Qiwi PLC (QIWI) 2014 Q1 法說會逐字稿

Greetings, and welcome to the Qiwi first quarter 2014 earnings call. (Operator Instructions). As a reminder this conference is being recorded.

I would now like to turn the conference over to your host, Yakov Barinskiy, Investor Relations for Qiwi. Please go ahead, sir.

Thank you, operator, and good morning, everyone. Welcome to the Qiwi first quarter 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 Wednesday, May 28, 2014. Access information for the replay is listed in today's earnings press release, which is available on our investor relations website at investor.qiwi.com. For those listening to the replay, this call was held and recorded on May 21, 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 our future performance are subject to known and unknown risks and uncertainties. Qiwi cautions that these statements are not guarantees of future performance. All forward-looking statements made today reflect our current expectations only and we undertake no obligation to update any statement to reflect the events that occur after this call. Please refer to the company's most recent annual report on Form 20-F filed with the Securities and Exchange Commission for factors that could cause our actual results to differ materially from any forward-looking statements.

During today's call, management will provide certain information that will constitute non-IFRS financial measures such as total adjusted net revenue, payment adjusted net revenue, other 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.

Thank you, Yakov. And good morning, everyone. Thanks for joining us on today's call. We had a strong start of the year and are well positioned to deliver our targets. Our continued strong financial results demonstrate our commitment to execution, our ability to gain share and our focus on delivering best in class services to our customers, merchants and partners.

As you saw in our earnings release, beginning this quarter we changed the way we reported adjusted net revenue and payment volumes. We believe this new method of reporting will provide you with a better understanding of Qiwi and our underlying growth drivers, while at the same time it brings our reporting strategy in line with the way we track our own business.

Alexander will take you through this more in a few moments.

Turning to our financial results, total adjusted net revenue increased 46% to nearly RUB1.9b in the first quarter. Payment adjusted net revenue was up 51% driven by strong payment volume and net revenue yield growth in our e-commerce, financial services and money remittances verticals.

Other adjusted net revenue was up 34%, and we are pleased with this solid performance even though growth in this segment was again affected by decline in advertising revenue.

As I discussed with you in March, we expect the launch of new exciting products this year, which will help to compensate for the outflow of advertising clients we experienced during the second half of the year, resulting from a change in the consumer banking landscape.

Adjusted EBITDA grew a strong 75% in the quarter reflecting top-line growth and continued operating leverage in our business, and adjusted net profit grew 72%.

In the first quarter, total payment volumes grew a solid 20% to approximately RUB150b. Active Visa wallet accounts also grew 20% as compared to the first quarter of 2013 to reach 15.6m total active accounts on an annual basis, reflecting continued strong secular growth trends in our market and the very, very unique network.

Now, I would like to take a minute to give you a brief update on the anti-terrorism legislation that we discussed a few weeks ago. The law has been finally adopted and came in force on May 15. As I discussed with you back in April this law includes no limits on consumer-to-business payment transactions in Russia whatsoever. It does prohibit unidentified peer-to-peer money transfers and unidentified cross-border payments.

However, we continue to expect that this law will have little or no impact on our business, first of all, because we do not charge our consumers for peer-to-peer money transfer and second we started several initiatives to always allow our consumers to identify themselves in a fast and easy manner. A few of those initiatives were already implemented and we will keep you updated on this progress in this area.

Finally, I would like to address the recent law passed to create a national card processing system which is intending to ultimately establish infrastructure for the launch of a National Payment System in Russia. The detailed analysis of the impact of that law on the payment landscape in Russia is yet to be completed, though our initial understanding is that this will have no or little impact on our current business model in Russia.

We will continue to assess any potential consequences of this law and as a leading provider of next-generation payment services in Russia, we are open to building relationships with new payment methods.

I will now turn the call over to Alexander who will take you through our financial results in more detail, Alexander?

Thank you, Sergey, and good morning, everyone. As Sergey just discussed we delivered strong financial and operating performance in the first quarter.

