Hello, everyone, and welcome to Kaspi's First Quarter 2024 Financial Results. My name is Harry and I'll be your operator today. [Operator Instructions] It is now my pleasure to turn the call over to David Ferguson from Kaspi to begin. David, please go ahead when you're ready.

Hi. Thank you, Harry. Hi, everybody. Welcome to our first quarter 2024 financial results conference call. Joining me on the call today, we've got Mikheil Lomtadze, our Co-Founder and CEO; Pavel Mironov, our Chief Operating Officer and Deputy CEO; Tengiz Mosidze, Chief Financial Officer and Deputy CEO; and Yuri Didenko, Head of Capital Markets and Deputy CEO. As usual Mikheil will take you through the strategic updates. I'll take you through to the financials section and then we'll open the call up for the regular Q&A. So on that note, Mikheil, over to you, please.

Thank you, David. So let's go straight to our some of the strategic updates for the first Q. So the quarter has been strong, so we're off a good start on 2024. The Payment's TPV has grown nicely, 35%, tracked by revenue growth of 25% and net income growth of 25%. Marketplace GMV is up 62%. Revenue is up 108% on the Marketplace, driven by the nice growth of on the bottom line on a Marketplace of 36%. And the revenue in the Marketplace, also driven by some of the new business lines which we've launched, including everything around the cars and the grocery showing nice growth as well. I will talk a bit about it later. And the Fintech, so TFV growing nicely, 48%, which results in a revenue growth of 26% year-over-year and net income plus 3% growth. And as the interest rates will be going down, there is a significant profitability cushion, actually, in the fintech business. But the volumes are nice and they're high quality which is reflected in the revenue growth. We continue to be extremely relevant for our consumers. So 71 monthly transactions per active consumer, which is the world-class standard, again, 71 transactions per month, not per year. And then the revenue growth is 40% and 28% net income growth year-over-year. So we have started the year with a very strong quarter. Next slide. As you see, we have been on this journey of building the Payments, Marketplace and Fintech platforms. And as the Payments and Marketplace are the fastest growing, we are really happy now in the first Q, pretty much having them contributing roughly the same share to our bottom line. And if the investors have been following us since initially becoming public on the stock exchange in 2020, this mix…

All right. Thank you, Mikheil. So I'll run you through the three respective platforms and the consolidated financial numbers. So starting with the Payments platform. Message on this slide very simple and clear, user and financial trends remain very strong and predictable. So you've got user consumers up to 13 million, that's up around 11% year-on-year. We've talked previously about the focus on transactions. You can see transactions volumes up 42% year-on-year and then that translates into TPV up 35% year-on-year. Just the one thing to keep in mind when you're looking at the year-on-year growth trends is that inflation has moderated dramatically over the last 12 months. So when we came into 2023, inflation was running north of 20%. Today, it's running north of 9%. So that does mute the growth trend. And that's a theme also in Marketplace as well. All products are contributing, but B2B Payments, no surprise, remains the fastest growing component of our TPV, up 78% year-on-year now equivalent to 4% of overall volumes. Robust consumer and merchant trends combined with stable take rate translate into strong financials. So revenue growth is up 25% year-on-year. That is lower than the TPV growth and that reflects the partial offset of slower growth in interest revenue on the wallet balances. The bottom line, as always with Payment platform, top line drops through to the bottom line, operate tight cost control and operational gearing very much intact. Bottom line up 25% and usually you see that, that operational gearing is more pronounced in the latter larger quarters. The guidance for Payments platform reiterated, so we continue to expect revenue to increase around 20% year-on-year, reflecting the robust consumer and merchant trends, albeit offset by moderating inflation. Favorable payment take rate dynamics should be positive for revenue growth, but…

Yes. Thank you, David. So basically, in terms of the - for last couple of weeks, some of the investors have been sort of contacting us to discuss the National Payment System and the Bloomberg article, which also was describing some of the aspects of it. What we feel that National Payment System project is not well understood by investors and we would like to take a couple of minutes just to explain its key aspects. And I also think it's good for the country, for its investment climate to avoid speculations and really focus on the facts. So as you know, when we develop the products, we always go through frequently asked questions, what consumers really care about. So I would like to use this simple approach in this case as well. So I would say that there are three frequently questions which I would like to basically explain and answer straight away. So the first question is, what is the National Payment System project? So I would say the basic main idea behind the National Payment System project was to sort of process transactions within the country and also aiming to allow consumers to transact and move money more seamlessly between accounts at different banks. The project has been under discussion for probably around 10 years. Five years, we - there have been more of a practical discussions and now also the technical test and sort of the pilot testing is now postponed to the next year, and then the results need to be assessed. I mean, it's understandable, right, because that's a quite technically challenging sort of demanding project, which really requires a lot of resources and input from a lot of parties. So second question is, what principles behind the payment system project being currently discussed?…

Okay. So thanks, Mikheil. On that note, Harry, over to you for the Q&A session, please.

