Kaspi.kz AO

NASDAQ:KSPI

Earnings Call Transcript 2023-Q2

[Operator]

Hello everyone and welcome to Kaspi's Second Quarter, First Half 2023 Financial Results Conference Call and Webinar. My name is Harry, and I'll be your operator today. [Operator Instructions] And it is now my pleasure to turn this over to David Ferguson to begin. David, please go ahead when you're ready.

[David Ferguson, executive]

All right. So thanks a lot, Harry. Good morning, good afternoon everyone. Welcome to our second quarter 2023 results call. As usual, we are joined by our CEO and Co-Founder, Mikheil Lomtadze; our Deputy CEOs, Tengiz Mosidze; and Yuri Didenko. I'm David Ferguson.

Usual format, Mikheil will take you through the strategic updates. I'll take you through the financial update, and then the whole team is available for Q&A. So looking forward to your questions. And on that note, I'll hand the call over to Mikheil . Over to you, Mikheil?

[Mikheil Lomtadze, executive]

Hello, everyone. So we would like to give you an update on our second Q, which is very exciting and well-executed Q by the team at Kaspi.kz. I will start with Juma update. As you know, the Juma is our 3-day shopping event, the festival, which we launch 2 times a year. One is in summer, another one is in autumn. So this one, we had post 2Q, so in July and has been a record engagement from our consumers and merchants, and the GMV is up 82%, which surpassing KZT 300 billion, which is another indication how powerful is our marketplace platform for consumers and the merchants. So extremely happy about it. Still delivering some items to our consumers. Everybody is busy. So that's good.

Next slide is just the highlights of our business. As you can see, we have strong growth across all the platforms. So we have a payments business has been growing nicely, 46% year-over-year, revenue 48%, net income 55%. So our revenue is going down to the bottom line due to the operating leverage network effects that is in our Super App business model. Marketplace growing also really well, 39% growth in GMV, 78% of revenue and 52% on the net income.

Our marketplace now includes also e-Grocery, which is the 1P business. We'll talk about it later. And the fintech accelerating also nicely, 48% growth on the finance values, revenue, 45% and net income, 36%. Consolidated basis, the extraordinary performance, 51% revenue, 46% net income and we are also pleased to announce another dividend subject to shareholder approval of KZT 750/GDR and we're also announcing another buyback program of up to $100 million. And just for information for our shareholders. We have completed GDR buyback of $222 million since April. So across the board, great growth on the top line and growth on the bottom line.

And yes, so the next details, I will explain some of the highlights of the performance. Payments in the marketplace continues to grow faster than fintech. And therefore, now in our bottom line, 61% comes from non-fintech, nonconsumer finance and merchant finance businesses. So 39% now is fintech, 61% is faster growing payments at the marketplace, which obviously creates more value for all stakeholders, consumers, merchants and the shareholders. We continue driving transactions. So we -- again, our business is all about the transactions. So that's where we create the value for merchants and consumers. So average monthly transactions for consumer reach another record high. So 66 transactions per consumer per month which is an incredible number by itself.

So our consumers are transacting more than 3x a day through us. GMV per number of purchases continues a very nice growth so 37% growth quarter-on-quarter, year-over-year and 40 million GMV purchases now on our marketplace completed. And then RTPV number of transactions just a remarkable 1 billion transactions in the second Q and the growth year-over-year 39%. So we have a nice growth in the transactions. Transactions deliver value for sellers for consumers, for merchants, when we deliver value for consumers and merchants, we deliver value for the company and therefore the shareholders.

We continue growing our e-Grocery business. So here, we have remarkable growth. So now we have grown 4.5x GMV. We've grown the purchases 4.3x, now more than 1 million purchases completed in second Q. Active customers growing also nicely. So all the growth just tells you how relevant our business model is, but also how we are excited about it.

And one other sort of important numbers, our first Dark Store in Almaty in the second Q net income positive. And that's an extremely encouraging, just another justification that our team is really execution driven. And therefore we -- when we'll be scaling business across the country we'll be scaling it with a confidence that we basically verify the business model and economics around e-Grocery.

Another nice highlight is the scale of it already. So our 5% of our GMV is now e-Grocery of our marketplace and the 12% of the purchases. Those are higher frequency, smaller ticket and therefore it's higher share of the purchases in our e-commerce business. The one thing to keep in mind that this is just 2 cities. So in just -- we're just in Almaty and Astana, only we have just started and the first Dark Store is already profitable, actually e-Grocery itself is profitable and it already has a meaningful share of e-commerce GMV. And once we scale that will become a quite important value generator for the company as well.

We -- here is the first time we are discussing some of the take rate components, which are also quite encouraging. So we have started sort of initial phase of the monetization of delivery and advertising. So as you can see 2% increase -- points increase on the take rate, more than half has actually being delivery and advertising. I would like to reinforce that actually is early stage. The way we deliver products to our merchants or consumers that we want to make sure they bring the value. So they bring sales to the merchants and they are also efficient and the merchants use them with understanding that they actually bring them sales, bring the value. So we will be scaling this carefully. But just wanted to bring to you that initial signs of monetization are very, very encouraging and will be scaling those services in the future.

