Qiwi PLC (QIWI) 2020 Q3 法說會逐字稿

Good day, everyone, and welcome to the QIWI Third Quarter 2020 Earnings Conference Call. Today's conference is being recorded.

At this time, I would like to turn the call over to Mrs. Varvara Kiseleva, Interim Chief Financial Officer of QIWI. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to the QIWI's Third Quarter Earnings Call. I'm Varvara Kiseleva, Interim Chief Financial Officer. And with me today are Boris Kim, our Chief Executive Officer; and Andrey Protopopov, Chief Executive Officer of the Payment Services segment.

A replay of this call will be available until Thursday, December 3, 2020. Access information for the replay is listed in today's earnings press release, which is available at our Investor Relations website at investor.qiwi.com. For those, listening to the replay, this call was held and recorded on November 19, 2020.

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

With that, we will begin by turning the call over to Boris Kim, our Chief Executive Officer. Boris?

Thank you, Varvara, and good morning, everyone. Thanks for joining us on this call today. I'm glad to share our third quarter 2020 financial results. This quarter, we continued to demonstrate robust performance in our Payment Services segment as well as in our Other projects. Our Payment Services segment showed solid results and delivered 11% net revenue and net profit growth. This growth was largely supported by several factors, including abnormally high density of sport events in the third quarter as well as growth in our strategic self-employed streams.

This quarter, we also successfully closed the sale of SOVEST, and conclude the wind down of Rocketbank. This helped us to refocus on our core payment business as well as on projects that can be synergetic to our key products, consumer niches and competences. This being said, we also continue to optimize and improve the efficiency of our operations across all projects.

Moving further, I would like to share with you our several trends that I believe are currently important for our business. Today, we see increasing uncertainty related to the spread of coronavirus. Moreover, as a result of several other factors, we may expect further deterioration of the consumer purchasing power and disposable incomes in Russia. We have not yet seen any substantial effect of the decrease of the purchasing power of the population on our operations. Our diversified portfolio of services and circular growth in our key markets cushioned the negative trends so far. However, we may expect certain negative effects to be visible going forward and into 2021.

Secondly, we have noted in the past and are likely to continue to see in the future, constant default of our governmental bodies to adopt more robust and stringent regulations in respect of our key products and markets. This may include develop limitations, more elaborate wallet KYC requirements, establishing certain limits for the digital wallet transactions, both in respect of the types and maximum amount, specific rules and regulations in respect of the cross-border transactions and regulation of the sport betting market.

As of today, a number of legislative initiatives are being discussed by different legislative bodies, formally or informally, that can eventually become legislative proposals on laws, and impose additional pressure on our operations. As of now, we cannot make any reliable assessment of the impact that these trends may have on our 2021 results of operations. But we continue to closely monitor the situation and will provide our 2021 guidance in due course.

Despite uncertainty and challenging economic and operating environment, we see diverse opportunities for growth in mid- and long term, including through general digitalization trends, new niches and services for self-employed as well as certain B2B products and services. I do believe that we are well positioned to continue developing our business and strengthening our ecosystem to provide our clients with the best-in-class digital solutions.

Now on some operating highlights. Third quarter 2020 total net revenue increased 11% to reach RUB 6.6 billion, up from RUB 6 billion in the third quarter of 2019. The increase was mainly driven by Payment Services segment and Corporate and Other Category net revenue growth, as well as by positive contribution of Rocketbank as opposed to negative effect on total net revenue for the same period of the prior year. Andrey will discuss the performance of our Payment Services segment in a minute while I walk you through the results of our other projects and segments.

Corporate and Other Category. Net revenue was RUB 449 million as compared to RUB 268 million in the third quarter of the prior year. Net revenue growth in Other Category was primarily driven by Factoring PLUS net revenue growth. Factoring PLUS net revenue grew to RUB 182 million as compared to RUB 55 million in the third quarter of the prior year. Factoring net revenue growth was driven by the scaling of the projects, including the expansion of bank guarantees and factoring portfolios. In the third quarter for 2020, Factoring portfolio increased by 15% to reach RUB 3.8 billion. Bank guarantee portfolio grew by 26% to reach RUB 16.7 billion. Most products performed well and continued to maintain low NPL level. Given the results of the project and the trends we currently see, we aim to further develop these products by scaling our current products as well as by expanding Factoring PLUS product proposition.