Now, before going through our results in more detail I would like to take a minute to discuss the changes we've made to the way we report both our adjusted net revenue and payment volume data.

Beginning in the first quarter and going forward, we will report adjusted net revenue by two primary categories, payment adjusted net revenue and other adjusted net revenues. Payment adjusted net revenue is deriving generally from our customers and merchants when they make or receive a payment into -- our integrated network.

We will show our segment payment adjusted net revenue by the following categories of payment verticals, e-commerce, financial services, money remittances, telecom and other which principally include governmental payments like taxes and traffic fines, [intuitive] payments to multi-level marketing companies and several other sub-categories.

Our adjusted net revenue mainly includes revenue from inactivity fees, interest on deposits and on overdrafts provided to agents, cash and settlement services, advertising and a few other line items.

We intend to continue to provide you with inactivity fees separately on a quarterly basis until we feel that this part of revenue becomes ongoing, recurring and stable. Please refer to our disclosure in the press release for more a detailed description of what is included into each of the line items that we present.

Let me now explain why we changed our reporting. First of all, based on our ongoing discussions with investors and analysts we believe that the representation will make our reporting more transparent and will help investors to assess our position on the market in a better way.

Second, we no longer manage the Company by business units. Starting from January 1, 2014 we completed our reorganization and the Company is managed by functional leaders. As a result, presentation of Qiwi distribution and Visa Qiwi Wallet segment separately will not make much sense from the management's point of view and also from the business point of view, because currently the growth in Qiwi distribution volumes are primarily driven by Qiwi Wallet top-ups as we discussed previously.

Finally, as Sergey mentioned, the new presentation of the financial data is exactly the one that we use internally to manage our business. That's why we decided to bring the external disclosure in conformity with the management's views.

Moving to operating metrics, going forward, we plan to provide payment volumes by the same payment categories or payment verticals that I just mentioned. Payment volumes consist of the amounts paid by our consumers to the merchants included in each of those verticals less intra-Group volumes.

To avoid any confusion I would like to stress that if you add up the volumes of Qiwi distribution and Visa Qiwi Wallet which was separately presented in our press release for the first quarter 2014 results, then this amount will be higher than the consolidated volume for the first quarter 2014 that was presented today, the difference is the intra-group eliminations.

And finally, we intend to continue to provide you with a number of kiosks and terminals and active Visa Qiwi Wallet accounts each quarter as previously disclosed.

Now onto our first quarter results, beginning with revenue, total adjusted net revenue increased 46% to RUB1.9b, up from RUB1.3b in the prior year. Adjusted net revenue excluding inactivity fees increased 42% compared to the prior year.

Payment adjusted net revenue increased 51% to RUB1.4b, up from RUB900m in the prior year. As Sergey mentioned, we had strong revenue growth contribution from our e-commerce, financial services and money remittances verticals which grew 53%, 99% and 159% respectively.

Revenue performance was driven by solid payment volume growth and growth of net revenue yields. Average payment net revenue yield was 0.91%, up 19 basis points from the prior year, and our total average net revenue yield was 1.26%, up 23 basis points from the prior year. Total average net revenue yield excluding inactivity fees was 1.17%, up 18 basis points from the prior year.

Other adjusted net revenue increased 34% to RUB515m, up from RUB383m in the prior year.

Net revenue growth in the quarter was driven mainly by growth in the interest income, cash and settlement services and inactivity fees which amounted to RUB127m in Q1 compared to RUB55m in the prior year.

As Sergey mentioned earlier, other adjusted net revenue growth was partly offset by a decline of advertising revenue in the quarter by 46% to RUB60m in the first quarter 2014.

Moving to expenses, we generally continue to experience positive operating leverage in our business which continues to drive our adjusted EBITDA and net profit growth in excess of our revenue growth.

Besides general operating leverage that we experienced, we have spent around RUB70m less of marketing expenses in the quarter than we initially planned and this amount will likely be spent in the coming quarters.

