QIWI's (QIWI) CEO Sergey Solonin on Q2 2014 Results - Earnings Call Transcript

Aug. 8.14 | About: QIWI plc (QIWI)

QIWI plc (NASDAQ:QIWI)

Q2 2014 Results Earnings Conference Call

August 7, 2014 8:30 a.m. ET

Executives

Yakov Barinskiy - Head, Investor Relations

Sergey Solonin - Chief Executive Officer

Alexander Karavaev - Chief Financial Officer

Analysts

Bob Napoli - William Blair

Alexander Vengranovich - Otkritie Capital

Dmitry Trembovolsky - Goldman Sachs

Meghna Ladha - Susquehanna

Anna Lepetukhina - Sberbank

Operator

Greetings and welcome to the QIWI Second Quarter 2014 Earnings Conference Call. (Operator Instructions) I will now turn the conference over to your host, Mr. Yakov Barinskiy, Head of Investor Relations at QIWI. Thank you. Sir, you may now begin.

Yakov Barinskiy

Thank you, operator and good morning everyone. Welcome to the QIWI second quarter earnings call. I am Yakov Barinskiy, Head of Investor Relations and with me today are Sergey Solonin, our Chief Executive Officer and Alexander Karavaev, our Chief Financial Officer.

A replay of this call will be available until Thursday, August 14, 2014. Access information for the replay is listed in today’s earnings press release, which is available in our Investor Relations website at investor.qiwi.com. For those listening to the replay, this call was held and recorded on August 7, 2014.

Before we begin, I would like to remind everyone that this call may contain forward-looking statements as they are defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements about our expectations of future performance are subject to known and unknown risks and uncertainties. QIWI cautions that these statements are not guarantees of future performance. All forward-looking statements made today reflect our current expectations only and we undertake no obligation to update any statement to reflect the events that occur after this call. Please refer to the company’s most recent annual report on Form 20-F filed with the Securities and Exchange Commission for factors that could cause our actual results to differ materially from any forward-looking statements.

During today’s call, management will provide certain information that will constitute non-IFRS financial measures such as adjusted net revenue, adjusted EBITDA, adjusted net profit and adjusted net profit per share. Reconciliations to IFRS measures and certain additional information are also included in today’s earnings press release.

With that, we will begin by turning the call over to Sergey Solonin, our Chief Executive Officer.

Sergey Solonin

Thank you, Yakov and good morning everyone. Thanks for joining us on today's call. I am very pleased with our second quarter results that concluded to a very strong first half of the year. Our continued strong financial results demonstrate our commitment to execution, our ability to gain share and our focus on delivering best in class services to our customers, merchants and partners.

Turning to the numbers. Total adjusted net revenue increased 35% to more than RUB 2.1 billion in the second quarter. Payment adjusted net revenue was up 57, driven by strong payment volume and net revenue yield growth in our e-commerce, financial services and money remittances verticals. Adjusted EBITDA grew a strong 62% in the quarter reflecting top line growth and continued operating leverage in our business and adjusted net profit grew 64%.

In the second quarter, total payment volumes grew a solid 17% to RUB 156 billion. Active Visa QIWI wallet accounts grew 12% as compared to the second quarter of 2013 to reach 15.8 million total active accounts on the annual basis, reflecting continued strong secular growth trends in our market and the value of our unique network.

Now I would like to highlight a few important developments in our business. In June, we launched new interface of our Visa QIWI Wallet product to improve the user experience even further and eliminated consumer fees for mobile phone top up. With that step, we started to actively promote Visa QIWI Wallet to attract new users and we are very pleased with the results to date, being more unit registration and more, various transactions being successfully made by our users. This proves the most crucial point for increasing simplicity and convenience.

In addition, we have jump started the promotional campaign in the money remittance segment by fully eliminating consumer fee. We expect this campaign to last for next few months and we are looking forward to track new consumers and to gain additional market share in this promising segment.

Now I would like to spent some more time on potential M&A opportunities that we are foreseeing. E-commerce, financial services and money remittances are the key areas of focus and I see that now is the right time to look at certain businesses that might be complementary to QIWI. For instance, we are currently in dialog with certain companies that are active in Russia and CIS money remittance market. We are assessing various opportunities and have not entered into any binding agreement with any companies yet, so I will keep you updated on this process and this trend.

