Qiwi PLC (QIWI) 2015 Q1 法說會逐字稿

Greetings and welcome to the QIWI plc First Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Yakov Barinskiy, Head of M&A and Investor Relations for QIWI. Thank you, sir. Please go ahead.

Thank you, operator and good morning everyone. Welcome to the QIWI first quarter 2015 earnings call. I'm Yakov Barinskiy, Head of M&A and Investor Relations. And with me today are Sergey Solonin, our Chief Executive Officer; and Alexander Karavaev, our Chief Financial Officer. A replay of this call will be available until Thursday, May 21, 2015. Access information for the replay is listed in today's earnings press release which is available in our Investor Relations website at investor.qiwi.com. For those listening to the replay, this call was held and recorded on May 14, 2015.

Before we begin, I would like to remind everyone that this call may contain forward-looking statements as they are defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements about our expectations for future performance are subject to known and unknown risks and uncertainties. QIWI cautions that these statements are not guarantees of future performance. All forward-looking statements made today reflect our current expectations only and undertake no obligation to update any statements to reflect the events that occur after this call.

Please refer to the Company's most recent annual report on Form 20-F filed with the Securities and Exchange Commission for factors that could cause our actual results to differ materially from any forward-looking statements. During today's call, management will provide certain information that will constitute non-IFRS financial measures such as adjusted net revenue, adjusted EBITDA, adjusted net profit and adjusted net profit per share. Reconciliations to IFRS measures and certain additional information are also included in today's earnings press release.

With that, we 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 today. I'm very happy with the start of the year. In the first quarter 2015, we delivered solid results in spite of the macroeconomic environment. We continue to strengthen our market positions, establish new strategic partnerships and launch new products.

Our total payment volume increased by 6% to reach RUB158 billion while payment volume in e-commerce and money remittances market verticals grew even faster by 19% and 44% to reach RUB21 billion and RUB19 billion respectively.

Our results demonstrate the resilience of the business model to the macroeconomic slowdown in Russia and we continue to see new opportunities to gain market share in the existing markets by executing new partnerships and introducing new products and services to fuel growth in the future.

As of March 31, we had 7.3 million Visa QIWI Wallet accounts and more than 177,000 kiosks and terminals. Turning to the numbers, in the first quarter total adjusted net revenue increased 34% to RUB2.5 billion. Payment adjusted net revenue was 35% driven by strong payment volume and net revenue yield growth in our e-commerce and money remittances verticals.

In financial services vertical continue to suffer from the difficulties in the Russian banking sector, which resulted into a significant decrease in payments volumes. Telecom demonstrated volume growth primarily resulting from the increasing coverage of physical distribution network. Adjusted EBITDA grew 50% in the quarter primarily driven by net revenue growth as well as affected by significant bad debt recovery and certain other factors that Alexander will tell you more about shortly. Adjusted net profit grew by 42% largely affected by the same factors as adjusted EBITDA.

I would like to turn into the acquisition of Contact and Rapida. I'm pleased to announce that we signed a deal. It is difficult in a stable environment. It took us a lot of time and effort to negotiate the appropriate terms and I am very happy that we managed to reach the agreement.

Money remittance is one of the key verticals for the QIWI and with this deal happening I see even more opportunities to grow market share and leverage the ecosystem that we have built today. Not only we are becoming a significant player in the money remittance market, we're also becoming the strategic partners in one of the largest Russian financial institutions, Otkritie Group. We view this partnership as mutually beneficial and expect it to contribute to strengthen our positions in financial services vertical and launching various products and services demanded by the customer.

We see a lot of synergies between our core business and Contact money remittance system especially given the strength and extent of our network. We believe (inaudible) composition of our core competencies and acquired businesses to achieve long-term growth and sustainability.

With this, I will 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 mentioned, we delivered strong financial and operating performance in the first quarter 2015. Total adjusted net revenue increased by 34% to reach RUB2.5 billion, up from RUB1.9 billion in the first quarter of 2014. Payment adjusted net revenue increased 35% to RUB1.8 billion, up from RUB1.4 billion in the prior year as a result of the strong revenue growth in our e-commerce and the money remittances verticals, which grew 93% and 74% respectively.

Revenue performance was driven by solid payment volume growth in e-commerce and the money remittances verticals. Our financial services verticals continued to suffer from the situation in the Russian banking sector, which resulted in significant volume decrease as compared to the first quarter 2014.

