Qiwi PLC (QIWI) 2021 Q2 法說會逐字稿

Good day, everyone, and welcome to the QIWI Second Quarter 2021 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Mr. Dmitry Kovalenko, Head of Investor Relations of QIWI. Please go ahead, sir, you may begin the presentation.

Thank you, operator, and good day, everyone. Thank you for joining us to discuss QIWI's operating and unaudited financial results for the second quarter of 2021. With me to review the results are Andrey Protopopov, our Chief Executive Officer; and Elena Nikonova, Interim Chief Financial Officer. The replay of this call will be available until Thursday, September 2, 2021. Access information for the replay in listed in today's earnings press release.

The announcement and presentation are available on our Investor Relations website at investor.qiwi.com. For those listening to the replay, this call was held and recorded on August 19, 2021. 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. Please be cautious that these statements are not guarantees for future performance. All forward-looking statements made today reflect our current expectations only, and we undertake no obligation to update any statement to reflect these -- 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 or actual results to differ materially from any forward-looking statements.

During today's call, management will provide certain information that will contribute non-IFRS financial measures such as total 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. After our remarks, we look forward to taking your questions. I will now turn the call over to QIWI's CEO, Andrey Protopopov. Andrey, please?

Good day, everyone, and thanks for joining us today. This is my first earnings call in the position of CEO of the group. So I would like to start with the priority set for the team and myself. We are customer-centric and return driven in all our decisions. We are all united under clear mandate to deliver profitable and sustainable growth while maintaining superior service level for our clients and partners.

To achieve that, we keep our focus on the key areas of our expertise, namely Payment Services segment with the digital entertainment, self-employed, digital commerce and money remittance directions as the main drivers of growth and ambition to develop SME proposition through Factoring projects. To deliver it, we already have the essential parts in place, the talented team of professionals, required IT infrastructure and broad product portfolio, knowledge of our customers and countless opportunities emerging around the economy, underpinned by overall digitalization of payments.

Historically, we managed to navigate in the rapidly changing regulatory environment and find new niches. From where I stand, I just have to do it once again. With no doubt, we are looking into the future ready to take current challenges. And now to our second quarter results. I am pleased with strong numbers with deliver. Although we have lost significant share of our volume and revenue in the wake of CBR restrictions, we managed to compensate it by the development in our key issues, resulting into net revenue growth of underlying business by 3% year-on-year.

Our core Payment Service segment showed remarkable results with Payment Service Payment volume growth of 32% and Payment Service Payment net revenue increasing by 7% year-on-year. In terms of volume, this quarter was the second highest quarter in our history. At the same time, we demonstrated superior profitability level with adjusted EBITDA margin of 64% and adjusted net profit margin reaching 45% on the back of optimization initiatives and divestiture of loss-making projects.

Then the Board of Directors approved interim dividend payment of $0.30 per share, in line with the target payout ratio of 50% of group adjusted net profit announced earlier. I will now add some color to the key quarter developments and operating results, while Elena will cover financial right after. Payment Service Payment net revenue increased by 7% as strong volume growth compensated average net revenue yield decline.

Our volumes in the second quarter showed sound growth of 32%, which helped to offset net revenue yield declined by 25 basis points. Volume growth was largely driven by the exceptional performance of the Money Remittance market verticals, adding over RUB 100 billion year-on-year, representing 71% growth. Payout to the self-employed from QIWI Wallet account holders increased by 109% year-on-year.

In the second quarter, we connected to our platform 653 taxi companies, and basically doubled number of taxi companies versus last year. We on-boarded 6 scrap metal companies and 46 new partners working with the self-employed in other industries. We absorbed significant increase in winning payout by 59% year-on-year built on overall strong [supine] growth. Contact Money Remittance System demonstrated volume increase by 29% year-on-year as we continue to develop our partnership model, reaching out Zoom, (inaudible) in Tajikistan and (inaudible) in Korea. Moreover, B2B2C and peer-to-peer transactions attributed to the QIWI [Master] products and other use cases contributed to overall growth of our Money Remittance.

