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Sergey Solonin -- Chief Executive Officer

Thank you, Leva, and good morning, everyone. Thanks for joining us today. We are excited to share our first-quarter results and the strong start to the year. Our core Payment Services business demonstrated solid performance with 26% segment net revenue and 27% segment net profit growth. Our growth this quarter was mainly driven by the development of our payment ecosystem, as well as secular trends toward digitalization of payments in our major markets.On top of that, we continue to develop our key products and use cases in order to offer our clients convenient solutions in our focus market verticals and niches.

Moreover, strong growth in the first quarter was underpinned by the low base effect in the first quarter of 2017, as several projects, which now contribute to our Payment Services business were launched and started to get traction throughout the year. At the same time, we continue to invest in our Consumer Financial Services segment, which includes SOVEST project, as well as in building up our SME segment through the Tochka project.Given all of the above, we believe that our performances serves as a solid foundation for our future growth. We achieved strong financial results in our Payment Service business in the first quarter creating a strong foundation for solid growth in 2018, as well as investing in our new business lines and projects. We believe we are well positioned to grow our Payment Services segment product.

In order to achieve this goal and generate substantial operating cash flows to support our investments in the new projects, we will focus on executing our strategies through building a wider digital infrastructure, creating new and enriching existing client use cases and expanding our product offering. Now to some operating highlights. Payment Services segment volume increased by 20% to reach RUB 249 billion, driven by significant growth in Money Remittance and E-commerce verticals, which grew 53% and 38%, respectively, over first quarter 2017. We are pleased with the dynamics of both verticals and believe that such growth was largely driven by the development of our peer-to-peer ecosystem, as well as the rollout of the project we deployed together with our partner, such as [Inaudible] companies that's part of our B2B, B2C focus.

As of March 31, we had 20.3 million Qiwi Wallet accounts, an increase of 2.3 million as compared to the prior year, resulting from our continuous efforts to grow and leverage our ecosystem. Our total Consumer Financial Services segment payment volume increased up to RUB 2.3 billion for the first quarter of 2018. We also see positive dynamics across key operating metrics for this project. We continue to develop our product and enhance our business model with the aim to set the multi-banking model for SOVEST by the end of 2018, as we see substantial interest toward installment card projects from other players in the market.

We believe that we have entered an interesting niche with a significant potential and have built a robust infrastructure, including best-in-class distribution and partner network. Our SME segment which we will develop through Tochka also demonstrates robust operating performance in the first-quarter 2018. We currently operate Tochka, a multi-banking service that provides customers with the opportunity to open accounts with either Qiwi Bank or Otkritie Bank. We offered Tochka services in Qiwi Bank, as well as provide services to Tochka clients, who have their accounts in Otkritie Bank.As of March 31, we have approximately RUB 1.6 billion of customer balances and serves more than 17,000 Tochka clients in Qiwi.

Positive volume dynamics in our key market verticals converted into strong Payment Services segment net revenue growth and overall robust performance of our business. Alexander will walk you through the first-quarter numbers in more details just in a moment, while I would like to walk you through some recent developments. Currently, we continue our negotiations with the management of Otkritie Bank regarding our future cooperation and development of both Tochka and Otkritie Bank project. We believe that our negotiations in respect of Tochka are currently in an advanced phase, and we might be in a position to frame a mutual beneficial resolution that will establish the basis of our future joint activities in the near future.

We have also recently started negotiations with Otkritie in respect of the Rocketbank project, as we are now in the early stages of negotiations, and we will provide an update once we reached agreement and developed further strategy. As far as we are in the process of negotiations with Otkritie regarding the future structure and development of Tochka and Rocketbank project, we are not in a position to provide any estimates of the potential mid-term contribution of this business. With this, I will turn the call over to Alexander who will take you through our financial results in more detail. Alexander?

Alexander Karavaev -- Chief Financial Officer

Thank you, Sergey, good morning, everyone. First, I would like to update you on the segment presentation of our business. Last year, we have revised our organizational structure to better reflect our operational and management strategy, as well as the expansion of our business operation. As of December 31, 2017, we have distinguished two key operating segments, as well as Corporate and Other categories. As of March 31, 2018, we have also separated our Small and Medium Enterprises business that is represented by Tochka as a separate segment.

Now onto the results. First- quarter of 2018 total adjusted net revenue increased by 41% to reach RUB 4.1 billion, up from RUB 2.9 billion in the first quarter of 2017. The increase was mainly driven by Payment Services and Small and Medium segment net revenue growth. Payment Services segment net revenue, which includes Payment Services, payment adjusted net revenue and Payment Services other adjusted net revenue, increased 26% to reach RUB 3.7 billion as compared to RUB 2.9 billion in the first quarter of 2017. Payment Services payment adjusted net revenue increased 36% to RUB 3.2 billion, up from RUB 2.4 billion in the prior year, and as a result of the net revenue growth in our E-commerce and Money Remittance verticals, which grew 50% and 43%, respectively, offset by a slight decline in net revenue Financial Services and Telecom verticals by 5% to 3%, respectively.

