Axactor ASA

Hello everyone and welcome to the Exactor Q2 2025 results. My name is Nadia and I'll be coordinating the call today. If you would like to ask a question at the end of the presentation, please press star followed by one on your telephone keypad. If you have joined via the webcast, you can submit written questions below the slides on the bottom right of your screen. I will now hand over to your host, Jonny Solis, CEO to begin. Jonny, please go ahead.

Good morning and welcome to Axtractor's second 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 Q2 highlights. Then Nina will present the financials before I give an updated outlook. We will round off with the Q&A session. Let us move to slide three and have a look at the highlights for the quarter. During Q2, we had a lot of focus on refinancing and we did mainly two things. We prolonged the RCF with two more years at attractive terms, and secondly, we placed a new 125 million euro bond. Even though we still think the market required a too large spread, we were able to place the new bond, ACR05, with more than three percentage points lower total interest rate than the previous one, ACR04. I think we now can say that for all practical purposes the refinancing is done, and we are well positioned to shift strategic focus to MPL investments and growth. Collection performance was 102% for the quarter, which affirms the updated collection forecast after the revaluations done in Q4 last year. This is the second quarter in a row that we are on the positive side of our collection forecast. Total gross revenue ended at 81 million euros. This is basically on par with last year after adjusting for the Spanish portfolio sales in 2024, despite low investment levels recent quarters. 3PC continues to show impressive growth with a 14% growth year over year. But even more importantly, we are well positioned for further growth in the next 12 months with large new contracts agreed in Q2, which has not been started yet. Annualized return on equity to shareholders was 8%, but adjusted for non-recurring items related to legal proceedings, IT infrastructure, migration cost and refinancing activities, it was 12%. Reported year-to-date return on equity to shareholders was 10%, 12% adjusted for the non-recurring items. Let's move to slide 4 for more comments on collection performance. AXA-Aktur continues to deliver on the expected level on collection performance. Actually, it was the second quarter in a row we were slightly above the forecast. The first half collection performance was affirming that our new forecast assumptions was correct for the period and the expected collection performance in line with the forecast going forward. Moving on to slide five and more comments on the continued positive development we have seen lately in the 3PC segments. Like I said last quarter, although NPL accounts for the largest part of Xactor's P&L, 3PC is a significant and important part of our business. It is a capitalized business model, offers low risk, but still generates a strong cash flow at healthy margins. It is also an important part in the relationship building with our banking clients. Q2 continued the very strong trend we saw in Q1 with growth in all markets and a 14% increase in revenues year over year. Even though we see strong development in all markets, I would like to highlight that Norway and Spain are the two markets we see the strongest growth. We have had a clear breakthrough in the Norwegian 3PC market for bank and finance over the last couple of years, and we expect to more than double the 3PC revenues from 2025 to 2027 as a result of both the landmark agreement we announced in Q2 and other large agreements as well. 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 give a very positive foundation for further growth and margin expansions in 3PC, not only for Norway, but for the group as a total. Let's move on to the next topic, refinancing on page six. Let me start with the conclusion. For all practical purposes, AXACTOR is now done with all major refinancing activities. We don't have any substantial maturities before towards the end of Q3 2027. The RCF is extended and matures mid-2028. Given normal circumstances and the long-lasting relationships we have with our RCF banks, renewal processes are doable at fair terms. The last bond, ACR05, was placed at more than 3 percentage points better total interest rate than the previous bond. We are continuing to work on our maturity profile, and the target is still to have more frequent and smaller bond placements than we have had historically. With that, I leave the word to Nina for the financial update.

