Earnings Call: Q3 2021

Oct 25, 2021

Hello all and welcome to the CASB Third Quarter 'twenty one Conference Call. My name is Sam and I will be your coordinator today. If you wish to ask a question during the webinar, please use the raise hand button if you have joined via Zoom. If you have joined us on the phone, please press star followed by 1 on your telephone keypad. I will now hand you over to your host, David Ferguson at Caspi to begin. David, please go ahead. Thanks, Sam. Good afternoon, everyone. Very warm welcome To our Q3 2021 conference call. For those of you who don't know me, I'm David Ferguson from CASB, Joined by, as usual, our CEO and Co Founder, Michal Lomtadze and our Deputy CEOs, Tengamer Sidze and Juri Dedenko. As has been in the PAC case in the past, we will start with Micha running through the strategic update. I will run through the Financial update and keep the remaining 2021 guidance and the rest of the team is available for or the full team is available for the Q and A section. So on that note, I'll hand over to Mikhail to start today's presentation. Over to you, Mikhail. Great. Thanks, David. So we're pleased to report on another strong quarter of Caspe KZ Management team executing. So we have growth across pretty much all the metrics across all our platforms. So our fastest growing payments in the marketplace platforms have been Showing a lot of strong dynamics on the payment side, we increased revenue generating TPV by 103%, Followed by the revenue growth of 72% and net income 111% on the back of rollout of Kaspi Pay and Kaspi QR And on boarding the merchants on the Caspi Pay platform. The marketplace continued very strong Performance, so we have 134% growth year over year, 160% growth of revenue on the back of expanding take rate In the higher margin verticals and the net income grown 201% again on the back of the also Inherited operating leverage which is inherited in our Super App business model. And then Fintech on the back of the On the growing originations, so the finance value have grown 174% year over year, Revenue 35% and net income 55% on the back of the improving cost of risk. And on the consolidated level, extraordinary performance this quarter, 94% growth on the monthly transactions for active Consumer, so very engaged consumer base in our super app revenue 55% and then net income 90% year over year and again another quarter of profitable growth and we are Happy to announce that the Board of Directors have recommended to dividend payment of 4.68.10 per GDR. I would like to go through some of the strategic initiatives and the highlights. So one has been historically our Sort of target as the marketplace and the payments business are growing really fast, they are taking Majority of our net income, so again, the goal for this year is to have majority of net income from those 2 fast growing platforms. And now In the 9 months, 50 percent of our net income comes from the payments and the marketplace businesses. Next slide. So here, as we continue growing our users, we also continue growing Their engagement, since we have a single app which integrates all the services across our platforms, You know, the users can easily navigate those services and our marketing activities are extremely efficient. So as a result, Now 40% of our users are using our 3 platforms. So on the one hand, that's increased from 33% of 3rd Q of 2020. But on the other hand, there is still a huge opportunity for us to continue engaging our users in all three businesses. We also have been driving transactions. So transactions increased 94% year over year. So now we've reached 45.3 transactions a month per active user. Now To put that number into perspective, PayPal reports around 44 transactions a year per active consumer. So That's another indication of how powerful is our Super App business, how engaged our consumers are and how we're driving the transactions For Consumer as we add more services. And again, just to repeat myself, We drive transactions because transactions is what is important for us. Transaction is where we sort of monetize Ourselves, but very importantly, deliver value for consumers as they buy products or they pay for the products and when they shop, But also for the merchants, we bring them sales. So the transactions is a smaller metric. It's growing really nicely And another justification of the competitive advantages that we have as a Super App business model business. As we drive our super app, we drive and add services. So we drive both Monthly users and now extremely importantly, daily users. So we have reached our daily users to 6,500,000 And we've decreased our monthly users to 10,800,000. So another very nice quarter and actually step up in the growth In absolute number of consumers, if you compare this number for the growth between the 2nd Q and the 1st Q of this year. But extremely importantly, as our users are more engaged, we were hitting a record high DAO to MAU ratio 60%, which basically means out of 10 of our monthly users, 6 Come to our app on a daily basis. And we're achieving this again by our team constantly innovating, adding the new services, adding the new verticals, Adding merchants, giving the reasons to spend, but also adding the government services. So we are growing on all the fronts, Not only with existing business but actually with the businesses that we just added. So here is an example of one of those services which drives engagement. So we work together with the government bodies. We work on Digitalizing the government services so that we can make them accessible to the citizens of Kazakhstan, make them accessible for free Seamlessly and that is a remarkable achievement. Now we have in the September of this year, we already achieved 7,000,000 monthly users visiting the gov tax section of our app and we constantly add new services. So example of the Sort of 2 kind of most recent additions would be that now users on a one spectrum of the age, they can Receive pensions through our super app. They can apply for application, get approved seamlessly online and receive pensions. But on the other spectrum of the age, our users and happy parents can actually Apply for the benefits for newborn and then seamlessly get approved and also receive those benefits. And again, this service It's extremely important for us both for the country, for us personally and for our users and is showing extraordinary increase in the usage More than 4 times compared to the September of 2020. Another example of the Sharpen business which It shows extraordinary performance is the Treble. So you have been with us through the launch, which we'll launch that service end of last year For second half of last year. And then we started to integrate the services, adding the new functionality. We started with airline All right. Tickets, then we headed railway tickets. And now we have reached another milestone of 1,000,000 1,100,000 tickets sold In the 3rd queue. And as you can see, we're not only growing nicely airline tickets, but actually we have grown dramatically More than 10 times we have grown railway ticket sales from the moment of the launch of railway tickets in the end of the second queue. Another important number which I could also highlight actually becomes quite a sizable business. So we have increased the GMV of the of our Caspian travel to 26,000,000,000 And just to put that number into perspective, if that would be the GMV of our marketplace, it would be equal to A bit over 5% of the total marketplace GMV. Another number to also look at it is the take rate. So the take rate is 3.3% on our Kusp of Travel and that is a healthy take rate. We don't manage this business for take rate. We're growing it At this