Net revenue yield across three key verticals continued to grow, partially because of currency conversion revenue growth due to higher ruble volatility and partially due to a decrease in agent fee for Visa QIWI Wallet top up which took place mid-year 2014.

Telecom vertical trend remained mostly unchanged with a slight increase in volumes and decrease in yield driven by general yield compression in that market. Average payment net revenue yield was 1.16%, up 25 basis points from the prior year. And our total average net revenue yield was 1.59%, up 33 basis points from the prior year. Average adjusted net revenue increased 31% to RUB675 million, up from RUB515 million in the prior year, mainly driven by growth in the interest income and new revenue stream coming from sale of kiosks.

Moving to expenses. Adjusted EBITDA increased 50% to RUB1.6 billion, up from RUB1.1 billion in the prior year. Adjusted EBITDA margin was 64% compared with 57% in the prior year. Adjusted EBITDA margin expansion primarily resulted from ongoing operating leverage and significant amount of bad debt recovery. Adjusted net profit increased 42% to RUB1.1 billion, up from RUB785 million in the prior year. Adjusted net profit was largely affected by the same factors as adjusted EBITDA, partially offset by an increase in depreciation and amortization expense due to our investment in security and the IT infrastructure.

Finally, as you saw in our earnings release, following the determination of first quarter 2015 financial results, our Board of Directors recommended a dividend of RUB0.25 per share. We remain committed to distribute all excess cash to our shareholders in the form of dividends.

Now on to our guidance. We reiterate our guidance on a standalone basis, excluding acquisitions for 2015, both adjusted net revenue and adjusted net profit to increase by 12% to 16% over 2014. As was already noted on the previous earnings call, our financial services vertical is most affected by the slowdown. And we might see further impact on it through the year [when our first] quarter results are strong. However, certain other factors being beyond our control, we reserve the right to revise guidance in the course of the year.

We would like to stress that our 2015 guidance does not imply any substantial scale effect in the bottom line as a result of our ongoing investments in our key verticals which includes the acquisition of consumers, marketing and promotion campaigns and the launch of new products. We feel this is crucial to strengthen our market position this year in order to be prepared for driving future growth once the consumer confidence is back.

Now to some details on the acquisition. The transaction is to be settled by 5,593,000 of QIWI class B shares. We are assessing other potential transactions and hence we feel like (inaudible) the most appropriate in the current economic environment. Even when the transaction is approved by the regulator, we expect the target to add between 15% and 20% in our life terms to both QIWI's adjusted net revenue and adjusted net profit in 2015.

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

Thank you. At this time, we'll be conducting a question-and-answer session. (Operator Instructions) Georgios Mihalos, Credit Suisse.

Congrats on the results, guys and thanks for taking my questions. Wanted to start off on the acquisition front. Alexander, just want to make sure, I think you talked about the 15% to 20% contribution from the acquisitions on both a revenue and net profit standpoint. Is that using 2014 revenue as a base, so should I be thinking that that 15% to 20% is adding, call it, RUB1.3 billion to RUB1.8 billion? And then maybe can you talk about the growth rates for Contact and Rapida?

First of all, talking about contribution of 15% to 20% that would mean that if you take on -- if Rapida and Contact would have been consolidated since the beginning of the year then the portion on the total net revenue and total net income of the joint company including the core business of QIWI would be in that range. So in terms of the numbers that is slightly lower that you said. So basically, so you make sure you take the consensus and multiply by that number.

On the growth rates, again, we are not yet in a position until we close the transaction to present more detailed financial data. But all in all, the growth rates of Contact and Rapida are similar to those that we have for QIWI.

Okay, great. I appreciate that color. And maybe two more questions again tied to the acquisitions. Just why pay for it entirely with stock, what kind of went into the thinking, I am not using any sort of cash on hand? And then do you think the relationship now with Otkritie could impair any of your other relationships with other banks in the financial sector?

Hi, George. This is Sergey. Thank you for your question. We generally did not have an option to use cash in this deal that much. So we're and greeting Otkritie as our partner for the future and we are glad that we have some money on the table so that we can review some other options that we are still thinking of. So from the point of view of banking segment, Otkritie will not have an A class shares. So their impact on our operations is relatively low although we agreed that we will do some joint contracts and we will do some products together with Otkritie and these products will be also opened for all other banks. So I think we will treat all the banking system in some sense equally.

