Hello and welcome to the Kaspi.kz Second Quarter First Half Financial Results Conference Call. My name is Elliot and I'll be your coordinator today. I would now like to turn the call over to David Ferguson. Please go ahead.

Thanks, Elliot. Good afternoon. Good morning, everybody. I'm David Ferguson from Kaspi. Welcome to our 2Q first half 2024 financial results. As usual, joining me on the call, I have our CEO and Co-Founder, Mikheil Lomtadze; our CFO, Tengiz Mosidze; and our Head of Capital Markets, Yuri Didenko. Standard sort of procedure for the call, Mikheil will take you through the strategic product updates. I'll run you quickly through the financials and guidance for the remainder of the year, then we'll open the call up to Q&A. So on that note, handing over to you, Mikheil. Over to you.

Hello, everyone. So pleased to report our second quarter results performance. We have done pretty well in the second quarter and for the first half year 2024, with growth across all our businesses and the new services showing remarkable growth. Obviously, all that is a result of our team's historically known execution capabilities, and our consumers continue to have strong engagement. We have 72 monthly transactions per active consumer, which is important as we build on this engagement of the platforms and individual services, and this is really driving our innovation. The PaymentsTPV is up 32% year-over-year, which shows the growth is strong on top of a really large business. Revenue is up 23%, and net income is up 22%. The Marketplace has been showing a very strong performance and is now our fastest-growing business. GMV is up 62% year-over-year, revenue is up 96%, and net income is up 68%. The Marketplace excites us because that’s a business where we connect the sellers and merchants. Most of our innovations will come from our Marketplace business. Fintech is growing nicely, with TFV up 43% year-over-year, revenue up 23%, and net income plus 2%. You will actually see in the third quarter and the rest of the year quite a rapid acceleration of our net income. Interest costs and rates have been going down, which will allow profits to flow through our P&L. Our consolidated revenue and financial performance show strong results. Our revenue is up 36% year-over-year, and net income is up 25%. We have been diversifying across our three platforms and are happy to report they are now more or less equal in size. 68% comes from payments in the Marketplace, and the Marketplace and payments have historically grown faster than Fintech. The e-Grocery business we started a couple of years ago is showing remarkable potential. Execution skills across operations, marketing, product, and user experience are top quality from our team. We can see that active consumers now reach 639,000 in the second quarter, almost doubling the GMV with 99% growth, and the average weekly purchase remains high at KZT14,000. In total, we surpassed 2 million purchases in the second quarter, up 83% from last year. We are expanding existing dark stores, adding capacity, and increasing efficiency, which is producing good results. However, demand is high, prompting us to invest in another large dark store in Almaty. We serve three cities: Almaty, Astana, and Shymkent, which represent roughly half of the total food retail trade in the country, and they will be our focus for the remainder of the year. We are also scaling a new service – vacation packages – with incredible growth of 644% from last year, which allows our consumers to book their vacations in several countries. This business features a high take rate of 7.9%. We're excited about the upcoming summer season because our consumers typically plan their vacations shortly before taking them. We continue to scale and innovate across value-added services, which have increased dramatically to more than four times last year. Out of 9.5% of total take rate in the Marketplace, 1.6% is now coming from added value services, compared to 0.6% last year. This includes service development for merchants, enabling them to promote and deliver their products nationwide. We have recently launched brand advertising, allowing brands to increase their awareness through our Kaspi.kz Super App. This service is well-received and offers a new revenue stream.

Okay. So moving on to the financials. I'll start with the payments platform. Transaction trends remain strong, up 46% in the second quarter, up 44% year-on-year in the first half of the year. Slightly stronger in the second quarter despite, as Mikheil said, this is a pretty large business. The growth is driven by all products, led by Kaspi Pay QR and B2B, but with bill payments still very robust. Strong volume growth translates into robust TPV growth, albeit with a lower average ticket size as consumers use us more frequently for their everyday needs. TPV is up 32% in the second quarter and up 34% for the first half of the year. Take rates are broadly stable, albeit with a lower take rate for Kaspi Pay QR visible at the margin. B2B payments remain the fastest-growing component of the payments platform, increasing from 0 to 5% of TPV in just 2.5 years, with strong revenue growth as well. Overall, payments revenue for the quarter is up 23% year-on-year and up 24% for the first half of the year. Tight cost control is ensuring that strong top line flows through to the bottom line. This platform is comfortably on track to meet our full year guidance. Regarding the marketplace platform, transactions are also strong and consistent, up 38% in the second quarter, up 36% for the first half of the year, with higher ticket sizes translating into faster GMV growth, up 62% year-over-year for both the second and first halves. E-commerce is the fastest-growing component of the marketplace, now almost half of marketplace GMV at 45% for the first half of the year, with take rate moving up due to promotional events and the added-value services that Mikheil mentioned. E-commerce GMV is up 113% in the second quarter, with similar numbers for the first half. The demand for e-Grocery and general goods, boosted by promo campaigns, is driving take rates up 30 basis points in the second quarter and up 60 basis points for the first half. The introduction of Kaspi Postomats has proven popular with consumers, making last-mile delivery more efficient. We are targeting 7,000 Postomats by the end of this year. The Kaspi Travel segment also saw decent GMV growth in both the quarter and half, up 33% and 38%, respectively. We anticipate stronger revenue growth in the Marketplace for the full year, with a 96% increase in the second quarter and over 100% in the first half. Marketplace is on track for the full year guidance.