Next slide is Postomats. So Postomats, we've building the last mile delivery network, which is an important source of competitive advantage. But the way it has been growing and being adopted by consumers, it also tells you that it brings a lot of value. So we have now over almost 4,500 customers across the country. The number of deliveries have grown 9x compared to the second Q of 2022 and 35% of all the deliveries are now through the Postomats.

And just to remind everyone that Postomats is a convenient way for our consumers to pick up items on the way home or from their office in conveniently located locations. We locate the Postomats where our consumers actually shop or transact. So it's really a decision-making based on the data analysis. That's why we have such a high adoption. And we are planning to have over 6,000 by the year-end. And again, that would be the widest and the biggest last mile delivery network in the country for e-commerce.

We also continue scaling B2B. So we have another quarter of quite nice acceleration. So we continue growing this year on the back of quite large numbers already. So the B2B is 2.6x growth in terms of the value compared to the 12 months ago and the number of transactions 2.2x. And again, B2B payments is when the business is convenience stores and the merchants are settling their invoices with the distributors, brands, wholesalers and so on and so forth. So really a very interesting product which we launched just less than 2 years ago and now it's growing really nicely. It's already at 4% of our revenue generating TPV and continues growing fast.

We also would like to announce the acquisition of a 40% stake in the leading classified platform in Kazakhstan, that's Kolesa Group, which owns two #1 classified in -- one is the real estate called Kolesa and the other one is real estate called Krisha and also has a leading classified, car classified in the Uzbekistan. Just a little bit about the companies themselves. So Krisha and Kolesa are by far #1 brands in its respective verticals. So 13.5x stronger brand awareness of Kolesa compared to a second player, which is OLX and in real estate, 4.5x stronger brand awareness compared to OLX in the real estate.

So the #1 brand, which as Kaspi is a brand itself, obviously brings a lot of value. Another highlight about the business is the sort of the scale of them. So in terms of users, those are also some of the most popular mobile apps. In Kazakhstan, Kolesa.kz, the number of users is 5.2 million and the Krisha is 4.2 million. So they are two largest and the #1 in their verticals.

And then we have presence in Uzbekistan, which is the leading car vertical as well. So through that acquisition, we're also getting a bit of a visibility on Uzbekistan as a market. And the listings themselves also are pretty nice and powerful. So we have around 1 million listings on cars. We will have almost 0.5 million listings on real estate. And again, just to take a step back acquiring car, acquiring real estate, acquiring home is probably one of the most important household decisions that are taken.

So through this acquisition, we can be in the center of the most important household decisions in the center of this transaction and the insights that will have -- will enable us and our teams now together post completion of the transaction will enable to continue to innovate around those 2 important family household decisions of acquiring real estate or acquiring a car.

Financial -- company is very strong and profitable and fast growing. So the revenue growth, 300% year-over-year for 6 months and the net income, 82% growth of Kolesa and the company has no debt. So it's a strong financial position and the fast growth, which makes this acquisition for Kaspi also attractive.

So if we go through sort of the rationale, I've mentioned some of those points. But again, #1 leading brands with the #1 brand awareness, so natural fit with Kaspi Classified, which we have launched last year. The purchasing car real estate, important decisions for the family. So Kaspi and Kolesa would be in center of those decisions, possibility for us to continue to innovate based on the insights, which we have with Autoelon so we're having visibility of Uzbekistan and have a footprint there. It's fast growth, profitable with no debt. And importantly, if we take a sort of step back, post completion of this acquisition, Kaspi has a classifieds now across basically 3 countries. So what we currently, as you, remember, we have Uzbekistan.

David, can you move to the next slide, please. So what we have, we have Kolesa cars, Krisha, and Kaspi Classifieds, in general, classified. So there's 3 platforms in Kazakhstan. We have 3 leading platforms in Azerbaijan, which is Turbo for cars, Tap for general, Bina for real estate. And then we have also the leading car classified in Uzbekistan and roughly over 10 million monthly users across all those platforms.

So really, the leading regional platform for the 3 countries, but that's not the only important point -- the main point is also that we have more of a consumer, merchant, sellers, listers insights, which will enable us to innovate on -- through those platforms in those countries in the future.

The transaction highlights show that acquisition is around 40% for $88.5 million, 11% of my shares. I'm a substantial shareholder in Kolesa, the remaining on the acquisition is from the private equity shareholder bearing most of managed funds. So we'll have -- Kaspi will have 51% after I move 11% of my shares to help in trust, which will result in a control and the board control as well, and Kolesa will be consolidated with Kaspi when we expect the transaction to be completed within this year, so the third or the fourth Q and the numbers which -- and the guidance which we have today excludes Kolesa.

So we'll update that guidance post transaction, post completion of acquisition from Kolesa. So very excited about it. We have 2 great management teams. And together, I'm sure we can bring the value to Kaspi by innovating around the merchants, sellers and consumers in 2 important decisions, buying the car and buying the real estate. David, back to you on the performance and [ vision ] of the platforms.

[David Ferguson, executive]

Great. So thank you, Mikheil. I'll run you through the performance of each of the 3 platforms plus the guidance upgrade for the remainder of the year as we were starting with the Payments platform. So Payments platform, another quarter of good top line growth ahead of our expectations. You've got a combination of a large and still growing merchant base 529,000 merchants, more transactions, as Mikheil talked about, up 39% year-on-year leads to RTPV, up 46% year-on-year.

