Kaspi.kz - Earnings Call - Q3 2025

Transcript

Speaker 0

I'd now like to hand you over to today's host, David Ferguson, Head of Investor Relations at Kaspi.kz. To begin, so David, please go ahead.

Speaker 2

Yeah, hi, Sam. Thank you. Good morning, good afternoon, everyone. Welcome to our Kaspi.kz's 3Q 2025 results call. Apologies for starting a little bit late, but let's crack on. On the call, you've got myself, David Ferguson, Mikheil Lomtadze, CEO and co-founder of Kaspi.kz, Tengiz Mosidze, and Yuri Dedenko, the Deputy CEOs of the company. As usual, Mikheil and myself will take you through the presentation, and then we'll open up the call to Q&A where the whole team is available. On that note, Mikheil, over to you. Thank you.

Speaker 1

Yeah, thank you, David. Let's go straight to the presentation. Briefly, the results for the quarter across all our platforms. What we're showing here is the results also without excluding the effect of some external factors. The payments grew, TPV 18%, revenue 10%, the nice growth on the net income of 12%. The marketplace is mainly impacted by the shortage of supply of the smartphones and iPhones, more specifically. Our growth has been 12% year over year, but 20% GMV growth in case if we exclude the effect of the smartphones. You can also see that our revenue would be 32% up, excluding effect for the smartphones, and 16% net income growth, excluding effect of the larger of the smartphones. 7% growth if we consider that factor in.

The fintech also has shown nice growth, 16% on TFV, 24% revenue, and it would be 28% growth, excluding some of the effects like tax on the government securities revenue and other external factors. I will go through them on the following slide, but 15% growth if we actually include them. Our top line growth of 20% year over year and 23% if we exclude the external factors and 21% if we exclude the external factors as well. Also, considering where we are in terms of our performance and the next year, we are also starting ADS buyback in November for $400 million. We'd like to bring forward, considering our cash generation and performance, we'd like to bring forward the distribution of cash, but also it's a good investment considering where we are on the stock.

This is just briefly some of the factors we have listed for the external ones, which had the impact on our performance from the financial point of view. Again, the core business has performed really nicely. Some of the things which have happened from external factors is a smartphone registration requirement and shortage of supply of iPhones that had about 8% impact on the GMV and 3% on the consolidated income. However, we still believe that the demand is there, so next year should be a good year to recover. 10% tax on revenue from government securities. I mean, in most of the markets, actually, the revenue is taxed.

Kazakhstan introduced the tax on the revenues from the government securities this year, and it's minus 1% on net income, increase in minimum reserve requirements, but also we cannot, those reserves are kept with the national bank and there is no interest accrued. That had the impact of minus 1%. The base rate increased from 15.25% to 16.5%. Again, impact on consolidated net income minus 4%. We are in the environment of high interest rates as the interest rates inflation normalizes. There is an additional performance positives for the next year. This is just to tell you and explain that actually the core business is performing really nicely and the growth rates are quite high. If you exclude the smartphones, our GMV growth has been 25%.

Highest growth, top five categories like beauty and personal care, 69% growth, clothing, 51% growth, and home and garden, 35%. We are really growing across the board on many of the categories. The smartphones, because of the supply disruption, really had an impact this year. We believe that demand is there, so we expect to recover next year and base also would be supportive for the growth next year. E-grocery, we continue building up the leading e-grocery business. As you can see, we continue growing very nicely. We have about 1.3 million customers now. We grew on the GMV 53% and we are growing on the transactions 55%. We are scaling across the board. As we speak, we had nine dark stores in the third quarter. We are just adding another one. We plan to enter at least two more cities next year.

We have ambitious plans. As you remember, the business is growing fast, but it's also profitable. For us, it's a very exciting vertical, which both drives the engagement, but also brings a lot of value to consumers just because of the speed of the delivery and the quality of services we provide. Another update is also on connecting to other banks and payment systems to our payment and the QR code ability to pay with the QR code. Now we have even more banks connecting to our platform. The growth has been very high, 176% in terms of the TPV and 5.4 million transactions in the third quarter. Transactions are going even faster. We have now seven banks connecting to it, and we have Alipay, which enables our consumers to transact with the QR code in the countries where Alipay is present.

We have also introduced the functionality when users of Alipay coming to Kazakhstan can also transact with the Kaspi QR. We are building up this flexibility for our consumers, which is also useful for the merchants, and we continue growing very nicely and fast. We also are going for the specific verticals we have mentioned briefly during our previous calls. The restaurants is one of the verticals which we are excited about. It is a major vertical and the spending in our lives. We have been growing very nicely. This is the functionality to remind everyone when the consumer can actually pay with the QR code straight in the restaurant instantly, but also can leave the tip, and all this happens in our mobile application. TPV has grown 259 times, and the transactions in excess of a million transactions in the third quarter. Growth is there.