And finally, we continue our cooperation with Visa. In May 2014, we have obtained VisaNet Processor status which enables us to process Visa transactions on behalf of our other banks. We believe VisaNet Processor status will contribute to our contemplated project we have in our pipeline.

I will now turn the call over to Alexander, who will take you through our financial results in more detail.

Alexander Karavaev

Thank you, Sergey, and good morning everyone. As Sergey just discussed, we delivered strong financial operating performance in the second quarter. Beginning with revenue. Total adjusted net revenues increased 55% to RUB 2.1 billion, up from RUB 1.6 billion in the prior year. Total adjusted net revenue excluding inactivity fees increased 46% compared with the prior year.

Payment adjusted net revenue increased 57% to reach RUB 1.6, up from almost RUB 1 billion in the prior year. As Sergey mentioned, we had strong revenue growth contribution from our ecommerce, financial services and money remittance vertical, which grew 65%, 112% and 145% respectively. Revenue performance was driven by solid payment volume growth and growth of the net revenue yields.

Average payment net revenue yield was 1% sharp, up 25 basis points from the prior year and our total average net revenue yield was 1.35%, up 18 basis points from the prior year. Total average net revenue yield excluding inactivity fees was 1.25%, up 25 basis points from the prior year. Other adjusted net revenue decreased 3% to RUB 550 million, down RUB 566 million in prior year. Other adjusted net revenue excluding inactivity fees increased 15%, mainly driven by growth in the interest income on cash and settlement feed. Inactivity fees amounted to RUB 156 million compared to RUB 223 million in Q2 2013.

It is important to note that Q2 2013 inactivity fees were abnormally high due to a catch-up effect for six month period ended last March 2013, during which inactivity fees was low due to certain legal aspects. Moreover, other adjusted net revenue was also affected by a decline in advertising revenues in the quarter by 52% to revenue RUB 54 million in the second quarter of 2014.

Moving to expenses, we generally continued to experience positive operating leverage in our business, which continues to drive our adjusted EBITDA and net profit growth in excess of our revenue growth. Besides general operating leverage that we experienced, we have spent around RUB 130 million less of marketing expense in the quarter than we initially planned. And this amount will likely be spent in the second half of the year. Adjusted EBITDA increase 62% to revenue 1.3 billion, up from almost revenue 800 million in the prior year.

Adjusted EBITDA margin was 61% compared with 51% in the prior year. The increase in adjusted EBITDA was primarily driven by revenue growth and continued operating leverage in the business. Adjusted EBITDA margin excluding inactivity fees was 58% compared to 43% in the prior year. Adjusted net profit increased 64% to RUB 899 million, up from RUB 546 million in the prior year. Adjusted net profit excluding inactivity fees net of tax more than doubled compared to the prior year.

Finally, as you saw in our earnings release, following the determination of second quarter 2014 financial results, our board of directors recommended a dividend of 46 cents per share. We remain committed to distribute all excess cash to our shareholders in the form of dividend.

Now on to our guidance. Based on our strong second quarter and first half of the year results, we are raising the 2014 guidance provided in our last quarter report. Net revenue to increase by 30% to 32% and adjusted net profit to increase by 36% to 38% over the last year. We are confident that this new guidance given the political and legislative landscape will not change any further. And we will continue to update you on our progress during our third quarter earnings call.

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

Question-and-Answer Session

Operator

(Operator Instructions) Our first question is coming from Bob Napoli with William Blair. Please proceed with your question.

Bob Napoli - William Blair

I guess a question on the revenue yields, you have had very nice movement in the revenue yield in ecommerce, financial services and money remittances. Are those sustainable and what is driving the higher revenue yield? Is it mix of product?

Alexander Karavaev

Hi, Bob. It's Alexander Karavaev. So there is basically a number of reasons in each of those segments. First of all, as we discussed during the Q1 conference call, we decreased the funding cost a little bit by cutting down the payouts to agents for 20 basis points. And in Q1, we have only part of that effect, because we started that campaign in March. In Q2, that obviously is lasting for the whole quarter that’s why the effect is much more visible. And second reason is obviously product mix. I mean in each of those categories, basically the merchant mix. What is happening is that we are in generally increasing the long tail, and the long tail is usually paying the fees and commissions higher than the average.

That is what was actually happening. Going forward, we think that the levels we achieved are kind of stable, generally speaking, though they will depend much on the campaign, from the marketing campaigns in each of those segments, which we either started or are going to be starting soon. Like Sergey said, in money remittance for example, we have just introduced a new campaign where we completely eliminated the consumer fees on money remittance. And in money remittance segment, I mean in those type segments, we have the payment gateways with other money remittance. That obviously will drive the net revenue down though we will expect substantial increase in volumes. Actual acceleration of growth in this particular segment.