The take rate remains stable, and that has been the case for some time now. But within the business, each of the 3 platforms, each of the 3 products continues to deliver good growth and also actually consumer growth. The payments platform is the main customer acquisition tool. And you can see here the growth in customers, consumers remains pretty decent, up 15% year-on-year to 12.1 million.

To reiterate the point, Payments platform is becoming more diverse, number one; and number two, each of this having 3 key products: QR, Bill Payments and B2B payments continues to deliver good growth. And in fact, actually Bill Payments, the most sort of mature, almost the day 1 product is still really delivering good year-on-year growth. So across the board, strong numbers. And then as Mikheil talked about B2B, growing RTPV 2.2x year-on-year, becoming more important in the mix and we expect that to continue to step B2B to continue -- to step up and become more meaningful. So the combination of strong RTPV growth with stable take rate combined with growth in interest-free balances up 20% in the second quarter for the first half up 15%, consistent with the full year guidance drops through to both strong and consistent top line growth.

And then the beauty with the payments platform is that top line continues to drop through to the bottom line, it's operational gearing. And that's just a combination of tight cost control around sales and marketing, up 17% year-on-year, so well below revenue. Administrative costs up 2% year-on-year, so basically flat. And incidentally, that's the theme across all of the platforms, dropped through to good margin improvement in the second quarter, adjusted net income margin up around 300 basis points.

So moving on to the Payments platform. Again, a similar message to Payments. Marketplace delivered good GMV growth of both our expectations. And just to be clear, Juma happened last week, so in Q3, not in Q2. In addition to strong top line momentum, GMV take rate moves up, mainly driven by e-commerce and the point that Mikheil made earlier, and incidentally, here to a very decent growth in number of consumers, 6.6 million consumers that compares with 13.2 million consumers overall. So still good scope to grow the marketplace consumer base.

Again, here now we have 3 segments all with a level of scale all continuing to deliver growth within e-commerce, as Mikheil talked about, we now have 3P. We've always had 3P. That's the core marketplace e-commerce business. And 1P today, that's e-Grocery and e-Grocery scaling quickly within e-commerce to around 5% of that 34% that you see there.

Breaking down by product segment, Marketplace always continues to deliver good numbers, volume of purchases up 19% year-on-year combined with inflation, higher ticket size, that drives GMV up 35% year-on-year. The m-commerce take rate benefiting from normalized promo activity. You should remember, again, looking back to the first half of last year, there was a lot of distortion in terms of both demand and in terms of our promotional campaigns due to different external events that were ongoing.

But this a platform on track, good top line dropping through to good take rate expansion. Within e-commerce, there's a couple of different dynamics going on here. So again, actually, the first point to make here is that the base for e-commerce, the year-on-year comp-free commerce is tough in the first half of last year. Demand was subdued in the first quarter, but there was a strong rebound in demand particularly in the latter part of the second quarter. And that's relevant across Marketplace but particularly for e-commerce. So that's the first thing.

The second thing would be overall good growth. Number of purchases in excess of GMV primarily reflects the inclusion of e-Grocery. So now e-Grocery is part of e-commerce, and that will remain the case going forward. e-Grocery is lower ticket size, hence the dynamic of more purchases versus GMV. And you also still continue to have the effect of adding more SKUs to the e-commerce platform which is something we've talked about before and remains ongoing. SKUs increased 1.9x, 3.9 million. We're adding more of the things that you buy on a day-to-day basis. Typically, they come at lower price points, hence, GMV growth below number of purchases growth.

Mikheil made the point earlier, but you can see both the impact of e-Grocery 5% of GMV, 12% of volume orders despite actually still really being in start-up mode in only 2 cities with nationwide expansion still to come. The take-rate here moves up much more materially, 200 bps year-on-year with the majority of that increase coming from both advertising and initial monetization of delivery. So these are initiatives that we've been mentioning to people for some time. They are in early-stage mode, and now you're starting to see them come through into the financials. Although again, as Mikheil said, it's still relatively early days for these initiatives. e-Grocery adds around less than 2% to e-commerce GMV both in the quarter and for the full year guidance. So actually, the strong growth is driven by the underlying or the organic performance of the business.

Travel continues to deliver good numbers outperforming Marketplace overall. GMV in excess of ticket sales, primarily a function of inflation, take rate moving up again a function of higher margin rail versus flights. As we talked about previously, we launched package holidays in May, so not particularly meaningful in Q2, but over the next 12 months, we'd expect travel to remain additive to Marketplace growth and package holidays to remain additive to travel top line and for that matter, travel take rate, but that's more for the next year.

Looking on -- well, the combination for revenue, the combination of strong top line, decent take rate expansion results in revenue growth in excess materially in excess of GMV growth, 78% versus 39%. Moving on to the margin side of things here. The reported margin declines because of the impact of e-Grocery, but to provide more color on that. You see actually that the underlying Marketplace business in the third quarter actually saw slight margin expansion. So that reported margin decline is entirely due to the e-Grocery that shouldn't come as a surprise to anyone that e-Grocery is a low margin business. But again, e-Grocery has canned net income positive and actually is already delivering very, very good bottom line profitability by retail standards.