E-commerce vertical volume also increased by 4%, partially due to weaker base of last year, but also thanks to recovery of tourism and increasing interest in Russian [betting] streamlined, which offset the negative impact of CBR restrictions active till June 2021. We enjoyed exciting matches at Euro 2020. The team did an amazing job with promo activities, which paid off dozens of times, resulting in volume and net revenue uplift.

This quarter, we also have substantially reduced on-boarding time for our partners, connected TikTok to our payment network and launched soft (inaudible) products. Payment Service Payment net revenue yield declined by 25 basis points year-on-year driven by the temporary restrictions imposed on high-yielding cross-border payments, which affected the E-commerce market vertical. Corporate and other net revenue decreased by 25% year-on-year, mainly driven by Tochka while Factoring and Flocktory projects continue to grow.

Factoring PLUS net revenue adjusted for one-off increased by 17% year-on-year. Factoring portfolio increased by 59% and reached RUB 5.3 billion with number of active clients going up by 39% to 492. Digital bank guarantees portfolio increased by 87% to RUB 24.8 billion. Number of [deals] increased by 44% to over 8,000. On top of active portfolio growth and expansion of customer base, we have launched our credit product for contract execution and started to provide loans via marketplaces via our platform at (inaudible).

Please note the demand for Factoring services is seasonal and is expected to be significantly higher in the second half of the year. Tochka net revenue declined 56% year-on-year due to switch of some Tochka customers from QIWI to Otkritie Bank. We have announced earlier that we are going to sell our stake in Tochka for RMB 4.95 billion, which resulted in about 2.5x return on our total investment or IRR of 35%. The deal amount is subject to certain performance adjustments dependent on Tochka fiscal year 2021 audited results.

In the next quarter, the impact on operating results from Tochka is expected to see. Now let me pass the floor to Elena and walk you through our financial results.

Thank you, Andrey. Profitability was robust and adjusted EBITDA margin of 64% and adjusted net profit margin reaching 45%. Thanks to the cost optimization measures, successfully implemented in 2020, we have significantly increased the overall efficiency of our operations.

And our margins went up year-on-year by 6.6 percentage points for EBITDA and 4.4 percentage points for adjusted net profit. The divestiture of SOVEST and Rocketbank compensated negative operating leverage effect driven by the temporary restrictions imposed by the CBR on cross-border payments. In (inaudible) terms, adjusted EBITDA and adjusted net profit declined by 1.4% and 1.9% year-on-year, respectively, primarily driven by total net revenue declined by 12%.

Payment Services net profit decreased by 6.2% year-on-year, driven by margin decrease of 6.5 percentage points.

First of all, we continue to see negative implications on margin due to cross-border payment restrictions. We are also reviewing compensation of our employees, align it to market level. Corporate and other category net loss adjusted to one-off decreased by 23% or RUB 99 million year-on-year. Net revenue declined by RUB 126 million was more than offset by lower ForEx loss by RMB 82 million.

Decrease in personnel cost by RUB [116] million and RUB 40 million one-off impact on factoring net profit due to a reverse of agent expenses accrued in the second quarter of 2020. We continue to optimize our operations and monitor margins and OpEx to net revenue ratio in order to sustain healthy financial performance of the group and which ensure its sustainable and profitable growth.

I will now give a few highlights on our upgraded guidance. Our outlook reflects our current views and expectations only and is based on the trends we see as of the date of this earnings call. In such terms, we're subject to change, the impact on our business and operations could deviate more than currently expected. I would like to note that at the moment, there still remains significant uncertainty in 2021, primarily related to the long-run effect of the CBR restrictions and our ability to recover or replace previously restricted cross-border operations, as well as our ability to define our place in the new betting industry landscape.

Our guidance reflects expected changes in the betting industry landscape. Converse -- conservative projections on recovery of cross-border operations and sale of stake in Tochka project, which eliminates contribution in net revenue and net profit in the second half of the year. Having said that, we upgraded our guidance in respect of 2021 outlook. We expect total net revenue to decrease by 10% to 20% over 2020.

Payment Services segment net revenue to decrease by 10% to 20% over 2020, while adjusted net profit is expected to decrease by 15% to 30% over 2020. We remain cautious and reserve the right to revise the guidance in the course of the year when the scope and extent of factors impacting our results become clear.