point, trying to bring the value for our users, airlines and the railway company. But on the other hand, The increase is natural and organic because the railway tickets have a higher take rate than the airline tickets. That's why the take rate Went up to 3.3% on the Caspi Travel. And again, this is another sort of example of how Quickly, we can ramp up services due to our Super App strategy and our users seamlessly navigating different services in a single app. We have made our priority this year To develop the services for the merchants. So we're extremely happy to report The merchants reached 182,000 merchants by the 3rd Q. So that increase of 4 17%. And again, the way sort of the merchants are coming to our platform, they start with the payments services, then move to mobile commerce And then move to the e commerce. And as a result, we're continuously engaging more merchants and we do we're becoming For them, the partners which help them to drive sales and have access to our technology, have access to our consumer base. Around 43% of the total merchant base is now shared between the payments in the marketplace. So that's another indication how much Potential and growth we have for the merchants as we our number one strategy, Sileesh, your priority right now is to drive number of merchants. But over time, of course, we're also catching up with engaging them in all our services across all our platforms. Another slide is the as we develop the merchants, we actually For developing the infrastructure for the merchants to engage in our payment platform. So we have Reached a remarkable 215,000 devices for the merchants, which help them to transact With our consumers, that's a 10 times increase during 12 months. So remarkable execution from SBKZ management team. But also What is extremely important is that now I remember all these discussions 12 months ago And now I just would like to mention that only 25% of our acquiring transactions Are coming through 3rd party acquiring networks. So 75% of the transactions comes Through Caspi Pay POS solutions, our own acquiring network and that's also quite a remarkable achievement that enables us to control the user experience, But it also enables us to provide all the benefits for disintermediating the 3rd parties all the savings that we get From that exercise to the merchants. So we don't take advantage of this cost cut. We actually move the savings and benefits to the merchants And there we have one of the lowest, if not the lowest, fee level for the acquiring services in the country. And as we rolled out the payment network, as we rolled out POS solution, Here is another example of how quickly and how seamlessly we can transform the user experience and the merchant experience. Again, discussions 12 months ago, if these QR codes have been tried in other countries, they have not been successful. Here is a living example How the country can move from plastic cards to the QR code transactions in just 12 months. So the number of transactions totally increased almost 14 times. But what is even more remarkable that 83% of all those transactions now done through Kaspi QR codes. And that actually means that we have become the most SPQR has become the most popular Payment network and the payment method in the country both for the merchants and for the users of Kasper Kaeser, Super App. Here is another priority for this year. So we have been driving as we drive merchants, Clearly, any marketplace achieves remarkable liquidity and the growth as it adds merchants and it adds SKUs or items listed on the platform. So we have increased the number of items listed to 1,200,000 by the 3rd Q. That almost 3 times increase From the 3rd Q of 2020. And if you would see that the take rate and David will talk about it later, but we are onboarding. We started from electronics And now we're moving to the smaller ticket, higher margin transactions, and those verticals are growing very nicely. And I think I used around and out items such as home and garden and furniture, the groceries, beauty and personal care, clothing, All those are important verticals for us and a lot of merchants are actually joining our platform with this assortment and enabling our consumers to shop, but they also increase On our e commerce, we have been also really focused As our management team has been focused on the delivery, delivery does deliver a lot of value for our Pires at consumers and the merchants, this sort of a very, very important service for our e commerce business. And we have grown the number of items that we are Shipping now and delivering to the consumers through different delivery methods to $2,800,000 which is 138% growth. But even What is also important is not just the growth itself, but actually now that's 97% Well, the delivery is free for consumers, so basically delivery is free. And then we're delivering the items in one of those 2 items we're delivering In less than 2 days, again, with help our courier partners and with help of our merchants. And that will remain our important priority To develop delivery. We have 2 new additional services that we've launched around the delivery. So the one service is that now we have launched delivery in less than 3 hours. We actually launched the express delivery And that has been taken off very nicely. We're doing this together with taxi partners and we're also Talking to some 40 food couriers in the country to enable us to scale even further, The initial ramp up has been extremely encouraging. So we have reached in the city of Almaty, which is the largest city in the country. We have reached 10% of our delivery items now being delivered through Express delivery in less than 3 hours. And just to remind everyone, so this is Part of our Astell Logistics platform, we have sort of 3 different levels of delivery now. So if you take Both merchant and user perspective, we have delivered in less than 3 hours. We have local delivery, usually that happens the same day. And then we have countrywide delivery that is Sort of the most complicated business to organize, but we have been able to organize that together with our Partners across the country starting from delivery stations, couriers, different types of sorting cups And we have developed a technology which unites our entire delivery process from the single labeling to smart suiting, routing And as for the couriers and we have multiple ideas to execute, delivery is extremely important for us. But again, Technology, data, user experience, that's what's driving our delivery. It's not building the warehouses. And then there is another addition to our delivery platform. So we have launched and we aim to build the largest Locals network in the country. There are several benefits to launching The lockers. First of all, it's 20% cheaper than operating other methods of delivery just for the simple fact That actually the courier can deliver multiple items or many more items to a single point of delivery than door to door delivery To the consumers. It's also very important in the cloud environment. So it's constantly it's completely contactless, which means Our user of Super App comes to the customer, scans the QR code, the locker opens, they take their items. And reliability is extremely high because sort of negotiating the right time for the person is something which Is reducing the reliability of to door delivery. In our case, we deliver to the customer and then users can pick up Those items at the convenient time on the way from work. And our goal is to have customers located in the most convenient locations. Again, we're using our big data capabilities. We know exactly where our users are and therefore we can strategically locate those customers In