Tochka net revenue for the third quarter 2020 was RUB 126 million compared with RUB 199 million in the third quarter of the prior year. Tochka net revenue declined primarily resulted from a decrease in revenue generated from cash and settlement services due to low number of active clients in QIWI Bank. At the same time, the consolidation of the Flocktory projects, starting from December 2019, also contributed to the net revenue growth.

As I already mentioned, in the third quarter, we successfully completed the sale of service projects and concluded the Rocketbank wind down processes. Thanks again to the team for an outstanding job done.

Further, I'm happy to share that in October 2020, we placed the first ever QIWI ruble-denominated bond entering Russia debt market. Varvara will give you more details shortly. But I would like to mention that the placement enjoyed a strong interest from both institutional and retail investors, which we believe is a good sign that general market as well as QIWI customers value our story and belief in our business.

Moving on, I'm glad to announce that following the determination of the third quarter 2020 financial results, our Board of Directors has approved a dividend of $0.34 per share. We remain committed to the target dividend payout ratio of at least 50% of the adjusted net profit for 2020 approved by the Board in March. The Board of Directors reserves the right to distribute the dividend quarterly as it deems necessary so that the total annual payout is in accordance with the target provided. However, the payout ratios for each of the quarters may vary and maybe above or below provided target.

Finally, I would like to announce the appointment of Pavel Korzh as the Chief Financial Officer of QIWI, effective December 1, 2020. Pavel has over 20 years of experience in finance. He joined QIWI in August this year and has served as the CFO of QIWI Bank since then. Given Pavel's extensive financial knowledge, impressive background and strong focus on delivering results, I'm convinced that Pavel will be able to support our further growth, strategy execution and help us expand our business further.

With this, I will turn the call over to Andrey for an update on our Payment Services business. Andrey?

Thank you, Boris, and good morning, everyone. Thanks for joining us. Moving on to the results of our Payment Service segment. For the third quarter 2020, our Payment Services segment volume increased by 11% to RUB 435 billion, driven primarily by growth in E-commerce and Money Remittance market vertical, offset by a decline in Financial Services and Telecom market vertical. As we've discussed on a number of occasions, we started to see volume recovery in June as the current restrictions are eased and the majority of sports events are back on track.

Different self-employed use cases also started to recover once the lockdown was over. Hence, our E-commerce volume was given to a large extent by abnormally often sport events as well as by growth of different other digital entertainment subcategories. The continued growth in Money Remittance vertical, at the same time, was largely driven by the strong performance of the Contact Money Remittance System, primarily resulting from the growth of the Tajikistan corridor, underpinned by the development of the Contact mobile application. Significant increase in payouts resulting from the scaling of our strategic self-employed stream also contributed to the performance of Money Remittance vertical. For example, in the third quarter 2020, we connected to our platform over 480 taxi companies, continue to improve our services for taxi park and other self-employed use cases in order to support further growth in the stream and started to develop several unitions.

At the same time, some of the categories primarily connected to our physical distribution, such as travel and ticketing or loan repayments continue to be adversely affected by the restriction related to the COVID-19 and overall economy slowdown.

As Boris mentioned, so far, we have not seen any significant slowdown in our volumes or revenues resulting from lower purchasing power of population in Russia, thanks to our diversified product mix and resilient niches. At the same time, we believe that further deterioration of the situation can negatively affect some of our categories, including not only our physical distribution, but our core categories like for example, E-commerce. At the moment, we remain cautious and closely monitor how the situation evolves, doing our best to mitigate key risks and uncertainties.

In order to maintain our growth, we continue to look from new use cases and developing useful products. For example, we are piloting certain projects in our Payment Service segment, such as debit card program for our partners and their employees really developed in Rocketbank. All premier loans for our key user groups as well as certain B2B-focused services. We believe that such product will help us expand our B2B2C product proposition and provide more demand-diversified and relevant services for our clients, cementing our market position and growth.

Going back to the third quarter results. Payment Services segment net revenue increased 11% to reach RUB 6.1 billion compared to RUB 5.5 billion the prior year. Payment Services, payment adjusted net revenue increased 13% to RUB 5.3 billion, up from RUB 4.7 billion in the prior year, primarily due to the volume growth supported by the slight improvement of the Payment average adjusted net revenue yield. Our Payment average adjusted net revenue yield was up by 2 basis points year-over-year to 1.22%, driven by increasing share of E-commerce and Money Remittance volume in total volume.

