Axactor ASA

Good morning and welcome to AXAktors fourth quarter presentation. Together with me, I have our CFO Nina Mortensen. This presentation will be divided into four parts. First, I will take you through the Q4 highlights. Then Nina will present the financial update before I give an updated outlook. Finally, we round off with a Q&A session. Let us move to slide three and have a look at the highlights for the quarter. Gross revenue increased substantially year-over-year compared to Q4 2023, up from 85 million to 161 million euros in 2024. This large increase is explained by the previously announced portfolio sale that was conducted in Q4. More about that later. Adjusting for this transaction, the revenue declined 4% year-over-year. However, it is worth noticing that the 3PC revenue increased by 10% year-over-year on a like-for-like basis. Cash EBITDA ended at 130 million, up from 55 million the previous year. Again, the main explanation is the portfolio sale. Adjusted for this, the cash EBITDA declined 6%. As most of you remember, we announced already in November that primarily due to the challenging macro environment we saw during the whole of 2024, we will have to do a substantial negative revaluation in Q4. The final number ended at 104 million euros. Please note that this negative revaluation does not have any cash impact, but will obviously impact financial matrix. Also, the revalued claims remain valid and will continue to accrue interest where applicable. Given this negative revaluation, the return on equity to shareholders ended at negative 19% for 2024. Excluding the revaluation, the return on equity was 6% for the year. AXAFTOR still has a solid balance sheet with an equity ratio of 26% after the revaluation. In addition, we have more than €100 million in available liquidity, so even though the revaluation is of course unfortunate, we still have a very strong financial position. Let us move to slide 4 for more details on the revaluation. Although it's never desired to do a negative portfolio revaluation, sometimes it can be necessary. The size of the revelation corresponds to 9% of Q3 book value after the Spanish portfolio sale and amortization. Since the reason for the revelation primarily can be explained by the long-lasting soft macroeconomic environment, it is natural that all of our markets are affected by it. However, the largest adjustments are done in Sweden and Germany. As you can see from the graph, Our NPL book values are down 14% NQ4 compared to NQ3, with the two main explanations, the Spanish portfolio sale and the revaluation. However, on the positive side, the revaluation will effectively lower our estimated collection curves, which will in turn make sure to improve our collection performance. The adjustment will make sure that the book values are correct and the improved collection performance will give us very comfortable headroom towards the collection performance covenant on the RCF. As I mentioned in the introduction, despite the revaluation, our balance sheet stands out as very strong. Let's move on to the next slide for more details. I can understand that it can be a bit challenging to evaluate individual company risk for investors in the sector, especially when you're reading about peers in chapter 11 processes and other types of restructurings. However, I think in order to understand the differences between the companies, it is necessary to dive a bit into the details, as the companies are very different in terms of business models, geographical risk, funding structures, etc. A good place to start would be to have a look at the balance sheets. If you do that, you will see that Axtractor has a very tangible asset side, probably the most tangible in the industry, where only 5% of the balance sheet is goodwill. Further, close to 90% of the balance sheet is either portfolios, repossessed assets, or cash. Even though our revaluation, like the one we announced today, has reduced the book value of the NPL portfolios, Axtractor still have a rock-solid equity ratio of 26%. In addition, we have more than 100 million euros in liquidity that could be used for either bond buybacks or portfolio investments. As you can understand, Axtractor is in a good position to handle all the coming debt maturities and prolongment of the RCF. We will talk more about that later, but first a quick reminder about the Q4 portfolio sales on the next page. A part of our deleveraging strategy was demonstrated through the very important portfolio sales we announced in Q4. We sold off the earliest Spanish vintages, representing close to 6% of our total NPL book value, and the transaction generated approximately 80 million euros in cash. The price was 102% of book value, and it was a true sale to our competitor. Hence, no continued servicing or servicing fee that impacted the sales price. We believe this transaction visualizes Axtractor's valuable and liquid balance sheet. It also shows that we are both willing and able to use the secondary market that has become much more active over the last two years in the exact two countries. The transaction has several positive effects. Obviously, it gave an immediate improvement on our financial governance, which was important, especially on ICR and leverage ratio. But it was also important as part of renewing our Spanish NPL book, opening up the opportunity to buy more fresh debt where we can create additional value by using our platform structure to a larger extent than on an old backbook. The transaction gave us improved financial flexibility, as you can see on the next slide. This flexibility we already took advantage of in Q4, as the liquidity gave us the opportunity to start refinancing of our ACR03 bond that matures in September 2026. During Q4, AXACTOR acquired bonds in the market for approximately €51 million at 94.2% of par. Hence, we achieved a gross gain of close to €3 million due to these buybacks. AXACTOR now holds approximately €70 million of ACR03. We believe this demonstrates approximately the commitment to execute value-creating transactions such as further accretive bond repurchases and portfolio divestitures. Moving on to the next page for an overview of our current debt structure. It is for the most part self-explanatory but I would nevertheless give a few pointers. The RCF draw by year end was 472 million leaving 73 million in headroom for max draw. The first maturity is in one and a half year and it is the RCF expiring end June 2026. Total remaining bond debt is now 425 million euro. Finally, the total outstanding interest bearing debts by year end was a little shy of 900 million. Before I give the word to Nina, I would like to just give a few comments on how we are thinking around the upcoming maturities. First up is our RCF. We aim to prolong or renew this during the first half of this year. We will continue to invest in attractive portfolios, but at the same time have a close eye on the leverage ratio. Given natural seasonality, first half will show a moderate investment level. Depending on how the bond market develops in general and how the spread specifically for our sector develops, we expect to refinance ACRO3 during 2025. As we have expressed earlier, we will aim for a more diversified maturity profile with smaller bonds, primarily with annual maturities. Compared to the current structure, we have some years without any maturities and some with relatively high maturities. This will reduce the point timing risk, which we think is an advantage for both us and the bond investors. As part of the refinancing strategy, we could potentially consider further portfolio sales during 2025. However, there are no ongoing processes at the moment. Nina, with that, I leave the word to you.