The vertical is also a very valuable service for the restaurants, and consumers love it. We continue rolling this out. As we are going for the restaurants vertical, we also have integrated the third-party restaurant delivery platform. It's Glovo. It's a subsidiary of Delivery Hero in Kazakhstan. It's a top three player in the country. We have integrated them in our super app. Basically, consumers can access the Glovo service through a single registration, which is Kaspi ID. From the registration, they can have access to the full service of the Glovo app. They are also integrated with our payments. The consumers can seamlessly pay with the Kaspi Pay. It's a major step for us. We're working with a third-party mobile application. Yeah, it's exciting that the teams are now working together to develop the service further.

This is again around the restaurants vertical, and we're excited to continue building up services in the specific verticals in the future. We have also done, Kaspi has been doing regularly the events, Kaspi Keynote event, when we present the major innovations and demonstrate them and tell what the service is about. We have launched three services on the Kaspi Keynote event. It's Pay by Palm, it's Advertising Service, and the Kaspi AI. Pay by Palm is probably one of our major innovations in the payments after we have introduced the QR code. Before that, we have introduced the payments and the wire transfer by the mobile number. We were the first one to do that. It's a very cool feature when you basically just connect through our mobile application and the device to the Kaspi Pay by Palm, Kaspi Alakan. Alakan in Kazakh means palm.

You can simply put your palm on the top of our device, and the payment goes through. It is a very exciting innovation. We are planning to roll it out at the end of this year. It will be free of charge for the merchants for the first three months. In general, our view in the payments business is that we would like to give as much flexibility and choice to consumers as possible. Our consumers are able to pay with the card, obviously, can pay with the QR code, can pay with the palm. In the future, we are also expecting to introduce some additional services. We would like to give as much flexibility to the consumers as possible. We are also working with the national bank so that our consumers can also pay through any QR code at any merchant.

Our consumers will have as much choice as possible. This innovation will just bring an additional very exciting way to transact in the stores, especially in the high-intensity transactions. There is a video we have published both of Kaspi Alakan and also the event. You are welcome to check them out. It is really cool, and the service is really exciting, and initial feedback is really great. Advertising revenue has been one of the fastest-growing revenue drivers for us on the marketplace specifically. We have grown that revenue 56% year over year. As we think about advertising, we constantly launch the services which enable merchants to increase their sales, but also for consumers to make very informed decisions. We have launched, as we speak, the service when our merchants can advertise on the third-party platforms.

It is a pretty exciting and really cool service when you can immediately, almost like within one minute, set up the campaign. You can manage the campaign from the screen of your smartphone. You can review the analytics. On the third-party platforms, you can preview your ads. The platforms which merchants will be able to advertise are Facebook, Instagram, TikTok, and Google. We are very excited. This is just one more tool for our merchants to have very efficient advertising campaigns, but also they can track them, they can manage them, and analytics are really in-depth around those marketing campaigns. We are very excited about this new service in advertising we have just launched. We also have been working a lot behind the scenes on the AI, Kaspi AI Assistant. Our view of Kaspi AI Assistant is actually quite simple.

We call him Assistant because we believe that technology that we're developing at Kaspi will help to make daily tasks faster, simpler, more convenient, better quality. We are looking for very specific use cases which technology we're developing in Kaspi can enable. Technology has very wide, as you guys know, very wide applications. However, we believe that to deliver the most value, we want the technology to be assistant in specific tasks for either merchants and in the future consumers. This is the first application of that technology which we're launching. It's a Kaspi AI Assistant for the merchants. The way the service works is quite straightforward. David, can you switch to the slide?

Basically, you can create the goal and application of this service is to enrich the product content and create the rich content, which helps you to increase the interest from the consumers, and therefore that converts into your sales. It's basically you are uploading the photos. You can see some functionality screens here. You're uploading the photo, then Kaspi AI creates the photos for your product. In this case, for example, the Kaspi AI will select the model which will be wearing your hoodie. Kaspi AI also creates the description. Description is based on many different insights and parameters, which also includes the customer reviews and what is important for the customers in order to make the informed decision about this product. Afterwards, you can preview the product and you can publish it.

Before that, it would take whatever per item, maybe depending on how complicated the item is, maybe 10, 15 minutes to upload the item and create the description. That was one of the main pain points for the merchants. Now it just takes the minutes and everything is filled up automatically. You can even make a photo of the label, and then whole characteristics of the product will be filled up also automatically. We still call this an assistant, which means the control is with the merchant or with the user. User can edit, user can confirm those descriptions, can select the photos, can ask AI to create more photos, and so on and so forth. That is really a very powerful tool which has shown extraordinary results.

As most of the technologies and the services we're developing, we run those services on ourselves first, and then we get convinced the technology is really working and the service has the value. After that, we offer it to customers and the merchants in that specific case. We have enriched about over 500,000 products. I just can show just some of the examples. For example, this one is the kettle. How much else you can say about the kettle in order to have more interest from buyers and to drive your sales. Actually, what Kaspi AI will suggest you to do, and again, this is all generated by Kaspi AI. Those are actual screens and actual texts. Interaction works similar to the AI assistant. It will create the photo in the interior.

