Thank you, operator, and good morning, everyone. Welcome to the QIWI Third Quarter 2013 Earnings Call.

I'm 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 Tuesday, November 26, 2013. Access information for the replay is listed in today's earnings press release, which is available on our Investor Relations' website at investor.qiwi.com.

For those listening to the replay, this call was held and recorded on November 19, 2013.

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 and 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 statements to reflect the events that occur after this call.

Please refer to the company's most recent prospectus on Form 44B1 filed with the Securities and Exchange Commission for the 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. [indiscernible] to IFRS measures and certain additional information are also included in today's earnings press release.

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

Thank you, Yakov, and thanks, everyone, for joining us today. I'm pleased to report another strong quarter financial and operating results.

For the third quarter, our adjusted net revenue increased 49% year-over-year, reflecting strong growth across both our QIWI Distribution and Visa Qiwi Wallet segments. Adjusted EBITDA grew 46% in the third quarter and our adjusted net profit increased by 56%.

Our results for the third quarter reflect continued strong secular growth trends in the payments markets we serve, as well as successful execution of our growth strategy.

I'm pleased with the progress we are making in driving the adoption of our Visa QIWI Wallet, as well as the with the progress we are making in further penetrating our target markets with our complementary suit [ph] of value-added services. I would like to thank our management team and all of our QIWI employees for their continued dedication to making QIWI the leading next-generation payment service provider in our market.

Alexander will walk you through our results in just a moment.

But first, I would like to share with you some business highlights, market development, as well as some important fusion corporate development with a particular importance for QIWI.

First, we continued to see strong growth in our Visa QIWI Wallet business. The number of Visa QIWI Wallet accounts grew by over 50% to approximately 15 million and payment volume grew by over 60% compared to the third quarter of 2012.

We believe our customers truly recognize the value and the convenience that our electronic wallet [ph] provides.

Second, we announced today that our Board of Directors approved the dividend of approximately 6 point -- $16.7 million or $0.32 per share. Our dividend payment with the exception of QIWI's significant financial flexibility supported by our strong free cash flow and balance sheet and our commitment to enhancing total shareholders’ value.

Our Board of Directors approved the declaration of intent with respect to future dividends, as you can find in the earnings release.

Next, we have seen an outflow of banks which use our advertising platform due to the structural change in retail banking segment. In addition, certain mobile carriers substantially increased the fee for delivering Internet to our clients.

As a consequence of these 2 factors, we expect our revenues to continue to decline in Q4 on a year-over-year basis. In response to the changing market conditions, we expect in 2014 to substantially shift our focus to [ph] more targeted types of advertising.

The financial effect on our stability in 2014 is yet to be determined.

Also, we moved to a new office in October, which simplified communication between business units and improved our efficiency [ph].

And finally, in October, we completed a 9.4 million share secondary offering from certain of our shareholders. I would like to thank our existing shareholders who participated in the offering for their continued support and to welcome our new shareholders.

Alexander?

Thank you, Sergey, and good morning, everyone. QIWI continued to deliver strong financial operating performance during the third quarter.

I will now spend some time going through our results in more detail starting with our revenues.

Our cost of revenue from the third quarter increased 32% to approximately RUB 3 billion, up from RUB 2.3 billion in the third quarter of 2012. Our adjusted net share increased by 49%.

It is RUB 1.2 billion, up from approximately RUB 1.1 billion in the third quarter of 2012. By important segment, QIWI Distribution net revenue grew 13% to RUB 835 million.

Revenue growth was primarily driven by 12% growth in payment volumes to approximately RUB 133 billion. The increase in QIWI Distribution payment volume was principally driven by an increase in Visa QIWI Wallet users reloading their wallets on the QIWI Distribution network.

Due to the factors that Sergey mentioned earlier, revenue from our value-added services decreased by 12% in the third quarter of 2013 to reach RUB 133 million.

Moving to Visa QIWI Wallet. Visa QIWI Wallet net revenue increased 134% to RUB 764 million.

Revenue growth was primarily driven by the following 3 factors [ph]. First, an increase in active accounts that Sergey mentioned and consequently payments were installed [ph].

As a result, our Visa QIWI Wallet payments volume was 63% to reach RUB 64 billion in the third quarter. Aside from an increase in net revenue yield, visa QIWI Wallet net revenue yield was 1.19% in the third quarter, up from 0.83% from the prior year period.

