Axactor ASA

Good morning and welcome to VoxActor's first quarter presentation. By my side, I have Nina Mortensen, our CFO. This presentation will be divided into four parts. First, I will take you through Q1 highlights. Then Nina will present financials before I give an updated outlook. We will round off with a Q&A session. Let's move to slide three and have a look at the highlights for the quarters. Collection performance was 101% for the quarter, which affirms the updated curve forecast after the revaluations done in Q4 last year. Total gross revenue ended at 77 million euros in the seasonally weak quarter. Here it is important to remember that we sold off approximately 6% of our total back book in the Spanish portfolio sale at the end of last year. Adjusting for this, the gross revenue was up 7% year over year. We also delivered an impressive 28% growth in the 3PC segment. On top, we managed to increase the margin. I will come back with more details. The EBITDA ended north of 32 million euros, which was an increase of 23% year over year. The solid EBITDA margin of 50% was driven by margin expansion and cost reductions. Annualized return on equity to shareholder reached 20%, which is all time high, and on par with 2026 financial targets. Oxtocler has a very solid balance sheet with close to 350 million euros in equity, which gives an equity ratio of 27%. Let's move to slide four for more comments on collection performance. I'm pleased to see that we are now back to the expected level on collection performance. This level is of course supported by the Q4 revaluations, but we can also observe positive signals in the underlying performance in certain markets. For example, we can observe more larger payments in the Norwegian market and even stronger collections in the Spanish market for secured assets. Both likely to be explained by positive development in housing prices. The Q1 collection performance was affirming that our new forecast assumptions was correct for the period and we expect collections in line with the forecast going forward. Moving to slide 5 and more comments on the positive development we saw in the 3PC segment for the quarter. Although NTL counts for the largest part of our sector's P&L, 3PC is still a significant and important part of our business. It is a capital-like business model, offers lower risk, but still generates a strong cash flow at healthy margins. It is also an important part in building the relationship with our banking customers. Q1 was a very strong quarter for our 3PC business, showing an impressive 28% increase in revenue year over year. and at the same time, the contribution margin was increasing. What is equally positive is that we see a broad improvement for the segment, with double-digit growth in all of our four 3PC markets. We see a clear trend that the customers are more willing to pay for high-quality collection services, and the growing pipeline with solid prospects gives a very positive foundation for further growth and margin expansion for 3PC. Let's move on to the next topic, refinancing, on page 6. Over the last couple of weeks, we have announced two important elements in addressing our loan maturities. Firstly, and maybe most importantly, we have agreed with our RCF banks to extend the RCF with two more years, and new maturity will be June 2028. The terms and conditions will not be changed. This is a pure extension exercise. We consider the terms both to be fair and attractive, and this shows continued strong support for our two main banks. Secondly, we have repurchased a substantial amount of bonds at significant discounts during Q1. In the quarter, we acquired bonds for 49 million euros at 97.3% of par. We continue to buy a little bit more in the ACR03 bond in April, so the current outstanding amount on ACR03 is 180 million. In total, we have acquired bonds for approximately 100 million euros during the last two quarters. Let us move on to the next slide for more comments on how we plan to continue the bond refinancing. First, it is important to say that we are on track to refinance the ACR3 bond. It is 16 months left to maturity, and normally we have done refi closer to the bond maturity. However, we recognize that the market has put a significant spread on our bonds and has therefore started the refinancing by acquiring bonds worth of 120 million euros in the market at substantial discount. Our aim is to refinance the remainder of ACRO 3 during 2025, and the main elements of this refi would be to place a new 100 to 150 million euro bond in combination with cash flow generation in the period until refinancing. This continued reduction in bond debt is expected to further fuel reduced interest expenses. We have also several other options for cash generation, such as portfolio sales. Regarding covenants, we have comfortable headrooms on all covenants, and many of them actually improved during Q1. The last point I will mention before I leave the word to Nina is the development in interest expenses. Please move to slide eight. The favorable development we saw at the end of last year has continued with even more strength into Q1. The reason for the positive development is the double positive effects from reduced IBOR rates in combination with effect from bond buybacks since we are using cash in combination with RCF, which has a lower interest margin. In numbers, the reduction is 15% of interest expenses last two quarters. Also, we believe the positive trend will continue the next two quarters, although at a bit slower pace. Still, a 7% reduction is expected until end of Q3. Please note that the 7% reduction is assuming a constant level of interest bearing debt. With that, I'll leave the word to Nina for the financial update.