And that can happen actually in all the segments, depending on the campaign that we are going to be launching. Let's say mid to long-term, we discover also a few plans. We really think that the processing fees and the acquiring commission will go down. But our stance towards it is that we are going to be replacing that by different value added services.

Bob Napoli - William Blair

Thank you. I heard you suggest that you were doing some more processing for Visa for other banks. Is it possible that you would be a significant processor for Visa under their requirements to process locally in Russia?

Sergey Solonin

Well, I think that we have some plans on processing for some specific areas and maybe specific banks that are closer to mobile operators. Generally for other banks we don’t have these clients in short term.

Bob Napoli - William Blair

Okay. Then just my last question. You did in your recent offering raise some capital and you mentioned that you're looking at many M&A targets, but yet you paid out a pretty healthy dividend. You're paying out a pretty healthy dividend. Just a little bit confused by that. What is your capacity today for acquisitions? What kind of capital could you put towards the right acquisition?

Sergey Solonin

Well right now -- thank you for the question -- right now, we are evaluating different opportunities and these are two processes that are not -- that are different in the company. So first, the dividend payout ratio which was historically close to 100% and we continue this practice as usual. Second is our M&A activities that we foresee and that we discuss right now, we don’t have any binding agreement up to now so we cannot comment on the amount or whatever. So we are in the process of discussions.

Operator

Thank you. Our next question is coming from George Mihalos of Credit Suisse. Please proceed with your question.

Unidentified Analyst

This is [Brian] (ph) filling in for George. I had a quick question on Wallet and new Wallet user growth going forward. How should be think about the marketing sped going towards that? You said something in the prepared remarks about how that was driving it? And how should be think about the Wallet growth accelerating over the back half of 2014-2015?

Alexander Karavaev

Thank you for the question. I think we look at this from two angles. First of all about the newcomers into the system. Basically, what it says in the press release, we have little bit under spend the marketing budget in Q2 and we believe that marketing spend is going to be move to Q3 and Q4. We do not expect any kind of additional spend on top of that. So we are going to be, as we believe, within the budget. We are not really guiding on the number of consumers but we may expect that we will start getting the new consumers in the second half of the year. That is one angle.

Second angle is basically the activity of the users because we do have already a lot of consumer in the system. More than 15 million. And the second focus of activity which is actually the more important, is to make those be more activity. Meaning to increase their average spend and to make those people use QIWI Wallet and all the functions that we can offer more often. And that process is also quite successful. So you may obviously see the increase in volume and that is primarily due to the increase in the average spend per wallet. So those two angles are of the very, kind of focus of the company just for now. And we believe we are going to be increasing both the number of newcomers and the activity levels as well.

Unidentified Analyst

Okay. That’s helpful. And kind of thinking about the growth in new wallet, could you kind of attribute -- it's decelerated, I guess significantly from 2013. Can you kind of help us attribute how much of that is due to a lot of large numbers is it harder to grow off larger base of wallet users and then is there any u can attribute to complication in the market?

Sergey Solonin

Well, certain portion of that is probably due to the complication of the market. We historically have received quite a chunk of newcomers from the bank in our financial services segment. And now you obviously will see a slowdown in consumer lending in Russia and that effect maybe long lasting in the economy. What we are trying to do actually to replace that inflow of new consumers in the system that we recently were getting from the banks through other channels like gaming. And we had some success in the gaming market where we started to gain a lot of newcomers.

In money remittance segment, we believe that in the campaign that we just started, we are going to be getting a bunch of new consumers and in many other segments, actually in ecommerce as well. So in answer to question, yes, to certain extent we may see kind of slowdown in the banking industry, in the banking segment. Especially in the consumer lending. Other than that, we do not really feel yet any market slowdown. Moreover, we believe that given that we are dealing really with a lot of small payments, we are really very well positioned to gain the share in that market. Because many industries will try to reduce their cost and to use us as the distribution network that is covering the whole Russia. It's actually really a good starting point to gain the market share in different segments. Hope, that’s helpful.

Unidentified Analyst

Yes, that’s helpful. And one final question. Where are you guys in terms of securing the large telco partnership. You have spoken about it in the past. And in your view, is that necessary to achieve your long-term 20% revenue, 25% net income growth target for 2015?