Moving on to the fintech platform. We talked earlier about higher interest expense being a theme over the last 12 months. You can see though that we're getting the return on that cost in the form of higher deposit customers up 32% year-on-year. Growth in loan customers at a slower rate consistent with previous quarter trends, lending more to existing high-quality customers rather than necessarily growing the overall loan base. Strong TFV growth driven by a combination of Marketplace Buy Now Pay Later, number one; number two, by merchant financing, which is growing at a very rapid rate and now actually meaningful in the mix.

Conversion remains healthy. This is telling you that customers are borrowing, we're paying quickly, borrow, transact, repay, repeat indicative of a healthy consumer and consistent with our full year guidance of around 2x. And here too, you see that the fintech business now comprises a number of different products, which continue to grow fast and have scale with merchant financing reaching mid-teens part of origination. It is growing fast in the second quarter. It was up close to 200% year-on-year. It won't grow at those rates going forward, but it is now at a point where if it grows fast, it makes a difference to the overall growth in TFV.

Fast conversion means that the balance sheet grows at a slower rate than origination. We're sharing the balance sheet more effectively up 37% year-on-year versus TFV origination, up 48% year-on-year. Yield guidance -- yield at 26.2%, consistent with our full year guidance of around 25%. That reflects the impact of Buy Now Pay Later and merchant financing becoming more important in the mix. And here too, you see the impact of the growth in the deposit base, savings up 49% year-on-year. The loan-to-deposit ratio moves down to 74% from 80% this time last year. So clearly, we have flexibility to lend more for that number to grow over the medium term.

Moving on to credit quality. Well, I've talked to you in the Payments Platform about payment transactions, surprising on the upside and Marketplace platform, Marketplace price ahead of expectations. So those 2 platforms themselves are indicative of consumer health.

We've also talked about within fintech, strong growth in deposits, rapid conversion or repayment of loans. Consumer credit metrics, therefore, remain extremely high quality. Whether you look at first, second payment default, numbers are very, very low and stable. We've gone into delinquencies again, low and stable. So both origination and collection trends remain very, very healthy and consistent, if not better, than our expectations for the year.

And again, you see that here on the next slide, cost of risk, 2%. We've talked about around 2% for full year. So it's exactly where we'd expect it to be, an improvement on this point last year. And again, on nonperforming loans, 6.1%. So consistent with the trends that we talked about on multiple previous calls and including the last call where I talked about seasonality, slightly higher in the first quarter coming down, in the second quarter in practice, we're talking about 10, 20 basis points here. Overall, it is stable and expected to remain around those levels for the remainder of the year.

So what does all that mean? It means that the combination of decent TFV growth, yield trends consistent with our guidance drops too, it means decent revenue growth, up 45% year-on-year. The margin is impacted by higher funding costs, up 75% year-on-year where we have been able to partially mitigate that by tight cost control of sales and marketing, down 15% year-on-year, down G&A down 16% year-on-year. Higher interest rates will remain a theme in the -- it will depress impact margins in the second half of the year. But we are now working through that sort of comp effect. Most of the interest rate rises went through in the first 9 months of last year. So the impact on the base becomes less meaningful, particularly as we move into the fourth quarter and next year.

So to wrap all of that up, I mean, I think it's pretty clear that the top line is being driven by all platforms particularly marketplace revenue and fintech revenue, the bottom line being driven positively by Payments Platform with the offset at the profitability level from the inclusion of e-Grocery in Marketplace.

Moving on to guidance. I'll spend a bit more time on this than sort of usual. So I guess there's a couple of things to say here. The first thing to say is, number one, every platform, Payments, Marketplace and fintech, the top line RTPV, GMV and TFV, the guidance is moving up #1. So that's the first point, and it's led particularly by Marketplace. Secondly from Marketplace, specifically the take rate guidance is moving up as well from around 8.5% to 9% and that is on the back of advertising, delivery and the strong performance of Juma in the third quarter. We will repeat Juma in the fourth quarter and sort of preempt the usual question around is guidance concerned. So we try to build Juma into the updated guidance that we've provided to you. So that's the second thing.

As a result of that point is guidance for the bottom line moves up. Adjusted net income goes from around 25% to above 30%. Within this, we're including the effect of e-Grocery, so you know that e-Grocery I mentioned earlier, will contribute just short of 2% to Marketplace GMV. I told you -- we've told you that it's bottom line net income positive. So you can extrapolate, estimate impact there. So that's on e-Grocery. The other point to make as Mikheil said, Kolesa is not reflected in these numbers. When the transaction closes, we will include it. So that's the first thing, as I say, on guidance.

Then the next slide. So what is happening in the business. Business is getting bigger. The business is getting more diverse with different business models at different stages of their development. So Marketplace is the best example on that, where for example, you've got a mix of e-Grocery. We all know that e-Grocery is a large revenue opportunity with a lower-margin business and post the closure of Kolesa. Classified has a lot of smaller revenue pie with a very high margin activity. So you've got different dynamics there. The change in the reported margin, therefore, is not the sort of the best explanation of the like-for-like performance of the business.