At the same time, E-commerce and Money Remittance verticals adjusted net revenue yields have declined year-over-year due to changing product mix with higher proportion of low-yielding products, such as, for example, acquiring and rescheduling.

Payment Services other adjusted net revenue was RUB 806 million as compared to RUB 808 million in the prior year. Fees for inactive accounts and unclaimed payment increased 5% to RUB 506 million from RUB 484 million in the prior year. Interest revenue decreased year-over-year, mainly due to lower central bank rates.

This quarter, we continued to see declines in the number of active QIWI wallets from 22.3 million as of September 30, 2019, to 19.7 million as of September 30, 2020. We believe that the key factors that resulted in such decline related primarily to the regulatory and operational reasons rather than any substantial changes in the consumer preferences or economic slowdown. Such decline did not substantially impact our financial operating performance due to increasing diversification of our product proposition and operating model. At the same time, we believe that certain regulatory initiatives that are being discussed from time to time as well as continued economic slowdown, have a potential to negatively affect our operating performance in the future.

Our growth this quarter was supported by robust performance of our key products and core categories. Although at the moment, we see many challenges ahead and remain cautious, we believe that we are well positioned to continue to grow our business in which our suite of services, developing niches and create new use cases for our users, merchants and partners. Simultaneously, we are working to improve and optimize our operations in order to lay a groundwork for sustainable long-term growth.

With this, I will pass over to Varvara for more details on the financial performance of the group. Varvara?

Thank you, Andrey. Moving on to expenses. This quarter, our Payment Services segment continued to demonstrate robust operating performance, and generated strong cash flows supported by good performance of our other projects. In the third quarter, we have significantly increased overall efficiency of our operations as well as our margins through successful divestiture of the key investment-intensive projects as well as other cost-control optimization measures that we have started to implement in the beginning of this year.

Before we move on, I would like to highlight that going forward, I will refer to the segment numbers that include the effects of both continued and discontinued operations under IFRS. For the avoidance of doubt, as of September 30, 2020, SOVEST and Rocketbank projects are presented as discontinued operations in our IFRS financial. This being said, adjusted EBITDA increased 60% to RUB 4 billion. Adjusted EBITDA margin was 61% compared with 42% in the prior year. Adjusted EBITDA margin growth primarily resulted from total net revenue growth, underpinned by a decrease of selling, general and administrative expenses, resulting from a decrease in marketing, advertising and client acquisition expenses, driven mainly by the termination of SOVEST and Rocketbank marketing activities. This is partially offset by an increase in personnel expenses, primarily related to Payment Services segment personnel expenses growth as well as consolidation of Flocktory.

Group adjusted net profit increased 73% to RUB 3.3 billion from RUB 1.9 billion in the third quarter of the prior year. The growth of adjusted net profit was primarily driven by the same factors impacting adjusted EBITDA as well as by an increase in foreign exchange gain that was offset by an increase in income tax. Payment Services segment net profit increased 11% to RUB 3.6 billion, driven primarily by Payment Services segment net revenue growth, offset by an increase of payroll and related taxes, excluding effect of share-based payments, predominantly driven by higher bonus accruals and expenses related to the cash-based LTI compensation program.

Consumer Financial Services segment net loss was RUB 137 million in the third quarter 2020 as compared to RUB 424 million in the same period of the prior year, resulting primarily from a decrease in personnel expenses, excluding effect of share-based payments and selling, general and administrative expenses due to the project sales as well as credit loss recovery compared to the credit loss expense for the same period in the prior year.

Rocketbank segment net loss was RUB 165 million compared to RUB 632 million in the prior year, resulting primarily from better net revenue performance as well as decrease in personnel expenses and selling, general and administrative expenses resulting from the project wind down. As what as has already mentioned, in October 2020, QIWI has placed RUB 5 billion unsecured bonds due in 2023. The final coupon was 8.4%, significantly below the initial range and the placement enjoyed strong interest and work oversubscribed. At the moment, the main purpose for raising debt is funding the development of a number of current projects, primarily funding the growth of Factoring portfolio, of Factoring PLUS project. At the same time, we do strongly believe that it was a good opportunity to optimize our capital structure.