The increase in Visa QIWI Wallet net revenue yield was driven primarily by an increase in payment volumes associated with higher revenue-generating transactions such as e-commerce and higher cost of machines from [indiscernible] account. Starting in quarter beginning in [ph] March 2013, QIWI introduced wallets that discontinued in the February of 2012.

These fees RUB 134 million in the third quarter, up from RUB 38.5 million in the prior year period. Now we expect to continue driving this revenue going forward.

We anticipate the amount of these savings will continue to decline in the near future. So while we experience historically [indiscernible] slightly before it discontinues.

Total QIWI adjusted net savings growth, excluding revenues from active [ph] accounts increased 42% compared to the prior year. Also I would like to highlight that even with excluding these fees, Visa QIWI Wallet net revenue again almost doubled when compared to the third quarter of 2012.

Now moving to the expense side of our income statement. Our selling, general and administrative expenses increased to RUB 684 million, up approximately 66% from the prior year period.

SG&A expense in the third quarter was primarily impacted by one-off -- onetime monitoring increase and other expenses resulting from our transition to the new office building and as well as payments [ph]. Overhead expenses are considered [ph] as little transition to our new office building, as well as payments were not significant last year but [indiscernible] in the future.

Adjusted EBITDA was RUB 793 million in the third quarter, up 46% compared to RUB 542 million in the prior year. The increase in adjusted EBITDA was primarily driven by revenue growth.

Adjusted EBITDA, excluding the effect of revenue derived from inactive accounts was RUB 659 million, up 31% when compared to the prior year.

Adjusted net profit was RUB 605 million, up 55% compared to the prior year period. Adjusted net profit, excluding the effect of revenue derived from inactive account net of tax increased 39%.

Finally, as Sergey mentioned, we announced today that following the determination of third quarter 2013 results, our Board of Directors has approved a dividend of $16.7 million or $0.32 per share. The [indiscernible] amounts will depend on the certain circumstances after the end of each particular quarter and the final decision rests with our Board of Directors [ph].

The dividend record date is November 28, 2013, and QIWI intends to pay the dividend on December 3, 2013.

Now I would like to review our 2013 guidance. Right now, performance year-to-date and now [ph] Inside the remainder of the year [ph], we are raising our adjusted net revenue and adjusted net profit guidance ranges.

We now expect adjusted net revenue to increase by 42% to 45% over 2012 versus our prior growth [ph] of 27% to 30%. And we now expect adjusted net profit to increase by 50% to 55% over 2012 versus 35% to 40% previously.

With that, [indiscernible] to open up the call for the questions.

Just wanted to start off, Sergey, you made some comments about some banks getting off of the platform. Is there a way to ballpark that impact heading into fourth quarter?

And maybe when it began? And should we be thinking then that your Wallet volume will slow in the fourth quarter but the net revenue yield will be going up overall?

Well, I think that we will not be able to justify the fourth quarter by any very good actions. So I think in 2014, we will definitely do that because banks were quite a big chunk in the revenue of advertising [ph], so to switch to another territories or in another advertisers, it takes some time.

So I don't think it will be that quick. So in terms of the impact on the total volumes in Wallet, I don't think that we will have impact because we will have some seasonal impact on volumes in December so we will see quite a big increase, I think, seasonal increase in the end of the year on the volumes so it will not affect that much our revenues solution.

Okay?

Okay. So we'll see more of this in '14 as opposed to '13 is that...

That's true. Yes.

Okay, okay. And then, looking at the net revenue yield, the underlying yield of 1.19%, which is up quite nicely, is that sort of a sustainable run rate going forward?

George, it's Alexander. So we think yes, that's a sustainable run rate.

Actually, we were thinking about our mid to long term target in terms of net revenue yield should be around 1% so we reach that a little bit quicker than we planned. So we -- our general thinking do not have any immediate plans to substantially increase the yield.

What I assume in the, let's say, in red [ph]. So we're going to be adding new products as the [ph] reduces [ph] high yield for but will [indiscernible] consumer and we believe that net revenue yield in your Wallet will be sustainable in the near term.

Okay, great. And then just last question for me.

As it relates to the Visa relationship, can you kind of denote the progress that you're making in terms of the integration into Visa net and the shift to the multibank issuer model? Maybe anecdotally how that is progressing?

Well, we have met a new team of Visa. They're making some changes in the team for Russian territory so we've met with them and now we will have another meeting very soon when we will make some plans on 2014.

So I would say we are progressing now that we get what we wanted but still we are on some changes on both sides. We were moving offices either we're changing some staff and we are adding marketing.