Thank you, Johnny. So now I'll take you through the Q1 financial performance, starting with the overall figures and then a bit more context on what is behind the numbers. Gross revenue for the group ended at 77 million euros in the quarter, down 2% compared to the first quarter of 2024. Excluding the portfolio sold in Spain in Q4 last year, The increase in gross revenue was a healthy 7%. The NPL segment reported a gross revenue of 62 million euros. The segment gross revenue, excluding the sole Spanish portfolios, increased 2% compared to Q1 2024. The CPC segment delivered revenues of 15 million euros, up 28% from the first 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 an increase of 11% compared to the first quarter of 2024, with total revenue of 50 million euros. The reported collection performance ended at 101% for the quarter, affirming the active forecast after a Q4 revaluation with adjusted ERC curves. The improvement in total revenues was also supported by lower net negative revaluations and lower effective NPL amortization rate. The amortization rate was reduced to 17%, down from 26% in the first quarter of 2024. The contribution margin ended at 77% for the quarter, up one percentage point from Q1 2024. The margin is supported by both rising total revenues and lower operating costs. Please turn to the next slide for comments on the development in the CPC segment. The CPC revenues ended at 15 million euros for the quarter, equal to a growth of 28%. All markets delivered double-digit growth this quarter, with especially good results in Norway and Spain. The contribution margin also increased this quarter to 33%, up from 32% in the first quarter 2024, driven by healthy volume growth. Further expansion in the CPC segment is expected throughout the year. with strong pipelines for new business in several markets. Let us move on to the next slide, where I'll present more details on the reported financials. Total revenue at group level ended at 65 million euros, up from 57 million euros in the first quarter in 2024. The reported EBITDA ended at 32 million euros, with a strong EBITDA margin of 50%. So we continue to see results from our cost reduction and revenue growth initiatives. Cash EBITDA ended at 47 million euros for the first quarter compared to 49 million euros in the corresponding quarter last year. The reduction is due to the large portfolio divestment in the fourth quarter 2024. Now on to the next slide for a look at the development in return on equity. The analysed return on equity for the first quarter climbed to 12%. The increase was driven by improvements in total revenue and lower financial expenses. The reported return on equity is all-time high in AXAFTOR's history and is on par with the announced 2026 financial goal. With lower interest rates, improved NPL collection performance, strong 3PC growth and a continued focus on cost, AXAFTOR expects to deliver a return on equity at a healthy level throughout 2025. With that, I'll now hand it back to Johnny for some comments on the outlook.

Thank you so much, Nina. As previously mentioned, we expect the collection performance to continue to be around 100% going forward, and we expect the 3PC growth to continue with healthy margins. Declining interest expenses from bond buybacks and falling IBOR rates will continue, and it is worth to mention that quarterly OPEX is expected to be reduced by approximately 700K post-IT migration to new infrastructure platform. We expect full run-right on IT savings from Q3. We will continue to see strong cash flow generation that will be used for both buying portfolios and to conclude the refinancing process. As I mentioned earlier, we expect to refinance ACR03 in 2025, while ahead of maturity, which is September 26th. With that, we open up for questions.

Thank you. If you wish to ask a question, please press star followed by one on your telephone keypad now. If for any reason you want to remove your question from the queue, please press star followed by two. When preparing to ask a question, please ensure your device is unmuted locally. Our first question comes from Gustav Larsson from Arctic Securities. Your line is now open. Please go ahead.

Good morning, and thank you for taking my question. First question regarding servicing, double digit growth in all markets and CPC revenue up now 28% year over year. Is this a temporary boost from soft Q1 last year, or can we expect this growth to continue throughout 2025?

Well, first of all, I will not promise 28% growth going forward because that is an enormous number. But we expect TPC to grow substantially also in the coming quarters. What we see here is that we are winning large market shares, especially in the Norwegian market. And also Spain is doing particularly well. So we expect growth to continue.

Thank you. Can you say anything about the potential contribution margin that can be reached in 3PC, given that you are signing more attractive contracts and I assume some operating leverage there as well?

We're not guiding specifically on the contribution margin, but it's obvious that if we continue to grow double digit, we will be able to take out more scale effects. So we expect the margin also to continue to gradually improve.

Okay, thank you. And on investing then in the MPL segment, capex is still low, but you're guiding for an increase towards the end of the year. Where do you think that you In which geography are you expecting to buy most MPLs during this year?

We believe that it, like it was last year, we believe that Spain will be the market that we invest most. And like you say, it will be mostly towards the end of the year. It is correct. We have low investments in Q1, 5 million, but we also had only 11 million last year. So it's not a big difference. Q1 is very slow. We expect a little uptick in in Q2, and then the majority of the investments will be later in the year, probably in Q4. That's when the majority comes from Spain. And then we also hope to be able to invest in the Norwegian market. But we are open to invest in all of our markets, of course, but Spain will definitely be the biggest one.

Okay, thank you. And then regarding refinancing, can you elaborate a little bit? You're saying you're expected to issue bonds 100 to 150 million. Will that be in NOKI or are you trying to do it in euros?

We haven't taken any decision on that, but the hypothesis now is that it will be euros.

Okay, thank you. That's all for me now. Thank you.