Okay, great. And just last question for me guys. Just going through the month of April, you had very, very -- you had stronger than expected, at least by our standards, first-quarter results. Have you seen any meaningful deterioration in the Russian economy? And I appreciate the pressure on the financial segment, but is there anything a month out now from the first quarter that sort of stands out to you that you think have an outside impact on your business?

Well, we had real worries in the very beginning of the year on the macro numbers. But right now, we can confirm that these macro changes that are happening has very low impact on QIWI, except the financial segments as you've said. So we're looking at the financial segments still not that optimistically and looking forward to make more correct evaluations in the next quarter.

Bob Napoli, William Blair.

The question on the e-commerce segment, very good growth and a good take rate though the revenue yield is up. I mean, is that revenue yield -- first of all, I'd like to understand a little bit more about the mix in growth between virtual goods and physical goods and if that -- the take rate or yield that we saw this quarter is something that you would view as sustainable?

Hi, Bob. Thank you for the question. So on the e-commerce in terms of the growth, it generally to a certain extent we can consider e-commerce segment as anti-cyclical benefit. That effect remains when there is a economic slowdown that people would tend to actually use more online shopping both for virtual goods and physical goods and this is actually what we have noted in the Q1. And likely the trend is going to continue throughout the year.

On the net revenue -- and in terms of the competition, so the sales of physical goods online in our portfolio continuing to gain share especially due to our partnership, the relationship with Alibaba. On the net revenue yield that was in Q1, a little bit distorted by abnormal let's say foreign currency conversion revenues because we were trying to hedge our risk [with the] devaluation approval. That's why the corridor for the ForEx trade between the Ruble and the other currencies was set unusually high. So from that point of view, we would not be really expecting such strong net revenue yields to continue for all the year. They will more likely come back to something that you have noted in Q2 and Q3 of last year though it really depends on the macro environment.

Okay, thank you. That's helpful. Then the question on, the cash on your balance sheet, you have -- using dollars about at the end of quarter exchange rate of about $200 million of cash. How much of that is free cash, how much cash do you feel like you need to have on hand from an operating perspective, for regulatory perspectives with the bank or how much -- so just wondering maybe some thoughts on that capital level?

Look, we actually -- if you strip off that float actually, not our [cash, but client's] cash then we would probably keep approximately the amount of cash that [we were doing last year, so around $90 million] probably slightly higher million of US dollars which will show our cash.

From an operational point of view, I would not really expect that -- I mean, we're a cash positive company. So we would not really require any additional cash cushion from that point of view, unless something bad happens on the market. And obviously, in that environment, there is not much trust on the market. So we would like to have a certain cushion but this is obviously not as high as that amount of cash we have on hand. And that cash that we have on hand is generally used for any other potential M&A that we may have.

Okay, last question, just any -- can you give any more color on Contact and Rapida as far as strategically how they fit with your business, what are the locations and geographic corridors that they are in, something like that?

Hi, Bob.

Hi, Sergey.

Thanks for your question. As for Contact, we see that Contact is mostly working in CIS environment, so more or less it's same as QIWI. Half of the turnover in Contact is domestic as most of the money transmitters.

As for Rapida, they serve a little different product line than QIWI, so it's not really the same. They do mostly processing services for banks. So it will give us an opportunity to be stronger on the financial segment side. Also Rapida has really big volume and good potential for yields and revenue to grow. So we believe that this partnership, this merger will be very efficient for QIWI.

David Ferguson, Renaissance Capital.

So a couple of questions on the acquisition please. You said that historically growth rates were similar to QIWI's money remittance business. Historically where have the yields on these businesses been? That's the first question.

Second question would be assuming the combination goes ahead, what do you think your market share will be?

Third question, what are the sort of hurdles to get over for regulatory approval? And then finally, is there any lockup on Otkritie's shares? That's it. Thank you.

Thank you, David for the question. Alexander, can you take that?

On the market segment, look, as of now we assume the Contact market share [in Miami], this market should be somewhere between 15% and 25%, yes, certainly this is basically what we are getting. Though strategically given the strength of our network, we really believe that together using the QIWI's capacity and QIWI competencies to substantially increase the market share. We are not really in a position to guide on what that can be, but we really believe the combination of Contact's (inaudible) capabilities and the network of QIWI we can be one of the key players in that market.