And now I will give the floor back to Andrey for some closing remarks.

Thanks, Elena. I would like to give you a brief update on the current situation with the CBR restrictions and changes on the betting market. The restriction imposed by the CBR on cross-border payment in December 2020 have expired. Unfortunately, the impact from restriction will have a long-lasting negative effect on our operations, primarily in the E-commerce market vertical. We have started to onboard foreign merchants, but the recovery process is highly dependent on changed customer behavior.

It cannot be accurately estimated as well as may never be restored. We are conservative in our assumptions, which is also reflected in our guidance. Update on the betting industry regulation. We have made a proposal to show as we took pursuant to the new regulatory regime. However, there can be no assurance that our bid will be successful.

By the end of September 2021, the newly appointed (inaudible) will take over operation of both existing TSUPIS providers. If we are not able to secure an active role in the new industry landscape, we may lose the ability to generate volume and income directly related to TSUPIS businesses in Russia and most likely, it will negatively affect acquiring services and winning payout provided to the sports betting company in a bundle with our TSUPIS separations.

For the first half of 2021, TSUPIS businesses and related acquiring services as well as winning payout accounting 23% or RUB 2.1 billion of Payment Services Payment net revenue.

At the same time, we believe that we should be able to retain a part of our revenue generated from QIWI Wallet services for the betting industry, which represents betting accounts top-up and winning payout, about 14% of Payment Services Payment net revenue. I strongly believe in my team and our resilient and consumer-rated payment ecosystem. We will further develop our product proposition for key niches and areas of expertise. There are many opportunities ahead, and we will pursue our ultimate goal of securing the sustainable and the profitable growth of the company.

Thanks for listening. We are ready to take your questions.

(Operator Instructions)

Our first question comes from the line of Chris Kennedy with William Blair.

Andrey, at the top of the call, you gave a little bit of your core focus for QIWI. Can you just, kind of, give a little bit more details on your 3- to 5-year vision for where QIWI will sit in the ecosystem in Russia?

Yes. Chris, thank you for your question. So we continue to focus on our key niches in the Payment Services, including the digital entertainment, self-employed, Money Remittance and digital commerce. We believe that in those niches, there are good growth opportunities because the market is still, in many cases, unserved.

And the markets themselves will be growing for the at least several years to come. Moreover, we are focused on our proposition for SME services with Factoring crews. And as well, we see quite a strong growth opportunities for the year to come. At the same time, the current situation with ETSUP is a certain difficulty for us as we are not clear yet how big volume and revenue we will be able to keep.

And because of that, we -- while we are working on those segments initiatives that I talked about, we are looking for other opportunities to grow to compensate potential loss in the ETSUP. And as soon as we -- together with the Board of Directors, we will be ready, we will be informing you on the strategy update.

Great. Appreciate that. And then on that contract -- so last question. What type of cost initiatives if you were to lose that contract, the sports betting one? Are there costs you could take out of the business? Or how would that impact net income?

Okay. So for the cost side, the biggest impact in the second quarter was related to discontinued businesses with primarily SOVEST and Rocketbank and some smaller projects as well that we stopped last year.

On top of that, we are constantly looking at our cost level. And in the end of 2020 and beginning of 2021, given the difficult situation with CBR restrictions and ETSUP uncertainty, we did some, I would say, cost-cutting in core business as well.

Our next question comes from the line of Andre Mikel with (inaudible).

I have several questions. I'll ask them one by one. The first question relates to the restriction by CBR that were listed in June. And you noted that you started to onboard foreign merchants. So my question is, are you only basically allow to onboard merchants that are new to you. Or can you re-onboard the merchants, the payments to whom were essentially prohibited during those 6 months? And I have other questions.

Andre, thank you for your question. So yes, in June 2021, the term of restrictions imposed by Central Bank expired. So we really restarted onboard foreign merchants, including old and new one as well. At the same time, in July 2021, certain amendments to the regulations -- cross-border regulations were introduced. And we are still analyzing the jobs and the additional KYC procedures required based on those regulations.