[Operator Instructions] Our first question is from the line of Darrin Peller of Wolfe Research. Darrin, your line is open. Please go ahead.

Guys, thanks. Great execution and results. If we could just start with a bit on guidance. Like, you're obviously showing some really good traction in the 1P car marketplaces, which you talked about as a potential source of upside for the year. We are seeing some other trends outperform. So despite that, we saw guidance reiterated. Just a little bit more color on your philosophy around the guide framework would be great and maybe conservatism embedded in or how you're thinking about the puts and takes in terms of upside potential.

Okay. So maybe I'll take the guidance question, Darrin. So, I mean, the guidance is the guidance, 25% growth for the year, bottom line. And just what I would keep in mind is that we're one quarter into the year. Yes, it started well, but there's a long way to go, and the first quarter is the smallest of the four quarters. So over the course of the year, momentum is good and things can evolve in different ways. But it's still relatively early days, and visibility for the full year outcome will be a lot better as we go into the summer period.

Darrin, can I add?

Okay. That makes sense. It was just a - yes go ahead, Mikheil.

Yes. Darrin, I just wanted to add that brief comment also about the first Q, right? So what you also see in the first Q, especially, there are two points I wanted to make. On the marketplace and e-Commerce and m-Commerce side, I think we have - basically, we're moving from sort of promotional events, which we have done two times a year now to more frequent promotional events at least three times, which is the big shopping events, which we have organized. Something like Black Friday, but it's basically Kaspi's event, right, Kaspi Juma. And the reason why we've done this is because merchants and consumers really have been asking us to be more seasonal in our promotions, and we have such a wide, diverse range of the services that buying the tools for vacation sometimes is not going well together with, I don't know, buying the refrigerators. So from that perspective, we have to become more seasonal, and therefore, we will be following our merchants in order to make the Juma more of a seasonal event. And the first Q was Kaspi Juma, which we have done. So that's a one comment. So, therefore, we always need to look at the dynamics through the year. And the second comment is that some of the services which we're launching, we always have a long-term view, even though we would be happy to see the faster traction than expected. But things, when we talk about the cars, for example, those are the things are some other value-added services. Those are the things which really are at the initial stage of our strategy implementation. And from that perspective, we - keep in mind, we're always focused on the quality of the service. So we scale services when we are fully confident they are working like a Swiss watch. They are working perfectly for consumers and merchants and therefore, that also might be partially responding to your question. So give us a time through the year and we also have a long-term strategy as well.

Okay.

Thank you, Darrin.

That's helpful. Just a quick strategic - that's really helpful. Very quick strategic follow-up, if you don't mind, is just on an international maybe that and capital allocation. Just your latest thinking around capital allocation priorities. I know it's early days, but anything on the international front that's worth keeping in mind from our perspective in terms of what you're looking at. Thanks again.

Again - actually, we're quite open-minded, as we said before, that we believe the business we have built in Kazakhstan is just a remarkable business model which we would like to bring to other markets. And I think even our consumers are asking us and the country is asking us, can we go outside of Kazakhstan? So we are open-minded. We are looking for an acquisition targets. But again, the country and the target quality is extremely important for us. So there is nothing immediate that we would report. I think we would communicate in these reports, but we will put capital at work if we - yes, if we feel like that's the target will bring a long-term value to the shareholders.

Understood. Thanks, guys.

Our next question today is from the line of Gabor Kemeny of Autonomous Research. Gabor, your line is open if you'd like to unmute locally and proceed.

Yes. Hi. Thank you. A few questions from me. First one is on the National Payments System. Do you have any idea about the economics of how the economics of the payments processed through this system would compare with the payments processed through your own system? And I guess it would be helpful to understand how disruptive it could this be to the Kaspi Payments platform. The other question on the e-Cars or the Car platform, I mean, impressive numbers. Would you be able to provide any comparables? I mean, this 26% of e-commerce GMV, it's an impressive number. And would be interesting how this looked a quarter or two quarter ago, if that was available, please. And just a final one on the Marketplace take rate, which seems to be on an uptrend. I guess, any sense of how much room do you see to monetize the value-added services further? Thank you.