Adjusted EBITDA increased 75% to RUB1.1b, up from RUB611m in the prior year. Adjusted EBITDA margin was 56.9% compared with 47.6% in the prior year. The increase in adjusted EBITDA was primarily driven by revenue growth and continued operating leverage in the business. Adjusted EBITDA margin, excluding inactivity fees was 53.8% compared to 45.2% in the prior year.

Adjusted net profit increased 72% to RUB785m, up from RUG455m in the prior year. Adjusted net profit excluding inactivity fees, net of tax, increased 66% compared to the prior year.

Finally, as you saw in our earnings release, following the determination of first quarter 2014 financial results, our Board of Directors recommended a dividend of $0.29 per share. We remain committed to distribute all excess cash to our shareholders in the form of dividend although this time we have reserved a certain amount of cash in the Company for the potential investments that may take place within coming months. In case those investments materialize, we will announce them in due course. If not, we will distribute that reserve to our shareholders.

Now onto our guidance, based on our strong first quarter results we are raising the 2014 guidance provided in our last quarter report, net revenue to increase by 24% to 26%, and adjusted net profit to increase by 27% to 29% over 2013.

We are confident with this new guidance given the political and legislative landscape will not change any further. And we will continue to update you on our progress during our second quarter earning's call.

With that, operator, please open up the call for questions.

Bob Napoli, William Blair.

Thank you. Good morning. Thank you for the additional disclosures, really appreciate it. Again it would be helpful to get that same data on a quarterly basis at least for 2013. I know you'll give it to us each quarter, but it would be helpful if we got that ahead of time.

Just a question on that data if you would, I'm a little bit surprised by the growth of remittances, the rate of growth of remittances. Can you explain that business and maybe talk about the growth by sector that we should be looking for commerce, e-commerce very strong revenue growth but just in line. So if you could talk a little bit maybe about the sectors, money remittances and also the growth of e-commerce would be helpful.

Hi, Bob, thank you for your questions. This is Sergey.

Hey, Sergey.

For the money remittances, e-commerce and financial services we are generally quite new to the segment so we are there maybe for two years only. And our market share that we have is relatively really, really slow so 2% from total market. And that's why we expect that in this particular segment we will have some growth in the future as well as soon as we are organizing several campaigns this year in this -- in all these segments.

Is the remittance business, is this being remittances at the kiosks, are you receiving remittances, are you -- is this all intra-Russia remittances? Is there cross-border remittances, are you partnering with anybody?

These are remittances that you can make at the kiosk or at your mobile phone so with any money [remitting] company that was in Russia.

Okay, so it's all intra-Russia?

Not only Russia, CIS, we also signed with Western Union I think, (inaudible) so we have all of them. We think that [December] we'll put money in the kiosks and then choose the system that you want to remit with.

Okay, you expect that growth to continue at the kind of rates that you've seen, that you've shown to us here in the first quarter?

Hi, Bob, this is Alexander. Look, we are not providing specific guidance for each of those segments.

Okay.

Given that the market share is quite small, so we have basically just started a few campaigns and a few more are coming throughout the year so we expect our market share will be growing in that particular segment and secular trends are quite good. The money remittances are growing very fast in Russia in this area. So we really would expect a decent growth in that particular segment for a few years ahead.

Okay. Last question for now, the financial services business up 50% volume, can you just give us -- what's driving the growth in financial services? Is it primarily bill payments and is it new banking partners? What is driving -- what is that, what is driving the growth?

I think [conceptually] it's basically manufacturers so generally, yes, we are signing up new bank partners. And again secular trends, so basically the people -- and the total amount of outstanding consumer loans in Russia is growing and expected to grow for -- again for probably a few years more.

And the people in the bank, our bank partners are starting to promote us because we are one of the cheapest and most convenient channels for their consumers to repay their loans. So we feel it's a number of factors; it's an expansion of the number of banks, it's extension of the number of users who are using the loan repayments throughout the network.

And again the expectations here would be that probably we are going to be gaining the share in that segment. We are still quite small, earlier we had just a few percent out of total market. So we really expect some gain in share and together with the secular trends in that segment, we would expect a quite decent growth in financial institutions vertical as well.

