Eleving Group S.A. (OT8) Earnings Call Transcript & Summary

Good afternoon, and welcome on behalf of Airtime to the Eleving Group Earnings Call for the third quarter of 2024. I'm pleased to introduce you to our CEO, Modestas Sudnius, and CFO, Maris Kreics, who will lead you through the presentation today. After the presentation, you will have time to post your questions in the Q&A session. And with this, let's start. Modestas, the stage is yours.

Thank you very much, and good afternoon, everyone. I want to welcome everyone who has joined the 9 months' results of 2024 review for Eleving Group. My name is Modestas Sudnius. I'm the CEO of the group. And today, together with me, we also have our CFO, Maris Kreics. So together, we're going to walk you through our latest results, latest developments of the group. I know this call feels a little bit different to the previous ones. I think we already had more than 20 of them. However, this time, the first time we're doing it with the video. So hopefully, it will be appreciated. But most importantly, we're doing it as a first-time public company since we're coming fresh out of an IPO. And as of 16th of October, we have publicly listed shares. So in relation to that, we also slightly updated the format of this presentation together with already things which you're used to, so operational and financial highlights. We also added some more relevant information for the shareholders, earnings per share, different developments on dividend side and similar. If we talk about things, what we expect from today's presentation, so first of all, 9 months' results were continuing the same solid trend, what we've been showing in the first 6 months. And then we've managed to accomplish not only growth but also stable profitability levels. And at the same time, of course, we have quite a few highlights to share. I already mentioned IPO, but also quite significant highlights from our areas of the business. So now I suggest jumping over to presentation right away. Let's start with Slide #4, our group's performance, and let's start with one of the key metrics, which is our net loan portfolio. So what we can see that the net loan portfolio has grown by 9% in first 9 months of this year in comparison to respective period last year. And the biggest growth can be observed here in consumer financing segment and the traditional lease segments. On flexible lease and subscription services portfolio was flat, actually even slightly shrink, but this is something what we expected as well because we were not actively growing our portfolio in some of the markets. And also worth to mention, we have merged our car-sharing business, which we had in Riga and the OX Drive brand with another brand in Latvia, Carguru, and now we're not a majority owner of this business anymore. So therefore, also figures from that business went out of the reporting of flexible lease and subscription products. But looking at our metrics, actually what we see that they very well mimic portfolio development. So overall, revenue has grown also even at a higher pace, by 16.6%, from EUR 135 million to EUR 157 million in the first 9 months. So we're on good track to have more than EUR 200 million of revenue for the year. And similar -- very similar trends, you can spot in adjusted EBITDA and then also total net profit development. So they grew, respectively, by 16% EBITDA and 14.7% on total net profit. And we have -- as of 9 months this year, our net profit for the year is already EUR 21.9 million. And worth to mention that all of these figures, what I've been presenting here, they are all-time best results for the group. And they just show that we're able to develop our business going forward and do it profitably and actually even have higher profitability ratios when compared to portfolio growth ratios. If we move forward to other highlights, of course, here, I want to touch upon recently finished IPO process. We're -- we can't be more happy to have more than 4,500 new investors, which supported us in our IPO process, which allowed us to raise EUR 29 million of primary capital. That means that all the capital stays in the company for further business development. And looking at some of the metrics shown in the slide, we can see that it was rather well-balanced sources of demand. Main source was still the institutional investors, which constituted, in total, 72% of overall money raised, and then 28% came from retail, which always supports us quite strongly. And then the balance between all Baltic markets was also quite well split. So very happy with the result. And going forward, as already communicated before, we're going to try to update these presentations in a way that they would provide a bit more flavor for the equity investors as well. If we look at our highlights, so worth to mention that we've already been actively deploying the money which we have raised. So first of all, short-term, as we have communicated, we'll utilize the actual cash to repay some of our most expensive debt what we have. So we've already initiated subordinated debt repayment. And then also, we're selectively repaying some of our most expensive debt with what we have raised from Mintos platform. And the combined effect of that we estimate might be even up to EUR 4 million annually. But we've been successful not only in equity raising, we've been also successful in third quarter in debt raising, primarily