It will suggest to create the photo with the hand holding the smartphone, for example, because this is actually a smart kettle. It is not only boiling water, but it is doing a bit more of the functions. It will also suggest to create and will create the size of the kettle because then you can understand from those photos that actually this is the way it looks in the interior. It is more just the kettle is a smart kettle, and it also has sizes so you can understand how it stands in the interior in terms of the size. It will create also the description, which will give you more details around each of those points. This, for example, card product has been enriched, and the results were quite meaningful.

We have this product after enrichment increased 35% in clicks interest from consumers and gave 83% increase in the sales. Again, this is the product which was just a photo or limited photo, limited description. This is the rich content which sells, which also gives consumer more tools to make the right decision. Another example is tires, how much you can tell about tires. Obviously, tire is a tire. Everybody knows what tire looks like. However, Kaspi AI actually identified that if you create the infographic which has on the first page, which usually consumer sees, you need to say actually what is the seasonality of this tire and also list some main most important characteristics in infographic so that consumer can make a decision while looking at the photo. This is how Kaspi AI created the whole thing.

It actually inserted the description and created the description which says a little bit more on every individual most important parameter of the tire so that consumer can make the right decision. Again, all of those are created by Kaspi AI, including these photos and infographics and description. Clicks actually increased 4%. They drive more interest from the consumers, and 53% of the sales increased just because of this change on that tire. It is really exciting technology. We have been working on this behind the scenes for quite some time. We have been running, obviously, running different experiments before we decided to launch on the merchants. Here, what you see on the screen is like we would normally do with any similar technology and innovation. We basically identified 30 days before. Let's assume there are two similar control groups, right?

Red is the product which we improved, enriched the content, and then the gray color is the control group. Those are the similar products. Let's assume similar kettles or similar tires. We observed them for 30 days. As you can see, behavior is very similar because those groups are extremely comparable products. After that, we have had our Kaspi AI to enrich the content. Again, to create the products, to create the description and characteristics, and so on and so forth. As you can see, 30 days after the enrichment, the control group continued performing decently, but still giving some increase. However, enriched content has more than two times interest and clicks from the consumers than the control group. This is a very exciting technology. It is the first application out of many which technology can be applied. We are rolling this out.

It will be available for the merchants in January of 2026. As I mentioned, we are ourselves using this technology, and ourselves are enriching already the content. We have enriched about over 500,000 products on our marketplace e-commerce site. I would like also to mention just very briefly some of the important priorities Hepsiburada is working on. Our main goal is really to ensure that we have a very sort of strong performance and continue exciting the consumers and merchants. There are four priorities. Number one is the delivery, and they are not in priority, right? We are working on four of them. The main areas of investment are delivery, BNPL and the payment options from the banks, marketing, and user experience. On the delivery side, we are making the low-ticket items more beneficial for the merchants to ship.

Before that, the delivery cost was more than the value of the item which was sold. We have actually worked on making sure the delivery is economically viable for the merchants, especially in the low-ticket items because those items are the ones which also drive engagement. We have launched the weekly delivery, which was not, yeah, weekly delivery basically was not the market practice. We believe that if you are an e-commerce business, you should be delivering on the weekends, especially if the traditional retail works on the weekends. BNPL from banks and payment options, it is a wider selection of the banks and the wider selection of the payment terms, and specifically also in the low-ticket items, which again are driving the engagement. Marketing, that is another area of investments and improvements.

Teams are working mostly to optimize the performance to make sure that if we are marketing the products, those products are high quality on the good terms, and therefore they generate more interest, more traffic, and more views. As soon as this traffic lands in your mobile application, of course, user experience improvements are targeted to redesigning the consumer shopping journey in order to have the higher conversion rates. There are a number of other things we're working on, of course, but this is something which gives us both results, but also they are important both for merchants and for the consumers. As a result of those, for improvements and changes in some of the areas, we have shown a very nice growth in number of purchases, which is the main metric for us, which shows the growing engagement from both consumers and merchants.

The growth has been through the year and the third Q, plus 16% in order growth, which is a really exciting trend. Obviously, we will continue making further improvements and investments, but that's already a reasonable result to share with you. A couple of things just to give you a bit of heads up, like some of the things which we're sort of working on just to visualize, those are really, you don't have to be the rocket scientist. There are some really simple stuff that you can do. In case of the payment options, for example, we have shown to the consumers number of payments you are making, but also the monthly payment that you might have with the BNPL payment option. Those results before and after gave us maybe a test 4.5% growth in the GMV.

This is, again, I'm just showing you some simple examples. Obviously, I'm not going to take your time to go through all the improvements we have done. Another slide is, for example, the redesigning some of the homepage items. We have basically brought in more personalization in order for consumers to easier understand some of the products that are fit for them or interesting for them. Recently viewed products and especially for you sections on the homepage and also in principle just to see more products on the homepage. CTR increased almost two times from 15% to 31% in A/B test for recently viewed section. Especially for you section increased from 18% to 23% click-through rate. It just tells you how much of the simple improvements on the user experience can bring the value. We're also working on the third-party platforms.