Thank you.

George Mihalos, Credit Suisse.

Great, thanks for taking my question and congrats on a very strong start to the year. Sergey, just wanted to start off sort of high level, there are a lot of moving parts, a lot of things going on in the payment landscape in Russia. As it relates to the rollout of a National Payment System I just want to be clear as per your relationship with Visa, that is an exclusive deal with Visa?

And I'm also wondering just given some of the more recent regulatory developments and some of the discussions that are going on there is it safe to assume that the integration of the Qiwi Wallet into Visa Net that, that maybe getting pushed out a little bit or be a little bit on hold as some of the foreign payment systems figure out their plans in Russia. Any color you can provide there would be helpful.

Thank you, George, for the question. I would say that, yes, we are a little bit on hold right now because right now within the next few weeks maybe there are negotiations on big topics about the National Payment System and the conditions on which international payment systems will work in Russia.

We are generally talking to Visa and as well we are talking to the Russian government and to those who are close to the formation of the National Payment System, though it's not really clear, everything is not really clear there.

So I expect that either today's announcement also I hope that they will come to a final agreement and it will be beneficial for all the parties. So generally I don't think that there is a target to close international payment systems in Russia, I don't see that. And we will continue to work with Visa.

Okay, appreciate your perspective there. And then, Alexander, I'm not sure if you have it handy but maybe just to dovetail on Bob's question, do you happen to have the quarterly payment volume for 2013?

Look, we have just started this new -- these disclosures are (inaudible), George. And basically, yes, we plan to provide same kind of disclosure that we provided for Q1 2014 for the whole 2013.

We just need some time to basically prepare that new type of presentation, verify all the data and put that in (inaudible). So really we plan to issue that new way of presentation of 2013 sometime throughout the year, so we understand the importance of that and are working on that.

Okay. And then looking at the margins which were particularly strong again here in the first quarter, I know you highlighted that there was $70m I think of marketing expense that has been somewhat deferred that will be spread over the remainder of the year. Were there any other investment push-outs or anything worth calling out as we think through the margins over the next three quarters of the year? Thank you.

Okay, so we are still as you know our currency is in rubles not dollars. Apart from that, no, Q1 was basically well-executed from the standpoint of budget and how we planned that. So we are probably just a little bit behind in [filing] (technical difficulty) to new developments and that also consider certain amount of savings on the cost side and the margin. They are not that significant, so generally speaking, the majority of the expansion of the margin is due to the scale effect.

Okay, thank you.

Matt Lipton, Autonomous.

Good morning, guys, and thank you for taking my question. My question is just on the wallet. User growth had accelerated about 200,000 users from the fourth quarter and a little bit (inaudible) in the fourth quarter as well with some slowing. So I guess firstly is there any relation here to the new registration requirements. And if not, are you just seeing this slowing result in a healthier user base, Sergey, meaning higher quality customers are sticking around? Thanks.

Okay, thank you for your question [Alexander]. Yes, it is. The speed of acquiring newcomers into our system is already slowing down. We already have quite a substantial number of users. And basically, I would say that first of all the [annual] number is not the only key parameter that we are monitoring. We are also looking into the engagement for the users. Basically, we are monitoring how often the user will use the kiosk like once a week, once a month and so on. And that engagement is growing.

Coming back to the newcomers, yes, indeed, how we see the situation is we are probably close to saturation from the standpoint of organic growth -- organic, but historically we never ever had any strategic marketing campaigns or promotion campaigns to attract new users.

That's why we did the full reorganization of the Company starting from the summer of last year, to develop substantially the marketing department and develop here, let's say, the marketing program to address all those segments where we believe we can get new extra users.

And that plan -- a quite substantial part of that marketing plan is being implemented now and it is planned to be implemented in 2014. So our estimation, that we really may expect some acceleration in the inflow of newcomers throughout the year but we will update on that during the second quarter earnings call and further on.

Would you say your competitor -- your largest competitor in the e-wallet space has gotten more aggressive or less aggressive, say, over the last six months? And that's it from me, thanks.

