Axactor ASA

Hello and welcome to the X-Acto ASA Q3 2025 results presentation. My name is Alex. I'll be coordinating today's call. If you'd like to ask a question at the end of the presentation, please press star followed by one on your telephone keypad. Or if you've joined us via the webcast, please type your question into the Q&A text box. I'll now hand it over to Johnny Solis, CEO, to begin. Please go ahead.

Good morning and welcome to AXAktor's third 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 Q3 highlights. Then Nina will present the financials before I give an updated outlook. We will round off with a Q&A session. Let us move to slide three and have a look at the highlights for the quarter. In Q3, AXAktor delivered double-digit revenue growth with solid contributions from both segments. Gross revenue grew by 11% year over year and total revenue growth was 12%. It was also positive to see that the contribution margin increased by 2 percentage points. The numbers are adjusted for the divested portfolios in Spain and a positive one-off effect from court cash bookings that we had in Spain in Q3 last year. EBITDA ended at 33 million euros, up from 27 million euros last year. The 23% EBTA growth is driven by increased revenue in combination with strict cost control. Annualized return on equity to shareholders was 11%. We now see the positive effects from both changes in the IBOR interest levels and reduced net debt, resulting in a 23% year-over-year reduction in financial expenses. One last item to mention is that we have secured the option to utilize our RCF to refinance the residual outstanding balance on our bond ACR03. This gives us high flexibility in terms of refinancing when it matures in September next year. Let us move to slide four for more comments on the collection performance. Q3 ended on the soft side regarding collections. Both July and September were good months, but August was slower than anticipated. The collection performance landed at 98% for the quarter and 100% year to date. Going forward, we expect collections in line with forecast. Moving on to slide 5 and more comments on the strong development in the 3PC segment. The 3PC segment continues to deliver impressive results. MPL is still the largest part of our business, but 3PC is a very important part of Axtractor's business model. 3PC, which is a capitalized model, offers low risk and generates strong cash flows at healthy margins. In Q3, their revenue growth ended at 19% year-over-year. We saw growth in all markets, but still, it is Norway and Spain where we can observe the strongest trend. In Spain, the growth is fueled by a successful partnership with a major investment fund. 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 expansions for 3PC, not only in Norway, but the total group. Let us move on to the next topic, refinancing, on page six. As you are well aware, 2025 has been a year where Axtactor has focused a lot on the balance sheet. The RCF is extended and matures mid-2028. Given normal circumstances and the long-lasting relationship we have with our RCF banks, renewal processes are doable at fair terms. In Q2, we placed our last bond, ACR05, at more than 3 percentage points better total interest rate than the previous bond. And as mentioned earlier, we can use our RCF to refinance the remaining part of ACR03. AXAktor has now full flexibility with regards to the refinancing of the last 65 million euros outstanding in ACR03. This means that we don't have any substantial maturities before towards the end of Q3 2027. 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'll leave the word to Nina for the financial update.

Thank you, Johnny. So now I'll take you through the Q3 financial performance, starting with an overall figures and then a bit more context on what is behind the numbers. Gross revenue for the group ended at 78 million euros in the quarter, down 9% compared to the third quarter of 2024. The decline was mainly a result of the sale of portfolios in Spain last year and a low investment level during recent quarters. Excluding the portfolio sold and a positive one-off effect from court cash bookings in Spain last year, the underlying like-for-like growth year-on-year was 11%. The MPL segment reported a gross revenue of 63 million euros. Excluding the sale of the Spanish portfolios last year and the positive one-off, the gross revenue increased 9% compared to Q3 2024, driven by improved collection performance. The CPC segment continued to deliver a strong top line of 15 million euros, up 19% from the third quarter in 2024. 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 10% compared to the third quarter of 2024, with total revenue of 46 million euros. Collection performance continues to fluctuate around 100% and ended up at 98% for the quarter. Year-to-date, the collection performance is at 100%. This affirms the collection forecast we provided after the Q4 revaluation last year, with adjusted ERC curves. The improvement in total revenues was also supported by lower net negative revaluations and a lower effective NPL amortization rate. The amortization rate was reduced to 22%, down from 33% in the third quarter of 2024. The contribution margin ended at 79% for the quarter, up from 76% in the third quarter last year. The margin is supported by both rising total revenues and lower operating costs. Total operating expenses for the MPL segment decreased 5% compared to the third quarter last year. The decrease in cost level reflects the impact of ongoing cost reduction and efficiency improvement initiatives. Please turn to the next slide for comments on the development in the CCC segment. The CCC revenues ended at 15 million euros per quarter, equal to a growth of 19%. All countries with CCC business deliver solid growth, with Norway and Spain being the main contributors. The CPC growth is tightly linked to the quality of services we provide. During the third quarter, AXACTO won approximately 80% of benchmarks they participated in. The solid benchmark performance means that AXACTO has allocated a high share of the volumes going forward. AXACTO's quality focus confirms the company's intention to continue investing in competence and improved solutions. The contribution margin was 36% down from 37% in the third quarter 2024. The decline in margin year-over-year is related to implementation and build-up phase of new contracts. Further expansion in the CPC segment is expected going forward based on the strong momentum across all four geographies supported by a solid pipeline for new business and implementation of recently signed contracts. Let us move on to the next slide where I present more details on the reported financials. Total revenue at group level ended at 62 million euros, up from 55 million euros in the third quarter in 2024, up 12% year over year. The reported EBITDA ended at 33 million euros with a strong EBITDA margin of 53%. So we continue to see results from our cost reduction and revenue growth initiatives. Cash EBITDA ended at 49 million euros for the third quarter, compared to 59 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 nine months reached double digits, coming in at 10%, increasing to 11% when excluding NRIs. This result was mainly achieved through improvements in total revenue and lower financial expenses. With lower interest rates, improved and failed collection performance, strong CPC growth, and a continued focus on cost, Axactor expects to maintain a healthy return on equity. With that, I'll now hand it back to Jonny for the comments on the outlook.

