Qiwi PLC (QIWI) 2020 Q2 法說會逐字稿

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

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

Thank you, operator, and good morning, everyone. Welcome to the QIWI Second 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 Wednesday, September 2, 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 August 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.

Thank you, Varvara, and good morning, everyone. Thanks for joining on this call. Today, I'm glad to share our second quarter 2020 financial results. This quarter, we demonstrated robust performance and reached a number of important goals.

Our Payment Services segment showed solid dynamics despite challenging market environment and delivered 5% segment net revenue growth. It's been stated, April and May were the most challenging months for us so far.

Our E-commerce market vertical was affected by the cancellation of numerous major sporting events. Our Money Remittances market vertical was temporarily hit by a decline in various self-employed payment streams. Our physical distribution network was negatively affected by the lockdown measures and temporary retail shutdown that limited users' access to certain retail locations as well as overall activity.

However, in June, we started to see strong recovery in the key markets and niches of our Payment Services segments and managed to achieve positive year-over-year growth. Moreover, our B2B projects, including Factoring PLUS, Flocktory and even Tochka showed impressive resilience and strong operational performance despite the complicated environment. We believe that the performance of Payment Services business as well as our other projects, demonstrated resilience of the digital solutions we have developed so far very well and relevant for our customers.

This quarter, we focused on optimizing our operations and loss-making projects. We also prioritized the health and well-being of our employees. Hence, the absolute majority of our employees is still working remotely.

I'm glad to note, however, that our business continued to operate smoothly on all projects, including the wind-down of Rocketbank and the sale of SOVEST, notwithstanding the challenges of their network. We strive to further improve the efficiency of our operations across all key segments and projects.

Today, we aim to focus on our Payment Services business in order to grow further by targeting our core niches and areas of expertise, creating new use cases well fitted to serve our clients. Simultaneously, we strive to expand our B2B proposition to projects like Factoring PLUS and Flocktory.

Having said that, I'm glad to acknowledge that we continue to see many opportunities, both in the payment space and the adjustment markets. I believe we are very well positioned to continue strengthening and enhancing our ecosystem in order to secure our long-term growth process.

Although the current recovery and performance give us optimism, we remain cautious. We continue closely monitoring the situation across the world and stay prepared for potential negative developments. At the same time, I do believe that we are well positioned to continue developing our business and strengthening our ecosystem to provide our clients in the best-in-class digital solutions.

Now on to some operating highlights. Second quarter 2020 net revenue increased by 23% to reach RUB 6.8 billion, up from RUB 5.6 billion in the second quarter of 2019. The increase was mainly driven by Rocketbank segment net revenue as well as by Payment Services segment and Consumer Financial Services segment net revenue growth. Andrey will discuss the performance of our Payment Services segment in a minute while I walk you through the results of our other segments.

Rocketbank net revenue was equal to RUB 509 million for the second quarter 2020 as compared a negative net revenue of RUB 132 million in the second quarter 2019. That significant growth resulted primarily from measures taken as part of wind-down process that we are implementing from the late March 2020, including mostly the termination of the Rocketbank loyalty program.

Moreover, I'm happy to confirm that we have substantially completed the wind-down process and reached our initial operating targets in terms of the number of clients and the amount of client balances. We believe that the termination of the current Rocketbank services offering will be completed shortly, and the total net loss of Rocketbank for the full year 2020 will be slightly below our initial expectations.

At the same time, we continue to review different ways to reuse or advance assets. We are piloting certain B2B2C-focused products in our Payment Services segment such as, for example, debit card programs for our partners and the employees earlier developed in Rocketbank. Hence, the expenses associated with piloting such products, including predominantly possible expenses, will be attributed to the Payment Services segment going forward.