Sergey Solonin

Thank you for the question. First of all, in terms of our cooperation with one of the carriers. We continue to cooperate. We had decided to make any announcement of that cooperation as soon as the product will hit the market. Hopefully, that may happen in the end of Q4 or in the very beginning of Q1, 2015. In terms of our model specifically towards the operator deal, we do not have any assumptions on that deal in our current guidance. So independently on the deal we have, the guidance is that we gave you before for 2015.

Operator

Thank you. Our next question is coming from Nick Robinson of Renaissance Capital. Please proceed with question.

Nick Robinson - Renaissance Capital

A quick question on advertising. Obviously still a bit weak in the second quarter. But I noticed earlier, in July you announced a campaign with Europe Bank of Reconstruction and Development, and that looks like to be a bit more of the, in terms of advertising campaigns that you're talking about using your data. Could you give us a bit of an update on how that campaign is going and what other activities you expect to be launching on the advertising front? Thank you.

Sergey Solonin

Thank you, very much. Nick, we just launched this campaign very recently, so we don’t have any particular data about this campaign right now. By this campaign we are trying to recover some of the bank clients and we are trying to still work with some of the banks on the advertisement products. But general strategy, or the QIWI strategy is to, to the end of the year, is trying to refocus a little bit from banks that were hit by some regulations provisions and today's crisis, towards new merchants and bringing some added value from the data that we have.

You may expect some of the results to the end of the year. As I told you before, so we are generally want to try to recover to the end of the year to our previous numbers that’s our internal goal.

Nick Robinson - Renaissance Capital

Okay. Great. Thank you. Understood. Just one question on the campaign, the money remittance campaign. Is that for a set period? And are you going to be running that for a month or two months or is that something that's going to maybe roll on into the fourth quarter as well? Thank you.

Sergey Solonin

Thank you very much. Right now we started the campaign and for sure it will last for few months. Then after that period we decide it internally to discuss the opportunities either to prolong the campaign or to stop depending on several factors, potential M&A target that we are reviewing internally. The mix in the sales that we will get from the foreign and local payments, maybe as you know we have some additional earnings on some of the foreign payments on the ForExs, on the exchanges. So we have there commission that can be enough to support that kind of the product for a longer period. So generally, we will talk about that internally after we have some results from the campaign.

Right now, I see current increase in the turnover on the volumes, so I am fairly positive that the campaign should be successful but less wait's for the results of this third quarter. We will see what is happening more precisely and then we will be able to guide and comment on that.

Operator

Thank you. Our next question is coming from Alexander Vengranovich with Otkritie Capital. Please proceed with your question.

Alexander Vengranovich - Otkritie Capital

A couple of questions from my side. So first, on the financial services side. So you've announced partnership with (indiscernible) Bank, with UBRD, and as far as I understand there are potentially more partnerships of that type which could follow. Can you please share whether we should expect any sort of that deals coming, being announced from your side this year through the fourth quarter and whether they could be significant to drive, for example, the number of kiosks which you'll be having in your network? That's the first question. The second question is, do you actually see an increase of money transfers to Ukraine and whether it had any sort of impact, any significant impact, on your money remittances revenues in the second quarter and do you expect this also to accelerate going forward? And probably the last question is, in case you have any update on regulation which could affect your business, can you please share it with us? Thank you.

Sergey Solonin

Thank you, very much. So for financial services. I think we can be under the effect of global slowdown in financial services, so I think that we may feel this effect. In terms of a new bank, most of the banks that are important for us area already connected to the system so we are generally working on the internal promotional campaign with the bank. So in short-term I feel that we will have some slow down on the financial services segment, although, in the long-term I understand that due to the same reasons, due to the slowdown in lending, we may experience some demand from the banks to have some cost cutting on their side. To less offices, less people regionally and federal level. So that means that we will have some of these volumes migrate into our system.

So it's very difficult to say how soon this effect will be visible but right now, short-term, I think it is more likely that we will have some slow down because of that reasons. On the money transfer, we don’t see any substantial increases or decreases on the Ukrainian direction and more likely it is slightly decreasing right now. And this will not affect our total numbers in our performance. The same as in financial segment, in money remittances where you have today a very, very small market share and very high growth rate. So we expect that this Ukrainian crisis will not really affect our growth.