So going forward, we will now guide for net income growth rather than net income margin. In practice, you can calculate one from the other, but it better reflects the performance of the business. In the interest of transparency, however, at this point, we've given you our old guidance in both formats, net income margin, net income growth, our new guidance, net income margin, net income growth. So whatever way you want to look at it, it is there and fully transparent for you to see.

But as we move into Q3 and Q4, this will be the way that we present the numbers not everything as usual except the point about net income growth. So that's it on the guidance. I think with that note I will pause there. And Harry will open the call up, please to questions.

[Operator]

Great. Thanks David. [Operator Instructions] And our first question of day is from the line of Catherine O'Neill from Citigroup.

[Catherine O'Neill, analyst]

I have a few questions actually. The first one is on the Classified acquisition and whether you could talk a bit more about the plan for Classified and the opportunities from integrating that within Kaspi because any sort of car loans is one of the areas you show separately as well. Also on the Classified margin, that's low relative to other Classifieds we look at where they're dominant. So is that quite a significant margin opportunity there as well?

Secondly, I wanted to ask about advertising, which you mentioned has been a relatively decent driver of the take rate in e-commerce. Again, could you provide a bit more detail on how you see the contribution of advertising longer term and what type of products you have now and the potential going forward?

And then finally, on B2B. I think in the slide, you talked about innovative products that you're at the start of on the B2B payments. Again, could you maybe give a bit more detail around some of those products and where you see the most potential on those.

[David Ferguson, executive]

So thanks a lot, Catherine, for your questions. I think all of those questions are for Mikheil.

[Mikheil Lomtadze, executive]

Catherine, thanks for questions. In terms of the -- so in terms of the Kolesa I mean and in general, the type of -- the way we look at them is more -- it's a platform where users, sellers and the consumers interact, right, whether, you want to sell a car or whether you want to sell real estate. And because there -- we in the platform, we will be able to come up with insights around those to extremely important decisions. And when our 2 teams work together, things related to enabling those transactions would be, of course, an important theme.

And again, Kaspi itself is a transaction-driven business. That's what Kaspi knows to do. So I think there, we'll have a bit more of insights going forward. In terms of the -- and again, I mean, just to reinforce, you can't really discount the fact that buying an apartment or buying a car, those are really important decisions that you take and some of the insights on the surface are obviously, if you're buying a car, you need tires. And if you're buying an apartment, you probably might do some cosmetic refurbishment or you can buy furniture and electronics. So those are the type of things, which I think we'll be able to just make sure that there is additional value to be created from those insights.

And at the moment, again, we haven't really closed the transaction yet. So we don't really want to go into too far sort of details but those are the leading brands working together that can create the value for us -- for Kaspi. The second question was, Catherine, you mentioned, I'm not sure I understood well about products of Kaspi advertising?

[Catherine O'Neill, analyst]

Yes. Is on advertising, you think got...

[Mikheil Lomtadze, executive]

Yes. In advertising, well, it's -- right now, it's pretty straightforward. We're talking about advertising on e-commerce when the merchants can advertise their listed products. And the merchants are paying for clicks basically, and it's auction-driven. So it's very similar to many other models that you would see on other marketplaces. However, it's also important to keep in mind the way we operate. And also describing this quite consistently that we want to make sure that merchants get the value. So we're not really managing advertising for monetization at this stage or a delivery. We're careful. We want to make sure that the merchants get the value. We want to make sure that those are the type of tools, which help you to increase the sales. And we want to make sure that those are not the type of tools that if you don't onboard them, you cannot sell.

So again, additional tools, creating the value and that's what we're really focused. But the initial sort of monetization and merchant feedback is excited. And we just wanted to really give you the driver of the growth of the take rate. But again, the current product is you as a merchant can advertise the products that you list on our e-commerce platform. On the B2B. Again, your question was about some future products that we're developing or...

[Catherine O'Neill, analyst]

Yes. I think on the slide -- on the top slide, you talked about being at the start of sort of innovative products to B2B. I just wondered if you could give us any more detail on that?

[Mikheil Lomtadze, executive]

Well, I mean, we prefer not to talk about our future products. So I can just maybe describe it the way we look and the way we formulate our strategies, right? We are focused on the transaction, which means step #1 is always let's enable the transaction and that's where we create the value because we help the seller to buy and sorry seller to sell and buyer to buy. And in this case, those are the two businesses transacting together. But obviously, outside of a transaction, there are other services which can be -- which can develop -- which can be developed by the -- for both businesses, which create value, and those are more added value services.

One of the services which we currently are developing, for example, which is useful for business in the future is Kaspi shopping register. So that basically means that we'll be developing register, which enables merchants to issue the state sort of fiscal invoices for the tax purposes, but also you are selling out items that you have been selling and obviously, things like inventory and stuff are becoming important and visible and we probably can help with that in the future.

But again, at the moment, the business is growing itself very strongly and we are always focused on the important priorities, so our priority right now is just to build the foundation for future innovations and to look for the use cases like B2B came out of the some of the P2P transactions and our Payments business insights, right? So that's how we came up with this big vertical.