Moving on to another achievement that I wanted to share with you. On July 13, 2020, we completed the sale of our SOVEST projects to Sovcombank. As part of this transaction, we have transferred to Sovcombank service loan portfolio as well as certain other assets related to the project. While we incurred a certain pretax loss on the disposal of the project, the transaction valuation was significantly better than initially expected. We were able to achieve such impressive results largely because of the better performance of our loan portfolio, including smaller gross portfolio as of transaction date, better collection and lower reserves.

At the same time, Consumer Financial Services segment net revenue has reached RUB 437 million in the second quarter 2020 as compared to RUB 283 million for the same period of prior year, driven primarily by the higher adoption of consumer paid value-added options as well as overall growth of the projects, including significant increase of the loan portfolio. For the avoidance of that, as of June 30, 2020, SOVEST project is presented as discontinued operation in our IFRS financials.

Corporate and Other Category net revenue was RUB 496 million as compared to RUB 254 million in the second quarter of the prior year. Category net revenue was primarily driven by Factoring net revenue growth to RUB 204 million compared to RUB 53 million in the second quarter of the prior year. Factoring net revenue growth was driven by the scaling of the projects, including the extension of bank guarantees and Factoring portfolios. Flocktory project consolidation starting December 2019 also contributed to the above-mentioned growth.

Finally, I'm glad to announce that following the determination of the second quarter 2020 financial results, our Board of Directors has approved a dividend of $0.33 per share. We remain committed to the target dividend payout ratio at, at least 50% of the adjusted net profit for 2020 approved by the Board in March 2020. The Board of Directors reserves the right to distribute the dividends 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 be above or below provided targets.

Despite the challenges we all face today, we continue to see many opportunities, both in the payment space and our key niches, including self-employed and the adjustment markets. We will continue to explore such opportunities and we'll strive to further strengthen our ecosystem with the ultimate goal of securing our long-term growth prospects.

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

Thank you, Boris, and good morning, everyone. Thanks for joining us. Moving on to the results of our Payment Services segment. For the second quarter 2020, our Payment Services segment volume decreased by 6% to RUB 347 billion driven primarily by a decline in financial services market vertical volumes, offset predominantly by increase in Money Remittances market vertical volumes.

The volume dynamics in Financial Services vertical was primarily driven by the decline of our physical distribution network. As Boris mentioned, it was negatively affected by the lockdown measures and temporary retail shutdowns that limited users' access to certain retail locations as well as their overall activity.

The growth in Money Remittances vertical was largely driven by the strong performance of contact money remittance system, primarily resulting from the development of the Tajikistan corridor.

As we have already discussed, we started to see the impact of the coronavirus crisis on our key payment categories, including primarily services from betting merchants in the second half of March. In April and May, our operation across most of our key categories were affected by the COVID-19 and consequent measures to one extent or another.

For example, we saw significant pressure in our retail distribution. Other categories, such as travel and ticketing services we provide to taxi companies and drivers, were also affected by lockdowns and other restrictions as well. On the other hand, certain categories such as, for example, online views and physical e-commerce were demonstrating strong growth rates during lockdown.

However, from end of May, lockdown measures started to ease across the globe, and some major sport events were started. In June, we saw a strong recovery in our key niches and markets, and we continue to see it across most of our key categories.

We believe that the performance of our Payment Services business demonstrates the resilience of our ecosystem as well as the value and relevance of our digital solutions we have developed to date and aim to develop soon. We are taking this opportunity to review and strengthen our product pipeline and the expanded use of services we offer. I believe we will be able to find new niches and enrich our value proposition as a result of this crisis.

Going back to the second quarter results. Payment Services segment net revenue increased 5% to reach RUB 5.4 billion compared to RUB 5.2 billion the prior year. Payment Services Payment adjusted net revenue increased 4% to RUB 4.6 billion, up from RUB 4.4 billion in the prior year primarily due to the improvement of payment average adjusted net revenue yield, resulting predominantly from higher net revenue yields in E-commerce market vertical, offset by an overall decline in volumes.