Thank you, Gabor. Yes, I will take it. So, in terms of the payment systems, again, I mean, the only thing I could do is really just speak of the facts, and the facts have been communicated by the National Bank in terms of the fees not being kind of regulated or interfered. And it's a market practice. I mean, that's basically the bottom line of the facts. I could also add in general trends my personal view in terms of the fee levels. I mean, if the fee levels are regulated to the extent that they will go down in general to the minimum thresholds which makes basically - which incentivizes the players to continue innovating and developing the services and competing, then that actually is counterintuitive in a sense that the bigger guys become bigger, right, because then nobody else can actually innovate. There is no enough value to compete. So from that perspective, I really don't like to use this analogy, but if the fee is reduced, then the players like Kaspi just get bigger. So I don't think it's in an interest of innovation around this and just allow basically enough value in the value chain for others to innovate on top of whatever is already done and actually just offer the services. So I think reducing the fees wouldn't be a good idea. And you need to keep in mind that Kaspi's fees are already one of the lowest on the market, right, 0.95%. So that's also important to keep in mind on the payment network side. So that's in terms of the payment network. In terms of the cars, as I've mentioned, the cars GMV - the car parts was a part of the e-Commerce GMV. And pretty much everything else is something we…

It's very clear. Thank you.

[Operator Instructions] Our next question is from the line of James Friedman of SIG. James, your line is now open. Please go ahead.

Hi. Good afternoon. Good morning. Good evening. So I wanted to ask about your perspective on the use of the balance sheet as the company evolves its offerings into areas like e-Grocery and 1P and cars. Historically, the company's been somewhat balance sheet light, transaction-based. Should we be anticipating that there'll be more of a balance sheet commitment as you dig into some of these additional and incremental offerings?

Hi James, thank you for the question. I mean, first of all, I would like to take step back and just even though we are much more than a bank and the third of our bottom line now contributed equally by the businesses we have been previously in the business of managing the balance sheet, right? We are - by the balance sheet, we are probably the largest consumer bank in the country. So we already had the balance sheet. So from that, that's number one. And therefore - and number two, you also need to keep in mind that the fintech products are really important for some of our businesses. And I can give, for example, when I'm mentioning the 30 days to buy a car and sell a car, that car is transformed into the car finance after we sell it, because quite significant portion of cars in any country is sold through the car finance. So if you think about managing the balance sheet, I think, and managing the risk and leveraging the technology is actually where we're coming from. And this is our competitive advantage. And this is why businesses that we launch, for example, cars is profitable with the first 1,000 cars that we sold, 1,200 cars that we sold. So that's basically just to kind of give you a bit of a heads-up. And from our balance sheet structure point of view, we are not going to see the major increase in our balance sheet, really just because we already have balance sheet in terms of the lending products. So this is not going to be a material number, but we are capturing the more value and we are capturing and we are creating more value for consumers and merchants by streamlining the technology, which means converting goods into the lending products, basically, which we know how to do because that's where we started from.

Yes, that's a great point. And then I just want to follow up on the Slide 32 since we are probably on this call adjusting our models. So when you say at the top that the 2Q is off to a great start, could you unpack that a little? Like, what does that mean, a great start? Any particular call-outs about the second quarter would be good. Thank you.

Well, Jamie, I'd say good - nice question, but nice try. But wait till the summer. It's off to a good start. We're talking positively about the trends across all of the businesses and there is forward-looking comments in some of the statements we've made. But I don't know if we need to start pulling out the Q2 numbers today unless Mikheil wants to.

Well, no, I just wanted to share, I really feel your pain, guys. And I think you just joined as analyst with our U.S. IPO and before that we had other colleagues of yours working with us. I feel your pain because the company is innovating at such a rapid rate that at some point you really need to - I don't know, to catch up with our new business lines and things like that. So I feel your pain that forecasting our business is a constantly learning curve. But yes, but I agree with what David said. I just feel your pain, guys. But, we will be continuously innovating. So don't relax just now. There will be more stuff coming over the years.

Understood. Thanks for that. I'll drop back in the queue.

Our next question today is from the line of Reggie Smith of JPMorgan. Reggie, your line is open. Please go ahead.

Good morning. Thanks for taking the question. I appreciate all of the color, the numbers you provided on the auto business. My question is, I think it'd be helpful for the U.S. investors to kind of understand what is the, I guess, typical process for someone to buy a car in Kazakhstan. And I guess kind of who are you competing with and how does your solution or service kind of change that car buying experience for people out there? And then I have a follow-up. Thank you.