So following this more stringent KYC procedures and due regulatory requirements, the recovery process is moving quite slowly. And on top of that, what is also important is that customer behavior has changed in the last 6 months, which is not helping as well. So that's why we are not able to provide some estimates how long this process will take. And if we -- be able to actually reconnect all the merchants and partners at all. So we don't provide any guidance on this one.

My second question is on the estimates for sports betting-related revenues, in particular, the ones that are related to TSUPIS and acquiring, you provide the estimate that they comprise RUB 2.1 billion approximately in the first 6 months of this year. Do I understand correctly that these are those revenues that [ruin] operations that you could lose the right to process, if you do not refund this new centralized authorizer for sports betting payments?

Yes, that's correct. So basically, we divide our revenue here for -- that we are getting from Russian betting into 2 parts. The first one is RUB 2.1 billion is related to the situations themselves and online acquiring, winnings payout to card operations, which can be done by other market participants, I would say.

And the second half is QIWI Wallet operations where we are, obviously, only providing all these type of operations. So we believe that we will be able to keep QIWI wallet operations in any case for a certain extent, and for the first one, RUB 2.1 billion, it can be much more easily replicate if we are not part of the new regulation landscape.

And a follow-up question on that. The new setup should come into (inaudible) September, but would you say that the announcement on who becomes the centralized (inaudible) would you expect such announcement to be made? If you have any expectations for this.

No news so far. So we are waiting for the official update that will be, I think, available for the whole market, but no news so far. We are waiting as well.

My next question relates to the card-to-card money transfers from QIWI wallets. The banking cards whose volumes doubled year-on-year in Q2. And my question is how much of that -- those operations or those volumes is represented by customers actually leaving QIWI, just making the transfers out of QIWI wallets to never return.

Andre, sorry, I didn't get the last half. What portion of those volumes?

Yes, what portion is represented by customers completely withdrawing their funds from QIWI and closing their QIWI Wallets?

No, it's actually a small one. We don't have -- I don't have the direct number, but majority of these volumes is, let's say, with active wallet that are continued the operations. So to give you some other color on this, it's usually a part of some bigger use case. It's either can be, let's say, self-employed person that is getting paid by other customers, we are clear to give transaction for the certain goods or services provided.

And then when he or she is accumulated money on the QIWI Wallet, then one of the ways how to use them is to transfer it to other bank cards or account to actually spend it because they are not using QIWI wallet for their, let's say, daily banking in most of the cases, they are -- more use it for this specific self-employed, let's say, payment type of operation.

So it's, kind of, the getting the revenue and then put this to their bank account. That would be the one of the big use cases here.

And my final question is on Kazakhstan. I would be grateful if you could provide some color on the operations there in particular, on the growth rates in operations in Kazakhstan versus Russia.

Andre, can you repeat, please? The sound is not good, unfortunately.

Yes, sorry about that. Operations in Kazakhstan, how well are they developing, especially compared to Russia?

Yes, I get you. Kazakhstan. Kazakhstan is growing, I would say, and this is different from Russian market. We don't have, obviously, any type of restrictions there. So with Kazakhstan volumes and revenues are growing versus last year. And here, I also would like to add that we have added a lot of taxi companies in Kazakhstan in the second quarter, over 600 of them. So volumes are growing.

Any specific comments on the growth rates, any estimates?

Probably not.

Our next question comes from the line of Alex (inaudible) with (inaudible) Investments.

My question is regarding competitive advantage of QIWI. It seems that recent emphasis to be on developing tailor-made solutions for targeting markets such as taxi drivers, air travelers, et cetera. And over here, QIWI is competing with established international players such as Uber for tax drivers, Expedia for travel markets. So my question is, what is QIWI's competitive edge over those established international players?

I would say that we are not really competing with Uber as a -- Expedia as a travel international players. We are -- when Uber was operating in Russia, Uber was actually one of our sales partner on the Taxi business. So we are distributing our prepaid card and we proceed with the payout and as well different international players with the proceeding let's say, payout for example, Airbnb to the Russian landlords.

We connected TikTok this quarter for the payouts as well. So I would say that for the international players that are in need for the -- either payout or payments, specifically with the QIWI Wallet as a payment method, we are, kind of, one of the payment gateway to the Russian market and, in certain extent, to Kazakhstan as well.