In this case, it's influencers, which Hepsiburada has a significant influencer channel which drives the sales. Here we have basically also made the very sort of important changes, basically helping the influencers and the merchants in this case to launch the campaigns when you reduce the price. You also have the reduction from the Hepsiburada, how much of the benefit you will get, how much of the sales uplift you will have. You can also see the products which you can launch. This A/B tests gave us more than 9% the GMV uplift. Again, this is the service when merchant can launch the prices, and the price reduction is also matched with Hepsiburada commission reduction. Influencers, again, influencers here can actually easier see the offers which they can market to their subscribers.

So we have done, you can easier see the brands, you can see the products, and those are also very much we're trying to match this selection with the specific influencer. Influencer channel is quite substantial, and the A/B test gave us also the same access in excess of 9% GMV growth. All in all, I mean, we have introduced some of the major innovations on the Kaspi side, and we're also achieving the growth in orders, which is very healthy because we're investing our efforts into delivery, marketing, payment options, BNPL, and user experience improvements. I'm back to you, David. All right. Thank you, Mikheil. Let's go on and just talk about the performance of the core business, starting with the payment platform. I think that's the key message here on this slide. Payments growth remains robust, but also consistent throughout the year.

Volumes up 14% in the third quarter, up 15% year on year for the nine-month period. As we have talked about previously, this just reflects the ongoing popularity of Kaspi Pay, bill payments, and the fast adoption of B2B payments. Strong volume growth translates plus growth in ticket size translates into faster growth in TPV, up 18% in the third quarter versus 14% volume growth, up 21% for the nine-month period versus 15% volume growth. Again, strong and consistent trends. What you have within the 69% of our volume that come from Kaspi QR and card is the shift continues to move in favor of QR. That drives the take rate down, down nine basis points in Q3, eight basis points for the nine-month period. Again, that trend is consistent. You have seen that actually playing out over the last couple of years.

The combination of strong top-line growth, strong volume growth, strong TPV growth, but with take rate dilution results in lower revenue growth, plus 10% and plus 14% for the third quarter and nine-month period. Again, as you consistently see in top-line dropping through to the bottom line, operational gearing and cost control, faster bottom-line growth in payments of 12% and 17%, respectively. Moving on to marketplace. Here, again, actually that you see the purchase volumes very strong and again, consistent throughout the year of 36% year on year in the third quarter, up 36% year on year for the nine-month period. Transaction growth on marketplace remains fast. In terms of GMV growth, GMV growth up 12% and 15% year on year.

This slide really illustrates the impact of the supply issues in smartphones because you see excluding smartphones, GMV is up 20% for the third quarter and up 21% year on year. You should keep in mind that the smartphone supply disruption is relevant not just for e-commerce, but for M-commerce as well. Marketplace's take rate continues to move up, hitting once again all-time high levels, 10.3% for the third quarter and for the nine-month period, driven by value-added services, namely Kaspi Advertising and Kaspi Delivery, as Mikheil showed you, advertising revenue up 56% in the third quarter, up 76% for the nine-month period. If we look more specifically at e-commerce, 12% GMV growth in the third quarter. If we adjust for smartphones, GMV growth up 25%. For the nine-month period, GMV up 19%. Again, if we adjust for smartphones, up 29% year on year.

The performance of e-commerce ex smartphones remains very, very strong. The smartphone supply disruption is a countrywide issue. As we move into next year, from March, we have a very favorable comp. We would also expect over the course of next year for supply issues to naturally resolve themselves. The competitive position of e-commerce remains completely unchanged. Actually, on the purchase side of the equation, you see here again, growth very strong, up 86% year on year and up 90% year on year for the third quarter and nine-month period, respectively, with e-grocery contributing to that fast growth. Commerce, always the slower growing of the marketplace platforms, but nonetheless still an important platform, particularly for onboarding merchants. GMV growth up 12% in both periods. Here too, if we adjust for smartphones, GMV growth up 17% and 15% in the third quarter and nine-month period.

Take rate moved up slightly, again, as we continue to just add additional value-added services and marketing campaigns for our merchants. On travel, travel continues to post decent growth. GMV up 13% in the third quarter, up 17% for the nine-month period. Here too, take rate moving up nicely, 50 basis points in the third quarter, 60 basis points for the nine-month period. That is primarily due to the growth in Kaspi Tours, now account for around 10% of GMV. Travel's GMV launched around two years ago, so has grown nicely from zero and will continue as we move into next year to grow above travel's overall GMV rate, implying further take rate expansion.

The combination of GMV take rate expansion above GMV growth plus fast growth in grocery revenue translates into revenue growth in marketplace well above GMV growth, up 24% and 27% year on year for the periods. Here too, if we make the smartphone adjustment, you see revenue up 32% and 34%. Really just again, reiterating the point that the supply disruption in smartphones, which we expect to be temporary and to resolve itself over the course of next year, is the primary and actually only reason for the sort of the slower growth that you are seeing in marketplace. Same comments on the net income side of things, up 7% and 13% adjusted for smartphones, up 16% and 20%. Net income growth will grow below revenue growth, and that is just the mix effect of one-piece e-grocery growing fast and taking share within the mix.