Hi, Reggie. Yes, it's a good question. So basically what the car buying experience in Kazakhstan actually is, what is important point is mostly consumer to consumer. So that's extremely important to keep in mind. So vast majority of cars are sold between the consumers and that's just because also the car marketplace, which has been built on the classified side of things really provided a great consumer experience, user experience and a lot of liquidity to the market. So that's basically - that's important point, right? So there is a penetration of the dealerships is very low so that's why there is a market opportunity to organize the process for both sellers of cars, which are actually individuals and buyers of the car which are individuals. So that's number one. Number two is that the penetration of the cars is actually quite small. And vast majority of cars is actually - not vast, but I mean, significant portion of cars is quite old. I mean, in excess of 10 years, 15 years. So from that perspective, that's an opportunity also to bring the technology to speed up the process of buying the cars, which basically means us helping the consumers to renew the cars and get the value out of having the newer cars in for their households. And then the third is ownership of the car and bringing a bit more transparency, technology, if you say between owning the car but also the serving the car, right? Spare parts and auto parts and things like that has been actually quite an experience. If you want to buy a spare part, I think it's a difficult exercise to match the actual auto part with your specific model of the car. And here is also our technology which we have…

Yes. And just to clarify on that, are most of the cars like owned and registered in like the big cities, or is it rural? And are those sales kind of hyper-local that people are like buying from folks that are in the same city? That's one question. And then my second question, I'm curious about, I guess, your product development. And I know you don't want to maybe disclose products that are on the come. But I'm curious, maybe you could talk a little bit about some of the products that you explored and decided not to pursue, just to kind of help us understand your approach and how you vet and think about new products. Thank you.

In terms of the car buying experience, it's mostly local and really concentrated in the larger cities. And in general, the way we sort of scale our businesses, we actually are focusing on the larger markets. And we have done pretty much in every business that strategy. So we will be --- like if you look at the e-Grocery, right, we started from Almaty, which is the biggest city also in terms of the economic and the financial consumer spending numbers. And then we moved into Astana and then now Shymkent. So we are actually - when we build the businesses, we are building businesses profitably, and therefore we're moving from one strength to another. That's always have been our strategy, actually scaling any business. We usually say that front troops shouldn't be too far from your support in the back office, and you are not stretching your units and so that then it becomes expensive and quality deteriorates. So we always scale pretty much from city to city, basically. In terms of the products, which we didn't do. Do you mean around the cars or general example?

In general. See, I'm just curious, like, how you think about product development…

For example…

And as you kind of evaluate stuff like.

Well, for example, the food delivery, right? So food delivery business, we have attempted several times, looked at it, but we have decided not to pursue that vertical, at least at this point. And the reason why we're not pursuing this vertical, because it's crowded. There are a lot of players - restaurants, if you take the restaurants' perspective, they have like five service providers. So people that - there is not much value that we can bring to this market because there is already enough of offers for a consumer and there is enough players. And it's just a limited value from us, really, both for restaurants and for consumers. And because we don't see the value, we thought that there are many more exciting opportunities that we could pursue. Again, don't get me wrong. If we decide to go to the food delivery, we will be aiming to be number one or to be the best one in terms of the quality. But when you look at today's market with five sort of players, out of them two or three are global guys. There is no value from us apart from disrupting pretty much the other guys on this market. And we don't like red ocean type of ideas. We like ideas of the blue ocean when we actually create opportunities for merchants, we create opportunities for consumers, and we basically bring the value and not destruct the value. So that's why, for example, food delivery doesn't fit that profile for us, at least at this stage.

That makes sense. I guess the same applies for rideshare. Safe to assume that rideshare market is probably overly competitive out there as well. Sorry for monopolizing the call, but since I have you here.

Yes, ridesharing would fall into the similar category, and there are very few synergies that we see at this stage, even though ridesharing is something which consumers are asking us to launch because probably they like the brand, Kaspi Taxi sounds cool. But never say never. Thank you for your questions.

Thank you, Mikheil. Thank you.

I'm afraid we have run out of time for any further questions today, so I'd like to hand back to David for any closing remarks.

All right. So thanks a lot, Harry. Thank you, everyone, for participating in today's call. If you do have follow-up questions, you know where we are, so feel free to get in touch. We'll be happy to help. But thank you and speak to you soon. Bye, bye.

Thank you. Have a good week, all.

Ladies and gentlemen, this concludes today's webinar. You may now disconnect from the call.