Our payment average adjusted net revenue yield was up by 14 basis points year-over-year to 1.33% driven by the yield increase in E-commerce and Financial Services market verticals. The yield increase resulted primarily from the change in product mix with a lower proportion of low-yielding retail cash transactions across most of our verticals as compared to the previous year.

Payment Services other adjusted net revenue increased 5% to RUB 788 million as compared to RUB 746 million in the prior year as a result of growth of revenue from fees from a native account and unclaimed payments. This was in line with overall growth of our operations.

This quarter, we have also seen a decline in the number of active Qiwi Wallet, from 21.8 million as of June 30, 2019, to 20.9 million as of June 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 for economic slowdown. Such decline did not substantially impact our financial operating performance due to increasing diversification of our product proposition and operating model.

Our growth this quarter was supported by the robust results we have achieved through our key products we offer and core categories we serve. Surely, at the moment, we see many challenges ahead and remain cautious. We believe that we are well positioned to continue to grow our business, enrich our suite of services, develop new niches and create new use cases for our users, merchants and partners. Simultaneously, we are doing our best to improve and optimize our operations in order to lay groundwork for the longer-term growth.

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

Thank you, Andrey, for an exciting update. Moving on to expenses. This quarter, our Payment Services business continued to demonstrate strong operating performance and generated strong cash flow, supported by the successful conclusion of the SOVEST transaction.

In this quarter, we have also significantly increased overall efficiency of our operations as well as our margins through the successful divestiture of the key investment in terms of projects as well as other cost control and optimization measures that we have started to implement in the end of the first quarter.

Before we move on, I would like to highlight that going forward, I will refer to the segment numbers that include the effect of both continued and discontinued operations under IFRS. This being said, adjusted EBITDA increased 48% to RUB 3.9 billion. Adjusted EBITDA margin was 57% compared to 47% in the prior year. Adjusted EBITDA margin growth primarily results from total net revenue growth as well as a decrease in selling, general and administrative expenses. This resulted primarily from a decrease in advertising from client acquisition costs.

In the second quarter 2019, such advertising and client acquisition costs related predominantly to SOVEST and Rocketbank projects that are being divested in the second quarter of 2020. This was partially offset by an increase in personnel expenses, primarily related to the Payment Services segment personnel expense growth as well as consolidation of Flocktory and Rocketbank redundancy cost.

Group adjusted net profit increased 40% to RUB 2.8 billion from RUB 2 billion in the second quarter of the prior year. The growth of adjusted net profit was primarily driven by the same taxes and its impact in adjusted EBITDA, offset by an increase in income tax expenses as well as an increase in foreign exchange loss, resulting largely from the ruble devaluation.

Payment Services segment net profit increased 1% to RUB 3.2 billion driven primarily by Payment Services segment net revenue growth, offset by increase in payroll and related taxes, excluding effect of share-based payments and foreign exchange loss. Consumer Financial Services segment net loss was RUB 134 million in the second quarter of 2020 as compared to a net loss of RUB 435 million in the same period of the prior year, resulting primarily from segment net revenue growth that Boris discussed earlier as well as a decrease in selling, general and administrative expenses, primarily related to lower marketing and consumer acquisition cost, offset by an increase in credit loss expenses predominantly resulting from the portfolio growth as compared to the prior year. The loss of approximately RUB 700 million that we have incurred on the disposal of SOVEST project does not affect our adjusted EBITDA or adjusted net profit numbers, as it was treated as a nonrecurring item in our segment report.

Rocketbank segment net profit was RUB 44 million compared to a net loss of RUB 511 million in the prior year, resulting primarily from net revenue growth driven mostly by revenue generated from the loyalty program termination as well as decrease in selling, general and administrative expenses, primarily related to lower marketing and consumer acquisition.

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 the COVID-19 strain of coronavirus on our business and operations. In addition, it is currently unclear how much consumer demand will be negatively affected by the outbreak of COVID and what effect the outbreak will have on the macroeconomic environment as a whole.