in the African region. So across 3 African countries, Botswana, Kenya and Uganda, we have raised approximately EUR 12 million in local currencies in those markets from local banks and local note programs. So that helps us to further diversify our funding sources. But most importantly, this is funding in local currencies, which is, from our experience, the best hedging solution for any foreign currency movements. And also, this is a more cost-effective solution while raising money in euros and then buying hedges. So we're very happy with the results, what we've managed to achieve in the third quarter. And looking at other highlights, so I already mentioned the OX Drive and Carguru merger. So now we are not a majority stake owner anymore, but we're still the biggest single investor in this business, having -- owning approximately 38 -- 36% of shares in combined entity, and combined entity has a bit more than 400 cars' car park, which makes it #2, #3 company in Latvia. And we believe that that was really the right move to make in this rather saturated market. Also, we continue successfully our e-mobility activities -- e-mobility financing activities in East Africa region. We've already financed more than 1,400 electric motorcycles, which are used to generate revenue. And with that, we're one of the leading financing providers, and we believe that we're going to get to our goal for the year of financing 2,000 electric motorcycles. And lastly, I'd like to mention that, just recently, we've been ranked as 41st fastest-growing European company by Financial Times over the last decade, which is, of course, a very heartwarming award, which just shows that we as a company were able to demonstrate growth not only through short periods of time, but actually for really long period of time. Now let's go further to next slide, to look at our portfolio split. I would say nothing very new here. If we look at overall split per product, so we maintain similar ratio of having 2/3 of overall portfolio in secured financing, so vehicle financing, and 1/3 in unsecured consumer financing. And trends remain similar for the ones which we have seen in the first 6 months. Overall, most of the markets grow their portfolio and their proportion stays rather equal. But still, if we would have to call out the champions for the first 9 months of this year, countries which have grown portfolio mostly in terms of percentage-wise, but at the same time in general terms, so those would be, on vehicle financing side, Latvia, which is back to growth trajectory; then it would be Romania, demonstrating very solid growth; and Uganda on African side. And on consumer financing side, here worth to mention 2 markets, Namibia and Zambia, just as a reminder that both of those markets we have acquired mid last year, so they are still rather fresh in our portfolio. And in both of them, we managed to pretty much double the business and double the portfolio in the first 9 months of this year, so very, very impressive performance and the market is still having quite a bit of growth potential going forward as well. If we're talking growth and sources of it, let's go to the next slide, nonfinancial KPIs. If we look here at boxes on top, you will see a lot of green arrows going up. So these just indicate positive trends. And if we -- starting at applications received, so this ratio had went up quarter-over-quarter. On vehicle financing side, actually, we see an astonishing growth, I would say, of 20% from one quarter to another. And then growth we've seen also on consumer finance side 2.3%. And the trend has continued on a similar pace across these both product categories over the last 12 months and then even going further. Trends can be explained slightly differently for different market. But if I would need to kind of call out the most unique reasons for that -- not most unique, but most common reasons across all the markets, so one is -- which is a very welcoming sight, that there's still quite a lot of organic growth. So we're utilizing our brand recognition in those markets. But at the same time, our recent digitalization channel, digitalization strategy and putting higher emphasis on digital channels such as affiliate networks, it works out very well and then contributes to the overall growth of applications, which allows us to be selective. And if we would look at our conversion rates, they are rather stable and, I would say, stably low. So -- but at the same time, this was first quarter after quite a few quarters when it has flattened out and even went up a little bit. So conversion rate on the vehicle finance side was 8.2% and on consumer finance, 35.8%. And this flattening out just shows that we're already very satisfied with the level of provisions what we have. But that doesn't mean that we have relaxed our underwriting rules. No, that was not the case. We actually maintained at a similar level. But at the same time, our risk and data analytics teams are working a lot to make sure that we're offering customers products best tailored to their needs. And in that category, we do see that it should help to maintain current conversion ratio going forward with maybe even potential upside, which would come with overall growth of issuances and portfolio. So overall, very welcoming view and insight in nonfinancial KPIs. And with that, I'm handing over to you, Maris, to walk us through financial highlights.