And on the regulation side, we generally don’t see any regulatory processes in our field. So the previous regulation is in place. It is already implemented in the systems and we do not expect any further development on this side at least for now.

Operator

Thank you. Our next question is coming from Dmitry Trembovolsky of Goldman Sachs. Please proceed with your question.

Dmitry Trembovolsky - Goldman Sachs

Hey, guys. I just wanted to check with you. I mean when I'm looking at your financial statements, I am seeing that the growth in users is still relatively slow and the growth in volumes is actually slowing down. I mean I am looking at all the segments and their year-over-year growth pace has slowdown in second quarter versus first quarter. And the way you obviously keep beating the numbers is constantly increasing yields, which I would assume is not completely kind of a sustainable strategy. Would you discuss a bit whether we should expect a reacceleration of usage and payment volumes versus increase in yields, or you just want to keep it like that for the time being?

Alexander Karavaev

Dmitry, thank you for the question. I mean first of all it's correct that the substantial growth on our net revenue side comes from the increase in the yields. But also on the volumes, it is not only driven by the number of consumers but actually by the average spend per consumer, or technically even by, what we might say that we are trying to convert as many users into monthly active and weekly active out of our annual base. And this is, as I told, one of our focuses. And in this, if you look from that specific angle, we can really increase the volumes many times. Because I mean still the average spend per wallet and average size of transaction and also on the distribution side, is not that high.

On the other side, we are obviously interested in getting more newcomers and that’s why we have developed that marketing campaign of different types. And in certain cases, like in money remittance, we discussed that we are just dumping the prices to gain new users and market share. In certain cases we develop different types of campaign to promote ourselves or in different segments like in gaming and so on. So our general response would be obviously to start increasing the number of newcomers into the system and to increase the loyalty of the users, to increase the usage per wallet. And the average spend per consumer that we have in the system.

Dmitry Trembovolsky - Goldman Sachs

All right. Okay, Alexander, understood. It's just that I am a bit worried that despite the effort, at least if you look in the second quarter or the first quarter, almost everywhere the growth was slowing down. Maybe it's just a bit of seasonality or whatever, but we are not accelerating the payment volumes. We're pretty much accelerating the yield. Is it a fair comment or not really?

Alexander Karavaev

It is obviously, yes. We have been discussing that we are probably approaching the saturation point, so to say, from the standpoint of organic growth, because we never ever had any substantial marketing campaign, especially in QIWI Wallet, in Q2, and thus we cannot actually expect to push up (indiscernible) in Q3. It's the seasonality because usually during the summer months the ecommerce segment is not that strong, where the majority of the people are on vacation. But generally, it's still our plan to start increasing the number of new comers into the system. So let's see how successful we can be and again based on our models, we would expect some acceleration in the number of users towards the end of the year.

Operator

(Operator Instructions) Our next question is coming from Meghna Ladha of Susquehanna. Please proceed with your question.

Meghna Ladha - Susquehanna

The first question is regarding the marketing expense. It seems like it got postponed again this quarter. If you could just maybe talk about why? Was there any particular reason why it got postponed again and how should we think about the EBITDA margins in the second half?

Alexander Karavaev

Okay. The marketing expense is basically -- not all of that but a certain portion was postponed because the focus of management was obviously switched to actually dealing with that new law that suddenly came at the beginning of the year. And with all those new sanction and so on we just really needed to actually develop a certain internal position, particularly how deal with that. And that resulted in the fact that we only launched, our main site, basically the front page of QIWI in June. So that’s why we are now starting all the major marketing campaigns.

On the EBITDA margins, I think that the level we achieved, around 50% EBITDA margin, would be sustainable. We obviously will not expect any substantial increase but this is we believe kind of our new level that we believe is sustainable in the long term.

Meghna Ladha - Susquehanna

Got it. And then maybe, Sergey, if you could just talk about the competitive landscape for a bit. Have you seen any new players enter the market or maybe the existing ones getting more aggressive?

Sergey Solonin

No, I don’t see any substantial changes. There are some, there were some announcements but generally I don’t feel this on the overall landscape. So we are looking at our numbers in our statistics, we also don’t feel any kind of movement towards competitors, whatsoever. It is although quite difficult to review because we don’t have objective numbers from the market on the volumes of our competitors. But still on my internal feeling, there is nothing really important happening on this side.

Meghna Ladha - Susquehanna

Okay. And just the last question on money remittance. So last quarter you announced a partnership with Western Union, the largest money transfer company in the world. Did that help your volumes at all this quarter or is it more second half where we should see benefit from that relationship? Thank you.