Our financial results in this segment were driven both by increase in volumes, as Sergey just described, and the improvement of the payment average net revenue yield by 15 basis points year over year as a result of changing category and product mix.Payment Services other adjusted net revenue decreased 17% to RUB 455 million as compared to RUB 536 million in the prior year, mainly because of the decrease in interest revenue, revenue from advertising, as well as revenue from overdrafts provided to agents. Payment Services segment net revenue excluding revenue from fees for inactive accounts and unclaimed payments increased 30% compared to the same period in prior year, primarily as a result of growth in Payment Services payment adjusted net revenue, as discussed earlier. Consumer Financial Services segment net revenue was RUB 3 million for the first-quarter 2018 as compared with the net revenue loss of RUB 10 million in the first quarter of the prior year, showing the development of our SOVEST project which has, however, shows good result as compared to the fourth-quarter 2017 due to seasonal factors, as well as substantial focus on clearing up our current distribution. Net revenue of the Small and Medium Enterprises segment was RUB 420 million for the first quarter of 2018, compared with nil in the prior year.

This segment net revenue includes mostly Tochka revenues recognized from the information and technology service agreement with Otkritie Bank for providing services to Tochka clients that have their accounts with Otkritie Bank. Net revenue of the Corporate and Other Category was RUB 8 million for the first quarter of 2018, compared to RUB 7 million in the prior year. Moving onto expense. Strong operating performance of our Payment Services business that continued to generate substantial cash flow support our investments in the development of our new projects, most notably SOVEST.

This [Inaudible] adjusted EBITDA decreased 5% to RUB 1.5 billion from RUB 1.52 billion in the prior year.Adjusted EBITDA margin was 35%, compared to 52% in the prior year. Adjusted EBITDA margin contraction primarily resulted from the increase in client acquisitions and advertising expenses by RUB 242 million incurred due to investments in the development of our SOVEST project, as well as higher personnel expenses incurred in connection with SOVEST and Tochka projects. Adjusted EBITDA was also affected by the increase in credit loss expenses of SOVEST project and other administrative expenses.Group adjusted net profit decreased 15% to RUB 1.1 billion, down from RUB 1.3 billion in this quarter of the prior. Adjusted net profit was largely affected by the same factors of adjusted EBITDA as well as increased income tax expense and decrease of foreign exchange gain generated as compared to the same period in prior year.

Payment Services segment net profit increased 27% to RUB 2.2 billion, compared with RUB 1.7 billion in the prior year, driven by Payment Services segment net revenue growth. Consumer Financial Services segment net loss was RUB 679 million in the first-quarter 2018 as compared to a net loss of RUB 316 million in the same period of the prior year, resulting from the expansion of he operation oft SOVEST project and associated cost mostly related to the consumer acquisition.Small and Medium Enterprises segment net loss was RUB 153 million, resulting mostly from client acquisition and marketing cost. Corporate and Other Category net loss was RUB 296 million, an increase of 90%, compared to the net loss of RUB 155 million in the prior year. The net loss was primarily driven by expense incurred in connection with the acquisition of assets of Rocketbank from Otkritie Bank, as well as several individually insignificant projects and items.Finally, as you saw in our earnings release, our Board of Directors decided to refrain from distributing the dividend while they're incurring significant investments in connection with the launch that will allow us to fund new projects. We expect that throughout the 12 months starting from the first quarter of 2017, we will concentrate on investing into our future growth.

While long-term, we remain committed to distributing all cash excess to our shareholders. Now onto our guidance. Given substantial uncertainty in respect of the future arrangements regarding the development of the Tochka and Rocketbank projects and the outcome of our negotiations in respect thereon with Otkritie, we believe that we are not in a position to provide any reliable estimates, revenues or expenses associated with Tochka and Rocketbank projects for 2018.We therefore only include in our guidance for 2018 actual revenues and expense associated with Tochka and Rocketbank project for the first half of 2018. Actual result of this project for 2018 may differ substantially from the data that we used in our guidance.

Given that, we increased our total adjusted net revenue guidance to interpret net revenue recognized in connection with our Tochka project in the first quarter of 2018, and expect our total adjusted net revenue to increase by 15% to 20% over 2017. This should reiterate our Payment Services segment net revenue, adjusted net profit and Payment Services segment net profit guidance. Payment Services segment net revenue to increase by 12% to 16% over 2017. Group adjusted net profit to decrease by 10% to 0% over 2017, while Payment Services segment net profit is expected to increase by 10% to 15% over 2017.