Thank you, Modestas, and good day, everyone on the call. If we move on to Slide 9 with the financial highlights, and if we start with the upper-left corner, we can look at a few of our financial profitability KPIs. And if we start off with EBITDA and adjusted EBITDA, so for the first 9 months of this year, we managed to achieve EUR 69.8 million of accounting EBITDA and EUR 65 million of adjusted EBITDA. The difference between these 2 metrics is minority share of profits. If we compare these figures to the equal period in year 2023, so we are actually seeing a 15% to 16% annual growth rate. And if we put these figures into context and comparing to the full year 2023 figures, we can reasonably expect to quite comfortably beat and exceed both of these EBITDA figures, which we managed to achieve 1 year before. If we move on and look at the net profit and net profit before ForEx, here, the dynamics are almost equal to EBITDA dynamics. So for the first 9 months of this year, we managed to achieve EUR 21.9 million of net profit and EUR 25.1 million of net profit before ForEx. Again, similarly to EBITDA, both of these figures have exceeded the equal period in year 2023 by approximately 15% to 16% each. If we move on, then we have the equity development over first 9 months of this year. So we started the year with EUR 82 million. And as of the end of September, we are at EUR 87.9 million. So our equity, in absolute terms, has been increased. And if we go and kind of digest the actual bridge between these 2 figures, so the major contributor of equity growth, of course, is our profit retention, out of which we managed to distribute dividends in the same amount as we did in year 2023. And lastly, also, there's a negative impact towards equity [ in the ] EUR 5 million. However, I would like to point it out that actually for bondholders and shareholders, this should be viewed positively, counterintuitively. But the decrease here in equity is actually our proactive subordinated bond repayments already during the first 9 months of this year, even before IPO. So in this way, we have smartly allocated excess liquidity by actually as a result of improving the net profitability because this is by far the most expensive debt that we carry in our balance sheet. Moving on, if we look at our capitalization and equity ratios. So here, if we start with the first one, so capitalization ratio, that is equity over net loan portfolio. Over the last 4 quarters, we have been at a consistently high level at 26%. And the same dynamic is pretty much observed also in the equity ratio. So this is equity over total assets. So we have been at a consistently high ratio there as well, and we managed to end September with a 17% of equity ratio, which is even slightly more higher than it was over the previous quarters, especially in Q4 2023. Moving on. So here in the next graph, we have, again, equity development in absolute terms. So here, we can see how we have added more than EUR 15 million in total equity compared to the beginning of year 2023. But we are especially happy with the return on equity improvements. So here, the return on equity is measured by net profit before ForEx over equity, which is pre-IPO. And as of the end of third quarter, we stood at close to 39% of return on equity. And this is especially a, we believe, welcoming message also to our current and future shareholders as well. Moving on, if we address and look at the cost-to-income ratio, here in the background, we can see the revenue development. Our revenue has been growing pretty much in sync with the growth of our net loan portfolio. And also, that is being reflected in our profitability metrics, which we discussed also before. However, we can point out the fact that, for the first 9 months of this year, our cost-to-income ratio was 39.1%, which was not exactly the level where we see ourselves as a company in the midterm or where we would like to be ourselves. However, we're actually more or less ready for this slightly elevated expense versus revenue ratio because of the few nonrecurring expenses. And just to name the few most impactful ones, so these would be IPO-related costs which we are not able to account as part of the IPO proceeds in the equity, so things like -- things relating to PR marketing activities and certain consulting works and listing-related expenses. In addition to that, this year was quite special with the fact that we work closely with many of the regulators in the markets where we operate. And for instance, we just received a digital lenders license in Kenya, being one of the very few asset lenders who managed to obtain that license. And that was quite an intense work also for our team, and also that is being reflected in different professional consultancy work -- works and expenses related to that. Moving on, here's a snapshot of our liabilities breakdown. Same as before, same as in the quarters and the years before, the majority of the capital, debt capital, comes from the -- our issued Eurobonds. So currently, as of this moment, we have 2 secured Eurobonds issued, so EUR 150 million Eurobond issued in year '21, and then the second smaller one, a EUR 50 million Eurobond, issued 2 years later. And actually, frankly, that bond was issued at the peak interest rate environment. That is also being reflected in the coupon rate. So the last bond was issued at 13%. However, worth to mention that that bond, since the pretty much very first moment of the listing and trading, has been trading with a premium. And I believe the latest transactions have been closed at the -- in the price range between EUR 106 and EUR 108. So actually, the yield on that bond, even as of this moment, is slightly more than 10%, so -- and we can think of it as a yield for our bonds, for both of our bonds currently in the market. Same as before, second largest source of financing for us remains to be Mintos platform. This is the largest platform of its kind in the Continental Europe. And currently, as of the end of September, we stood at EUR 63.6 million in the borrowed capital from that platform. The same way as we like our asset structure to be diversified, we are also really pretty much focused on diversifying our liabilities so we will not be reliant on one source of borrowing capital for our company. And also, we would be able to optimize our cost of borrowing by doing that. So that's why we are quite focused on borrowing locally, especially in a few of our mature markets. And we are really proud about our ability to attract local debt capital in 2 of our largest markets in Africa, in Kenya and Uganda. So as mentioned before, in Kenya, we have a local notes program which already exceeds EUR 20 million. That local notes program is largely in the local currency. And that helps us greatly to, firstly, manage the local or foreign currency exposure for the group, because our assets and liabilities currencies are then matched. And then it also helps to optimize funding costs as well. And the same or similar