All right. So basically, what you're saying that when international players try to enter Russian market, they actually come in to QIWI asking for -- to provide support in terms of financial services. Is that correct?

Yes. It's the case, we're obviously not the only player on this one, and there are other players like you mine, for example, but we are obviously one of those and we are working with a lot of international players as well.

Okay. And I have a couple of related questions. So how secure and reliable QIWI's financial solutions are versus competitors?

Could you elaborate a bit? What do you mean? How reliable...

Like you provide financial solutions in terms of payments. So how reliable and how secure those solutions?

Solutions, yes. We are operating on the market for the long time and we believe that our solutions are very reliable. We have no, like, major issues with any of our products and with any of our customers for a very, very long time. So our clients, including majority of our key customers are working with us for a long time. No data links will, like -- no data link for the, I don't know, how many years, I don't remember. If we have any of those at all. So we believe that we are very reliable payment company financial services.

So would it be fair to state that those solutions as reliable as credit card solutions?

I believe so.

All right. And my last question is, if anonymous wallets remain important feature for QIWI's customers, it seems to be in last quarter, at least, was a significant decrease of QIWI's Wallet accounts, which primarily was related to anonymous wallets.

Yes, there's actually a different -- several reasons why the number of QIWI Wallets decreased over time. There were some trends for certain periods of time already that is related to the changes of how we work with anonymous wallet and some procedures. At the same time, as a bigger impact, of course, this quarter was related to the CBR restrictions and payments with international merchants because, obviously, many of our clients, we are doing their payments to the -- a lot of different international merchants. And as soon as those payments were not available, some of those wallets were not active.

And I would just add on the anonymous wallets as well that more than 90% of QIWI Wallet volumes are going through wallets with KYC, either simplified KYC or full KYC. So anonymous wallet is more like stage of the product lifetime. So usually, people starting to use the wallet as anonymous and as soon as they need to do some operations that requires KYC or they need to spend more money that also requires KYC, they use either simplified or full KYC for the wallet.

That's why majority of the volumes is there with -- are not with anonymous wallet.

I understand. And it looks like a number of wallets still decrease. Is there any expectation that the trend will change in the coming months or quarters?

We believe that for -- because it's, kind of, longer trends, I believe that it will -- the trend will continue as the same. At the same time, I would -- as we mentioned already for those use cases that are important for us like self-employed, for example, and related payments volumes of the wallet, we actually were able to demonstrate quite significant growth, like the one that was mentioned in one of the previous questions related to the payments to the card from QIWI Wallet.

So while, let's say, the number of wallets, yes, is decreasing. At the same time, the operations in certain important use cases for us are growing. In the press release, you may know that actually the Payment Services payment volume per active QIWI Wallet account is increasing almost 80%.

It is currently about 30,000 approvals while in the quarter last year, it used to be about 17,000. So utilization or volume is growing per active QIWI Wallet account and that is what we are targeting.

And what's the fraction -- just a follow-up on the statement you made that typically, customers joined as anonymous and then they transfer in the full solution. So what's the current fraction of anonymous wallets?

As I said, the number -- the volumes that -- volumes anonymous wallets have generated 8% of the total volumes of QIWI Wallet. We are not disclosing the number of anonymous wallet.

Our next question comes from the line of Vladimir Bespalov with VTB Capital.

First of all, I would like to ask a question about your guidance. You increased the guidance for total adjusted net revenues, but left the guidance for net profit growth unchanged. Even if we adjust for Tochka, it still looks very conservative because like the contribution from the growth from higher net revenues should exceed the potential losses related to -- not losses.

I mean, the part of net profit attributable to Tochka. This -- and if we look at the guidance, for example, like at the lower bound for the second half of this year, it would be something like RUB 2.5 billion of adjusted net profit, which is way, way low even if you lose a lot of betting streams, even if it's lower than the second quarter. So maybe could you elaborate a little bit what is behind all these assumptions.

Vladimir, this is Elena. I can start maybe, Andrey will add some additional comments. Usually, we are quite cautious about our guidance and maybe a bit conservative. But yes, firstly, it's Tochka operations that affect net profit, and that's why we decided not to upgrade guidance in respect of net profit by something like 3 or 5 percentage points. And of course, we have some uncertainties in the second half of the year that we also included in the guidance.