Although we see our first-quarter 2018 results as a solid foundation for future growth, certain other factors remained beyond our control, and hence, we reserve a right to revise guidance in the course of the year. With that, operator, please open up the call for question.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Ulyana Lenvalskaya with UBS. Please proceed with your question.

Ulyana Lenvalskaya -- UBS

Good afternoon, everyone, and congratulations on the numbers. The guidance on the underlying Payment Services revenue that's unchanged 12% to 16% looks quite very conservative against the first quarter delivered. Why is it that? Do you see any deceleration trends now, or what is the logic behind?

Alexander Karavaev -- Chief Financial Officer

Yes. So we're going to resume [Inaudible] as such, but we – in Q1, there had been an excess of low base was throughout last year, we started to launch several projects, now Payment Services vertical starting from Q2, Q3, and Q4 and then gaining traction. And that's why in Q1, the growth was a little bit also subject to a low base in Q1 of last year. So that's why we kind of upgraded the guidance in such a way.

But anyway, we still feel the guidance is conservative, but just we need some time to see for the trends of Otkritie.

Ulyana Lenvalskaya -- UBS

OK. And then a second thing. On the Wallet, we do see some deceleration in the pace of growth, through 13% now versus like 17% in the fourth quarter. What is the driver behind do you think? And what shall we expect going forward?

Alexander Karavaev -- Chief Financial Officer

Well, generally, we see – so we are like close to the saturation point in a way, so we usually when we prepared our model [Inaudible] , we were thinking that we'll never reach 20 million wallet. We'll certainly be somewhere close to a saturation point. For now I think we generally believe we can grow like few millions more, but the pace of gaining new wallets are not a trouble. And what's important here that the number, it's not only the important parameter.

So also what's very important is the volume per wallet, generally speaking, and the quality of volume, so to say, because we are now focusing on specific segments where we believe the majority of wallet will come from. For example, the self-economy, the self-employed and a few others. So that's why we feel certain a situation of the number of the wallet, but we are not in a position as of now to guide what would be the growth rate of the wallets going forward.

Ulyana Lenvalskaya -- UBS

OK. That's very useful. And another question, if I may. Another one which actually slowed in terms of the quarterly growth pace was volume in SOVEST, the payment volume in SOVEST.

Do you see some sort of normalization there as well? So this 20% quarter-on-quarter is sort of less impressive than before. Are we coming to some sort of a saturation at all?

Alexander Karavaev -- Chief Financial Officer

Not really. If you'll see [Inaudible] effectively, Q1 is the weakest quarter so to say generally for such type of product at least based on the data that we collect. So generally, we believe we're still far, far away from the normalization of the wallet. So we have to expect substantial growth throughout the year.

Ulyana Lenvalskaya -- UBS

It's like a seasonal effect?

Alexander Karavaev -- Chief Financial Officer

Exactly, yes.

Ulyana Lenvalskaya -- UBS

OK. Thank you. That's it for me.

Alexander Karavaev -- Chief Financial Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Chris Kennedy with William Blair. Please proceed with your question.

Christopher Kennedy -- William Blair

Hey, guys. Thanks for taking the questions and I appreciate the additional segment disclosure. One question on E-commerce. You alluded to new projects that's been driving the growth, I mean volume has accelerated I think for four consecutive quarters.

Can you talk about those new projects? And then any update on improving the mix to physical goods with your E-commerce business? Thank you.

Sergey Solonin -- Chief Executive Officer

Hi, Chris. Thanks for the question. Well, there are several projects with quite big companies. One of which is SOVEST, it's a platform for sports-betting companies to make bet.

This is one. Another one is the large project with Uber, with the taxi drivers, not only with Uber, through major Russian taxi company. And another one, I think, it is recently started with [Inaudible]. So all three are still in a growth position, so they will be increasing more.

And generally, QIWI is focusing on that kind of clients and services who cannot only increase the volumes, but also who is helping us to find new clients.

Christopher Kennedy -- William Blair

OK. And then an update on the physical, the mix toward physical goods?

Sergey Solonin -- Chief Executive Officer

Well, it's more or less unchanged. So it's still for the majority of the wallets reform as that we are showing mostly [Inaudible], so the physical E-commerce is not more than one fifth of total volumes. So it hasn't been differential.

Christopher Kennedy -- William Blair

OK, great. And then just two questions on SOVEST. Any update on kind of working with more bank partners? And then I guess still looking for the project to be breakeven exiting 2019? Thanks a lot for the question.

Sergey Solonin -- Chief Executive Officer

I think this year, we'll be announcing only one bank who is testing the product now, and we'll wait in few months, I think. So this year, it will be one bank, and we have another two banks for the next year. It seems that the integration part on SOVEST on a, I would say, more sophisticated product than just payment is a little bit more difficult and takes more time than we expected, but we are still in line with our strategy to do the multi-bank model on SOVEST.