achievements can be noted in Uganda as well, where, just recently, we received an approval for the EUR 5 million loan from a local bank, actually one of the largest banks in Africa, in local currency as well. And the same trend we see in some of our newly acquired markets in the Southern African region. In Botswana, we have been also successfully working with the local lenders, and we see good opportunities to replicate that structure also in the markets as Namibia and Zambia going forward as well. If we now look at the 3 financial metrics, so these are 3 financial covenants that are present in all of our issued Eurobonds. So if we start first with the interest coverage ratio, so that ratio is EBITDA over financing costs. As of the end of September, we stood at 2.3x, which is almost 2x higher than the required minimum level of 1.25x. Moving on with the net leverage, so this ratio would be net debt over EBITDA. We were at 3.4x. And here, the lower the ratio, the better for the bondholders. Well, if we compare that to the maximum allowed level of 6x, we have plenty of headroom there. And lastly, as already mentioned before, our capitalization ratio has been consistently high at around 26%, which is quite substantially higher than the required minimum level of 15%. And as already also mentioned before, in the maturity profile, right in the middle of the slide, you can see EUR 25 million that are maturing in year 2031. So this is the nominal amount of our subordinated bond. Actually, on our balance sheet, we had -- as of the end of the quarter, we had slightly more than EUR 10 million. All of this amount is expected to be retired by the end of November once we're going to fully repay the bond with our IPO proceeds. Moving on, on the portfolio quality, we can start from left to right. And basically starting off with the net loan portfolio for the vehicle business segment, we can see here that the NPLs are below 7%, and also the NPL definition for vehicle business remains consistently conservative, and that's 35 days and more. So only these loans are considered as nonperforming loans. Usually, it is customary to apply 90-plus days overdue for NPLs. This metric is being applied for our consumer business segment, where we have less than 5% of NPLs in our net loan portfolio as of the end of September. If you look at the slide on the right -- or graph on the right, you can see our gross and net NPL developments for both business segments over the last 4 years. And I suggest to focus on the post-provisioning NPLs, and these are net NPLs. So for these 2 business lines, we can see that we have been able to consistently maintain below 10% of NPLs over the last 4 years with a consistently high impairment coverage ratio, which was 89% for vehicle business segment and 121% for consumer business segment. And here's a bit more details on already mentioned pretty much most important event for our company during this year, and that is IPO. As a result of IPO, we issued 17 million shares at [ one ] share price of EUR 1.7, and that gave company -- gave company's capitalization on a post-money basis at close to EUR 200 million. If we look at the total profit over the last 12 months and compare that to the number of shares outstanding before IPO, so that would be EUR 0.25 on euro, and compare that to the IPO price, we arrive at a price/earnings ratio of 6.2x. Worth to mention that, during the IPO process and even before that, planning the IPO, we -- as a company, as a management, we are pretty much really focused on the fact to basically price the IPO appropriately, price it even ideally with a slight discount to the market rates or market P/E ratios and even slightly below our peers. So we believe that, in this case, the dynamics of the future share price should be positive for the shareholders, especially our shareholders that have invested in the IPO. And lastly, on the return on equity, so here, we are using the total net profit after ForEx, after taxes and everything, comparing to our equity levels before IPO proceeds. And here, you can see the figure of 31%. Of course, with the IPO proceeds taken into account, the return on equity will decrease slightly in the short term. But let's say the 30% return on equity remains as a goalpost for us in the midterm, where we'd like to see the company delivering value to our shareholders. And speaking on delivering value to the shareholders, so price appreciation is one thing, but dividend payment is another way how to do that. And as communicated to our shareholders before the IPO and during the process, we expect to pay dividends 2 times per year, on a semiannual basis, with the first dividend to be paid during the second quarter of next year. And that will be dividend for the full year results of year 2024. If we look at the equity ratio and why equity ratio is important for dividend payout, this is in line with our dividend payout policy where the higher the equity ratio post-dividends, the higher the dividend payout ratio can be. So in this way, we are managing the company's ability to return capital to shareholders while also maintaining growth prospects. And if you look at the equity ratio as of the end of this quarter and adding back IPO proceeds, so we are at the 23.4% level, which would trigger a dividend payout ratio of 50%. If you look at the first 9 months of total net profit, so we are at EUR 21.9 million, as mentioned already before. And if we apply 50% dividend payout ratio to that figure, we have already earned more than EUR 10 million of dividends for our shareholders. And to this dividend pool, of course, we'll need to add 50% proportion of the profits that is going to be earned during the fourth quarter of this year. And speaking on the financial KPIs, where we are currently and what were our goals for this year, we will start with the net loan portfolio. As of the end of third quarter, we're not necessarily exactly where we would like to be, because we are at 61% of achievement. However, this is something that was pretty much, to some extent, expected because for the first 3 quarters of this year we are really focusing on the profitable growth of the company, really rationalizing the capital deployment in certain markets over others. But also worth to mention that the Q4 historically has been the highest-selling month in terms of loans issued for our company, and this is also expected to continue this year. And by this one, we expect the net loan portfolio growth to close the gap to our goal for this year. On the revenue side, here, we are actually closer to our expected target rate, and there are good prospects of us actually achieving that goal because we are at 71% achievement as of the end of third quarter. And lastly, net profit before ForEx, so we are actually exceeding our goal here. And we're really, really happy about this achievement, especially in the context of our ability and plans to pay dividends for this year. I think that would be it from my side. [ I'll turn it ] back to you, Modestas.