Thank you. As a reminder, to ask a question, please press star followed by one on your telephone keypad. We have no further audio questions, so I'll hand back to Johnny for any written questions.

yes we have a couple of questions here so the first one is uh personal expenses increased uh quarter over quarter with approximately 1.5 million could you please comment which factors that contributes uh to this cost increase and there are two main explanations for this it's uh first of all uh it's the number of fdes has gone a little bit up since we are increasing uh so much on ppc so um that that is one of the main drivers And then we have salary increases from Q1 that increases. But if you compare this year over year, you will see that the 25 was actually lower on personnel cost compared to 24. And then we have older operating costs. Is there any cost items to mention that drives up tech total cost in the quarter? So as you know, we are in the middle of this migration for a new IT platform. So there are some one-off costs that is included in the numbers. And I think we also mentioned in the presentation the level that we expect and when the full IT cost savings will start kicking in. And that is from Q3.

I think we also, just to add, Johnny, also on the total operating cost, that's also the business mix between CCC and MPL. Since the share of CPC is higher, it also has a higher share of costs. It's also contributing to driving the total cost up in the quarter. If you look at the nominal numbers. If you then again also look at the increase in total revenue of 15%, the increase in total operating expenses is only 8%. So we are still having a quite good cost focus.

Good enough. That's correct. Next question. Can you elaborate a bit more about your decision to focus more on secured and failed investments? What risk do you see? Is it more OPEX heavy? So first of all, we have not a decision that says that we will focus a lot more on secured. I think it's around between five and 10% or a total book closer to five. That is secured assets. We only do secured assets in Spain. we are also having a really quick recovery on the secure assets. So I would say that the book is more or less constant in size on secured. And we need to invest quite substantially this year just to keep the secured book constant. So I don't expect that the secured book will increase a lot relatively to the unsecured. But regardless of that, the risks are more or less, there are no particular risks other than in the unsecured. You could claim it's less risk because you actually have security behind the claim and the price difference is of course different, but we believe that the risk reward is even better in many of the secured portfolios that we are buying. It's, of course, a bit more OPEX heavy because you need to go legal on some of the claims and the legal process could be cumbersome and expensive. But this is, of course, reflected in the acquisition price. And then next question, can you comment on timeline for introducing dividends or repurchase of stocks? So there will be the earliest possible timeline, I assume will be approximately one year from now, if the board decides to give dividends based on the 2025 numbers. And yes, those were the questions that we have received. So unless there are any new ones on the line, I think yeah.

No, we have no further audio.

No, we got another one here. How can you describe the competitive situation of MPLs in different geographies? so um i would say that if you start with the with spain which is the most important process it's it's quite an active market but in general we see less bidders in the auction so that goes for all the markets but spain is competitive but still the irs are better than a few years back italy we haven't been very active so and i also feel that there are less deals in the market But we haven't done any large acquisitions lately. We did one in Q4, but we have not bought anything there in Q1. In the Nordics, I would say that there are, like I said, fewer participants. We see maybe the market that we see the largest change is Sweden, where it used to be very, very active and a lot of bidders in the processes. Now we see far less. So I think it will be easier to achieve reasonable IRRs in the Swedish market going forward. Finland, I would say due to legislation reasons, we are not active in the Finnish market. It's in many ways uninvestable until we are getting more clarity on how the Finnish government will handle payment-free months going forward and so on. So we also see less activity in the Finnish market. And then in the Norwegian market, we have two to four bidders normally and healthy competition, but still we see that the price level is fair and it's possible to achieve an okay IRR, I would say. Let's see, here we have another one. It was a long question. AXA has reported strong revenue growth of 15% and improved EVTA margins of An improved EBITDA margin of 50%, that is not correct. The EBITDA margin is 50%, not improved to, but that is the level that we have normally seen when we have not done revaluations. How sustainable do you believe these assumptions are, and do you see any opportunities for continued probability in the coming quarters? that the level we see now is more or less the level that we will continue to be at. Of course, this depends on collections going forward, but as long as we are able to deliver around 100% on collection performance, which we believe we can do, I don't see any large risks in the profitability. We know that the interest expenses will come down in the next couple of quarters, and we believe 3PC revenues to continue to grow, and we have really good cost control. So I would say that we are very confident when it comes to the margin, as long as we are able to reach the collection curse. And there it says, sector-acquired MPL portfolios worth of 5.2 million. Do you expect NPA investments to increase throughout? Yes. So we stay at our current guiding. So we believe it will be at least 100 million euros. So we have said in our annual guiding, it's not specifically for 2025, but it's in our financial targets. Over time, we would like to invest between 1 and 200 million euros. Like I said earlier, yes, it was a low amount in Q1, but the same was the case for last year, and last year ended up at 128 million. So Q1 is not decisive for where we end up in investment levels, so to speak. Yes, and I think I've touched upon the last part of the question. In our view, how would the market for such investment move forward? We believe that there will be ample opportunities. several deals in the market. We see the normal annual processes in more or less all markets are going as they usually do. So I would say there's not a boom in the volumes, but we also see that there has been, we know that there are some large secondary portfolios in the market. So it should not be a challenge to invest 100 million euros at attractive IRRs. But again, We also have said that we will make sure to prioritize the bond maturity. So that's why we are holding a little bit extra back here in the first half until we have been able to refinance the ACO3 bond. Okay, that was the last question we have received. So thank you so much for calling in and I wish all of you a good day. Bye-bye.