Now on to our guidance. Firstly, I would like to remind everyone that at the moment, we have limited visibility regarding the potential impact of the outbreak of COVID-19 strain of coronavirus as well as certain other factors on our business. In addition, it is currently unclear how much consumer demand will be negatively affected from the outbreak of COVID-19. And what is effect such outbreak will have on the macroeconomic environment as a whole. The full impact remains uncertain and will depend on the length and severity of the effect of the coronavirus on economic activity in our market.

Our outlook reflects our current views and expectations only is based on the trends we see as of the date of this earnings call. If such trends were to deteriorate further, the impact on our business and operations could be more severe than currently expected. We continue to monitor the situation closely.

Having said that, we reiterate our guidance in respect of 2020 outlook. We expect group total net revenue to increase by 7% to 15% over 2019; Payment Services segment net revenue to increase by 3% to 10% over 2019, while adjusted net profit is expected to increase by 35% to 50% over 2019. Although we see our 9-months results as a solid foundation for our 2020 performance, certain other factors remain beyond our control, and we reserve the right to revise our guidance in the course of the year.

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

(Operator Instructions) Our first questions come from the line of ever Ildar Davletshin of Wood & Co.

Congratulations on good strong results. So I just wanted to ask 1 question on your core Payment business, and particularly, the E-commerce segment. So we noticed this decline in net revenue yield, which is partially understandable. And so the question is, do you see this as a sort of sustainable new level going forward? Or is there still downside risk to this around 2.2% yield?

And then separately, on the self-employed, it feels like you're also making good progress. At the same time, other competitors like Sberbank and Yandex have also plans in that segment. Do you see any direct competition? Or if you could talk a little bit maybe more about the niche that you operate, if it's kind of safe for your operations.

And maybe just on other revenues. It seems like it's also making very good progress. Could you maybe speak a little bit more about the prospects that you see there, like in terms of maybe contribution overall to your revenue in the next, I don't know, couple of years in terms of the potential?

Thank you for your question. I will cover first two ones regarding the E-commerce yields and self-employed. So for E-commerce, the reason, as we described, that we now sell a more broader range of the product, including online acquiring. And the share of online acquiring is bigger versus our traditional growth versus our traditional QIWI wallet. So I would say that we may see certain continue of this trend. Though, we believe that those growths will be generally on a quite high level because our E-commerce digital entertainment where yields are normally higher versus traditional E-commerce.

Talking about the self-employed. We are targeting specific, I would say, markets. We're not targeting all self-employed that we have. So it's -- and on those markets where we are playing, including, for example, the taxi companies and taxi drivers, scrap metal pickers, web markers and some others. We have certain competitive advantages because we build kind of tailormade solutions for those markets. And with the tailormade solutions that fit exactly our partners in those markets.

At the same time, I would say that overall focus of the industry, including our competitors in those markets, is a reflection that this market is interesting and growing. And at the same time, in those markets we are playing in and some others, we are not yet, I would say, a lot competing with each other. We are more competing with the cash payment. Because even in the scrap metal pickers market, the majority of the market is cash based. On the taxi market, big portion of the market of the -- how taxi companies are paying to the drivers is cash based. So there is still, I would say, huge opportunity to grow -- to move from those cash-based payments to the online payments. And the more players are there, the fact that this will be -- this move will go.

So in a way, in those markets, we are -- it's good to have a competition. While our, I would say, competitive edge would be not to try to have the broad market products, but to have this, I would say, a larger focus on the specific niches where we can provide the strongest proposition.

Okay. Maybe just to doublecheck on your first comment. So do you expect this third quarter net revenue yield in the E-commerce to be sustainable? Or -- I didn't get the answer because the line wasn't quite clear.

So could you please repeat, Ildar? There is some noise in the voice.

Yes. I was trying to ask about if the answer to the first question on the net revenue yield. So the level, which we saw in the third quarter, do you think this is sustainable? Or is -- can still go -- can go down from this level?

Yes. I said that it still can go down a bit, though I think it will stay on some quite high, I would say, quite high level overall. So it may go down a bit in the next quarters as well.

Our next question has come from the line of Chris Kennedy with William Blair.

Sorry, sorry. I think we have -- we had 1 more question regarding our new businesses. So I could comment if it's possible. So the question was about contribution of new businesses on midterm and long-term perspective. You know that after closing -- selling service project and winding down of Rocket, we have 2 business verticals left, Flocktory and Factoring PLUS. And as we discussed during our previous call, they performed very well. And they performed even better than we expected at the beginning of the year, especially during this COVID pandemic we have. We still -- we are still working on our strategy and midterm business plan. But I could say that in long-term perspective, say on the horizon on '23, 2023, we could expect these new businesses could bring us like 20%, 25% of our net revenue on the group level.