Thank you, Maris. So with this slide, we're approaching end of presentation. So I once again want to walk you through our business outlook for 2024. Probably this is also the last time when you're seeing this slide as, in upcoming quarters, we plan to present to you a more detailed plan and kind of short-term goals for 2025. But still looking back at the goals achieved, and then starting with products and our product development, so as already mentioned, we are going close to our growth targets when it comes to portfolio development in most of the markets. We are on target in some, maybe slightly lagging behind. But on overall level, even despite slightly slower third quarter, where, obviously, the focus for our company was also a little bit shifted due to IPO, we have a good chance to get very close to our target figures. And all of that is based on organic growth. And of course, our rollout of digital tools, as well as our e-mobility success -- e-mobility financing success helps to accomplish that as well. When it comes to new products development and also potentially exploring new markets, there we're somewhere midway to where we wanted to be. But at the same time, in fourth quarter will be the most active and where quite a few of our researches will be finalized. And I'm sure we're going to share with you, in upcoming quarters, a more detailed plan for, let's say, inorganic growth, like which markets we plan to launch when and what products one could expect the company will launch in the upcoming future. When it comes to capital management, so here, I can only rejoice and tell that we've already accomplished all of our goals. So we're coming out of a successful IPO, which was actually the biggest IPO ever in Nasdaq Riga history, and one of the biggest in -- of private companies in Baltics in general. And I already mentioned the successful track record in raising debt and diversifying our debt channels further. And then when it comes to governance and the impact side, I also believe that we're on track to have fully accomplished all the goals by the end of the year. We've already strengthened our corporate governance quite a bit throughout the year, and we're on a good track record to finalize quite a few of our carbon footprint offsetting projects as well as other important ESG initiatives. And lastly, I think it's very appropriate to finish this presentation once again looking at our more long-term strategy. So already mentioned that EUR 29 million, which has been raised, the primary goal of that is, in long term, to invest in company's development while short-term optimizing -- using the opportunity to optimize the balance sheet. But in the long run, we do see a potential to grow our business significantly, to actually double it in the next 3 years. And primarily, we're going to be doing that while utilizing the platform and infrastructure that we already have now. But we have businesses in 60 markets, so has quite a bit of organic growth left there. At the same time, we're looking into launching new products in the existing markets on the similar cost base and, lastly, get back to our -- to further geographical expansion while launching new markets. So with all of that, we do believe that we'll slightly accelerate the growth rate what we have been showing so far in the first 9 months of this year. And also, basically, we're going to be getting back to the growth ratios that we've been demonstrating across a longer period of time of our company because we've been doubling our business pretty much every 3 years already in 2 or 3 [ iterations ]. So with that note, I want to end today's presentation. Thank you, everyone, who has joined. And as always, we have time to answer your questions. So for that, I'll turn it back to you, operator.