[Catherine O'Neill, analyst]

Okay. Can I just come back briefly actually, just on the transaction. I just wondered if there's sort of any particular reason why you retained the stake as opposed to Kaspi acquiring 100%.

[Mikheil Lomtadze, executive]

Well, I'm not selling Kaspi. I'm not selling Kolesa. It's a simple explanation. It was a good -- I think it was a good, attractive investment for Kaspi to make considering the value that can be created and Kaspi is making this attractive acquisition. I'm not a seller of either.

[Operator]

And our next question is from the line of Gabor Kemeny from Autonomous.

[Gabor Kemeny, analyst]

I have a couple of questions. One is a broader question on your take rate. If you could give us a sense how you see your take rate trending maybe beyond the next quarter or 2? I'm asking this in the context of your merchant base becoming over time like more mature in size. And seeing e-commerce companies, ecosystems elsewhere with significantly higher take rates, I wondered how you saw the longer-term trends here. The second one would be on the Uzbek expansion. What are your thoughts about scaling your Uzbek presence after this dispersed step of acquiring a Classifieds platform, interested to hear your thoughts on that.

And just finally, on the U.S. IPO, can you confirm what the -- are you assuming that the current shareholders are outstanding shares if this transaction will go ahead or were you planning to raise any new capital.

[David Ferguson, executive]

All right. So Gabor, thanks for your questions. Maybe I'll take first the U.S. listing. and then pass the floor to Mikheil for long-term take rate and long term Uzbekistan. So I guess, just on the U.S. listing, let's say a couple of things. So number one, I'll draw your attention to comments in previous press releases and on previous conference calls, including as of 3 months ago. So that's the first thing.

Second thing would be today's press release is quite clear. We remain committed. We'll update the market at the right time. So I would just add to that, that these processes come with rules, regulations about what can be said and when it can be said. So that's just sort of wait and see in that regard.

To your point specifically or your question, specifically primary versus secondary. Well, I would just simply say that, as you know, this company prints cash for paying dividends. We're buying back stock. We're making acquisitions. So there's no need for the company to raise primary funds given the one of the main reasons for any potential listing is to increase liquidity, that would involve a secondary component from existing shareholders but at this point, it wouldn't be appropriate to sort of go into any more detail than that. Mikheil?

[Mikheil Lomtadze, executive]

Yes, I want to take -- sorry, should I go ahead with other questions?

[David Ferguson, executive]

Yes, please.

[Mikheil Lomtadze, executive]

Okay. So on the take rate, I think we really try to give visibility on the things which are sort of kind of like trends on our take rate, right? So the portion of the increase in the take rate is just a mix of the things which our merchants trade consumers buy. And as you know, we have been moving over time from electronics, which was primarily vertical, we worked several years ago. Now we have a diversified range of the products, so they are higher margin products, and that would be -- that's the result of the growth and then advertising and the delivery, those are for us, the important services.

But again, we are very careful in making sure that we scale them in a way that we create value for the merchants. And the only thing I could say that the guidance we're providing for the year-end is pretty much based on our view of how the trend on the take rate will be developing during this year.

In terms of the Uzbekistan business, we will see. I mean, we don't really want to speculate at this stage. I mean it's a business which has nice -- currently nice presence in the car vertical and gives us an opportunity to be sort of more engaged with the market. But -- that is also a very early stage when Azerbaijan actually are well-established verticals already in their leading verticals, I mean, from the size of them.

So Uzbekistan is actually early stage, but it's good for us to start sort of having the insights about the country and dynamics on the consumers and the lister side of things.

[Gabor Kemeny, analyst]

Can I just quickly follow up on Kolesa. Have you made any calculations of how many new clients have you acquired in Kolesa? I just wondered about the overlap and the new client acquisitions.

[Mikheil Lomtadze, executive]

Well, I mean, I think we are at the stage of our strategy, sort of acquisition -- sort of strategy implementation when we -- even though we're growing quite nicely still on the users and the merchants and listers in case of the completion of acquisition of Kolesa, but we're really thinking in terms of transactions and in terms of value of the business we generate around those merchants and around those consumers. So with Kaspi already having such a huge user base in the country, you can hardly think that you are acquiring any meaningful user base from anyone else, especially when you're growing yourself, right?

So from that perspective, we're just going -- you should think more in terms of we're going into the new verticals, into larger share of wallet, new insights, new spending and things like that. So it's more of a new -- basically the new verticals for the household. But I mean, there is no transaction that can drive Kaspi user base in a meaningful way, especially if Kaspi is doing by itself. So overlap is very substantial basically.

[Operator]

Our next question today is from the line of David Shapiro from Vanshap Capital.

[David Shapiro, analyst]

Thank you Mikheil, thanks David and again, thank you for all the hard work you guys do and the team at Kaspi on a job well done. Appreciate it. Just 2 quick questions on the growth rate. I'm just wondering the cadence of the rollout and how aggressive you intend to be. Clearly, the early signs are very encouraging, but I do wonder whether the first locations naturally would be the best ones in Almaty, and therefore, you might not get the same margin or volumes through the latter one. So I just wanted to know how you guys intend to roll that out, if it's going to be aggressive or more methodical?