the best solutions. And of course, as this is a fixed footprint, it also delivers The benefits for the environment just because there is less travel, there is less pollution, less congestion And so on and so forth. So again, we're extremely excited about this opportunity. We will have about 300 of them by the year end. We'll have about 1,500,000 to 2,000 of developers by end of next year. And, yes, in terms of investment, I mean, again, our team is extremely efficiency oriented as usual as we've Proven ourselves multiple times and the price of the locker is around $4,000 So and this is it's equipped with our Technology and the QR codes and again is fully seamless and in the lockers can be also beautiful. So it's very nice Looking longer. So we hope it drives our delivery business going forward. Another development Or update and development. So we have discussed on the last calls that we've selected Ukraine as the country which We would like to bring our business model and visualize further the experience in the Ukraine itself and bring value for Consumers and merchants. So we've selected Ukraine for several reasons of the cash withdrawals being Quite high, almost 50%, the low penetration of retail, 8% of total retail trade, the very low consumer leverage of 4.5 Percent of GDP and 70% smartphone penetration, all of that to put together, it's basically a great place for us to replicate the customer case at Super App. So we've completed Portman Acquisition. That's a payment platform which enables us to build the dual payment business And even though there is no material financial impact on our financials, it does provide enough capabilities for us to launch Regular payments around the households starting from utility, electricity, taxes, education, so on and so forth, very similar business that we have In Kazakhstan. And we have also approached the bank license acquisition. So we're acquiring the bank. We have signed the SBA. Now the acquisition of the bank is only for the bank license purposes Because we'll be able to open accounts, mobile wallets, so basically scale our payments and fintech products In the country, so that is the only rationale and has no material impact on our financials. And the bank we're requiring doesn't really have branches, no loan portfolio, very limited operating activities. So we've signed SBA. Hopefully, we close the transaction First half twenty twenty two after we received all the regulatory approvals for that acquisition. David, back to you. Great. Thank you, Michal. So I'll run through each of the 3 operating segments, Starting with the payments platform. The payments platform is the gateway to the CASB Ecosystem, it is the foundation upon which everything else is possible. As Michal said earlier And for those of you who have spoken with me over the course of the year, one of the most, if not the most important priority This year has been to onboard merchants into the the ecosystem and here is ongoing evidence of of execution in that regard. Number of merchants up 521 percent year on year. That's a dramatic change in the merchant proposition, 180,000 merchants versus just under 30,000 merchants when we IPO'd 12 months ago. It's also an acceleration versus the Q2. About 521 percent was just under 4 50% In the Q2, so the momentum is showing no signs of slowing down, number 1. Number 2, On the consumer side of things, despite the fact that the payments platform is our largest, most penetrated platform, still very, very robust growth In number of consumers, up 28% year on year. Looking at payment values, TPV, again just to put color on this, what is important is this this is funds flowing in So the the the ecosystem, indicative of the health of the ecosystem, it's important, therefore, As a lead indicator, this continues to show very, very strong growth and indeed that's the case in the Q3 up just over 100%. RTPV payment volumes which we monetize, what you see here Is that for the first time our TPV, albeit only slightly, is growing faster than TPV. So that is a result of the strategy we outlined 12 months ago and have executed on over the course of this year, I. E. To roll out CASB Pay Opportunity is for people to transact commercially within the the country. And here you see evidence that that is playing out. And again, that is important because, again, if we think back to the IPO 12 months ago, there was a lot of skepticism around the ability to monetize TPV volumes and here you see evidence that that is playing out increasingly at a faster rate. Another way you can look at this is number 1, as I said peer to peer will remain an important part of the mix, Certainly as long as the economy in Kazakhstan has a high cash element to it and you see that that's the case, but this is A future opportunity for monetization, not all of peer to peer volumes, but a proportion of them, Number 1. Number 2, RTPV. Again, what you see here is this is evidence of the success of CASPI Pay within monetized volumes. Kaspi QR and card transactions are growing in share at the expense of bill payments, at the expense of monetized Peer to peer. Ticket size for for QR is higher than for bill payments. QR is going at a faster rate Then bill payments. Another lead indicator that you can look at is funds again, kept In wallet, average interest free balances, people move money to CASB, people store funds in their wallet To ultimately spend, transact, hence why this is a lead indicator for RTPV in Q4 and into next year. What you see here is again remains absolutely robust, up 58% year on year. That is a very similar rate To the rate we saw in the second quarter. What does that mean in terms of financials? Strong revenue growth with stable take rate over the course of The year, 1.2 percent consistent with the guidance that we provided, is dropping through to the bottom line. Principally, that is a result of what Michal talked about and that's the reduction in third party processing costs with now 75% Of gold volumes processed in house, the other 25% are Visa and Mastercard combined with just the natural operational gearing Within the business, Payment Platform, in addition to strong top line growth, delivers another record high margin just short 65%. Moving on to Marketplace, Merchants and Consumers. What I may have talked with some of you about previously is growth in payment merchants over time should translate into growth in marketplace merchants Initially via M Commerce and for some of those merchants over time via e commerce. And you see But again, that is exactly what is playing out. Marketplace merchants up at a very strong rate just short of 200%. Again, that is an acceleration from the rate of growth we saw in the Q2. That number in the Q2 was about 130%. So merchants are upgrading to via the Kaspi Pay app to m commerce and e commerce on the one hand. On the other hand consumer growth in response to more merchants, more SKUs, more opportunities to transact Combined with things like free delivery are also seeing very strong growth, up 40% year on year. And again, That is an acceleration from the Q2 when active consumers were up around 35% year on year. So there's numerous lead indicators that you can look at here where momentum remains very, very strong. Growth in merchants, growth in consumers translates into strong growth in GMV, Up 134% year on year. That is a slowdown in the rates of growth versus the second quarter When the base was distorted by COVID related factors, but still clearly a very strong rate of growth number 1. And as you'll see later on, we've upgraded marketplace guidance, so ahead of where we expected to be. Mikhail mentioned it earlier, take rate continues to move up, up around 100 basis points year on year in