On the regulatory approvals, it's kind of a usual procedure. We have to get the antitrust approval in terms of bank approval and it looks like -- we don't expect any problems. So it should take a few weeks from now. And, David, I am not sure I understood exactly the question. On Otkritie shares, you mean, their intention is [take the full shares] or something else?

Yes. I guess the shares that they receive are they free to sell them at any point?

Yes. They are actually free to sell them. It's probably subject to all the US rules like, I mean, filing of [FP and sales] and other things. But our general understanding we obviously may not comment on the intentions of Otkritie, but we understand that they would like to be a strategic partner of QIWI. They believe in growth in our business and they likely are going to be holding the shares, at least the major part of the shares for a while. That's our understanding.

Okay, great. Thanks. And I am not sure if I missed it, but on the yields of the Contact business last year?

Okay. Look, so unfortunately we cannot really say that as of now. We will likely present more robust financial data both on pro forma basis and standalone after we close -- within some time after the closing. But we may not comment on that as of now.

Anna Lepetukhina, Sberbank.

I have a follow-up question on the financials of Contact and Rapida. I am just trying to understand you assume that these two payment systems will add 15% to 20% both to net revenues and net income. So to me it implies that kind of margins of Contact and Rapida are similar to that of QIWI. So I'm just trying to understand these estimates, do they include some potential synergies or it is just the pure consolidation of these businesses and kind of going forward, there can be some kind of additional synergies from basic revision? And my second question is, I just wanted to understand the nature of bad debt recovery and what should we expect going forward for these expense item? Thank you.

Thank you for the question. We unfortunately cannot comment on the margins of Rapida and Contact yet. In terms of the potential synergies, a very approximate guidance that we provided in our press release relates actually to the case where we will not be having any synergies and this is our plan. So we will obviously be integrating these businesses for a while. Especially in 2015 likely we will not be getting any substantial synergies. Starting from 2016 though, we really may have those and we will separately discuss then the yields. So they generally will be -- the potential financial type of synergies will be on top of what we've guided for.

On the bad debt recovery, yes, so the core of that bad debt recovery was basically due to our bad debt policies and management estimations. We were conservative in assessing and estimating the bad debt as of the end of the year because the macro situation was very unclear. And we saw certain of our agent merchants were not actually feeling well. So in Q1 we see that situation a bit more positive. And all our large partners, they are now between compliance with all the policies and procedures and all the rules of QIWI and that effectively means that we reserve those conservative estimates of bad debt in Q1.

Going forward, we really expect to be, let's say, back to normal which would mean that we historically were having a kind of a bad debt expense. And we tried to control that in a way that they should not exceed the percentage of total volumes. So we keep that under control by having all deposits and purchases to prevent substantial bad debt expense and that is something that we believe is going to be happening for all the -- so we do not really expect any substantial deviations in terms of the bad debt amount as compared to last year.

Thank you. And can I just have a follow-up question on personnel expenses? I am just -- it's impossible to see, but just trying to understand kind of what was the increase in personnel expenses, if possible and also, maybe you can talk about marketing expenses, whether you kind of stick to your previous guidance that you will increase marketing spend and whether you did it in the first quarter?

We actually -- our intention is not to increase the marketing expense this year. Our intention is to actually keep that more or less stable as compared to last year. So we really believe that we have to continue to invest in the market and the market share and we actually implemented and executed on that policy in Q1. So we were probably a little bit under spent, but not that substantial amount.

On the personnel expenses, again we cannot really comment in detail, but generally the growth in additional cost was outpaced by the growth in revenues. So we, as always, have a scale effect on that specific line item.

Vladimir Bespalov, VTB Capital.

Congratulations on your strong results. I actually wanted to ask you a question about your previous partnerships with MegaFon and how this one is developing. Is there any positive trends, positive contribution to QIWI's performance from the partnership? And the second question is in the previous quarters you benefitted quite a lot from FX volatility and high spreads. How this affects your financials now and toward going forward in this respect? Thank you.

Thank you for your question. Well in terms of the volatility and the problems that the market has, it has very little effects on what we see in our financials. And what was your first question? Sorry, I was --

First question was on your partnership with MegaFon and how this is developing and how you're benefitting from that?

