, in our car marketplace and on top of GMV and generating businesses, it does seem that you don't really know much about our business, but things like drivers can issue the driving license in our app. They can register car ownership, they can pay car taxes. So that they can buy tires. So that is all they can buy a car actually car. So there is a lot that can get car finance. So it's a huge universe of different services around the car.

So we are excited about that business just because it's after an apartment, real estate, probably the biggest household spending, both buying servicing, maintaining the car, and selling it afterwards. And we are in this market, and we started this strategy from acquiring the largest car classified business last year.

So now we're basically number one. We are in the car vertical, but we're just starting to innovate. Because there are some things we're really excited it, maintaining, and serving the car vertical. So that's about the car. In terms --

hey Mikheil, just to clarify, Mikheil, so e-cars is actually -- the business you got with Colessa, did I understand it right?

Fortunately. Obviously, e-cars we combine together, we're number one in tires. So that is -- you could actually see in a first year numbers. The breakdown, I think we provide a breakdown for spare parts, cars, 1P car, 3P.

Got it.

It includes, pretty much everything around, selling and servicing car sales, were number one in car sales, were number one in tire sales as we speak, and we aspire to become number one in spare parts sales. And other services that you can imagine around the car dealer. I don't want to talk too much about some of the things we are working on. So it's everything around the cars, whatever you can imagine, feel like your car, everything around the car. So we'll be some cool stuff talking later this year about it.

The grocery, is pretty much e-grocery business. We went into the business. We have around 10,000 SKUs. We deliver you weekly purchase home, and we are working directly with the suppliers and whatever Amazon Fresh, something like that. And the main difference of our business compared to many other businesses globally that we have been able to make it in just 12 months 7%, I think 7% an income margin business.

So it's profitable, it's growing. And actually, we are our challenges to cope with the demand because there is such a strong demand for that service. And this is a huge market that we're talking about sort of this that the $14 billion, $15 billion market in front of us. So and we are in three cities, and we just started one city in spring of this year. So that's something which we'll be scaling. And it includes delivery. It includes stock store, everything relationship with a FMCG brands through our marketing platform, but also with the brands and suppliers and distributors. And we are the biggest grocery player, I think now in Almaty already. So we're really excited about that. So that's the grocery business. I'm not sure if you had any other question, but --

The last question, what do you also offer BNPLs for grocery purchases?

While I mean, BNPL, in our case is basically a substitute of a credit card, right? So we offer our consumers an ability to have the payment options which are related to your own money or BNPL. So consumers decide and what happens with the consumers is consumers don't use BNPL actually for grocery because that's a small ticket, relatively small ticket transaction and they actually prefer to pay with their own money.

But our consumers have a choice of using any payment option they want. And we basically completely killed the credit card business because we make approval within 99% and whatever seconds, less than two seconds, I think and it can be -- it basically people don't need the credit card, which has a fees and nontransparent products pricing. And as far as I'm concerned credit card business does not exist in Kazakhstan anymore, just because we built such incredible transparent product for our consumers.

Okay. Thank you, Mikheil.

Thank you.

That's all the time we have for our Q&A. I'll now hand back to David Ferguson for any final remarks.

All right. So thanks, Elliot, and thank you, everyone, for your time. Thank you for your questions. Let's wrap it up today. Happy to take any further questions offline. But if not, thank you and speak to you in the autumn. Thanks a lot, Bye, bye.

Thank you. Have a good day. Bye, bye.

Thanks everyone. (multiple speaker) Thank you, everyone. This concludes today's webinar. You may now disconnect from the call.