[Operator Instructions] I've received already some questions from the chat. First question, it seems that the quarter-over-quarter interest income went down despite a slight increase in the loan portfolio. Can you please elaborate on the drivers behind that?

Yes. So this actually was a technical adjustment that we did. Usually, we make this adjustment once per year, and it relates to Stage 3 loans where we actually need to deduct same amount from both revenue as well as from the impairment expense. So I believe, if you would look at the quarter-to-quarter development of the impairment expense, you would also see it quite a bit unusually lower than expected. But this is -- this goes in line with the adjustment on the revenue. There is no other kind of, let's say, "weakness" in the revenue side other than this one-off adjustment. So going forward, this will be -- this will not be that evident on a quarter-to-quarter basis.

Second question, you mentioned repaying subordinated bonds from IPO proceeds. Are there any related party investors holding subordinated bonds?

To our knowledge, there are no related party investors being subordinated bondholders. However, worth to mention that the subordinated bond is also tradable both on Frankfurt as well as in Riga exchange, and of course also in OTC. And since the very first moment, once we place subordinated bonds, we actually have no way to actually check the actual bondholders behind the bonds. But to our best -- best of our knowledge, there are no related parties in there.

[Operator Instructions] There we have another question from the chat. Net loan portfolio in Q3 remained broadly stable. The next loan portfolio targeted for 2024 is EUR 363 million, and accordingly to the growth should pick up to 5% quarter-over-quarter in Q4. Already being in the middle of Q4, do you see the loan issuance improving to reach the IPO target for 2024?

I can cover this one. To an extent, we can't really comment numbers before they are published. But as I already mentioned, there is a bit of seasonality in our business. And the fourth quarter historically is best quarter out of all 3 quarters when it comes to issuances just because the consumption picks up due to holiday periods across consumer finance and vehicle financing segments. So definitely, portfolio growth will pick up, but it might be that we're going to be some percentages shy of achieving 100% of goal achievement. But that's still to be seen. I think we should not be going to -- we should not land somewhere far, far away from our target, definitely.

And we have another question from the chat. When [ your ] investors get first dividend payment, this year or next year, based on 2024 results, could you please elaborate on that?

Yes. So we had a slide specifically on that, that the first dividend payment is expected to be in next year, year 2025, during the second quarter, after annual financial statements are published and approved by auditors as well. And during that payment, it will be a dividend payment for the full year 2024 profits based on the dividend payout ratio that will be subject to equity ratio. But as per the slide, the expectation is that we will be able to distribute 50% of full 2024 profits during the second quarter of year 2025.

Maybe if I may add that, afterwards, going forward, then we will move to the semiannual payment and then the next payment will be in 2025 fourth quarter for first 6 months of 2025.

Then another question, I think you touched on this already, but maybe you could please elaborate on this again. What are the next year financial KPIs?

Sure. So next year, the financials -- actually, we don't have them in these slides, but we have published 3-year KPI strategy for net portfolio development, for revenue development and for profit before ForEx development. So across all 3, those 3 sections, we do expect to grow approximately 20% per year.

And then we have another question. If post-dividends equity ratio falls below the 20% threshold level, will you continue to pay dividends, but at a lower payout ratio?

The short answer to that is yes, our dividend payment policy, which is also published on our web page, does allow us to distribute dividends. Even with a lower equity ratio post dividends, then the payout ratio would not be 50%, but the lower one. But in broad terms, our shareholders should be thinking about the relation in the following way: the higher the equity ratio post dividends, the higher the payout ratio can be there. But yes, as long as we are exceeding 15% of equity ratio post-dividend payouts, we are paying dividends as per the dividend policy.