Alexander Karavaev -- Chief Financial Officer

And on breakeven, yes, we're still kind of in a position so to say that, yes, we like to report you breakeven toward the end of next year.

Christopher Kennedy -- William Blair

Great. Thank you.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Vladimir Bespalov with VTB Capital. Please proceed with your question.

Vladimir Bespalov -- VTB Capital

Congratulations on good results and thank you for taking my questions. First, I would like to clarify a little bit about dividends. You changed the statement compared to what you had in your previous release. In particular, currently, it looks like you're ready to take potentially in six months from now, in the previous release, it was like 12 months from that point.

So do you see any changes in your new projects like they're moving to profitability or just the core business generating more cash that you feel like more prepared to pay dividends earlier rather than later?

Sergey Solonin -- Chief Executive Officer

Thank you. Well, actually, we not only changed our position in respect of that, but we – so we always thought that potential dividends kind of a temporary decision. We generally are in a position [Inaudible] shareholders based on the plans that we have as of now, we may restart paying dividends within probably nine to 12 months from now if everything goes according to plan.

Vladimir Bespalov -- VTB Capital

Thank you. My second question, I would like to clarify a little bit your guidance. What effectively I see from the changes that you include your actual revenues from Tochka in the first quarter of 2018, but you also mentioned that you would reflect, it sounds, like actual numbers for the first half in the guidance. But I don't feel like any additional revenue contribution from Tochka in the guidance or no changes on the expense side.

Could you provide a little bit more clarity on what is in the new guidance and what is not?

Alexander Karavaev -- Chief Financial Officer

OK. So we have in the new guidance, I mean, suffice the actual revenues of Tochka that we have [Inaudible] to you, actually, we've seen in Q1 report, the actual number which is RUB 420 million of revenue in Q1. And then there also separate slightly the numbers that we delivered on existing for the second quarter as well, and that would be-so given that we are still in negotiation with Otkritie, so again, we're in the final stage but not yet concluded. So I'm not sure which is [Inaudible] through our P&L in the second half of the year.

So that's why those are not included. So that's the whole reason why we increased the guidance.

Vladimir Bespalov -- VTB Capital

But you didn't include anything for the second quarter, right? Is that correct?

Alexander Karavaev -- Chief Financial Officer

We have included a certain amount for the second quarter as well, but not for the second part of the year, not for Q3 and Q4.

Vladimir Bespalov -- VTB Capital

OK. Thank you. And one more question, if I may. On Rocketbank, there are some expenses associated with the Rocketbank and some losses.

But could you maybe update – you are not going to get any revenues. It looks like from this asset. So could you update how this asset is being negotiated with Otkritie and whether you're going to recover some losses and how are negotiations are going around this asset? Thank you.

Sergey Solonin -- Chief Executive Officer

Yes. I mean so – yes, we have a certain amount of expense that we taken for Rocketbank, but those are not material. So we have not launched the Rocketbank operations. And therefore [Inaudible] it's a small amount.

And because of the plans, we have just started eventually the negotiation with Otkritie. This is a good sign itself, because we were not really talking to them on Rocket, so the Tochka was the main subject. So that's a good sign, so let's see how we proceed so we maybe having the final evaluation in respect of profit within that timeframe.

Alexander Karavaev -- Chief Financial Officer

With that, we do have some of the program as, for example, and some stuff that is dedicated to Rocket project with some types to connect and integrate Rocket into QIWI ecosystem. So for today, we are I think ready to do that depending on the negotiation with Otkritie.

Vladimir Bespalov -- VTB Capital

Thank you very much.

Operator

Thank you. [Operator Instructions] We have a follow-up question from the line of Vladimir Bespalov with VTB Capital. Please proceed with your question.

Vladimir Bespalov -- VTB Capital

Yes, thank you for taking my question again. So one more question on SOVEST, we saw a pretty big volatility in yield, so you explained it by some seasonal factors. But still, where do you think the yields will stabilize for months? These projects are going to be like more mature, what will be a normal yield for this kind of business? Thank you.

Sergey Solonin -- Chief Executive Officer

Yes. Well, we'll not be guiding on the yield, but I mean soon as that project would mature, it should be around same yield as we have in our core business. So that's what we mentioned.

Vladimir Bespalov -- VTB Capital

Thank you.

Operator

[Operator signoff]

Duration: 32 minutes

Call Participants:

Varvara Kiseleva -- Head of Investor Relations

Sergey Solonin -- Chief Executive Officer

Alexander Karavaev -- Chief Financial Officer

Ulyana Lenvalskaya -- UBS

Christopher Kennedy -- William Blair

Vladimir Bespalov -- VTB Capital

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