And probably this is the case why we -- a bit more conservative in respect of net profit, and we are more confident in net revenue. That's why we upgraded guidance only in respect of net revenue.

But could you elaborate a little bit about these uncertainties? Are these betting related because as far as I understand, those uncertainties were in your previous guidance? Or there is something new coming up?

I would say that uncertainties are mostly the same. We still do not know how it will go with, I think, (inaudible) and all the betting operations, this is probably the most uncertainty that's included in our guidance.

Okay. My second question will be on the potential use of proceeds from the sale of Tochka. First of all, when are you expecting to get those proceeds? And how are you going to spend -- can we expect, for example, more dividend distribution or you have some other plans?

Yes, thank you for the question. I will also try to cover it. We are expecting the most part of the consideration in the third quarter, as we said prior in our press release related to Tochka. Also, we will have a final adjustment to the deal when the audited financials of Tochka will be issued. So it will be somewhere in the first, second quarter of 2022. And only then we will understand the real cash consideration, the real price for this deal.

Also, I would like to highlight that it is a decision of the Board of Directors to decide how to distribute -- what amount of dividends to distribute. Prior, we decided and we did in 2020, we paid 20% of our adjusted net profit. And for this year, it was also agreed by the Board of Directors to distribute at least 20% of the adjusted net profit, and this will be done for sure.

In respect of the Tochka payment, we firstly need to consider our budget for the next year and the investments in the project that we right now are working on. And considering this at year-end Board of Directors, there will be a decision whether to invest this money in development of current and big projects or whether partly to distribute this part to the dividend.

And of course, our high priority is to expand with a strong focus on our returns and create value for our shareholders. And of course, if we will have any extended cash, of course, we will distribute it, if it will be a decision of Board of Directors.

My next question is on Factoring PLUS. As far as I remember, during some previous calls, we discussed with the management that this could be a very important part of your business in the medium to longer term? But looking at the numbers for this quarter, even adjusted for some one-off in the second quarter 2020. It looks like the growth performance is not that impressive in general. Are there any changes in your views on this part of your business? And in general, what do you expect from it in the medium term?

Yes. Thank you for your question. I will give the overall remarks and probably Elena will give more color on the numbers. generally, while you are right, revenue is not growing versus last year, which is mostly related to the certain one-off adjustments. If we are looking into the growth of the numbers, including the, for example, bank guarantees portfolio, which is growing close to -- which is close to doubling year-on-year.

And Factoring portfolio is growing quite nicely as well together with a number of [constant] clients. On top of that, team was adding 2 new products on top of this bank guarantees and Factoring. So we believe that it still have a quite strong potential for the growth. I would also mention that due to seasonality specifics, the majority of the growth and the volume is coming from the second half of the year. So Elena, if you can add some color on this adjustments -- one-off adjustment last year that is, kind of, confusing the results of the second quarter.

I would say that in prior year, Factoring operations were not too significant for the company. And yes, there was some -- maybe not too significant for the group adjustment related to deferral of agent commission that had effect, if you will, call it year-over-year. If you will take it off, you will also see that they are growing and the operations are much better and increasing compared to prior year.

I would also add to Andrey's word that we also should consider economy scale, like when you will see increase in portfolio, if we will consider bank guarantees, we will see more profits and the same as to the Factoring operations. We see that the project -- both projects are growing quite well. And we see the 3 years plans that also have a good growth rate.

And just a couple of figures here also on the portfolio itself. The Factoring portfolio increased by 59% year-on-year. The digital bank guarantees portfolio increased 87% year-on-year. And this comes along with the active client growth by 39% in Factoring and number of deals growing over 40% in the digital bank guarantees. So the operating results are quite impressive.

But in terms of the medium-term growth, what do you think is, kind of, a normalized growth rate for this kind of business?

Well, probably we would not like to comment now on the midterm growth rates of this project.

Yes, I believe that there is a market potential to continue the same levels of growth of business for the next couple of years. But obviously, we'll need to see how we go further, but currently growing, according to our [requirements].