So I think we will be able to tell something in the first quarter of 2014. Right now, we are just making plans and putting some figures into that plan.

As I said before, the results for the impacts on P&L we will have on -- we think that we will have on 2015. So it's all progressing and will be progressing throughout 2014.

Two questions, please. Number one, you talked in the past about the potential to do some kind of deal with one of the Russian mobile operators.

Can you update us on whether negotiations are still going on in that regard? And if so, how close are we to being -- to reaching any kind of an agreement?

That's the first question. And then, number two, I know looking into sort of midterm you've talked about revenue growth of 20% to 25%, but I guess, that's an average over a couple of years.

As we think about 2014, where are you happy for market expectations to be at this point? That's it.

Thank you, David. So for our negotiations with the sellers, we're keeping them growing.

So we're I think progressing quite good on that. The contract itself is kind of complicated so it's not that simple for us and we are still in the progress.

We're already doing something internally on our side and on the sellers side to support this project, but I don't think that we will be able to release anything before the end of the year right now. So I think it will be moved to the beginning of the next year.

On the 2013, we are basically are now in the budgeting purpose for next year. We have one board meeting with the -- where we discussed the strategy and key parameters of the budget that we'd like to achieve in 2014 and beyond.

Net profit is not yet complete as far. We -- though we remain confident that we basically would like to reiterate the midterm guidance that we provided [indiscernible] that our net revenue will be going at 24% year-over-year and net income at 25%.

Though we need to sort out [ph] something to now revenues and expenses, something like the changing landscape in the banking industry. That certainly, if possible, we will be coming back to you with 2014 guidance after we issue our 20-F for 2014.

My first question, I guess, is last year, when we look at net revenue growth in the fourth quarter, it was up a little over 15% sequentially. This year, the way that you're guiding for the full year guidance, you're kind of implying a flat sequential Q4 if we exclude the extra RUB 138 million of inactivity fees from Q3.

And I'm just wondering -- I mean, are you attempting to be conservative with the Q4 kind of the implied guidance? Because it seems like Q4 would have a nice seasonal ramp.

Yes, exactly. On Q4, yes, I mean, it's not that we would like to be conservative for the -- [ph] we provide the guidance we think is perfectly achievable and we -- for Q4, from the standpoint of our corporation in QIWI Distribution and QIWI Wallet, we're quite confident about the growth phase in numbers are quite feasible.

But as Sergey discussed, we have that change of landscape in advertising revenue line and that's, let's say, an amount [indiscernible] so far. So we are now evaluating what impact of that [indiscernible] going forward, that's why we cannot estimate [ph] exactly the [ph], the net revenue of that specific line item.

That's why we'd like to be conservative.

Okay. That makes sense.

And my other question is, I guess, in the QIWI Distribution business, volume growth continues to be very strong, and I think 12% growth again this quarter. Is that something that you do expect to get closer to the mid-single digits over the next few quarters?

Because it's continued to hold up so well.

Look, we -- frankly speaking, as we discussed, we are likely going to be changing the composition of the segment. QIWI Distribution is becoming just one of the chain of QIWI wallets, so we are not really guiding separately on QIWI Distribution growth rate.

Though the [indiscernible] QIWI Wallet is now feeling the quite substantial degree of the growth of QIWI Distribution Wallet in [indiscernible]. I mean, internally, we would expect that QIWI Distribution will continue to yield to a substantial degree by the growth of QIWI Wallet.

Though, I mean, it's not a matter of the guidance. So we like to [indiscernible] representing the products and categories rather than business units separately QIWI Distributions to QIWI Wallet.

Okay. And how much of the QIWI Distributions revenue now comes from advertising?

And maybe how has that changed over the last several quarters now?

It's going quite substantially, but in Q3, it's actually -- it decreased [indiscernible] effects that we discussed. As of now, total net revenue from advertising QIWI Distribution is less than 5% of total QIWI Distribution revenues in Q3, I should say.

I guess 2 questions. One, just going back to the revenue yields, can you talk about the business mix, and kind of how e-commerce grew, and kind of what percentage of total volume that it represents now?

Look, we are not disclosing that. So again, as I've said, we are now rethinking our understanding of what segment of the company should be and we may be disclosing that next year, but we reiterate that e-commerce is one of the fastest growing segment and that is primarily the reason for growing yields.

Okay, great. And then, any update on the regulatory environment in Russia?

A few things are going on, if you can just comment on that, it would be great.

Well, we think that there may be some regulatory changes in the banking segment. So we've foresee the -- there can be further increase in the reserves rate and maybe it will affect things.