Finally, in Kazakhstan, moving on to the fintech platform, TFV growth remains very robust, up 16% and 17% in the third quarter and nine-month period. Here too, not just robust, but again, consistent over the course of the year. The TFV growth is being driven by merchant lending, which we expect to keep growing at a faster rate than the consumer lending products. That is actually nothing new. That has been the case over the last couple of years and should remain the case going forward. The growth in origination is happening with stable pricing. The fintech yield flat year on year at around 16% in the third quarter, 18% for the nine-month period. Here too, you see strong growth in the loan portfolio, up 30% and 32% year on year, growing at a faster rate than the deposit base.

Here too, the deposit base continues to see very robust and predictable trends. The new products that we've introduced and that we've talked about previously have seen solid month-on-month growth in deposits since their introduction. Cost of risk, 0.6% versus 0.5% in the same period last year. Overall, credit trends remain strong and consistent, albeit that, as we mentioned at the H1 numbers, currency depreciation in the first part of the year did necessitate higher macro provisioning in the first part of the year. MPLs have moved up slightly, but again, this is the trend that's been consistent over slightly versus the end of last year. This has been the trend throughout the course of this year. Overall, credit trends remain strong and consistent. Lower coverage reflects the growing share of the car loan and the growing share of the merchant financing. The car loan is secured.

The merchant financing is sort of by nature a lower risk product and therefore requires less provisioning unchanged on the consumer side of the equation. So what you have is just a mix effect. With strong origination in previous periods, stable pricing, you have decent and accelerating fintech revenue growth, up 24% in the third quarter and up 21% for the nine-month period. Faster revenue growth has also translated into accelerating net income growth, accelerating net income growth up to 15% from 10% in the nine-month period. That's despite the growth in interest expenses in the third quarter, up 30% year on year. Adjusted net income growth reflects the effects of the base rate increase.

You can see that if rates had not moved up in the first part of the year, actually the fintech platform would be on track for it would have delivered 28% bottom line growth in the third quarter and 18% for the nine-month period. I think the point to illustrate is just how material the rate increases have been on the bottom line. Interest rates in Kazakhstan are at high levels, and this can move the other way when rates trend downwards. Moving on to Hepsiburada, as Mikheil talked about, there are multiple product initiatives taking place around payment options, marketing, delivery, user experience, and so on. One way you can sort of track the progress ultimately is in terms of purchases, driving purchases, frequency of transactions on the marketplace.

You can see here that the initiatives that we have launched are gathering increasing momentum with purchase volumes up 16% for the third quarter versus 4% for the nine-month period. That is a really encouraging increase in growth momentum as we look into next year. That mirrors in the GMV side of the equation. Financials are inflation adjusted. We are talking about real growth here. I know there has been some sort of confusion around that in some of the commentary that I have seen. Here too, you see GMV growth moving up, up 15% for the third quarter versus 5% for the nine-month period. The investments, the product improvements that we are making are starting to drive an improvement in the top-line performance of the business. That is reflected in both three-piece and the one-piece sides of the business.

The 15% and 5% GMV growth translates again into faster real revenue growth of 22% and 11% versus 11% for the nine-month period. Here too, you see that the investments that we're making are starting to translate into a faster growing business. That is the aim to invest and drive the top-line performance of this business up to a faster rate for a sustained period of time. That is also being helped at the revenue level by growth in advertising and growth in external delivery services, hence the faster revenue growth versus GMV growth. You can see the impact of the investments that we're making. The investments are targeted primarily into those sort of four areas that we've talked about: delivery, payment options, marketing, and user experience. You see that impact on the EBITDA level.

You can see that these investments are translating into faster revenue growth. The aim is for that faster revenue growth to be sustainable as we go into future years. The investments impact the bottom line. What you can see here, if we look at the third quarter of 2025, is that the main area of that investment is on the payment options, the buy now, pay later options that we are integrating with third-party banks. That is the main increase: performance, advertising, and delivery to a lesser extent. Hepsiburada has also announced a $100 million share capital increase. It is raising funds with a view to ensuring that business is well capitalized to pursue its different objectives over the course of next year. What does all of this mean for Kaspi in Kazakhstan?

You see decent and consistent revenue growth of 20% in both periods. Here you see again at the revenue level, at a group level, the impact of smartphones. Revenue would be up 23% and 22%, respectively, over the third quarter and the nine-month period. At the net income level, here you have the impact. The 21% net income growth in the third quarter and the 24% net income growth reflects the impact of smartphones, the higher base rate, and the other external factors, regulatory and tax changes that have been introduced over the course of this year. It helps you to understand the underlying operating performance of the business.