the quarter to 8.4%. That is principally a function of change in mix. Monetization of delivery, monetization of CASPI marketing services All playing a part, but it's not particularly meaningful at this stage. At this stage, the driver is mix change As we move into next year, delivery, monetization, marketing services, other things can become additive In a more meaningful way to that number and to put some color on that, what you see, these are the Top 5 fastest growing marketplace categories and 4 of those 5 Our take rate accretive only tire and auto accessories is below average take rate. To give a bit more color on GMV trends, first of all, just on e commerce, What you should is important to bear in mind here is growth in e commerce up 69% year on year, Growth in purchases up 121 percent year on year. So what is happening is we add More merchants as we add more SKUs. It is true that some of those SKUs are in lower ticket categories. If you think that we started from consumer electronics, probably the highest ticket category that you can find. If you add beauty And healthcare products probably one of the lowest ticket categories you can find. So growth in purchases is at a faster rate And the broadening of SKUs goes on the one hand new GMV growth, but on the other that is partially offset by the revenue level By many of these new categories being higher take rate, that dynamic is less relevant for M Commerce. Mcommerce is always lower ticket size. And actually, what you hear is see here is you're seeing some growth in ticket size From a materially lower base, m commerce is principally growing as a function of just that dramatic growth In new merchants, as I talked about earlier, merchants start with pay, m commerce is the 2nd product, e commerce is the 3rd derivative. So growth in merchants driving m commerce growth and also boosted by some growth in ticket size from a lower base. What you see here is that broadly speaking, ecommerce and mcommerce are roughly equal with within the mix. Mcommerce It's slightly more, but I think for modeling purposes, I wouldn't make a sort of a big distinction between the 2 at this point. Revenue boosted by GMV growth, boosted by travel. Michal talked about That's earlier. So just for the benefit of everyone, travel is not booked in marketplace GMB, but is booked in marketplace other revenue And so is a contributing factor here. Growth in revenue boosted by higher take rate, Gearing within the platform driving margin improvement, there is a muting factor there and that's the Investment in free delivery approximately CASB covers around 2 third of delivery costs, Merchants cover around 1 third of delivery costs at this point. So that is an offsetting factor. It's within our budget. And again, you see the marketplace is delivering the margin as high as it's ever delivered previously. Record levels. So finally, moving on to the FinTech platform, Very robust growth in deposits, 32% consistent with the trend you saw in the previous quarter. What you're also starting to see is an acceleration in load consumers, up 31% Year on year. And that is just a natural consequence of COVID to some extent being in the past, the outlook becoming more predictable, The economic environment, consumer environment showing more favorable trends. We are ramping up Origination of which loan consumers is new consumers is one driver of that. Taken together, this drives strong TFV growth, up 174% year on year. So that is a function of, again, improving economic outlook, our willingness to originate, number 1. Number 2, A strong above budgeted trends in marketplace. There's a couple of other things that you see going on that are important. TFE to loan portfolio conversion rate continues to move up. We are turning the balance sheet. We are using the balance sheet more efficiently. 2.3 tells you that the average duration of all our lending portfolio is around 5 months. So clearly, buy now pay later is a lot lower than that. General purpose is above that on average, come out at around 5 months. That is a material change versus where we were in the Q3 of 2020, 1.4x where a More cautious consumer was less willing to to to prepay. So what you're seeing here is that the consumer is taking smaller ticket lending, It's prepaying more frequently. That is actually yield neutral but it is cost of risk positive. So not only do we use the balance sheet more efficiently, we use the balance sheet more profitably. Here is the mix again. I sort of say that general purpose and buy now pay later are broadly similar share within the mix. We have been more we have ramped up general purpose origination as the COVID or economic outlook Has stabilized and improved. What you'd naturally expect to see in the Q4 on the run up to the sort of the holiday season is The buy now pay later will move slightly up within the mix, but on balance these 2 are broadly similar. The other point to note is our merchant finance product which we launched only really 12 months ago. So this is again a derivative of of Caspi Pay merchants. 1st, a merchant Signs up to Caspi Pay. That is fundamentally an acquiring product. From that, they have access to other products service products and services, Including working capital to invest, grow their business, ultimately to drive more transactions and that's up to around 7% of TFE and I think you'll see that move slightly higher In the mix in the Q4 and going forward, so very, very strong growth from a product that barely existed 12 months ago. What you see here is that TFV growth is north of 100%, loan portfolio growth 56%. So again, that is I'm reiterating the point that we are just churning the balance sheet more efficiently, a mix of a function of Smaller ticket lending, and that's relevant to both the general purpose and the buy now pay later product that the ticket sizes for both continue to come down And consumers incentivize to prepay borrow, prepay, borrow Again, loan to deposit ratio has improved to around sort of has increased, sorry, to around 79% and I would consider that a more normalized level Going forward and here too, you see the same trend that's been consistent throughout the Q3 Numbers throughout 2021, namely strong revenue growth, up 35% year on year. So again, that's on the back of origination. Some as budgeted and guided for muting in the margin sorry, in the yield as the buy now, pay later increases Within the mix, but more than offset at the profitability level, net income up 55% year on year, Profitability up to 43% and that is a function of origination continuing to scale And also getting better at originating I. E. Lower cost of risk. Well, the metrics that you could look at to illustrate that would be ROE 77%, very, very strong Cost of risk. So to put a bit more color around the 1.5%, I would say that broadly speaking there are sort Two factors contributing to lower cost of risk. 1 is we're getting better at origination. That's a function Of all of the data that we continue to collect, particularly from the the the the payment foundation, Number 1. Number 2, better collection of loans that do go overdue. Roughly, you could think about the two factors as having an equal contribution To that lower cost of risk, but you should also take that take into account that the Q3 of 2020 or 2020 is a distorted Base because of COVID. Better origination is also translating into lower NPLs Down to just over to 5%. Other risk metrics that you can look at, for those of you who are on the Full year 2020 call back in February, one of the things you may recall I mentioned is that origination trends will In 2021 should be consistent with trends in 2019, not 2020. So the point there In 2020, because of COVID, we scaled back origination. We were more conservative and we only learned to The highest quality of consumer now origination has normalized. 