No, I wouldn't say so. I think that we've been growing faster than the competitors. I think the problem here is that none of those competitors are issuing the data in a format and level of detail as we are doing. So it's very difficult to monitor. But at least based on the financial data of the competitors that we have, we believe that we've been gaining the market share from those competitors for the last several months.

All right, thank you. Great quarter guys, thanks, bye.

Thank you.

Nick Robinson, Renaissance Capital.

Hi, good afternoon, good morning. Just two questions, please. Firstly, on the new legislation that came in last week, there were a number of press stories in the days that followed suggesting there was a bit of confusion in how certain providers were implementing the law. And also, one thing that was mentioned was that the government agencies which need to support the faster regulations -- the simplified regulation (technical difficulty), is that going to be an issue for you? And if not, do you see any other issues in implementing that new law?

And I'll follow up with a second question after.

Yes, okay. Hi, Nick. Thank you for your question. Based on our interpretation of this -- of that new law, we have already changed the user interface of our product, both on the kiosks and Visa Qiwi Wallet. So we are basically a feature that the transactions, that is above the limit, stated within the law, we are asking the person to identify itself by any of those means prescribed. So the person needs to provide a number of passport or taxpayer number or something.

And basically, we do not, at least right now, see any problems. So we believe that we are in compliance with the law although the interpretation obviously may change as soon as all the market participants will start to develop their approaches and their interface.

But that -- so let's see how that will evolve. As of now, we do not really see any potential problems in complying with that law.

Okay, great, thank you. Understood. And then just a second question, in terms of the marketing activities you've got planned for 2014, you mentioned obviously we should expect to see some reacceleration of user numbers for the wallet. Are you also targeting any particular segments within that? Product segments? What should we be expecting a focus on, either e-commerce, money remittances, etc?

Hi Nick, it's Sergey. Yes, we -- most of our marketing activities are around new wallet users. And specifically we are targeting money remittances, we are targeting financial services and e-commerce, for the major area where we will market our products.

Thank you.

Dmitri Trembovolsky, Goldman Sachs.

Hi, guys, it's Dmitri. Thanks for the presentation. A couple of things that I wanted to ask you. First of all, am I right to understand that this EBITDA margin that we have seen which is about 50% is more of a new normal for you because, obviously, of larger volumes? Or I heard that this RUB50m cost that you potentially can spend in the next few quarters. But other than that, shall we assume that these numbers are sustainable? And I will follow up with more questions later on.

Okay, yes, hello. Based on our models, yes, we believe that even with scale effects, the 50-plus EBITDA margin should be normal for our business going forward.

Understood. And the increase in the yield that we have seen? We pretty much, every quarter, have certain increase in yield. Can you just talk a bit more about that? It's -- I understand some of this is obviously change in mix which we haven't seen in the past. Were there any other reasons for this increase in yield and where do you think it could ultimately settle?

It's basically a number of reasons. So first of all, we still continue to gain some additional (inaudible) due to product mix. And now, you would not see, for the whole company, but even within the (inaudible) categories, those transactions that usually bring higher yields are growing faster than the -- those with the lower yields.

Apart of that, especially in telecom, if you note that last year we introduced a consumer fee of RUB25 for each payment. That just increased a little bit of the net revenue yields themselves.

And on top of that, we reduced just a little, starting from March 2014, the funding costs for around 20 basis points. So for Q1, that effect was not that large. So it's only just one month of the quarter.

So those are probably three major effects. Going forwards, again, as we mentioned a few times in our previous conference call, net revenue yields is pretty much under our control so we can manage that that pretty heavily. So we have really a lot of levers to pull here. And again, our position is now that we are still under-monetized and likely will not be heavily monetizing the users this year.

Again, as Sergey mentioned, the key of our marketing campaign would be basically attracting new users. Even more, we might even be reducing the price just a little bit in certain segments, just to attract new users, but the part, let's say, of our marketing activities.

Taking that all together, going forward, we would not really expect any substantial growth in the net revenue yield. We will try to keep that more or less stable. And basically try to get more users in exchange.