To put some perspective on this, if you think about at the beginning of the year when we guided for net income growth of around 20%, you can see that without these external factors that have occurred subsequently, we're actually trending very close, exactly on track for that. The underlying core business growth drivers remain unchanged. Here are the consolidated numbers in just the culmination of Kazakhstan and Turkey together. In terms of the guidance, on the middle column here, you see the updated guidance. Lower GMV growth. This reflects the absence of the recovery in smartphones in the fourth quarter. Again, just to reiterate, from March 2026, if nothing else, we have a very, very favorable base effect going forward. There's no reason to think that the supply disruption won't resolve itself over the course of next year. We adjust for smartphones.

You can see that marketplace is on track for 19%-21% GMV growth. TPV payment growth around 20%. That is at the top end of the range we provided at the beginning and summer periods. And TFV growth in line with the guidance that we provided at the summer period around 15%. It is really only the smartphone issue that is affecting the top-line trends. Bottom line of around 10% growth in Kazakhstan, that is lower than the around 15%. That reflects smartphones. It reflects the tax and regulatory changes and again, the impact of the higher base. If you X out those factors, the business would be on track for around 18%-20% growth next year. This gives you some indication of what can growth be as the smartphone issues resolve themselves. Interest rates at some point move down.

The tax and regulatory factors at least move into the base. We have also launched the $100 million, or we will launch and post this call, the $100 million ADS buyback program. I think what we have said in the press release as we look into 2026, we expect to be able to achieve a balance between investing in the business, returning cash to our shareholders via both buybacks. This $100 million ADS buyback program does not have to be the end. It can be the start and the resumption of dividend payments. It is too early to go into the detail just to preempt that question around exactly what dividends can be. I think we have been pretty consistent. This year was an investment year. We have made those investments to put the foundations in place for future growth. That was what we said 12 months ago. Our message has been consistent.

We can achieve our message now is we can achieve a balance between investing in our growth and returning cash next year. I hope that's sort of pretty clear to people. On that note, let's open the call up to Q&A, please. Thank you. As a reminder, if you would like to register a question, please use the raise hand button on your Zoom toolbar. If you have dialed into the call today, you may register a question by pressing star followed by one on your telephone keypad. Please hold whilst we allow questions to queue. Our first question comes from the line of Igal Aronian from Citigroup. Igal, please unmute and proceed with your question. Hey, good morning. Good afternoon, guys. Maybe I'll start with Hepsiburada and Turkey. The updates there on the investment is really helpful.

Can you just help sort of paint the picture on kind of where we're going from here, particularly around the investment level needed when we can get to reverse the trend in terms of the operating losses and how you found the competitive environment so far to be in Turkey, better than expected, worse than expected, sort of any insights around that. Then second question back to Kaspi in Kazakhstan and the advertising product numbers. I mean, real strong growth there, and it looks like still very early in terms of penetration. You've got a lot of different products. So just help us about how to think about advertising, kind of if you benchmark against global peers, how big it can be, which areas that you can drive more advertising or less, just kind of help think through that product as well. Thanks. All right, Igal.

Thanks for your questions. Mikheil, do you want to take both of those questions? Yeah, sure. On the Hepsiburada side, we are, again, as a part of our priorities and the strategy is always to make sure that the products or the services and both for consumers and merchants is the one which brings the value. That is our priority, which means when you think in terms of the growth or in terms of consumer engagement and the merchant side, that is our most important priority. The growth is a result of those changes. We believe that by building up the highest quality products and the user experience, those are the, yeah, those are the priorities which generate the value for us going forward. That is our priority, has been our priority for this year.

The teams are working on, yeah, basically on bringing the quality of the products to the next level. The investments that you really see, those are the investments which, again, on the delivery side, we want to deliver both faster, but also have more engagement from merchants. On the consumer side and the marketing side, those are the investments which bring traffic, which converts at the increasing rate into the sales. Most of our initiative strategic priorities are around the mobile application, which we are obviously prioritizing. That is where we are. We do not really see the huge need for capital investments going forward. Again, if those are justified by improving the quality of the services and the speed of delivery and the infrastructure for the delivery, then we will bring those investments into the company.

That's basically on the, so in our priority is really growth. That's about growth, high-quality growth, which means growth of happy engaged customers and happy engaged merchants. That's on the Hepsiburada side. Yes. In terms of the overall competitive dynamics on the market, again, I think we have been saying this many times that we do pay attention to competition, but at the same time, we believe that our priority needs to be quality of the services and bringing excitement by the quality of the services to the merchants and consumers. We do not think about competition in a traditional way like maybe some other companies would think. That's on the Hepsiburada side. In terms of Kazakhstan, I think we are developing the full range of the advertising services, which are in different stages of the development.

You can advertise products now through the product listings. We have Advertising Service for the brands. We have Advertising Service when you can actually introduce these points or rewards as a merchant. We also are thinking how we can enhance the merchant experience in the app itself in order for the merchants to bring a very highly targeted, engaged consumer base to their products and to their shop in Kaspi.kz itself. Yeah, it is growing very nicely. The merchants are giving us very good feedback. Yeah, we believe that we can continue growing this business, and it will grow faster than the rest of the, we believe it will grow faster than the rest of the revenue on advertising. We just launched, I think we have talked during the last presentation, if I am not mistaken, that we launched gift certificates even for offline retailers.