Our next question has come from the line of Chris Kennedy with William Blair.

Great. Boris, 1 follow-up on those B2B initiatives. Can you talk about the long-term profitability of those?

Yes. I believe that the question is about Factoring PLUS and their business model, how sustainable it is. So at the moment, we see very good profitability in this segment. And talking about long-term and midterm perspective, we think that, also, we could expect some decrease in profitability and in margin. In general, we expect that the margin will be rather high because of 2 reasons. We work in a special, very special segment of small- and medium-sized enterprises, which have contracts with big, reliable companies. And for them, it's not a question of margin. For them, it's a question of time.

So we could enjoy a rather high margin. And on the other hand, the NPL, the cost of risk in such operations is rather low, say, compared to the loans for small- and medium-sized enterprises, in which we have practically the same NPL as for retail loans, around 10% to 15%. In fact, from operation with these companies, we have a cost of risk less than 1% even in this -- during this crisis.

Okay. That's very helpful. And then just can you give a little bit more color on the potential regulatory changes in Russia? And how that would impact QIWI's business and how you would navigate potential changes?

Yes. Well, as I mentioned earlier, we have a few initiatives from the government and legislative bodies regarding 2 key markets. The first one is betting. And I mean the speed at which they change the legislation is astonishing even for Russia because they just adopted 2 new laws in July, changing the legislation for bookmakers in terms of taxation and offshore beneficiary ownership. And now they prepared 2 new laws, which now are being discussed, and they got at the level of the government, a bit slow is about further increase in [quadrant] taxation of bookmakers.

And the second law is about changing the whole regulation of bookmaker companies, including creating unified (inaudible). Now I remind you, we have 2 (inaudible). One of these (inaudible) is key. So it's very early to predict any material effect on QIWI business. But for sure, that's a very important change in the regulation. And the second law is about foreign e-money wallets. At the moment, it's about -- I mean they try to introduce a special form of reporting of owners of this wallet for federal taxation office and for Central Bank about the operations.

It wouldn't directly impact our operation. But of course, that shows -- that's a sign of the level of attention of the regulator to their e-money and to the electronic wallets, especially in transborder payments. So it's a sign of this attention and potentially they could limit such operation. And that could have an impact on our business in this case.

Our next question has come from the line of Maria Sukhanova of BCS.

I just wanted to ask you to elaborate a little bit more on the circulation part. Specifically about such initiatives you mentioned about creating single (inaudible). Could you please tell us, have there been more developments on this front so far? Just -- I'm just wondering like this press release, you seem to have stressed specifically to regulatory risk. And we know that regulatory risk is general background risk for the business in general. So I wonder of the fact that you have stressed now, is it because you are really concerned about what's going on the regulatory front? Or it just like reflects there have been so many initiatives so far, which together might be, if approved, negative? So just to understand, if you feel that regulatory environment is indeed more potential more helpful at this point?

Sorry. Unfortunately, one of the lines may be muted. We can't hear your response.

Sorry, I was on mute. Thank you for the question. So talking about single (inaudible). The situation has changed since September or since August when we had the last earnings call. Because in August, that was just a proposal from local federation, which was discussed at the level of government. And now it's a draft law, which is now in Parliament. And so they started to consider this draft law. That's a huge progress in this. That's why we put this sentence in our press release even because the situation is changing. At the moment, I mean it's difficult to predict whether this draft law will be adopted eventually. And what will be the final test and who will be the single (inaudible). We also have a chance to be the single (inaudible). And that's going to be much better for us even because we will serve the whole market instead of half of that -- half of it. But the true is here, the situation is changing and is becoming more uncertain.

And just a quick follow-up on Factoring. Do you still confirm you plan to double the portfolio of, like half-on-half, to RUB 8 billion by the end of the year or the risk will slow down in this respect?

Yes, I'm sorry, Boris, please comment.

No. Varvara, go ahead, go ahead.

Yes. Maria, Thank you for your question. I wanted to outline that, of course, Factoring business is quite seasonal, and we always see significant increase in the portfolio numbers in Q4. However, of course, given the current levels, the portfolio would probably be slightly less than RUB 8 billion, though, more or less on -- in this, I would say, proximity.