Understood. Okay, and just looking at the volume, of course I'm not -- I don't have a particularly good disclosure on the first quarter overall volumes. You said, we can't really just sum it up because there were obviously intra-Group transactions. But if we look at the first quarter last year and first quarter this year, it looks like total volume per wallet hasn't really changed. First of all, can you confirm that this is a right calculation?

And second, is there anything that you guys plan to do to address that? Because I guess you want the volume per wallet to get growing right?

Yes. We would have not really disclosed the volume, we are not disclosing now the volume for Qiwi Wallet because we don't believe that this would be an appropriate disclosure.

Generally speaking, we are still experiencing the growth of the volume per wallet. It has continued throughout 2014. Though that growth has obviously slowed down as we discussed, we are approaching some saturation point from that point of view.

Again, going forward, the substantial increase in volumes per wallet is not yet our goal. First of all, we would like to get more [main] consumers and then we'll work on their engagement, actually increasing the volume per wallet. So this probably helps.

So first of all users and then more volumes for these users. And can you -- in this context, can you discuss first your JV with the mobile operator which I think it's -- was kind of forgotten so far at the conference call?

And then separately, are there any other partnership that you want to mention as a tool to attract new users? Maybe that's part of the marketing plan you mentioned, I don't know.

Well, as for the mobile operator we are still in negotiations and we have a few topics because of the situation with international payment system that a little bit delayed our talks. So hopefully, very soon, we will be able to announce something.

What was the second question?

Sorry, on the mobile operator, you said there is nothing yet settled and you may announce something later. But there is no timing, right, which you can discuss now?

Well, yes, I wouldn't be giving you exact timing.

Okay, and just --

For -- for the other partnerships, we are reviewing several right now but I cannot disclose it as well.

Okay. And can you then discuss this marketing plan? So what exactly do you mean by that? What are you going to do to make sure that users keep growing? Thank you.

It's mostly promotional campaigns] in specific segments. So it's the marketing for example on the promotional campaigns in the banks so that our financial segment in that payment volume will be growing.

There are a few promotional campaigns that are focused on cross-selling the product. We will also do special campaigns with money remittances and with the segment of foreigners for traveling or working in Russia. So we are promoting special services for them.

We are -- we will be working with telephone companies as well on marketing campaigns. So mostly we will try to do many different activities. For example, we will try new [initiatives] in gaming industry. So we will try to promote our wallets for the gamers and give additional services for maybe companies that are involved in gaming. So that's just a few.

Understood. And this has already started? Or this is going to start?

Well, some of it has started. We just finished our new website and this was a trigger to start attracting consumers, new consumers to new website and new application. A little delayed while we (technical difficulty) law and so we needed to change a little bit.

All right. Yes, that's pretty clear. That's it from me, thank you.

Alexander Vengranovich, Otkritie.

Yes, thanks for the opportunity. I actually have a couple of questions. First, with regards to your results in the first quarter, what are the main reasons in your mind for the outperformance versus what you expected before because as far as I understand, strong first quarter is one of the reasons why you upgraded your guidance? So probably specifically in which segments you've outpaced your expectations which you made approximately a quarter ago?

And second question is actually specifically on the e-commerce payment volume growth. So I see you showed only 19% growth of that segment in terms of the payment volume. So how would you estimate your payment volume versus the market growth for the respective quarter? Do you feel that you probably are growing slightly slower than the market here because 19% looks to me quite a conservative figure for the quarterly growth for the e-commerce? Thank you.

Okay, thank you. So first of all, on the actual and the guidance. When we've been issuing the guidance for 2014, just slightly more than a month ago, we -- I was not having a full clarity regarding how that new law would develop and how the situation with the national payment system would resolve. So basically, it was not clear about what was actually the exact consequences of that change in the landscape. That's why we were conservative with the guidance as you said.

So now, we see that some of those uncertainties have already been resolved. That's why we -- based on Q1 one results, we are in a position to raise the guidance.