And we received another question. What is the total net profit of Q3 in 2024?

Yes. So the total net profit of Q3 of this year was in the range of approximately EUR 6 million.

[Operator Instructions] And we've received another question. Could you please speak and tell us your name?

Yes. It's [ Frank Oliver ] here. Modestas and Maris, first of all, congratulations to the IPO. I'm just interested in your Page 13 and Page 15, the financial KPIs. And my challenge here would be that I see your growth, and we always liked your growth because it was a quality growth in the history. And on the same side, with the IPO now, I see a regular flow-out into the dividend bucket. And looking at the financial model, which we quickly sketched out here, if we come up with, let's say, you retain 50% of the net profit in equity in the company, and let's, just for the sake of it, say this is EUR 15 million for the 2024 year. And of course, you cannot comment on that because the year is not finished. And that EUR 15 million would stay. How much would you typically look into leveraging that number for growth in the coming year? Would that be 3x or 4x?

Yes. So that would be something in the line of those 4x because that's kind of our long-term kind of comfort if we speak about the equity ratio of around 25% or close to 25%.

So if you leverage it 4x, let's say, you retain EUR 15 million and you add another EUR 75 million -- sorry, another EUR 60 million, that would get you to EUR 75 million in balance sheet growth. And rolling that forward for 3, 4 years, that would, of course, generate a lot of growth, but it wouldn't necessarily double your balance sheet. So I'm kind of a little bit struck by the idea whether you will be finding the quality growth you want to add on top of your existing business, which, of course, should not be producing lower profits. And on the other hand, the growth goal in itself, whether that's not biting itself into this dividend payout ratio, do you have a -- if you have a financial model that kind of highlights that, I would just like to hear that your confidence into being able to pay out, on the one side, the 50%, on the other side, to double the business every 3 years.

Sure. And of course, we do have a financial model. This is how our projections are based on -- so one angle you need to take into account that our current cost-to-income ratio is, in our opinion, quite high for our business. We see that we have still quite a bit of potential to lower it. So that's one of kind of secret sauces for the growth and for this profitable growth. And also, that will allow us to lower -- to offer lower, let's say, yielding products, but at the same time, having similar unit economics just because we do not expect additional admin cost at the same level. So our goal is to definitely decrease from, currently, I believe, close to 39% cost-to-income ratio to something closer to 35%. Secondly, I do fully agree that growth is expensive in general in short term. But if we look at the overall, let's say, this growth for next 3 years, still a bigger part of that -- I don't have the exact number at the top of my head, but it's more than 60% of the growth will come from the existing markets, existing products, what I've mentioned. So all these new developments will -- will of course -- will add up, but that's not going to be the focus one because launching new market, of course, first 2, 3 years, you should not expect that profitability will be there. It should be like a loss-making. And I think these ratios, also what we see, that if you split it for 3 years, actually 20% growth ratio to net loan portfolio already gives you this almost doubling the business. And that's not very far from what we've been doing even if we look 3 years back. And at that time, we also actually had a way lower equity ratio. We were at closer to 15%. Now we're comfortably at close to 25%. So kind of summing all of that, our model confidently indicates that this is achievable and that there's even some room for some adverse one-off effects.

All right. I didn't see that cost-to-income ratio reduction that would generate. Let's say you bring that down from 39% or 38% to 35%, what's the hard euro amount at the moment? You show -- you had that up here somewhere on the pages, the cost-to-income ratio. Was that further down?

Yes. So cost-to-income ratio was 39.1%.

That would get you EUR 8 million less expenses, 4%.

Yes.

Yes. Okay. That's just for 9 months. Of course, there will be then EUR 10 million less expenses, and that would stay available for retention and for distribution. Excellent. Best of luck.

Thank you so much for the questions, and also thank you for answering. This is the last chance for you to ask a question.

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[Operator Instructions] As no further questions have come in, thank you so much for the presentation to the leadership team. Should any questions arise in the future, please do not hesitate to contact us. And I wish you a beautiful day, and I give the stage now for some final remarks to Modestas. Thank you so much.

Thank you very much. And let me once again thank everyone for joining the call. Thank you for your insightful questions, and enjoy the rest of the day. Thank you very much. Bye-bye.