And then secondly, on the fintech unit, obviously, with the loan to deposits falling I guess you're in a strategy that you're taking in more deposits than customers that you need. If you can maybe flesh out what you hope to gain from that on conversion later when obviously you can reaccelerate lending opportunities. Just maybe any strategic thinking around sort of why you're allowing more deposits than you really need to come into the business at the high cost of bonds. And that's it.

[David Ferguson, executive]

Thanks, David. Over to you, Mikheil.

[Mikheil Lomtadze, executive]

Okay. So the first question was Postomats, right?

[David Ferguson, executive]

No, e-Grocery I think.

[Mikheil Lomtadze, executive]

Well, I mean it's such a -- it's just -- I mean it's such an underpenetrated market. It's basically just -- we're starting from 0. So from that perspective, there is a lot of opportunity to drive the value and to grow. What you actually will always see in the case of us that, again, we're not -- we don't believe into concept of first mover.

We believe in the concept of right mover. So we want to make sure that the business we develop is delivering value to its shareholders, not only because of the growth perspective, but long-term value because it's got to be profitable. We don't like to run unprofitable businesses, as you can see from our portfolio. So the early results are just encouraging because there are things which we're working between all our teams and the profitability is actually a result of data-driven sort of approach to the pricing or to the SKUs or to the efficiency of the courier services because we're delivering those items. So that's basically where we are.

I mean -- and the dark stores -- we also are -- our business is to deliver very reliably and deliver fast. Most of our items are basically delivered within sort of several hours windows. And as a result, dark stores are also located conveniently on the crossroads and are not located outside of the cities. So again, I mean, it's -- I don't even -- I can't even tell you what's the penetration of the online sort of grocery in the whole country because it's extremely small.

And then the one city for us is just verifying sort of the business model kind of exercise, and we have done it successfully. So what you will not see in Kaspi, you will not see us launching the business, burning the money, showing the growth and then trying to fix it to become profitable. We prefer to make sure that we understand the business, and we're comfortable investing further. And that's what you would see in the grocery that's why even though it's growing fast, we are still focused on the 2 cities to make sure that we can then invest into regional expansion with the confidence.

On the deposit side of things, Again, our strategy is all about consumers and the consumer needs. And in the high interest environment, there's an opportunity just to acquire more consumers. So we don't think in terms of the savings -- size of the savings or the portfolio because if you have a view as Kaspi, which is the long-term view of many years in front of us, the consumers which we acquired today because the high interest environment allows us to acquire consumers with savings, those are the consumers who actually over time will be high-quality consumers for shopping and the marketplace will be low-risk consumers for fintech. So we're just taking this opportunity to acquire consumers.

And when the interest rates will be going down, those consumers are staying with us because then they are engaged in all other services that we have, then there will be becoming even more valuable consumers going forward. And also that will generate for us more value in the profits because interest rates will go down, but consumers hopefully will stay with us just because of our Super App driven business model. So we're not thinking in terms of interest expenses for this year. We're thinking about those consumers being with us in other 3 to 5 years. So that's how we think about consumers with savings.

[Operator]

Our next question is from the line of Mikhail Butkov of Goldman Sachs.

[Mikhail Butkov, analyst]

Congratulations on the results. And I have one question on the acquisition and on Kolesa. We can see in other markets that it is quite common for real estate classifieds and car classifieds to have banking partners for lending. And it is not a strategy of Kaspi to have longer-term lending products, but considering the experience in some -- of some peers, it seems that there can be some synergies like providing mortgages for property classifieds and expanding the car lending as well.

And this is especially taken into account, your deposit -- strong deposit position. Can you potentially expand into the longer-term products with this acquisition? Or if not, what synergies do you see with your fintech segment, which you mentioned in the press release?

[David Ferguson, executive]

Mikheil, do you want to take them?

[Mikheil Lomtadze, executive]

Yes, sure. I mean, first of all, we're thinking much wider, right? So we're thinking more in terms of use case, in terms of insights of the consumers around, their sort of daily activities, around their decisions and things like that. So there are a lot of insights about the consumer, if you think that how much of a car related or apartment-related transactions, purchases, payments and so on and so forth, any household would make. So that's basically is a quite wide range of the things which we're interested in.

Specifically on fintech side of things, car would -- is an interesting segment for us, and we expect the growth there. Again, we already have car products developed together with Kolesa for some time ago, and we would be interested to grow it further and grow it faster. And regarding the real estate sort of mortgages, there are a lot of government state programs for the mortgages, which do their job of allowing people to get mortgage at a reasonable interest rates. So -- and on top of it, it's a long-term transaction. So we don't really believe that in the mortgage specifically, there is enough value that we can create.

So I think there are other players that could actually do it. And it's a long-term funding, which is required for that. But when we think about, again, real estate and apartment, there are other things on the purchases transaction level, which we could explore. But yes. But basically, I think the most important thing just to take a step back, some of the major decisions, households are taken car and apartment, house, real estate. And I'm sure we can innovate around those 2 important decisions.

[Operator]

Our next question is from the line of Sam Griffiths of Vergent Asset Management.

[Sam Griffiths, analyst]

Just one quick question, please, Mikheil. Obviously, you've -- over a period of years now been delivering really strong execution, developing and rolling out your own products. But how do you think about opening up the platform to third parties. Like is that something that's on the agenda? Is it something that you're thinking about near term, long term? And are there any kind of obvious products that you would like on the platform one day but you wouldn't really want to do in-house?