Thank you, Johnny. So now we'll take you through the Q4 financial performance, starting with the overall figures and then a bit more context on what is behind the numbers. Gross revenue for a group almost doubled from 85 million euros in the fourth quarter of 2023 to 161 million euros in the fourth quarter of 2024. The high increase in gross revenue stems from the sale of Spanish portfolios for an average premium of 2% over book value. Excluding the sales proceeds, Gross revenue was 82 million euros, equal to a decline of 4%. The NPL segment reported a gross revenue of 144 million euros. The segment gross revenue excluding the sales proceeds was 66 million euros, a decline of 6% compared to Q4 2023. The CPC segment delivered revenues of 16 million euros, up 5% for fourth quarter last year. Let's look a bit more into details on each of the business segments, starting with NPL on the next slide. The NPL segment delivered a negative total revenue of 59 million euros for the quarter. The negative total revenue is mainly caused by net negative NPL revaluation from revised ERC curves of 104 million euros. The revaluations came mainly as a result of continued challenging collection environment across all X-Actor countries. In the fourth quarter, the overall collection performance ended at 94%, up from 90% in the third quarter. When we sold the Spanish portfolios, we amortized the remaining book value. Thus, the effective amortization rate for the quarter was significantly higher. The effective amortization rate ended at 68% for the quarter, up from 29% in the fourth quarter last year. On the more positive side, we continue to have success with the ongoing cost improvement projects. Total operating expenses for the NPL segment fell 9% to 11 million euros in the fourth quarter. Please turn to the next slide for comments on the development on the CCC segment. The CCC revenues ended at 16 million euros for a quarter, equal to a growth of 10% if we exclude Sweden and Finland, which were closed down last year. The increase was driven by double-digit growth in Norway, Germany and Italy, as well as a strong development in Spain. The Norwegian CPC business is performing particularly well, with solid growth from new sales within the banking and finance segment, a key focus area of Exactor's strategy. The contribution margin is slightly lower this quarter compared to the previous year, due to one-off revenue items following in the aforementioned CPC business closures. This led to a decline in contribution margin from 46% to 44% in the fourth quarter of 2024. The underlying operational profitability is in a positive trend, with the full-year margin increasing to 38% from 36% in 2023 without adjusting for a positive one of items. Let us move on to the next slide where I present more details on the reported financials. If you look at the two charts to the left, you clearly see the impact of the revaluations on the total revenue and the EBITDA for the quarter. Total revenue at group level ended at negative 43 million euros, while the EBITDA was minus 74 million euros. Cash EBITDA ended at 130 million euros for the fourth quarter, up from 55 million euros in the corresponding quarter last year. The increase was mainly driven by the proceeds from the Spanish portfolio sales. Now on to the next slide for a look at the development in the return on equity. With the adverse impact from the MPL revaluations in the fourth quarter, the return on equity for the full year 2024 ended at minus 20% on a fully consolidated basis and at minus 19% for ROE to the shareholders. Despite the negative result for the year, AXACTO still have a robust financial position with an equity ratio of 26% and a comfortable liquidity position with approximately 100 million euros available in cash and headroom on the RCR. Moving on to the next slide for some comments on the status of the financial targets. Early last year, we communicated our four financial targets for 2026. Firstly, the annual NFL investments for the period 2024-2026 should be in the range of 100-200 million euros. In 2024, AXAOXA invested 128 million euros, well within the target range. Secondly, the annual dividend payment should be within 20-50% of reported net profit. As the net profit for 2024 was negative, dividend payments are not applicable for 2024. Next is a target of raising 12% ROE in 2026. And despite the 2024 result, we stay committed to this target. Finally, it is a sector's ambition to be at or below 3.5 on leverage by the end of 2026. The leverage ratio at the end of 2024 was below target at 2.7. I'll now hand it back to Jonny for some comments on the outlook.

Thank you so much, Nina. Regarding collections, we expect higher collection performance after the negative revaluation in Q4. On OPEX, we continue to have very good cost control and aim to absorb any cost inflation and to keep OPEX flat. Cost of funding will continue to go down due to lower IBOR rates and bond buybacks. Leverage is substantially reduced. On the investment side, we expect to do high-quality investments. However, we believe that this year, investments will be in the low end of the financial target of 1 to 200 million euros on an annual basis. Our pan-European position continues to give us valuable access to attractive NPL markets in Europe. Finally, we expect the 3PC business area to continue to deliver solid growth at healthy margins. With that, we open up for questions.