The impact remains uncertain and will depend on the length and severity of the effect the coronavirus has on economic activity in our market. The full scope of the negative impact that the abrupt decline in oil prices and resulting devaluation of the ruble may have in Russian economy also remains unclear but has the potential to be significant.

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. 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 upgrade our guidance in respect of the 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 second quarter results as a solid foundation for this year, certain other factors remain beyond our control, and we reserve the right to revise the guidance in the course of the year.

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

(Operator Instructions) Our first question comes from the line of Chris Kennedy with William Blair.

Can you go into a little bit more color on your B2B initiatives, please?

Chris, I'm sorry for the radio silence. We're trying to see if the equipment works well. So Boris will take the question. He will talk about...

No. I'm okay. I'm okay. I was just on mute. Than you. Thank you for your question. My understanding that your question refers to Flocktory and Factoring business. Indeed, we consolidated 100% of Flocktory in December. And this company is a B2B company which provides the management of customer cycle. It's basically a data company. And yes, what is good about this company that they showed very good results even during the crisis, which is, I would say, more or less obvious because, especially during the crisis time, relationship with customer and attracting new customer and keeping loyalty with old customer is necessary for all the companies, especially in E-commerce segment.

The second company in B2B segment is Factoring PLUS. They offer structured financing for SME segment. So they work with SME company which works with big companies. So they have some orders from them. They provide with materials or services for big company. And they have 2 basic products, Factoring itself and bank guarantee. Both products demonstrated very good resilience to private situation during the first half of the year, and the business model looks very promising. And we are planning to develop the ecosystem for SME segment in this field, providing new products. And so we are discussing like 3 new products, which we are going to launch to the end of this year.

Great. And then just one other one. Can you give an update on the sports betting market? And I understand there's some regulatory changes in the fall. How could that impact your business?

Yes. Yes, I will give you a small update regarding the regulation of betting segment, and probably Andrey will give you some more details regarding market itself.

You know that we already mentioned that the government was considering the proposals from boxing federation regarding the change in regulation of betting market. And according to the major reports, the government has decided to postpone the discussion of these proposals until autumn. The first reaction of regulators and market participants to the proposal was generally negative.

As the ground of its proposal, the federation mentioned the low contributions to the development of sports and the lack of transparency in their calculations. These problems were addressed with the adoption in July of 2 laws specifying the regulation of the industry. They also report in the press about the creation of the boxing federation was under one of the market players. And this, they have joint projects with sports lottery. However, I don't think that it's possible to delegate the regulation of the market under the control of its participant, a private company.

Nevertheless, we believe that the uncertainty in market regulation has increased, and we will closely monitor the situation. We are also confident that our expertise as super acquirer and issuer of Qiwi Wallet will be in demand in any scenario. And this will allow us to maintain a significant presence in this market in any case.

Let me add a detail, the dynamics of the market itself. So as we, I think, told earlier, there was a decline in April and, let's say, to the middle of May. Later on, we started to see the increase of the volumes in June, and the trend continues.

And I would say that, overall, the summer is very strong for betting because as most of the championship and the competition stopped for half of the spring, now we have a lot of events going on almost every day. So like these 2 weeks, we have a championship league, and the volumes are quite high because we have kind of events really, really every day. So we will see how it will go after this, I would say, transition period will end, but current trends are quite, quite strong, I would say, overall in the betting market.

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

Congratulations on good numbers. My first question will be on dividends, maybe not for this year but going forward, in general, how you look at this. So you have a 50% payout, but if we look at the business, currently, it's mostly Payment Services. It's a good cash generator. In terms of funding, you no longer have saw this figure winding down Rocketbank. Factoring is probably the only business, but relatively small, which requires funding. So is there a chance that this 50% payout ratio will be increased going forward and still distribute more cash as dividend?

And the second question is on your full year guidance. If I look at the first half and at what you guide for the full year, the second half of the year doesn't look very strong even though, like we know, that most of pressures were in April and May. So maybe you could provide some color. Are you generally very cautious because there is not that much visibility at the moment? Or there are any headwinds that you anticipate in the autumn?