2019 is a more comparable base And these risk metrics are trending in line to some extent with 2019 trends. That wraps up on the 3 respective platforms. Overall, again, the picture is the same. Revenue growth up 55% year on year in the 3rd quarter, materially faster growth, Ultimately driven by ecosystem fundamentals, strong merchant and consumer growth, more opportunities to transact, whether it be via payments, Whether it be via marketplace including travel or whether it be as a result of higher origination with lower risk dropping through To the bottom line. So a very, very strong performance which has put us in a position to upgrade KPIs and or financial metrics for every division, payments marketplace and fintech. I won't read through every line here, but the rationale for upgrade in each Action is consistent effectively with the trends that you've seen over the course of this year. And ultimately, consolidated net income moves up So around guidance for 2021 moves up to around GBP 445 billion, that's the fair upgrade over the course of this year To net income guidance. Just to sort of pre empt the question, today's call is about 9 month 2021 results and the outlook for the remainder of the year. We will update on the outlook for 2022 In February of next year, but at this stage, it would be too premature to provide guidance Around next year, I've illustrated to you how many of the lead indicators are in. The momentum is very, very positive. But if you ask for 2022 guidance, that's the answer you'll get today. Here is the full guidance update And so I think on that note, we'll turn the call over to Q and A. The team is all available, so please, Sam, we're ready when you are. Thank When preparing to ask your question, please ensure your line is unmuted locally. Our first question comes from Nida Iqbal Hi, this is Natai Iqbal from Morgan Stanley. Congratulations on the great results Today, I had a question about the expansion into Ukraine. It would be very helpful if you can perhaps talk about The competitive landscape in Ukraine, please. Okay. So maybe that's a question for Mikael. Yes, sure. Well, I mean, in general, I would say that we look at the We look really at the country dynamics which we have described again the penetration of the Cash versus cashless transactions, financial services and e commerce. And all those numbers clearly indicate that there is a lot of room from the market penetration perspective. Now we as a company, even though maybe Some other people would think that we're extremely competitive company. Actually, we are the company which does not Kampit, this is the company which is focused on the quality of the products that is launched. So we're the product company and the Experience of the consumers and the merchants is the most important competitive advantage that we have. And as a result, we actually are growing our business. We're creating the markets. We're not just going after existing markets, right? So Kazakhstan is a great example. We help the country to transform from cash to cashless economy. All the products we have developed are super high quality. The growth rates are extraordinary and we Created the markets for ourselves. So that would be the strategy for any other markets. We just want to make sure that the market structure Is there. And we of course also for entry will be looking for sort of potential partnerships on the consumer merchant The base is with different players because the way that we've developed in Kazakhstan is different. We didn't have a now we have a super app and we started with never super app. So that's basically would be the comment On the Ukraine and again we're execution driven, we're product focused and we're obsessed about technology. So That is our competitive advantages and we believe that underpenetrated rates across all the markets provide enough opportunity for us to enter Ukraine. Thank you. That's very helpful. Just to clarify, so in terms of the plan for Ukraine, it would be to Going with all three of your products as you have now in Kazakhstan, so marketplace payments and fintech at the same time? Well, I mean, we don't really like to comment about our future plans. So we only usually describe the plans which Are available and the products which already are being launched. So from that perspective, I can mention only And describe to you the way that we approach the strategy. A strategy in our case is driven by the Super App. And Super App Architecture and Super App Products, it's almost like a combination of different type of services, different type of apps In a single app. So as a result, we will enter other countries with the product which we believe Provides the most value for users because the product that provides most value for users drives the user acquisition. So that basically would be Sort of our general concept of the strategy. And also another comment that I would like to make, we're extremely focused company. Extremely focused means we don't like to be stretched to fit across multiple products across multiple markets. So we have extremely, again, focused strategy. So we'll pick the narrow product line, which We'll deliver the most value for the users and as a result we'll be able to grow our business. Thank you very much. Thank you. Our next question comes from Gabar Cabany. Gabor, state your company name and please proceed with your question. Hi, this is Gabor Kemi from Autonomous Research. A few questions from me. Firstly, on your market shares, could you please give us an update On your latest market shares in e commerce and digital payments. And then more broadly, how do you think about your addressable market In the marketplace segment, I mean, pretty impressive growth here. It would be useful to get a sense of how you see your potential market In this segment with a 2, 3 year view, if you could help with that. And then moving to the marketplace take rate And some positive trends here. Would you be able to quantify the contribution from the value added services Like delivery and the promotional campaigns in the take rate and how do you think about your ability To increase your take rate, your merchant take rate from here. Thanks. Okay. So thanks for the questions Gabriel. Maybe I'll take The first and the third on market share and take rates and then I'll ask Camille Karl to talk more broadly And what's the medium term addressable market? So I guess on market shares, I'd say we're sort of it's probably not the right way to look at things on A quarter by quarter basis. But if you look back to the the first half of the the year, in e commerce, PwC produced a report and our market share had increased to around 68% from From low 60s in 2020. So that's as of the the first half of the the year. On the payment side of things, our CASB pay share share for CASB pay terminals, Again, we provided the number in the first half of the year of being just over 50% And I think you can assume from the numbers that you've seen today it's continued to move up but it'll probably be more appropriate to update on that at the end Of this year. So that's the first question on market shares. I suppose for consumer lending and FinTechs, sorry, I'd say, If you look back historically, in unsecured consumer and lending, our market share has been around 30%, Sometimes a little bit less than that, sometimes a little bit more than that. And broadly, I'd expect that to remain the case today and going forward. But what is happening is that We are chairing the balance sheet more and more. So whilst in value terms our share hasn't necessarily increased in terms