On the MegaFon partnership, well, we are not expecting that this partnership will show something new in our financials. So we are committing to our guidance. And we think that it will not change dramatically our financial. We are still in the period of technological integration, so we actually issued the product and now we are testing the product on MegaFon customers, but we're still not in MegaFon shops and outlets. So we are working on that and we should be there in the second half of the year.

Igor Gerasimov, Goldman Sachs.

Hi, thanks for the presentation. I have a few questions. My first one relates to the growth in your other payments revenue. Could you please elaborate a little bit on that? Where they grow more -- the growth stems from and how should we think about this revenue line going forward? And I will follow up with other questions after this one.

Generally what's included in other payments it's represented by all kinds of payments, so especially, multi-layer marketing, governmental payment for all kinds of taxes, speeding tickets and utilities. And the growth primarily comes from basically more or less all the categories in there, but generally speaking from MLM in the first place.

Going forward, again, once that category consists of many different options it's, let's say, difficult to estimate. So each of those categories will have their own kind of patterns. And we're not really guiding specifically for each segment. What we might say is that as soon as any category in other section will become large then we may choose to present it separately, but this is not yet the case.

Okay, understood. My second question is on your yields in the money remittances sector going forward, because in the first quarter of 2015 you posted a quite noticeable increase in the money rem yields. I want to understand whether it is attributable to FX commissions? And how merger with Rapida and Contact will affect money rem yields going forward? Thanks.

On the net revenue, yes, to a certain it was obviously affected by the ForEx rates towards the, let's say, at least half of the -- not at least, around half of the money remittance volumes would be from rational booked to other currencies.

Going forward and given the acquisition of Contact, again, let's say in the longer term we would expect at least the stabilization of that market. So we would not really expect the commissions to go down. They likely will go up, but again when that will happen would really depend on what's going to be happening on the market. We will not be actually guiding on that specific kind of parameter until we really have, let's say, a joint plan of actions with Contact and Rapida.

Okay, thanks. My last question is on your OpEx guidance and on your marketing expense. You said that you plan to spend at least the same amount of money on marketing this year. Just maybe you could give some color on when it is reasonable to expect marketing expenses [for QIWI], so what should be the seasonality behind this expense? Thanks.

Yes. The market expense should be spread more or less even with throughout the year except for Q1 which is usually not that active from the standpoint of marketing activities. And in terms of the overall understanding, you're exactly right. So we spent about RUB0.5 billion of marketing expenses last year and you can see that in our 20-F filing and this is more or less our estimation for this year.

Thanks. Just a follow-up on that. Do we have a guidance on the OpEx for 2015?

Well, we do not guide separately for OpEx, we are just guiding for net revenue and net profit.

(Operator Instructions) Elena Tsareva, Sberbank.

Congratulations with results. My question just was to specify on your dividend payment. So remember you guided that once you return to a dividend payment, you will pay for fourth quarter as well. So just to clarify does this payment include fourth quarter and if not is it going to be paid somehow?

Thank you for the question. That amount is not including the Q4 cash cushion. So we still would like to keep this in the Company and we actually have some usage for that to recover our potential if something happens on the market. But again, generally speaking, as soon as we see that there is no longer probability of a banking crisis in the market, we will likely pay the Q4 cash cushion as well.

And going forward this, like, commitment is -- intention to pay dividends, I mean, next quarters still there or it also will depend on like the situation in the market?

It will depend, I mean, what we're actually doing. So we are defining our cash needs and free cash flow each quarter. We discussed it with the Board of Directors. After we determined Q1 results and looked for all the cash balances, we felt like we do not see kind of a need to keep that cash in the Company. That's why we decided to pay that to the shareholders. If something goes actually as predicted then we likely will be back on track and we'll be a company that pays dividends quarterly. Though it's a certain aspect of what's going to be happening on the market is beyond our control.

Svetlana Sukhanova, UBS.

If I may, two questions. First would be on number of e-wallets. I notice that e-wallets increased only by RUB0.1 million year-on-year to RUB17.3 million, which looks like quite a modest increase quarter-on-quarter projects which compared to the previous periods. Can you please elaborate on this?