Vlad, thank you for your questions. I will take both of them, and Andrey will probably add on the guidance if there is something else.

So for the dividends, I want to remind everyone that the decision about the dividend payout ratio is taken by the Board of Directors annually, and we do establish an annual payout ratio. For 2019, as you mentioned, it's 50 -- for 2020, I'm sorry, as you mentioned, it's at least 50% of adjusted net profit. The payout ratio for the next year, for 2021, will be adopted by the Board of Directors in March.

So as to potential changes to the dividend distribution strategy and higher payouts, that will depend largely on the market outlook at the time when we revert to the decision on our plans, on opportunities that we see ahead, et cetera, et cetera. So we expect, generally speaking, that the payout will not -- is unlikely to be lower than this year. But to judge on the opportunity of increasing the payout, first of all, as I said, it's up to the Board; and secondly, it's too early to give any guidance in this respect.

On the guidance question, there are several points that I would like to mention. First of all, we discussed it already, I believe, on our last call. The Q3 of 2019 have -- is a very high base for us. So we expect that the growth for the second half would kind of have a high base effect, and this would be more complicated to show a faster growth rate.

Secondly, we still don't see how and can't -- don't have enough visibility on how the macroeconomic environment, overall, consumer behavior and consumer sense will evolve given all the turbulences, et cetera. So in this respect, we do believe the second half would have a high base and a complicated comparison for us. But we do believe that there is quite a healthy growth potential.

Moreover, I would like to mention one thing you should take into consideration when you're looking at the group guidance that for 2019, you will have SOVEST revenues as part of the top line, contributing to the top line growth. And given that the sale of SOVEST was finalized in July 2020, so the base in terms of having SOVEST contribution to the group will also move different for 2019 and 2020.

Yes. Well, I would probably just add here that though we see quite strong trends now, we believe it's not yet kind of the normal grade because as I mentioned for the sports betting, we have currently a kind of postponed effect because there was cancellation of events, limited opportunity to play. Now those major events are back, like everyone is excited, et cetera. So when we will be -- let's say, in the autumn, we will see how this new reality is really formed and what will be the trends on this market and some other markets as well. So that's why we are, as Varvara said, on the one hand, looking positive but still are cautious.

Our next question comes from the line of Andrey Mikhailov with Sova Capital.

I have a couple of questions. The first one is on the number of active Qiwi Wallet. I would be grateful if you could share the dynamics of this metric in July and August and, perhaps also how it evolved in the second quarter on a monthly basis. And I'll ask my second question afterwards.

Actually, thank you for your question, but we are not disclosing these numbers on the monthly basis. Overall, I would say that we may continue to see the same dynamics of some decline for the next period of time for the same reasons that we mentioned in the press release.

My second question...

So...

Yes, go ahead.

Yes. I can just add here that I just want to underline that those reasons are partially kind of technical because we have different policy how we operate these nonactive wallets, and this has just some technical effect on the numbers. And secondly, what is important is the key use cases that are driving our revenues of the wallet, namely digital entertainment wallets and self-employed wallets, are representing not the big number of wallets. So the dynamics of number of wallets that we are reporting are not really kind of reflecting the dynamics of the volumes and revenues that those wallets are representing.

Yes. I would probably add that the number of wallets itself is not relevant anymore for our company because we operate in certain niches. We don't operate in a mass market segment. So we focus on the quality of the wallet and not on the quantity. So we focus on such parameters as lifetime value, business unit economy. And we are trying to enrich our ecosystem with new products like debit card, which we started to offer to our self-employed and B2B2C segment.

All right. My second question is on the SME products. You already have the Factoring product, and first of all, I'd like to know, if possible, what's the current size of the Factoring loan book? And what's the expected size of this loan book by the end of the year?

And my second question on this one is you mentioned that you plan to launch 3 products by the end of the year. Would you be able to elaborate on them? And in particular, how many of these 3 products will have or expected to have a credit component?