of number of loans, It would have increased considerably. So that's on on on market shares. On take rates, so I would say that the vast majority of the increase In take rate is mix effect. So take rate increased by around 100 basis points. How much of that can you attribute to monetization of delivery and monetization of marketing services? A small component of that, I would say, Let's say 20 to 30 basis points, something in that magnitude. For delivery at this stage, the focus This is on scaling volume, number 1. With volume, you can improve unit economics, number 2. And with improved unit economics, we can take our What is effectively a subsidy away and push the cost of delivery onto the merchant, which is is where it should be. But that that isn't a 1 or 2 quarter proposition. That's a multi year challenge and you can see that things like CASPI Express Delivery, Kaspi Lockers are providing the merchant and the consumer, but providing delivery partners with more value added services, which ultimately The medium term will increase your ability to to to monetize. That would be on, logistics. On marketing services, it's actually so advertising, it's Exactly the the same. It's about building volume from both merchants, from from brands within the the the ad Platform, the auction mechanism of this year is all about volume and is all about very light monetization. As you demonstrate a return on the investments to advertisers, there'll be opportunities to improve monetization, and the initial indications are From both brands and from from advertisers are very, very encouraging. But again, this is about these these are Products that have been launched and will be material to financials not in 2021, 2022, 2023 over the next 3 to 5 years. So maybe I'll stop there and hand over to your second question on addressable market to Mikhail. Sure. I mean first of all, I would mention that our addressable market is we are creating our addressable market. That's What I've mentioned on the previous question, which means we're growing at such a fast rate that we're actually Building the digital sort of market. We're building the online services, online payments, the e commerce, Shopping, travel market. So we're digitalizing, moving them from offline to online and making everything seamless and cashless. So that's basically how we are growing. And we have provided cohort analysis in the Annual call, so we'll be without the quarterly cohort analysis on sort of GMV and RTPV Would be too much to do on a quarterly call, so any other call we'll update, but continues an extremely strong growth. And that actually is based on the 3 pillars of our strategy. So number 1 sort of strategic priority is to acquire users based on sort of high frequency services Which are highly applicable to the users. And then build the usage of those services, engagement of the users in a specific product. And then the 3rd, engage users across the products. So that's what you see for increase, for example, usage by the users of our Of our different platforms. So as and all of that is enabled by the Super App strategy because users seamlessly navigate. So those three pillars are the I have a strategy for the growth and as you can see the growth rates, we don't really we see a lot of opportunity in the years to come in In Kazakhstan itself, which is our core market. And the second growth opportunity, which we just scratched the surface is the merchants. We had pretty much no merchant business last year. And with launch of Costi Pay, we're just starting to ramp up different services for merchants and that would be Another pillar of the growth is we have a super app strategy for consumers and we have a super app strategy for the merchants with different type of services. Very helpful. Thank you. Our next question comes from Mikkel, sorry. Mikkel, Please proceed with your question. Yes. Hi. This is Mikhail Butkov from Goldman Sachs. Yes, thank you very much for the Presentation and congratulations on strong results. My first question is on as a follow-up on Ukraine actually. So Could you maybe provide some color on it or indication how capital intensive actually this project might be? Yeah. Yeah, Mikhail, I'll just answer that. I mean, I think you know that the whole sort of Fundamental philosophy of of CASB is we do things, number 1, via a super app So we try and leverage the user base over multiple addressable or monetizable markets. So there's an OpEx cost there rather than a CapEx cost. So number 1. Number 2, with regard to CapEx, Specifically, again, fundamental philosophy of the company, we do things in a CapEx light way. You see that particularly probably the best the most obvious example is in our marketplace business. We We have one of the most profitable marketplace businesses in the world and in part a CapEx like strategy has played its part in achieving That, if you look for the 1st 9 months of the year, capex was just over $30,000,000 for the entire CASB KZ That is absolutely nothing in the context of $445,000,000,000 targeted 10,000,000 of net income and most of that or An important part of that was, the funding of POS, physical POS terminals over the last, 12 months. So long answer to your question is that Ukraine is not envisaged Thank you. Another question is on payments business. So what share of TPV actually Do you see as potential to reasonable potential to monetize that? I think you mentioned There is some opportunities in peer to peer segment. You continue to rollout the acquiring services. So Over the medium term, what percentage of TPV do you think can be reasonably monetized? Thank you. So I'll start on that and say if you look in developed markets, if you look at PayPal, for example, A sizable minority of their payment volumes are peer to peer. Let's say for PayPal it's something in the region of around 30%. So PayPal peer to peer never goes away. Over time it can go from being a majority To a minority, but it is fundamental. The question is and shouldn't really be around around it going away because it's So that would be fundamental to the vibrancy of the ecosystem, but you've seen that The delta between RTPV growth and TPV growth narrowed. Now RTP is slightly above TPV. I would expect that trend to continue and the mix to change gradually over time, but we probably stop sort of going into more detail than that. Our next question comes from Marcin. Marcin, your line is now open. Please state your company name and proceed with your question. Read your question. Hi, this is Marcin from Atom View Capital. Hi, David. Hi Mikhail. Congratulations again On the results, a few quick questions for me. So can you tell us or what you think about a potential Listing in New York, is that in the plans? And if yes, then on what timeline? The second question would be about International expansion. You said you don't want to spread yourself too thin. But Are you looking at other countries at the same time? Which countries are you Interested in expanding into at the moment is Turkey perhaps Turkey and Egypt on the list? And then the final question is about the merchant finance or the microfinance business. I mean now that's all these businesses have Your POS is and you can see their transactions and you can see their shops on your marketplace. I mean you have collected or you're collecting huge amounts of data like no other bank in the world it seems. Does that mean that you can now Crack the complexity of small business lending. You mentioned that IPO that you would be willing to lend up to 20% Of TPV for those businesses, is that still the case now or are you willing to go higher with this extra data That would be very interesting what your plans are there. Okay. So thanks for the questions, Martin. I'll take the first on U. S. Listing, then I'll ask Mikhail to comment on 2nd international expansion Turkey, Egypt. 