Although as we discussed, we still need to see how the whole situation with national payment system will affect the landscape and probably the interpretation of the anti-terrorist law might change a little bit the (inaudible) of our strategy. So that's why though we raised the guidance, we believe that it is conservative. So we want to leave -- actually, (inaudible) providing guidance for only in case we're confident that we have all the chances to meet that.

Hopefully throughout the year, on our next calls after we finish second quarter and third quarter, we'll be in a better position to elaborate on guidance a little bit more.

On this quarter, I think -- we think that we have been probably growing in line with the market. So 20% is probably below the top market growth of e-commerce. But generally, what you would see in the market this year, is e-commerce will mainly consist of physical goods. And now for physical goods, online sales of physical goods is just a tiny portion yet. That is the segment that is yet to be affected.

The e-commerce is largely represented by the gaming, by all the virtual goods, music, social networks and so on. And how we see the market, those segments are growing around the same pace as our volumes.

Again, going forward, we believe that we certainly will not be losing the market share. As soon as we launch our marketing campaigns, we like we're going to be increasing our share a little bit, especially in those segments which we target, like gaming market.

So -- but again, we will update you, what's going to be happening in those segments during our second quarter and third quarter conference calls.

Okay, just two follow ups. So on e-commerce, do you plan actually to be more active in terms of the physical goods? Or you want to concentrate on gaming segments where you're traditionally strong?

And regarding the first question, do I understand it correctly that your new guidance, you feel much more confident with the new guidance versus the previous one?

We were also confident with the previous one. It was a very conservative because it was really -- provided historically on the very conservative basis and it was sure that we were going to be reaching those numbers. Although a few potential upsides to the guidance was not included, because we needed to see how the situation with the proposed legislative and consumer landscapes would evolve.

So we're also confident with this guidance and we also see some potential upside to the new guidance. But it's just too early through the year for us to make a definitive judgment on that. We just need to analyze and to make our own assessment of how the national payment system will affect the landscape and if we can gain some share there probably and some partnerships.

So we are working on that and hopefully if all those potential upsides will materialize, we believe we will be giving some shareholder announcement to you.

On e-commerce, again, both physical goods and gaming markets are on our priorities list. The difference here would be that physical goods, the market is probably not mature enough to be heavily affected by an online payment system. So we believe that can be our focus, probably next year and afterwards.

Gaming market is already mature enough from that point of view to give you that fact. So gaming sub-segment within e-commerce is one of the key focuses for this year.

Thank you, very clear.

(Operator Instructions). Bob Napoli, William Blair.

Thank you, just a quick question. The -- do you feel like and can you tell from looking at your business if the slowdown in the Russian economy has affected your business? Or is that now, with the secular growth of your market, do you feel that -- are you not able to see any trends economically driven?

Well, not on the payment side. On the payments we still see all the same trends that we had before. On the advertising side, we see some slowdown, the investment slowing down and we understand that we will be recovering within some time. So it will take some time to recover.

And then just on the dividend and retaining capital for investment opportunities. Is this -- are you looking at M&A opportunities or are the -- are you looking at investments in organic growth? What is the -- can you help a little bit there?

We're actually looking for both. We have basically few initiatives on the table, both on the M&A and as well on organic investment. Although, we are usually bound by NDA agreements and all of that, so we cannot really disclose for now when and if that's going to happen. So -- but again, if both things will not materialize, we will just feed it to the shareholders.

On the M&A side, what type of things make sense? Is it a technology-type of acquisition or distribution related? What types of M&A would interest you or make sense?

Mostly it's about technology right now. But these are small ones that we are looking at right now. There is one bigger potential and it is on the distribution side.

Great, thank you. Look forward to seeing you in a few weeks.

Thank you. If there are no further questions at this time, I'd like to turn the call back over to management for any further or closing comments.

So now we've had another very good quarter and I'm looking forward and pleased that we have even more opportunities in 2014 than we thought. Hopefully this whole geopolitical situation will be resolved somehow soon. And looking forward to hear you in the next call. Thank you very much.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.