Andrey, thank you for your second question. So on the loan book side, currently, the Factoring portfolio size is around RUB 4 billion, and we expect that by the end of the year, it will reach between RUB 7.5 billion and RUB 8 billion.

As for other projects that we aim to test pilot and probably launch this year, I would say that it's premature to discuss the details. Once we have the pipeline, we would present it definitely to the market and discuss it in more details. But I would say that all of these products are around the different types of SME services and based on Factoring as executed and developed by Factoring PLUS, even based on their infrastructure.

Yes. I would add that the portfolio of bank guarantee will reach like RUB 25 billion by the end of the year. And well, all the products I mentioned and Varvara mentioned were around structured financing of SME segment. But at the moment, it's very early to discuss it in detail.

Our next question comes from the line of Andrey Pavlov-Rusinov with Goldman Sachs.

Congrats with the strong results. My first question is about the E-commerce segment. Essentially, first of all, if you could give a little bit more color on how the volumes in this market still show very solid dynamics despite the cancellation of major sports events, and what basically helped you to sustain the solid deployments? And also, what basically drove the yield upwards in that segment? There was a 20 basis points increase, both year-on-year and quarter-on-quarter. That's my first question.

Yes. Andrey, thank you for your question. So for the volumes, there are 2 reasons: First one is the decline -- while we absorbed the decline in betting volumes, though it was not like dramatic and drastic decline as we told in our previous calls. So because people were still playing for other types of sports and other type of events. Second reason is that, at the same time, other digital entertainment -- some other digital entertainment categories such as, for example, online games, demonstrated solid growth at the same period of time. So overall, we managed to, let's say, keep them -- the overall volume.

Talking about the yields, there are 2 reasons of how we managed to grow the yield: First one is the same type of mix effect because betting does not always have highest yields within the E-commerce category. And some of those merchants and categories that will grow during the lockdown have higher yield versus betting, for example, average yield.

At the same time, we have -- we managed to have lower top-up cost and lower cost of our transactions. Some of this effect was temporary. For example, we have lower cash top-up volume versus average because of the lockdown, and cash top-up for the wallet is the most expensive top-up. And secondly, we optimized some of our acquiring top-up costs as well. So part of those effects includes the mix effect, and the mix of top-up cash volumes will have temporary effect. So in the next period, we probably see the numbers back in terms of the yield, the numbers back to the level where it was in the first quarter.

Andrey, that's very clear. And then a couple of follow-up questions. Maybe also on the payment business, do you expect there, basically, the margin in the business to be more or less stable in the second half of the year? Or there will be some changes essentially regarding the staff for remuneration or other things?

And finally, just a small question about your Financial Services segment. There was also a little bit interesting dynamics with the increasing yield and declining volumes. So maybe you could share some color on that as well.

Okay. Let me cover first the Financial Services piece. So it's, again, this kind of mix effect. So we have some high-volume, low-yield contracts with retail partners for the loan repayment. And those volumes were down for the lockdown period because of the lockdown. So we -- the volumes went down and the yields were technically up because we did not have those lower yield in volumes in this segment. Secondly, we managed actually to optimize, at the same time, some of our contracts having higher operating yields on those. So probably in this area, we will -- going forward, we will have -- we will keep some of this yield effect for the future as well.

Yes. And the marginality of the Payment Services business, I'll take that one. So basically, in the first and second half, the marginality of the Payment Services business included all the additional quarters compared to last year, meaning cash LTI program and certain other costs connected to being online, for example, and other projects.

On another hand, as we have stated in the press release, certain costs associated with the development of the B2B2C product proposition based on the Rocket and to some extent, SOVEST systems, they basically will be included as part of the Payment Services cost, meaning that the margins would probably be slightly lower. At the same time, we do target -- and one of the key targets and KPIs that we have is the relationship between net revenue and SG&A. And we aim to keep the net revenue -- SG&A to net revenue ratio at a confidence level.