3rd, outlook I guess for merchant financing. So listing in the US, what I have we have said to investors is that we do see some benefits Around the the US and believe actually not just some benefits that it is a more it Could be a more appropriate long term home for CASB KZ and there's numerous reasons for that. Certainly, one of those would relate to liquidity, stocks trading. We see we observe the stocks A similar size, similar market cap to us trading in the US, but, have materially higher liquidity, which is is an issue For our UK listening. So over time, there is a a a commitment internally to addressing that. But at this point in time, no formal decision has been made. When a formal decision is made by management approved by the Board of Directors will We'll present it to the management, but it would be, it would be wrong for me to sort of preannounce specifics, to today. But You can take away and others can take away from this call that it is something that we we see many many benefits from. And maybe I'll pass to Mikael for questions 23. The other markets, nothing really Nothing really that we can specifically discuss at this stage. Again, I will still reinforce the fact that we are a truly focused company. So which basically means that we know that When we channel our execution skills into a specific direction, we achieve the most result. Therefore, Ukraine is there, it's on the map Well, nothing really specific at the moment that we want or can discuss on the other markets. Regarding the merchants, so you are exactly right. So that's the product which we have launched. That product is Driven by the technology and driven by the data. So we're making risk decisions seamlessly. So which means seconds. So it's actually pretty much the same way that we make decisions for consumers. And we the same way as we deliver the products for consumers, we deliver the merchant finance products To merchants, which means through the mobile app. So our merchants actually in a vast majority of the cases don't have to sign Anything, unless there is a purely regulatory requirement to update certain piece of data. But vast majority of the financing Being delivered through Kaspi Pay Super App, which is super app for the merchants. And that what is driving the customer Satisfaction and there are all other elements of the product in the merchant finance which are attached to it, prepaid Without fees, without penalties, anytime, it automatically get deducted from your sales. So there is a lot of And a lot of features in the product which are providing very high merchant user experience, foundation of our experience with the consumers. So we're just basically replicating that technology that data driven risk assessment And as a result, delivering the extraordinary growth and the value for our merchant partners. But you're right Of the payment value and the JV. Yes, please. Thank you, Mihael. Just to follow-up on this, You said during the IPO process that you would be willing to lend up to 20% of payment volume to those merchants, Which is is this still the case? Because right I mean, right now it's a very small business, right? You have about $30,000,000,000 Of RTPV, you're only lending a few $100,000,000 to those merchants. So is this just the beginning and we should be Seeing this scale up or how do you feel about this product? Yes. It's just the beginning. We're just Sort of at the very early stage of the product launch, it's still a sizable amount Of the total financing volume, if you are thinking in terms of the inherited structure of the product, you're right. So up to 20% of the volumes that are done With us, but also it's extremely important to keep in mind the way the strategy we approach the financing either for users or for the merchants. We don't push financing on the merchants. We don't push financing on the users. They make decisions when they see the app and ability to take it in the app. So we're taking this extremely responsibly and yes, and the product has already very high traction. But you're right, in terms of The structure of the product, it's up to 20% of the business with us. That's right. Thank you very much Mikhail. And then just Final follow-up on the international expansion. So you would not want to do 2 countries at the same time, 2 new countries or you would be Open to that if you find a right place. I think you responded with your question after if Yes. If there is a right opportunity, of course, we'll act on it. But in general, we are extremely conscious and we put capital extremely Efficiently, but yes, if there is a right opportunity, of course, we will consider it. Okay. Thank you very much. Our next question comes from Simon Ravi Visz. My apologies. Ravi, your line is now open. Please proceed with your question. Ravi, you might be on mute. Can you hear me now? Yes, we can hear you now. Go ahead, please. Thank you. Congratulations, David and Mikhail. Great to see the fantastic growth. In this kind of fast growing environment, what are the challenges you're seeing now? And what is additional risks that could come your way that you're worried about, including any regulatory issues? Thank you. So maybe that's a question for Mikhail. Sure. I mean, we are Again, because we are approaching our growth extremely responsibly, we always laid down Foundation from the product perspective and technology perspective and the services which support the growth, which support the consumer service. So from that point of view, operational wise, we're very sort of solid Company which does a lot of planning before it starts scaling. And again technology allows us to do that. So We are of course having the best people in our company is the most important priority which is Constant priority, we were very happy to report that we have expanded the stock option plans or equity rewards for Now 74 people included and we will be continuously increasing number of people that can Key people that can share the success of the company and the shareholders can also motivate people to perform. In terms of the working with the state and with the government, I mean, we're working hand in hand on Continuously digitalizing the services. So, you know, right now, government services, I mean, Now 7,000,000 people are coming monthly to our section of the government services. So That's a suit of the products which comes from distributing pensions to The benefits for newborn, you can register your business, you can pay taxes. So we're actually helping the state To efficiently distribute the government services to the citizens but also achieve the financial sort of efficiency in terms of the tax payments and so on and so forth. So I guess that's the priority of the government and the state as well as has been mentioned on the various meetings. So we take it seriously. The state takes it seriously and we take the well-being of The people extremely seriously as the company that is driving the quality of life and standards in the country. So that would be basically Where we stand. Thank you for that. And on a different note, obviously inflation has been rising in Kazakhstan as In the world and I suppose potentially interest rates could go up as well. What do you see as a trend of inflation going forward in the country and how might it impact Gatsby in particular? Well, I mean, in terms of our In terms of our business, we're local currency business really, we're the platform where people shop, people transact. So inflation has been rising across the world. So I mean, In our case, I think we're just solid company operationally, which