All right, Darrin. I think I'll just reiterate what I have said. The key point when you're considering Q3 and Q4 is the Juma promotional events. It’s important to note that this year there are three events taking place, which differs from last year when it only occurred twice. The marketing campaigns may vary, impacting GMV growth, marketplace profitability, and TFV growth. It is crucial to understand that Q3 will not have the key promotional event, resulting in lower growth across payments and marketplaces, with a rebound expected in Q4. The full year guidance remains the correct number to reference, so any conservatism should be applied there.

Thanks. I appreciate the momentum on those initiatives. I wanted to touch on the financial question. You're reiterating your fiscal year expectations, yet the underlying assumptions indicate some deceleration in the second half compared to the first half. Can you help clarify if this is due to comps or a conservative approach based on trends?

Hi, Darrin, thank you for your question. We'll continue working on expanding outside of Kazakhstan. The good news is that we are selective about the opportunities we pursue and have a healthy pipeline. I wouldn’t speculate on regions or specific targets, but we're working with advisors on various opportunities carefully. We want to ensure any expansion adds value, leveraging our technology experience and business model. We're excited about what we can achieve.

Thanks for taking the question. I appreciate the color on the brand advertising launch. Can you provide details on when that went live and how many brands are currently on the platform? Additionally, can you explain the process for adding new brands?

Sure, Reggie. We are in a unique position where some of our ideas are directly coming from requests by our merchants or brands. The brand advertising is currently in the scaling stage, with FMCG brands already working with us due to our position as a top grocer in the country. We're seeing healthy growth among these brands. Regarding the general goods, we are engaging with both global and local brands. The opportunity is large, and we are successfully scaling this segment. Although current numbers are minimal, we expect rapid growth in the second half as contracts with brands are already established. For KPIs, they will differ for goods and brand advertising. For merchant advertising, we ensure it's efficient and they don't overspend. On the brand side, brands focus more on awareness rather than direct sales, having budgets allocated for such advertising globally. We aim to be competitive, so results from tests indicate we are more efficient than platforms like Instagram. When considering Juma, it has become a nationwide shopping event similar to Black Friday in other markets. It has a significant impact on engagement and drives consumer spending during and after the event. Juma promotes new categories, fostering a shift from offline to online shopping. We will evaluate the performance of each event as we progress through the year.

Hello, Jamie. You may be on mute. We can't hear you.

Good evening. I had two questions about take rates. For the payments take rate, when experiencing growth in QR and B2B, are those deflationary to take rates? Also, regarding e-commerce take rates, how do we unpack the components of take rates between e-grocery and general goods? Thank you.

On payments, our QR payments have historically been around 0.95%, and we venture closer toward this over time. Although we've diversified our services, the take rates have remained stable at around 1.2%. We're working on new added-value services that should yield a higher take rate later this year. On e-commerce, only 3P sales contribute to the take rate as 1P sales, particularly in e-grocery, do not factor in. We're seeing strong performance in e-grocery, which generates a net income margin and allows for growth without factoring into the take rate.

Good day. I have two questions. What is the average duration of your deposits, and how does the competitive landscape look regarding deposit costs? Secondly, I've heard about investor interest in building warehouses in Kazakhstan to facilitate international deliveries. Do you see Kaspi benefiting from this cross-border potential?

Our deposit product is straightforward with a single annual offer. As for market players, most are pricing similarly to us. We’re not merely viewing funding costs but consumer engagement quality. Regarding e-commerce infrastructure, it's promising for further e-commerce growth. We’re constructing significant warehouses for our e-grocery business. Although cross-border transactions are of interest, we are nevertheless focused on supporting local merchants and establishing a strong local presence.

Good afternoon. I'd like to understand the e-Cars business model and your value proposition there, especially since it's becoming a substantial portion of the e-commerce GMV. Additionally, what can you tell me about the e-Grocery business model? Also, do you offer BNPL for e-Grocery purchases?

The e-cars business integrates elements of various successful models such as Carvana and Carmax, expanding to classified markets for spare parts and maintenance. We’re excited about our significant market presence. In e-grocery, we are delivering weekly purchases directly, have around 10,000 SKUs and generated a 7% net income margin. Our e-Grocery model is profitable, and we are scaling quickly to meet strong demand. As for BNPL, we typically find consumers prefer using their funds for grocery purchases rather than taking on credit options, but they do have that choice.

Thank you, everyone, for your time and questions. Let's wrap it up for today. I'm happy to take any further questions offline. If not, thank you, and we look forward to speaking to you in the autumn.

Thank you, everyone. Bye-bye.

Thank you, everyone. This concludes today's webinar. You may now disconnect from the call.