All of those things at some point will start contributing meaningfully to the growth. Advertising is really exciting. That's our core competency. It's all about data. It's all about user experience. It's all about the merchant experience in the mobile application. Yeah, we're very excited about the advertising services, and they will continue growing much faster than the rest of our revenue. Great. Thank you so much. Thanks. Our next question comes from the line of James Friedman from SIG. James, your line is now open. Please go ahead. Hi, good morning, guys. Good evening. I wanted to ask about the, on the marketplace side, the take rate was up again, 80 basis points. I was hoping you could elaborate on some of the components that are driving that.

And then on the advertising side, can you just explain kind of in simple terms when you say you'll run the advertising campaigns for the merchants on the super app? I'm trying to understand what it means to run it for them. One on marketplace, one on advertising. Thank you. Sure. On the take rate, the main drivers of the take rate are really additional services and advertising more specifically, and also the delivery revenues. That is the main driver of the take rate. We are not, as you remember, historically, we believe that we want to deliver the value to the merchants by additional services, not by constantly increasing the seller fees. That is not our strategy. The increases that you actually see, they are driven by additional added value services, and those are at the moment specifically advertising and delivery.

That is on the take rate. In terms of the advertising, I mean, it is quite straightforward, right? The current technologies enable us to develop a very sort of simple user experience when the merchants, from the screen of their smartphone, can select the items they want to promote and then advertise, and then they just tell us a bit the type of customers they want to reach. It is a very simple service, all data-driven. We truly believe that advertising needs to be developed in a way that you can launch an advertising campaign on Kaspi with one hand by driving a car if you are a small merchant. This is how we are looking into this. This is not something which complicates the merchant's life. They can quickly launch it, very simple settings.

They just need to tell us the type of merchants, sorry, the type of consumers they want to reach, and then we will do the rest of the job for them. Behind this, of course, is a number of technologies which we're developing and the data which enables us to have this very high prediction, high accuracy advertising services or advertising campaigns for merchants which deliver them the value at an affordable cost. That is basically the way we look at the advertising. It's simpler than many other big advertising platforms just because we do not really do a lot of work for the merchants rather than merchants going through the complicated quest of setting up the advertising campaign. This is why the services are showing high engagement and the growth rates. Thank you so much, Mikheil. Thank you. Thank you.

Our next question comes from Griffin Drebbing from Wolf Research. Please unmute locally and proceed. Hey, guys. Griffin Drebbing on for Darrin. Just wanted to touch on the smartphone impact again. I know last quarter you mentioned there would not be an improvement, so the eight points impacted GMV largely as expected. Just any color on current trends through October, first week of November, or updated thoughts on the potential duration, and then how you're viewing the sustainability of non-smartphone marketplace growth given so much strength across the top verticals. All right, Griffin, thanks for your question. Maybe I'll just still start on that one. Just for the benefit of everyone, I think there's sort of two issues to be aware of. The first was number one, new registration requirements.

Those were introduced in the spring, and that was sort of the initial cause of the supply disruption. What subsequently that's evolved into then just a shortage of the latest models, iPhone type 17 models across the entire country. You have a situation where now people who are long overdue a new smartphone do not want to go out and purchase the old model when they know that the new model will be available shortly. That is what is going on in the market. There is nothing to show any improvement currently. Supply remains, particularly of new models, incredibly constrained. Apple will get new phones into the country over the next couple of months. Number one, as I mentioned earlier, you have got a very favorable comp. It kicks in in March of next year. That is your base, if nothing else, favorable comp.

Number two, there is no reason to believe that whilst it is taking a little bit longer than we would have hoped, the supply disruption will not normalize over the next couple of months and certainly through the first part of next year. That is on smartphones, and we have shown you just how material that is and how meaningful that can be when it does turn, and it will turn. That is the first thing. The second thing we have showed you is that excluding smartphones, marketplace and particularly e-commerce growth in all of the verticals is really, really strong. Again, as you look into next year when smartphones come back, other verticals should also remain pretty decent, and you have marketplace and e-commerce sort of returning to its more normalized growth trajectory. There is no change in marketplace's competitive position, and the supply disruption is not unique to Kaspi.kz.

It's a countrywide issue, and it's affecting one vertical. Everything else is pretty much performing as we'd expect it to within marketplace. That'd be my main comments. Thank you. Thank you. As a reminder, if you'd like to ask a question today, please use the raise hand feature on Zoom, or if you dialed into the call, please press star followed by one on your telephone keypad. Our next question comes from Reggie Smith of JP Morgan. Reggie, your line is now open. Please go ahead. Perfect. Thank you. I guess one quick follow-up on the marketplace question a second ago. I guess it was some quick math. I think year to date, you guys are at 16% growth in marketplace GMV. I think your guide calls for like 12-14% for the entire year. Just wondering, am I thinking about that?