[Mikheil Lomtadze, executive]

In general, I would say that, we are as open as can be, right again for the merchants and for the consumers, for example or for distributors, right. We basically are or for airlines or for operators of the vacation tours. I mean anything around the consumer and the merchant in the household and their daily -- and the dairy activities, we are open to all of them. We're not making that smartphone or that furniture, which we're selling, right? So from that perspective, I guess everything around the payments and shopping, we're actually are very open and because we onboard seamlessly, and we have strong biometrics technology and some other, it helps us to keep the risks in check.

So from that perspective, I would say that we are as open as can be. In the future, we have -- we're just sharing our core business, which is growing very strongly and our technology can be used by wide variety of verticals, right? So from that perspective, we still would like to focus on the things which are which -- where we have competitive advantage and the things which we are doing now extending our platform to some additional services, right? Take delivery. Delivery, even though Postomats is something which we actually is device, which we actually install because we believe that we can install it faster and more efficiently than anyone else.

We are not actually doing our own delivery on our e-commerce side of things in 3P. So we have couriers across the country. We have sorting station companies. We have a smaller companies now when the person would buy just a small minivan and will start delivering for us. So we are building the technology platform. We're not doing these ourselves actually but we're giving them technology, we're giving them volumes, we're giving them standards and we're developing them tools so they can run their businesses more efficiently.

So from that perspective, I guess, we are the platform. So the only thing which I would say we're doing from A to Z is fintech, it's savings products and financing products. That's something which we have just built such a capability when we can make 99% of decisions in 6 seconds, it's very high quality. So if there is any other player that could do that, would love to see it. But it's such a seamless product that from that perspective, we basically are doing, it's ourselves. But everything outside of our fintech is open platform for everybody to engage and to onboard and we're just providing technology really to grow their businesses. I don't know, David, anything you want to?

[David Ferguson, executive]

No, I think that covers everything.

[Operator]

And our next question is from the line of Catherine O'Neill from Citigroup. Catherine?

[Catherine O'Neill, analyst]

I just had one more that I meant to ask you about. It's quite broad. But I wanted to ask you about generative AI, given Kaspi is very data and AI-driven anyway. But just how do you see the impact for Kaspi over the longer term as generative AI is developed and what the opportunities could be there?

[Unknown Executive]

Well, I mean -- sorry.

[David Ferguson, executive]

Definitely one for you, Mikheil.

[Mikheil Lomtadze, executive]

Yes, Catherine, welcome back. Well, in terms of the AI, I mean, first of all, we already employ the AI in our current business. So if you watch, for example, if you look at the number of people that we have in our company since an IPO, that number of people starting from 2020, 2021, '22 actually reduced the headcount of our employees.

Now how many companies that are growing like us that are coming up with the new businesses like us and that are profitable, they have been, what, profitability, okay? Most of the companies are not profitable but they're not growing the headcount. And that is actually a result of us having the AI on the just to give you one example on the virtual assistant. So we have virtual assistant, which is actually -- is equal to hundreds of people when accepting the calls or when complementing the chat or reminding at the right time of the payment schedules and things like that.

So we already do that. And the way that we always look at the technology is not just sort of nice statement to impress our shareholders is actually or the investor community or you, it's actually how we use it.

And one specific use case for us is reflected in the number that instead of growing our headcount, we have actually developed a virtual assistant, which has taken the vast majority, was significant share of most of the consumer interactions across all our consumer interaction channels. So that's the one example for you. We have face recognition, which enables us to control the risk. That's another example.

Risk, which you have, which is less than 2% sort of cost of risk, world class. Again, it's driven by machine learning, artificial intelligence, instruments, which enable us to analyze the vast amounts of data in just 6 seconds. I mean, can you imagine how much -- how your technology needs to be developed so that you can make high-quality credit decision in 6 seconds.

And that's basically all these tools, they're allowing us to do it. So our view is very simple. We believe that we can deliver the value to consumer and merchant and we can do it cost efficiently. Then we use or develop ourselves the tool like artificial intelligence and any technology as a matter of fact. And virtual assistant is one of the examples, which we have been quietly rolling out for the last several years actually. So it has been very successful.

[Catherine O'Neill, analyst]

Okay. Great. So for you, it's more sort of incremental evolution in general to AI, given how embedded AI already is.

[Mikheil Lomtadze, executive]

We will see. I mean it is yes. But let's see the value it delivers, right? We're not going for fashion. We're going for delivering the value and making our business more efficient type of AI at this stage. And we're not the universe to where you can use the ChatBot to develop your essay. So we're transaction-driven business.

[Operator]

Thank you. We have no time for any further questions today. So it would be my pleasure to hand back to David and Mikheil for any further remarks.

[David Ferguson, executive]

All right. So thanks, Harry. Thanks, everyone, for joining us. We're going to wrap things up for today. If you have follow-up questions, please get in touch directly. Happy to speak off-line. Thanks, everyone, and see you in the autumn.

[Mikheil Lomtadze, executive]

Cheers. Thank you. Bye-bye.

[Operator]

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