(Operator Instructions). Our next question has come from the line of Vladimir Bespalov of VTB Capital.

Congratulations on good numbers. I would also like to follow-up on the regulatory issue. Probably you do some stress-case scenarios. And if we assume that this situation develops according to worst-case scenario, you are not the funder of this new single (inaudible). Could you give a very rough maybe estimate what kind of heat your adjusted net revenues or whatever metric could take in this event? And my -- I have also a question on what Andrey mentioned, given the prepared remarks on Tajikistan. Maybe you could elaborate a little bit on this project. And what is the contribution of this project to your performance?

Let me talk. I'll probably start from Tajikistan part of your question. So Tajikistan store is falling. So starting from the, let's say, the end of the last year, there was a new regulation from the Tajikistan Central Bank for companies -- for money remittance companies to trade. And not all of the key players in Russia were able to do so. So we get the kind of competitive advantage there. And our volumes grew significantly in this quarter ago. Moreover, in the second quarter of this year, we launched Contact mobile application with initial product proposition from being able for clients to send money from our partners, retail and bank to be able to do it directly from mobile app. And it's growing quite successfully as well.

So all of that help us to grow the volumes and revenues of the Contact money in the midterm this year quite significantly. So it's, I would say, now close to doubling versus last year. So that impacted our Money Remittance vertical quite strong, specifically in terms of the volumes.

Yes. So I will answer to your question regarding betting. At this stage, it's very early to make such stress scenario. Just because the legislation itself, it's not even on the first reading. And statistics of Russian laws show that only 80% -- so 80% of the laws, which are just -- which could be into Parliament -- enter the Parliament, only 20% goes further from the first reading. And there are 2 competitive laws at the moment. One from the government, but it's still not in the Parliament because it's being still discussed at the level of the government.

And the second one about single (inaudible) is already in the Parliament, but not on the first reading, even. So I would say that at the moment, it's a very theoretical discussion, what will be the real hit on our net revenue if and when this legislation will be adopted. So at the moment, we couldn't just give you any numbers. But we have to warn you, and we have to discuss that, that could be probably an impact on our net revenue in the future.

Our next question comes from the line of Anna Kurbatova with Alfa-Bank.

2 minor questions about operations. First of all, on Rocketbank and SOVEST. Could you give some guidance or provide us some expectations? Should we expect further scaling back in the losses in the -- until the end of the year? Or the purchases that you are making now with these assets, unlikely to produce more or less the same result on the net EBITDA on a profit basis in the fourth quarter?

And the second question, I note that Telecom part of your Payment volume business has significantly reduced volumes, transaction volume in the third quarter. So could you make some color on the trends there?

Anna, thank you for your questions. So on the first question regarding Rocketbank and SOVEST expectations. As Boris mentioned, we have already sold and closed SOVEST transaction. And we have substantially winded down Rocketbank operations. We don't expect any costs associated with -- any material costs associated with 2 of those projects in Q4 2020. And all costs associated with the pilots that they're being in our Payment Services business as part of the Payment Services business cost and as well do not represent any material amount. So in this respect, the total losses that we have earlier guided for Rocketbank and SOVEST, and that have been already booked in Q1 -- Q3. And this is everything that we expect to record on our books for this year.

Regarding the Telecom question, this is in line with our performance on the physical distribution that we already mentioned. So meaning our self-service kiosk network and retail network, that those channels are still, I would say, under pressure during the third quarter. So the Telecom volume there as well. So those are the same reasons for loan repayments or some other categories that are majorly represented in the physical distribution.

Do you see any, on the other side, again, in the -- digital online payments are still a concern. So I mean when you lose some of the physically-based transactions, do you protect part of them as part of maybe E-commerce right now?

Yes. We will obviously see the growth in E-commerce and specifically in the digital entertainment. And that's reflected in our numbers because of majority of our growth is coming from those categories. At the same time, we have some volumes of the Telecom as well with our bankers partners, and with the wallet where there is more, I would say, positive trends in those categories. However, proportionally those channels for the Telecom is smaller versus physical distribution. That's why on the overall numbers, we see the decline.

There are no further questions at this time. On behalf of the QIWI team, I thank you for your participation. This does conclude today's conference. You may disconnect your lines at this time.