And my last small question is purely technical on the betting-related revenues. Is my understanding correct that those revenue streams, which are at risk, go to E-commerce, while those which you -- I mean, in the worst-case scenario that you are not going to be an operator for the industry and that the revenues you are going to retain a part of money remittances?

Yes. Part of this revenue, the bigger one is going to the E-commerce, but the winnings payouts to cards are going to the Money Remittance so its -- both verticals will be affected.

Our next question comes from the line of Ildar Davletshin with Wood & Company.

Okay. Just mostly some follow-ups to the questions that have been already asked. So on the guidance, would you be able to confirm that this 10% to 20% decline assumes that you have absolutely no role in the new -- the regulator, the betting regulator? So that would be my first question.

Yes, we included all negative effects to this guidance.

Yes. That was my understanding as well. Okay. And the second, so on cross-border transactions, so you sounded a little cautious in your comments about, kind of, current and near-term trajectories, saying that there was some impact or there could be some impact from the restrictions on future performance.

So I'm just wondering, now that we have 1.5, almost 2 months in the next quarter since you reported these numbers. What trends do you see? Is it similar to the second quarter or like, let's say, June in terms of the cross-border transactions or is there some further continued recovery. So I understand there was some, sort of, a progress month-by-month from the start of the year when it was the worst -- the biggest impact and then gradual recovery. Is this recovery continuing at this level?

As of now, we see -- we still see -- Andrey do you want to comment? We still continue to grow.

Yes, Elena I'll cover you. So yes, generally, we're mostly talking about the overall business, the same trends that are in May and June. I would say that a bigger impact on our growth, let's say, the growth trend this year in absolute numbers like month after month was driven not by international transactions. Though some of operations were able to establish starting from the first months of the year, but more with the growth of TSUPIS separation because this year it was quite strong growth here.

At the same time, talking about this quarter, I would like to -- and probably give you more color on guidance as well. I would like to remind that the second quarter of the last year was the worst quarter for us because of the lockdown and cancellations of the majority sports event.

And the third quarter of last year was basically the best quarter for us in the last year because it was, kind of, ramp up after the lockdown was over. And a lot of sports events were back. So last year, there was very, very strong results in betting and some other key streams for us. So that's why, while absolute numbers currently are, kind of, continuing in the trends in the second quarter. When we are looking versus last year, it's obviously a high base, and its results will be much worse versus second quarter.

I see. Okay. And maybe just 2 very quick follow-ups. So you mentioned Kazakhstan, which apparently is doing quite well. So I'm curious if you could give us some color in terms of contribution or the scale of this operation. Maybe as a percentage of total volumes or revenue and maybe a broader CIS, like, other than Russia, other countries like what percentage?

On Kazakhstan in somewhat material and you can think about around 5% of Payment Services.

That's volumes or revenues?

Revenues.

Revenues. And last one is -- so there was a question already asked on capital allocation, the use of this process, but maybe more midterm. So you've been paying around 50%, sometimes more, of your net income, adjusted net income. Like what do you think, given that you have a bit less -- some still early-stage growth projects, yet many are already becoming profitable.

Do you think that it could be in the future higher share of dividend payout ratio more than 50% or alternatively have you thought about the buyback, given the current dividend yield, which seems to be over 10% on an annualized basis? Have you thought about buyback at all?

I will cover the midterm vision here, and probably Elena will add on the buyback. It's one of the traditional question. So I would say it's too early at this stage to say. As we set for this year -- our Board of Directors set a minimum dividend payout.

Going forward, we will be discussing this one. And as I said answering the strategy question, we are currently looking for other opportunities to grow, given the difficulties and uncertainties that we are facing with TSUPIS businesses. Those opportunities may require, in the future, investment and based on those the decisions on -- the future dividends will be made.

So it will depend, I would say, on our strategy and capital needed for its execution.

Okay. And power, the second question in respect of buyback. From the technical perspective, it's a bit difficult as we have a holding like in other companies (inaudible) in Cyprus. And it's a bit difficult to make a buyback through the Cyprus entity. But it's possible. I would not say that it's right now on the table what we are discussing, but this is possible.

Ladies and gentlemen, we have reached the date of today's question-and-answer session. This also concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and enjoy the rest of your day.