Does that assume a low single-digit GMV growth in the fourth quarter? Is that primarily seasonality around the cell phone purchases? One other piece with that, I know you mentioned iPhone. Is this an issue for all phones, so Samsung phones or Android phones as well? Maybe talk a little bit about the mix of, I guess, iPhone sales versus Android in the country just to give us some background. I have one follow-up after that. Thank you. I will start. Yes. I mean, you will see marketplace growth moderate in the fourth quarter. Remember, marketplace is not just e-commerce. It is e-commerce and commerce and travel. You will see that that happens, number one. Number two, I would say on the smartphone issue, particularly at this time of year, it is high-end smartphones. It is particularly the likes of an iPhone 17.

It's not just that, but that sort of this is when the latest models are released. If you think about it, if a smartphone is $1,500, that's a lot of missed GMV, but it's a lot of gained GMV when it comes back and a lot of missed revenue versus an average ticket size on marketplace and on e-commerce that's materially below that. They would be my comments. I don't know if Mikheil wants to add anything about the market as a whole. Yes. I think that the GMV growth is a combination of also the value of items which are sold. As David said, the highest value item in the smartphones is specifically the iPhones.

Since the new model has not reached in the requested volumes the country, it's not only Kazakhstan specific, basically the people don't have a trigger to change the phone. We just believe this thing will change in the future because demand is there. Reggie, in terms of looking at the trends and the engagement, I think that the number of transactions or number of purchases is actually extremely sort of valuable number just because that actually tells you how many purchases consumers make, how many times they interact with your marketplace, and not just the value of items they buy. You can see that actually the value of the marketplace purchases went up 36%. Not the value, sorry, the number of the marketplace purchases went up 36%. E-commerce, which is taking share from the M-commerce, is actually plus 86%.

I think, again, transactions on the marketplace, 36% up, transactions on e-commerce, 86% up, quarter on quarter. This tells you that there is a very healthy engagement, and our core business continues performing well, and those external factors eventually will have to, we believe, will disappear because demand is there and supply will be reinstituted. It's just unfortunate that it's not happening as quickly as all of us wanted. Yeah. No, that makes sense. It's interesting. I hear you talk about the iPhones, and I think about here in the States, $1,500 for a phone. A lot of Americans are pulling back on those types of purchases. I'm surprised that folks are still, I guess, hungry for new iPhones out in Kazakhstan. One last one for me.

Thinking about grocery and delivery, I know obviously those businesses are scaling now, but remind me, thinking about, are those businesses self-sustainingly profitable on their own longer term, or are you still thinking about them as kind of engagement tools to keep people on the platform so you can monetize them through other ways? That's it for me. Thank you. Yes. The grocery business is very much self-sustainable. We are on the profitability side. I think some time ago, we did show the profitability of grocery. So you can go back to those numbers, and those numbers are the same pretty much. Yes, it is self-sustainable. It's profitable. As we are also having more demand for our products than the capacity to fulfill, we are building up dark stores, which is not just an investment, which is huge.

But still, to build the state-of-the-art dark stores, which we are opening depending on the size, but it can be an investment from, what is it, $10 million-$15 million, something like this, which can hold inventory for at least 15-20 days on 10,000 plus SKUs. When we say we're entering the new city, we are building the dark store sort of first or renting it if its rent is very affordable. Those are the investments we're taking because we need to build the infrastructure to meet the demand. The good news is that the demand is there, and it's almost like always demand is more than we can serve. We are following the demand. At the moment, as we speak, we have about 10 dark stores, and we will enter a couple of new cities next year.

We'll continue sort of building that infrastructure. Yeah. If I could sneak one more in, I know this is important to investors, the dividend. You guys are going to reinstate that next year. Should we think about that being at a similar level to where it was or maybe even higher given that the income base is higher today than it was before you paused it? Reggie, I'd just say on that, you should keep in mind international will require further expansion. That's something to keep in your base case and will remain an important priority. International was never there pre-2025. That's number one. Number two, though, again, having said that, we can have a balance between the two. Our track record at returning cash primarily via dividends, but also via buybacks speaks for itself.

We get that this is something that is important to our investors. It is precisely why we have actually started the buyback or it is one of the reasons why we have started the buyback earlier than we had initially indicated in our H1 numbers. We indicated cash returns would start from the beginning of the year. We will do our best to get the balance right between investing in future growth and returning cash via different methods, both buyback and dividends, and we can decide what is appropriate as we move into next year at the right point in time. It would not be right at this stage to go into specifics around what payout ratios can be. All right. That is helpful. Thank you. Thank you so much. Thank you. Unfortunately, we have run out of time for any further questions.

At this time, I'd like to hand back to David for any closing remarks. All right. Thanks, Sam. Thanks, everyone, for your time. We've done in our 20 minutes, but we have another meeting starting shortly. We'll wrap things up now. Happy to follow up one-on-one post the call. Get in touch if you have follow-up questions. Thanks a lot for your time. Speak to you soon. Thanks, everyone. Bye. Thank you, everyone. This concludes today's webinar. Thank you all for joining. You'll now be disconnected.