(Operator Instructions) Our next question comes from the line of Sveta Sukhanova with Sberbank.

Congrats with good results. I got several small questions left. First one would be about Cyprus tax treaty. How will it affect you? It sounds like nothing should be changing for you. So what would you expect? That would be the first question.

Then second question would be on FX loss in your Payment Services. As part of the reason why the payment margins -- Payment Services margins are down, you grew FX loss. I would appreciate if you elaborate on that FX loss.

Third short question would be cash at your balance sheet. I mean your key on cash at the balance sheet. What's the size?

And very lastly, when you mentioned about -- when you talk about winding down Rocketbank, you want to reduce, reposition that kind of assets for B2B2C product at QIWI. If you can elaborate a little bit about it, I'd much appreciate.

Yes. Thanks a lot for your questions. So I'll cover 3 of your questions. And Andrey -- and I'll pass to Andrey for B2B2C and our Rocket asset.

So for the Cyprus tax treaty, we believe that -- we believe and hope that you are correct. As far as we know at the moment, as far as we understand, the information that's publicly available, public companies incorporated in Cyprus will be able to maintain the 5% dividend tax. However, of course, in order to be sure, we need to see the final documents that would be published, we believe, in the beginning of September. But it's likely that nothing in this effect would change for us, at least for now.

As for the FX loss, as you know, when there are significant jumps in exchange rates, we are sometimes subject to FX gains and losses. Largely, that results from the fact that some of our operating companies that are part of the Payment Services business do operate in other countries and report in other functional currencies rather than ruble. So primarily, these FX losses are simply the revaluations that we do between the functional currency of some companies and the functional currency of the group. So it's kind of dollars, rubles, et cetera, et cetera. So I would say that, that's primarily kind of a paper account.

For cash on the balance sheet at the moment, we have around RUB 5 billion of our unrestricted cash on the balance sheet. Everything else, as you know, is restricted cash, which includes different types of consumer deployed as wallet balances, payables, et cetera, et cetera.

And I'll pass to Andrey for the Rocketbank question.

Yes. Thank you, Svetlana, for your question. For the Rocketbank, what we are currently doing and planning to do. So as you know, we were working for some time with our B2B partners concerning the payouts to the self-employed, the projects like taxi companies and scrap metal figures, and we target some other audience. And what we were proposing to those companies as a solution will pay out to our Qiwi Wallet into other bank cards. Currently, Rocket has another solution for the same type of customers. So -- and with this one, we are proposing to the -- those and other clients, payouts to the self-employed to the Rocket debit card, with customizable tariffs and loyalty program.

So basically, we are enhancing our product proposition to the same or similar type of partners with the new products. We already have some early success with the contracts with construction company, multilevel marketing company and courier company with Rocketbank card. So we will continue development within the Payment Services, both in terms of the organization and in terms of the business. So currently, already, the sales team is the one sales team that are selling both Rocketbank solution and QIWI Payment Services solution.

It actually sounds to me you're offering pretty much -- from the customer perspective, you're offering pretty much the same product as the wallet, just being upgraded to the debit card. Do I get you right?

Yes. But -- you're right. However, debit cards have -- from the consumer side from, I would say, preference versus wallet because for some of our self-employed clients and the B2B customers, wallets, let's say, are not enough. And that's why they are asking for the payouts to other bank cards. So they are in need of this product as well.

(Operator Instructions) Our next question comes from the line of Ildar Davletshin with Wood & Company.

So maybe I could ask also on your non sort of payment business. The one which wasn't, I think, mentioned in detail today is the Tochka, which turned profitable. And a couple of questions here. So was this level of profitability the normal one or was there any one-off? So can we expect this profitability to continue as we've seen in terms of improving? Maybe there is some kind of idea of where this profitability could reach? I'm particularly surprised that second quarter was pretty weak for the SMEs, yet you were profitable. So that's quite interesting.