So if the bank effect will be big, we will still continue to see some decreases in this segment or the -- not much as fast growth that we experienced before on, for example, loan repayment programs, but again, it depends on what will be the reaction of the market on these changes and what will the changes be? So we don't foresee any regulatory changes in our particular segment of the third quarter [ph].

I have 3 of them. First, your new guidance on revenue implies a slowdown of revenue growth in Q4 down to 25% on my estimations.

I just wanted to make sure that this does not include any significant impact from macro slowdown in Russia. So to rephrase this question, do you see any impact on your business from the continued macro slowdown in Russia or not?

This is number one. Number two, can you please roughly disclose the size of the cost which is related moving into the new office or just give me the rough impact on EBITDA margins in basis points?

And number three, on advertised revenue, am I right in understanding the revenue was declined in year-on-year in Q3? It was minus 12%, right?

And if yes, I understand that was the year-on-year growth in the previous 2 quarters. What would you expect in terms of the dynamics in Q4 for the advertising revenue?

Okay. Thank you very much.

Great questions. On the -- yes, again from the guidance.

From the macro impact, we do not really see so far [indiscernible] come from time, but from the volumes and average percent [ph] to our wallet and that's actually our main driver for the growth. We do not feel this so far.

Again, some change for landscape in the banking news [ph] can have impact on that we are not really in the position now to itemize on what the impact can be. On the second question, for the total impact on the EBITDA margin of the -- of those nonrecurring cost to move into the office, and amounted to approximately 3.3% in actual demand is being around RUB 13 million [ph].

And revenue from advertising. Yes, in Q3, the advertising revenue actually decreased on a year-over-year basis.

Short time [ph] for the last 3 years and we can expect that if you'll be declining on a year-over-year basis in Q4, again, to what extent, we are still estimating, but it certainly depends on what the [indiscernible] limitations imposed by telcos will have [ph] on that. But it can be quite substantial.

Just had a couple of follow-ups to what my colleagues were asking. First question I have is can you please give us the exact revenue estimate for the advertising?

I think Sergey said it's RUB 133 million. Is it -- this correct or there was another figure?

Yes, exactly. That's was the amount in Q3.

Okay. Can you just give us the similar amount in third quarter last year?

And if possible, in the fourth quarter last year, just so that we have the basis?

Basically, the similar amount of last year was 12% higher as we said on the -- and I think going forward, look, I mean, approximately half of the advertising is [indiscernible], one is that our slow bank but used other bank [indiscernible]. And secondly, the limitation from [indiscernible] and advertising is a substantial part of our advertising [ph] revenue.

So we're really just estimating what effect that will have or not. We are slightly -- we're seeing the advertising will be declining in Q4 on year-over-year basis.

Yes. No, what I was actually asking is that -- ok, so for me to get to the third quarter 2012 advertising revenue, I just need to decrease the amount you have now by 12%.

Now can you just give me the fourth quarter number so that I have basis for the fourth quarter 2013 estimates? I need fourth quarter 2012 revenue figures from advertising if you have them.

Well, I don't have it right now. I don't think that we've ever disclosed that -- so we're going to be disclosing that one when we issue the full year results.

All right. And can I use your prospectus full year revenues minus the 9 months as you just reported or they are not consistent, because this is ...

They are consistent by prospectus [ph].

Okay, all right, very good. So did I understand correctly that you had 2 issues?

First of all, you had higher costs on their estimates, so pretty much up, you pay more to that network operators [ph] with estimates that you're sending? And second, you have some banks canceling their programs with you?

And then, these [indiscernible]? Okay one does not depend on other, is this 2 effects coming all together, correct?

Exactly. Exactly, that's right.

Okay. And from the bank's perspective, what is happening?

They're just seeing the slowdown in the consumer loan growth and that's why they don't need as much of the advertising they needed previously? Or they're just seeing the pull in the effectiveness of the contains they've been running through you?

Do you know what was that?

I think it's both. First of all, they are right now reviewing their policies and their strategy on consumer loans because of the regulations and the reparations [ph] that are coming.

And second, they live only on -- they leave only most efficient channels. For example, if they already have clients, they would rather call to their current client and/or previous clients to try to give them loans instead of searching for new one.

Understood. Can you maybe talk just a bit about any other projects maybe not necessarily advertising.

Like what you call a value-added services that you could launch, which could substitute potentially the advertising revenues, say next year? Is there anything you can talk about like just the products?