work with consumers and merchants and we just put our head down and concentrate on the things that we control Really. And what we control is high quality products and high quality merchant and user experience. So that would be My comment on the inflation, I don't know, Derek, if you want to add. I mean, I would just say, so I think we need to wait a bit Of time, as Mikael mentioned everywhere in the world, sort of inflation is an issue post COVID. So let's see where sort of trends Normalize in 2022, number 1. But having said that, If we look in our fintech business or if we look in our payments and fintech business, if we look at sort of all the sort of lead indicators around The health of the consumer, consumer spending, we see that trends are improving, Not deteriorating. So certainly on balance, the broader economic environment, including inflation, We're seeing a materially more healthy consumer than was the case 6 12 months ago. But again, Let's give it a little bit of time to see how that pans out into 2022. Thank you. I mean, one would think that the increasingly higher inflation would potentially dampen demand, consumer demand and therefore impact marketplace volumes And potentially impact demand for loans as well. Am I right or is that your sense or not? So I mentioned earlier around the health of the consumer stands, so that's what we're seeing today in real time. But the other important point, so yes, you may be right, Ravi, but If you think about the growth numbers that we're delivering, every platform is growing north of 100%. So the structural Far outweighs the cyclical. Mikhail talked about creating markets that didn't exist, Shifting the economy from cash to digital payments growth in e commerce. So, I'm not saying that the cyclical factors don't have any part that they clearly do, but this is a We have positioned this business in high areas of structural growth irrespective of the cyclical environment. Great. Thank you very much, David and me and Kierke. Our next question comes from Simon Nellis. Simon, please state your company name and proceed with your question. Hi, thanks very much. David and Michal, very strong results. Again, I'm quite impressed you keep upgrading your guidance. I wonder how many quarters you can keep doing that. I guess my question just following up on the last one is, yeah, what's your rate sensitivity? Because the NBK has been hiking rates. I think they're expected to continue doing that. I guess that means you'll make higher interest on your interest rate balances in your payments business, but what's the interest rate sensitivity on the Fintech balance sheet? That would be Question number 1. And then the question I usually ask actually just on your capital ratios, do they reflect the dividend that you're preparing to pay? Or Has that not been deducted from CT1? If Tenka gets us back there somewhere to answer that one. Okay. Well, I'll try and answer the second question on the capital ratio first of all. So, yeah, what you see in the presentation with regard to Capital ratios. I don't I'll see if I can get it up now quickly. Wrong way straight. One second. Yeah. Here. This is for CASB Bank. This is post Dividend. So yes, this takes the tier 1 11% regulatory capital that you see That is after dividend, which has been upstreamed from CASB Bank to and now sits in CASB Group balance sheet. Regulatory capital relates to Cassidy Bank, Balaji. Right. Okay. So then it reflects that €90,000,000,000 okay, that you were paid. And for the benefit of everyone, so you could say that roughly 50% of the dividend comes from the bank and roughly 50% of the dividend comes from the other So, juries principally shop and payments and that's that's upstream to group. So, that's happened. So, that was your second question. Your your your first question with regard to rate sensitivity. So I think this point that I would make and If any of the other guys want to to to to jump in, they they they can, is that the core product, number 1, is is is buy now, pay later. And how we would like you to use that product, this isn't the case for in entirety, but how we'd like you to use that is Buy repay within the 3 month period interest free period, the grace grace period. So that's that's that's one. The second answer would be the again, if you look at the the all of the lending whether it be buy now pay later or whether it be the general Purpose lending, it is small ticket type lending. So in the Q3, the Average ticket size for the buy now pay later loan was approximately $65 It was about $4.50 approximately Even for the general purpose loan, it's only $4.50 So small ticket lending as a whole, I would say, would be amongst the least sort of interest rate sensitive Lending, small ticket number 1, small duration. I mentioned that the overall duration of the balance sheet has come down And it's likely it could well continue to come down further to around 5 months and within that you still got things like the car loans which are 16, 17 months pushing the average up. So the bulk of the balance sheet is very of short duration. People are borrowing for transaction Just to facilitate a transaction, the convenience that comes with that and often repaying at the end of the week, at the end of the month within a relatively short period of time And therefore, the nature of that product is not especially interest rate sensitive. Okay. So it sounds like you're relatively neutral. But and I guess on the securities book, which around a third of the balance sheet because you've been growing deposits pretty nicely. That that would also be short maturities as well, right? Yeah. It is short maturity, low risk lending. So yes, only there would be some benefit in a higher interest It's a race environment, but I don't think it would be material. Okay. And then maybe just one last question on Azerbaijan. I think that shows up primarily in the marketplace of the revenue as well. Was it fair to say that the growth in that Line item is mostly coming from travel and not from Azerbaijan? Yeah. Correct. So marketplace other revenue principally Includes travel, it includes Azerbaijan, which for the benefit of everyone is is classified businesses in Azerbaijan And it includes initial monetization of Caspi Logistics. There may be some other things there, but there's only the 3 most important components. Well, you've seen we've given you, it's something in the press release and and in in the presentation, the numbers for CASPI Travel. It has scaled. It is sort of probably be like if you think about sort of addressable markets, it probably sent me today is A larger addressable market, you can see that it's scaled very quickly. Michal mentioned that it's up to around 5% or 6% of 5% of marketplace GMV scaling really, really quickly. So yes, you are right. That is the bulk Of of other revenue, Azerbaijan is being monetized, but principally it's it's about Usage, billing users for the classified titles with very light monetization rather than sort of sophisticated value added services, they can come over time, They're not there today. Okay. Yeah, most of my other questions have been answered. Thanks very much. Okay. You're welcome, Sam. There are no further questions. I will hand over to the management team for any final remarks. Okay. So, thank you everyone for your time today. If you do have follow-up questions, me or the team, Please get in touch and we'll be happy to speak and help you. But thank you for your time today. Nice to see everyone and looking forward to connecting Over the next couple of months. So thank you. Goodbye. Thanks Sam for organizing the call. Thank you. Bye bye. This concludes today's webinar. You may now disconnect from the call. Thank you.