Sergey Solonin

Well, it is more likely -- this is a strategic partnership so we will look forward and look at what will be important for as our next step in money remittances and that’s why we think partnership with Western Union is an important one because Western Union covers many areas that local payments systems, money remittance systems do not cover. So we generally do not expect any effect on our financial statements of this particular relationship. Although a much bigger affect that we expect will be on the side of our current marketing campaign on payments and money remittances that are offered to our consumers for free. So we think that this factor will effect, will have a much bigger effect on our volumes in money remittances than cooperation with Western Union. Although, as I told you, we think that strategically, this is a very important partnership for us.

Operator

Thank you. Our last question is coming from Anna Lepetukhina of Sberbank. Please proceed with your question.

Anna Lepetukhina - Sberbank

I have two questions. My first question is on M&A opportunities that you mentioned. Can you please probably talk about the rationale for doing M&As? Do you see value of assets declining and for this reason you think that it's worth looking for acquisitions, or you think that in some segments, like money remittances, it's not possible to increase market share organically? So, basically, what is driving your willingness to do M&A?

And my second question, I just wanted to clarify on money remittances and elimination of consumer fees. I mean in the press it was reported that you reduced tariffs for money transfers to Unistream, Contact and some other payment systems. Was it a reduction in tariffs to these payment systems or consumer fees were not eliminated for all payment systems? Can you just clarify? Thank you.

Sergey Solonin

Thank you, Anna, for your question. On the M&A side we generally, the answer is, yes. We generally think that in the current situation we have more opportunity which looks very interesting in terms of the value for the company. Of course we aligned these opportunities with the strategies that we have and generally we analyze these opportunities from a strategical standpoint where we think, for example in money remittance, that we do need -- for the service development we do need to have some part on the control in the recipient side so we will have some power on the sender side. And that means we will use some of the opportunities in that particular segment.

On the current marketing campaign, this campaign is done only with two remittances so it's not for all of the money remittances that we have. We agreed only with Unistream and Contact, who agreed to participate in this campaign on the terms we proposed. So we will do this experiment and generally this -- strategically of course we hope to increase -- by this campaign we hope to increase our market share in this segment.

Anna Lepetukhina - Sberbank

And just a follow up. Do you disclose how much Unistream and Contact account for current payment volumes? Is it a significant share?

Sergey Solonin

No, I think we do not disclose that number, no?

Alexander Karavaev

No.

Operator

Thank you. We are showing time for one last question today. Our final question is a follow-up coming from (indiscernible) of UBS. Please proceed with question.

Unidentified Analyst

I have a couple of follow-ups. First on this M&A expansion or M&A deal. Do you see any potential risks for the dividends in case the acquisition happens?

Alexander Karavaev

So thank you for the question. It obviously would depend on the actual amount and financing. So based on what we see in the market, we will likely going to be having enough resources on cash, both from operational activities. And the primary component that we raised during the last issue. If that would be option we take then it likely will not affect the dividends much. If we will have to take the debt then usually one of the covenants would be eliminating the dividends or reducing their sizes. So those are basically the two major options we are discussing and it obviously will depend on if and what that M&A would be.

Unidentified Analyst

Thank you. And my second question would be on distribution segment. It seems that the second quarter 2013 was a year of significant addition to the number of kiosks. Could you please elaborate on the main reasons for that and what's the outlook for the second half?

Sergey Solonin

Well, we generally are looking at our strategy right now towards 2015 on that side. So generally we see some positive signals in 2014 already. And we were, if this previous strategy was a little bit to limit the number of points of sales in order to support the revenue and turnover for the agent, it may be reviewed, and recently I met with my managers but we are still undecided. But we may review it and we may put some bigger numbers toward the end of the year and towards the next year on the distribution segment. So generally right now it is the more management effort and organic growth but for the future, we are deciding and trying to formulate our strategy. Again, my personal feeling is that we will be a little bit more aggressive towards increasing the number of self-service point of sales in the near future because of this correction in the strategy.

Operator

Thank you. At this time I would turn the floor back over to management for any additional or closing comments.

Sergey Solonin

Thank you, operator. I would like to thank everyone for taking time and listening to this call. Generally, I am really pleased with our results which reflect great execution by our management. I feel very confident about the rest of the year and hope to see many exciting new opportunities ahead. Thank you all.

Operator

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day.

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