I mean, well, look, we certainly have some products in the pipeline and that they are -- I mean, strategically, what we think we're going to be doing in '14 and our strategy is unchanged in this particular respect. We -- even having all those revenues this year, we were all communicating [ph] that does not mean that the advertising debt we would think is a long-term growth driver and our strategic idea was to move towards the more targeted and smart types of advertising.

That change of landscape is basically the reason for us to speed [ph] up that kind of work. The exact products and instruments we're going to be using -- I mean, we have -- few of them was used internally and we'll announce to the public as soon as we launch them.

Do you think they will be commercially launched by 2014 or is that unlikely?

Some of the products at least that may increase will certainly appear ready in 2014 that's for sure. And also the advertising revenue will come back again but not for bank maybe from other nation [ph].

So it will be substituted somehow.

All right. Okay.

There's one other thing that I wanted to ask you guys. Is on these fees from inactive accounts, so they -- for the second quarter in a row, you keep them actually quite high, although, I think you reflected at the last -- at the previous quarter that they're going to decline.

They decline just a bit, but they haven't come back to RUB 30 million, RUB 40 billion level that you said were sustainable. When should we expect these revenues to really decline substantially or we should not?

I mean, we are expecting internally these revenues will be declining. So we'll see what we're going to have in Q4, but certainly, in 2014, that revenue will come at least now in the segment with [ph] models to much more level.

We just need to -- just need sometimes to shift what statistically what's happening with [ph] the users make appropriate information of the training.

All right. And normal level is RUB 30 million, RUB 40 million per quarter, right?

Or...

We certainly are. Historically, if you're looking for our Q1 to Q4 [ph], last year before we discontinued charging for foreign activity, It has been around RUB 13 million worth of quarter.

they adjusted to we may expect something like, I don't know, RUB 40 million, RUB 50 million of a lot of [indiscernible]. And again when we come to that level, we just need to give more statistics [ph].

I have 2. Sorry if it was asked, but I just couldn't connect.

I just wanted to understand what was a reason for such a slowdown in growth in average volume per QIWI Wallet account? It was just 6%.

Can you just please explain? And my second question is a follow-up on the fees from inactive accounts.

Do I understand correctly that you didn't charge for inactive accounts in fourth quarter 2012 and first quarter 2013? And therefore, we should see kind of growth from basically 0 in the following 2 quarters and this should support also the growth?

Okay. So on the short question, yes, we saw some slowdown in average spread of wallet we basically have 2 reasons for that.

We obviously [indiscernible] inside where we break out of the users of QIWI Wallet by different categories. But in general, what is happening first of all, seasonality, so in Q3 we have July and August and both markets are usually way weak on equal on loan line activity for the people.

That's one. And then, secondly, we are probably approaching kind of the natural growth ceiling, and it's obviously, that basically every consumer joining of QIWI Wallet is generating less volume.

And that's our response to that. Basically, we [indiscernible] we are not only keen to acquire new consumer, but basically, keeping existing loyal ones [ph] and the average spend [ph].

And for that, we have the kind of a big problem for next year. So we're going to be analyzing the volumes, the -- or I mean, provide for different categories from the [indiscernible] that.

Well, on the second question, again, I'm not sure that we've ever disclosed the inactive accounts or what the average for -- I'm not sure I'm able to.

Okay. But can I just ask a follow-up?

You mentioned approaching growth ceiling. This is for average volume or active QIWI Wallet account?

Average volume, for average volume. Basically, we're in quite special number of new users, of new comers, and you could the Wallet -- it is certainly quite complicated structure, but I mean, you may understand that every new user, the new comer is usually producing less volume than the loyal one.

And that's actually a loss of inside the whole user base [ph] that is how we feel. we really would expect that we still have some potential to grow to the Q4 next year but we are not sure exactly what the exact numbers so far -- or we'll report them to you when we have the actual data.

And one more question. In October, you signed an agreement and now in Moscow people can pay for parking through Visa [ph] terminals.

Do you think that this can provide boost in revenue in payment volumes in QIWI Distribution or this will just offset decline in other services and you think that the growth will maintain at the current level?

So yes, we did announce the cooperation with Moscow parking and also in -- not only in Moscow but in other cities we are working with the client that [indiscernible] they are making a parking. But in terms of the total revenue, it is so small that you will not see any impact on our net revenues or any yields [ph].

Thank you very much. We remain very excited and confident about our growth and growth opportunities.

We thank everyone for your support, and we look forward to discuss our year end results, and we will provide more insight into 2014 on our next quarterly conference call. Thank you very much.