Well, thank you for your question. There are two, I think, reasons. One reason is that we actually do have some decrease usually in activity in the first quarter, still no activity. Second is that we do focus mostly, right now, not on client acquisition, but on the usage of the wallets and its revenues, average checks revenues from the wallet cross sales in the wallet. So, the first quarter was definitely above that. And also we understand that with MegaFon business deal we have a much bigger reach to the clients and we will have it in the second half of the year. So we don't want to use our mechanisms that we used in the previous year. So I think you -- I don't want you to expect a very big growth in numbers as soon as we focus on this very loyal customers. But still, you can expect some growth in the second half as soon as there will be a season. So we will open some new things with MegaFon.

That's very clear. Thank you very much. My second question would be on yields for Rapida and Contact. Sergey already mentioned that there is a yield expansion potential for Rapida. But can you elaborate, please how yields for Contact are compared with the yields for QIWI in money remittance services?

Excuse me, until after we close the transaction and prepare the standalone financial statements, we are not able to comment on that.

Bob Napoli, William Blair.

The financial services segment is something obviously that you pointed out is going through challenges. I just wondered if you were seeing any signs of stabilization and if you could give any colors to the decline. Is it the number of banks, is it just through, if the number of consumer loans are down, so payments for consumer loans? How do we gauge -- are you seeing a bottom and maybe a little bit of color on where you've seen the biggest decline within that business?

Thank you, Bob for the question. Well, my personal estimation is that we really are at the bottom level right now. So my expectations would be that the financial services segment will grow to the end of the year. In terms of the factors, I think it is a mix of factors. So we think that banks really dropped down their approval levels, the approval levels on the consumer loans are down several times from the level they were at a year ago. So there are less new loans issued and less consumer loans issued in general. So, I think -- and also repayments are very low. So I think that we do have some effect of macro economical problems. Maybe it can be connected to some people losing jobs, so whatever happens and they are just stopping to pay for their loans. But still, as I said, I think that we're somewhere at the bottom level. So my personal expectation is that through the end of the year we will, together with the marketing programs we are planning, we will see some growth in this area.

Okay, thank you. And then the kiosks, you've had growth in kiosks. Now you accelerated growth as you've talked about a year ago. How many kiosks -- what markets within Russia are you adding kiosks and what is the optimal level? And is there any technology change in new kiosks that enable more services?

We're, of course, working on the new kiosks constantly. So we think that kiosks will enable people to have more services than they do have right now. But we don't think that it will be very soon. So we plan that this will take place in 2017, 2018. But for this year we think that there is still some extra capacity for kiosks because we see the turnover on kiosks is growing. As soon as the turnover on -- per kiosk is growing, there is always some capacity to put more kiosks closer to people habitat. And I think that we will see quite a good growth this year and a moderate growth next year. I'm not sure that we're guiding number of kiosks.

Okay. And then last question, just quickly on the tax rate, Alexander, a little bit lower this quarter, full-year tax rate, what would you expect for a full-year tax rate?

It's usually due to the kind of tax return filing deadlines in Russia. The tax rate would usually be slightly lower in Q1 generally than overall for the year. So given that the corporate structure and the -- I mean the space the same this year, we do really expect the tax rate not to change substantially as compared to last year. So it should be left around 22%, 23%.

Anna Lepetukhina, Sberbank.

I have one follow-up question about operating expenses. When I look at the SG&A expenses excluding bad debts, they increased 38% in the first quarter. At the same time, you mentioned that you underspend in the marketing and personnel expenses are not growing faster than revenues. So, I am just wondering what was the reason for this increase, if possible. Thank you.

(inaudible) expenses would relate to, let's say, the cost per share with writing QIWI as a public company. So, for example, we became subject to Sarbanes Oxley Act starting from actually last year. So we spent quite substantial amount of time, effort and cash last year to be in full compliance with that law and obviously continue to build our systems in this year. So these types of expenses were not booked in Q1 of last year. So this probably explains the majority of that increase.

Thank you. At this time, we've come to the end of our time for questions. So, I'd like to turn the floor back to management for any final concluding remarks.

Thank you, operator. I just wanted to thank and congratulate my team with the results of first quarter and with the deal that I know was very difficult and we have spent a lot of time doing that. I am very pleased and very happy with that deal. And I think that this deal opens a lot of new opportunities for QIWI, makes it more secure, gives an opportunity for identification procedures and looking forward that QIWI will pursue this opportunity in the future. Thanks all very much for being on this conference call. Bye.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.