And then separately, within Tochka. Given Otkritie's plans to divest, as I understand, all of its stake, roughly 1/3 of the company, what would be your joint project? Tochka, would it be affected by this? And given how big impact this plan had, the plan to sell shares, they had on your share price, I understand it's not exactly a question for you, but maybe you are involved somehow to find alternative solutions, maybe nonmarket solutions like find a strategic partner. Would you -- would it be possible? Or is it completely a handbill as to kind of a new partner in your business at some point?

This is Varvara. So I'll comment on profitability questions. I'll pass to Boris for the question on Tochka's strategy. And for Otkritie, I can comment on probably, but if he wants to add anything on top of that, he will.

So I'll start with the last question on our plans of Otkritie. Of course, as you mentioned yourself, we cannot comment on this plan. We don't know what other opportunities Otkritie is considering and if they are considering. And of course, they, as the shareholder, have all the right to basically have any discussions, et cetera, that they might want to. But we are not aware and are not in a position to comment on their strategic plan.

So for -- going back to Tochka for profitability, I would say that throughout the crisis, Tochka performed much better than we expected. And they managed to generate pretty substantial revenues, maintaining a lot of the clients and maintaining high client balances, which we did not anticipate. So I would say that the level of marginality of Tochka was not horrifically affected by the crisis. So they kept a pretty good margin level. And we believe we're -- I would say, given their performance so far, we're pretty sure that they will maintain healthy marginality going forward. And as you know, Tochka is not a kind of a start-up. It's an established business model. Historically, their profitability or their target profitability was, I believe, at the level of about 30%, 35% EBITDA margin. And I think that's what they're aiming to reach at some point.

Yes. I would probably make some comments regarding Otkritie's strategy. Well, again, I would say that it's better to ask Otkritie themselves regarding their strategy. But my understanding that they consider Tochka as a strategic asset for them, and they do not plan to get rid of Tochka or to sell it.

Frankly speaking, we as well can see that Tochka is a very interesting asset for us. And we already have found and are trying to find some new synergies between Tochka and Factoring business and between Tochka and payment business, especially in self-employed and B2B2C segments. But at the moment, we are more financial shareholder in Tochka; the rest, Otkritie controlling shareholder of Tochka, and this is true.

I believe that at certain point, we have to decide and if we decide that Tochka, which provides now very interesting services to SME, which is very complementary to what Factoring is doing for them because they provide financing. They provide structured financing for SME and Tochka provides cash and settlement service, basically, for the same segment.

So the synergy could be potentially very high. So at a certain point, we have to decide what to do. If buying back Tochka is impossible for us, then we should consider some other options to sell our shares in Tochka and to build similar business within Factoring PLUS. But at this stage, it's very early to discuss the details.

And maybe just very quickly on a point that was already discussed previously on the E-commerce vertical, which performed quite robust despite the lockdown. So correct me if I'm wrong, but my understanding was that a lot of this strength was coming from other digital entertainment forms such as the games and other things which, in a way, were driven by the lockdown. So going forward, the betting industry will continue to be the dominant -- something like more than half of your payment volumes within e-commerce category. Or do we actually see new -- maybe I'm wrong and there are structurally new kind of subsegments within E-commerce, so it's becoming more diversified going forward?

One moment, we're having a technical difficulty. One moment, please.

(technical difficulty)

We were disconnected. Can you please repeat the question?

My question was on the E-commerce segment, the payment business. So am I right that your business segment, E-commerce is becoming more diversified so the share of betting fees is getting lower? Or was it more the one-off effect from the lockdown in the second quarter? So going forward, the betting will keep dominating this segment?

I would say that it would rather be one-off effect, as I mentioned, because we saw a temporary decrease in betting volumes while increasing also temporary in some other categories like online games. So going forward, the structure will be more or less the same as it was before, but we will see.

Ladies and gentlemen, this concludes our Q&A session, and thus, concludes our call today. We thank you for your interest and participation. You may now disconnect your lines.