Thank you, Johnny. So now I'll take you through the Q2 financial performance, starting with the overall figures and then a bit more context on what is behind the numbers. Gross revenue for a group ended at 81 million euros for the quarter, down 9% compared to the second quarter of 2024. The decline is a result of the sale of portfolios in Spain last year and low investment level recent quarters. Excluding the portfolio sold, the decrease in gross revenue was down 1% compared to Q2 last year. The NPN segment reported gross revenue of 65 million euros, Excluding the sale of our Spanish portfolios last year, the gross revenue decreased 4% compared to Q2 2024. The CPC segment delivered revenues of 15 million euros, up 14% from the second quarter in 2024. Let's look a bit more into details on each of the business segments, starting with Enpel on the next slide. The NPL segment delivered an increase of 6% compared to the second quarter of 2024, with total revenue of 48 million euros. The reported collection performance continued above 100%, ending at 102% for the quarter. This affirms the collection forecast we provided after the Q4 revaluation with adjusted ERC curves. The improvement in total revenues was also supported by lower net negative revaluations and lower effective and pale amortization rate. The amortization rate was reduced to 23%, down to 134% in the second quarter of 2024. The contribution margin ended at 77% for the quarter, same level as last quarter. 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 14%. All markets continue to deliver growth this quarter, with especially good results in Norway and Spain. The contribution margin was 31%, down from 36% in the second quarter 2024. The decline in margin year over year is related to implementation and build-up phase of new contracts. A landmark CCC agreement was reached with a leading financial institution in Norway during the quarter and is expected to contribute to significant growth for Norwegian CCC revenue when fully operational. Further expansion in the CCC segment is expected throughout the year with strong pipelines for new business in most of our 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 64 million euros, up from 59 million euros in the second quarter 2024. The reported EBITDA ended at 33 million euros with a strong EBITDA margin of 51%. So we continue to see results from our cost reduction and revenue growth initiatives. Cash EBITDA ended at 15 million euros for the second quarter compared to 61 million euros in the corresponding quarter in 2024. The reduction is mainly due to the sale of the Spanish portfolios last year. Now on to the next slide for a look at the development in return on equity. The analyzed return on equity for the first half year reached double digits, coming in at 10%. This result was mainly achieved through improvements in total revenue and lower financial expenses. With lower interest rates, improved NPL collection performance, strong CPC growth and a continued focus on cost, AXActor 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 I have already mentioned regarding refinancing, ArcStruxure is well positioned with no major maturities the next two years. We expect the collection performance to continue to be around 100% going forward and we will now shift focus from refinancing to investments and expect a pickup in accretive NPL investments going forward. We continue to see strong momentum in the 3PC segment with several large new 3PC agreements secured during the quarter that will ensure continued significant growth for the next 12 months. Regarding costs, quarterly OPEX is expected to be reduced by approximately 800,000 euros post IT migration to new infrastructure platform. With that, we open up for questions.

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to remove your question, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally. If you have joined via the webcast, you can submit written questions below the slides on the bottom right of your screen. We'll pause for just a moment. As a reminder, that's star followed by one on your telephone keypad. If you have joined via the webcast, you can submit written questions below the slides on the bottom right of your screen. It appears we have no audio questions. I'll hand to Johnny for any written questions.

Thank you so much. So we have a couple of questions here. The first one is regarding the 3PC agreement in Norway. Do you expect this to double by 2027? Will most of the increased collection be front-end loaded? And that I can confirm, yes. It will be quite heavily front-end loaded, and most of the growth will come into 2026, but there will be a tail into 2027. Second question is, can you talk a bit about the NPL market? Are there a lot of portfolios for sale? And what money multiples are you observing on your portfolio? So what I can say is that Q3 is normally relatively slow. It will also be the same for this year because of the vacation period. And we see a normal buildup for the Q4 pipeline. So expect normalized volumes in the market. Regarding money multiples, I think that it's fair to say that IRRs are slightly lower now than if you compare to, for example, six to 12 months. But it's still attractive IRRs if you put it in a more historical perspective. And those are the questions we have received so far, so I don't know if the moderator have any more.

We currently have no questions, but as a reminder that staff, fill it by one on your telephone keypad, and if you have joined by the webcast, you can submit written questions below the slides on the bottom right of your screen. We'll pause for just a moment.

Yeah, and we have also received one more question here online. and that is how do you view the competition situation in the NPL market? And what I can say is that there are, in definitely most of the processes, there are competition, but we see also fewer participants than what we did a few years back. So it's, like I said, in a historical perspective, IRs are good, are attractive market, but we see normally three, four competitors in each bid. Sometimes more, very few times less.

We have no audio questions, so I'll hand back to you, Johnny, for any written questions or any closing comments.

Now it comes in actually a couple of more questions here. What are the dividend prospects? There's no new take on the dividends. It's clear what we have in the financial targets and we are mid-year, so there's no new view on this. Next question is, how will potentially reduced interest rates in NOC in the future affect you? I don't know if you're looking for a number that I don't have, but Nina, would you like to comment shortly on that?

Of course, we have one of our bonds are in NOK with 2.3 billion NOK. So, of course, reduced interest rates will impact us in a positive way when it comes to financial expenses. But I think also, you know, if the interest rates goes down in Norway, that could also potentially have a positive effect on collections as well, as a lot of our debtors also could then have potentially higher disposable income as they pay less interest on their housing mortgage, for example. So I think it could benefit us in several possible ways.

I think there's no more questions here. There we have another one. How comfortable are you regarding meeting the leverage covenants requirements by the end of 2025 and early 2026? We are quite comfortable the way that it is now. First of all, there's a lot of mitigating action so when we do portfolio acquisitions which we expect to do primarily in q4 that will improve the covenant position and we are also considering to sell off smaller portfolios that could also be helping out on the government position. And then we have another one. Do you plan on repurchasing the outstanding part of ACR03 bond this year? That could happen, and we are working on different ways to look at it, but we have flexibility. It's also true that the interest rate on ACR03 is quite attractive. I think we pay 5.35 plus euro more. This is not something that we will stress doing, but we are looking into different options how to solve that little stub that is left on ACR03. okay since there are no more questions i think it's um i think we're ready to close the meeting and thank you so much for for calling in and for the questions have a nice day everyone thank you this now concludes today's call thank you for joining you may now disconnect your lines