Thank you so much, Nina. As I've already mentioned, regarding refinancing, Axactor 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 we expect a pickup in accretive MPL investments going forward. We believe, however, that the Q4 investments will be a bit moderate than normal, and we expect to invest 50 to 100 million euros in 2025. The reason for the relatively modest investment level is that we were holding back on investments in the first half of the year as we were safeguarding until we had the refinancing of ACR03 in place. We continue to see strong momentum in the 3PC segment, with several large new 3PC agreements secured during the quarter, and that will ensure continued double-digit growth for the next 12 months. One last point to mention is that we are in advanced discussions with regards to a smaller-sized portfolio backlog sale. We will revert with more details in due course. With that, we open up for questions.

Thank you. As a reminder, if you'd like to ask a question and have joined via the telephone lines, please press star five by one on your telephone keypad. If you have joined us via the webcast for today, please type your question into the Q&A text box. Our first question for today comes from Ulrich Zerke of Nordea. Your line's now open. Please go ahead.

Yeah, thank you. Thank you for taking my questions. I have a couple. First, I was just wondering if... You are guiding or indicating that 100% collection performance, but I was just wondering, have the uncertainty increased in any sort of fundamental way? And by that, I mean, are there any regulation, cost of living budgets, or stuff that was challenging last year? Maybe that's on the horizon, or is it a stable operating environment?

Yeah. The only thing that comes to mind is that in Finland we were expecting a reversal or at least a partial reversal of payment three months and we were expecting new legislation from January. That has been postponed. It's uncertain when and if that will happen. That is the only thing that I can say in regards to regulations. Yeah, I think that's at least the most important one.

Okay, that's great. And then just two questions on the MPLs. Do you have any indication of or expectation for the investment target range for 26? And then also, I'm just wondering how the IRR that you're seeing on available volume compares to your back book? Yeah.

So I think the target range, it should be the 100 to 200 million that we also have in our financial targets. I think that is the best estimate that we have for 2026. And regarding IRRs, I think it's fair to say that there is some pressure on IRRs in the wrong direction for us, but not substantially. But compared to the back book, it's still accretive.

Okay. And then the last one. I was just wondering about the potential sale of the small MacBook portfolio. Is that to release some RCF capacity for potential refinancing, or why are you doing it?

No, it's just a smaller one. If we do this, this is a mature portfolio. old back book in one of the countries and it's on we will only do it if we get a good price for it so it's just more like a normal adjustments of the portfolio basically it's not it's not going to be anything near the size that you saw last year for example ah okay okay got it yeah thank you so much thank you thank you and i'll hand it over to the management team for any written questions Yes, thank you. And then we have the first question here. Could you elaborate on how Covenant would have looked if we adjust the Q3 figures for the positive impact from the Spain sale in Q4 2024? To be honest, we haven't done that calculation, but I would expect that we would have been compliant. Next question is, bond spreads have tightened significantly recently. Do you have any comments on what your spread required to issue a new one prior to september i don't have a fixed number but i still think that even though we have titan i think there's still still potential if you compare our spreads to others in the industry we are still paying way more so i think that by delivering a few good quarters hopefully that our spreads could be even more fair and i think that this uh what could could lead to a bond placement during next year before it expires in September, the ACR03. Yes, and then the next question here, how will the smaller backbook say impact covenants? I don't have a separate calculation for it, but obviously it will impact positive.

I can just also add that a small book sale will have a positive impact both on the cash MBTA and also then reducing the net interest rate deficit, two very important parameters when we calculate the governance. So as you said, John, it will have quite a positive impact.

Yeah. Next question, do you expect portfolio purchases to pick up in 26? Listening to Høyst, there seems to be no shortage of portfolios for sale. I can agree on that. There's a lot of portfolios, but it also has to be a good business case. So I think it will pick up because this year, as we have said, this is on the low side because we had to hold back on investments for the first half of the year because of the refinancing process that we were focusing on before the summer. And we expect the investments to be in the area of up to 200 million next year. What plans do you have for dividends to shareholders? So we don't have any plans for it. This is up to the board to decide based on the financials for 2024. They will decide whether or not to pay dividends.

That was all the questions we have here. Are there anyone else on the audio?

Yes, we have a question from Rickard Hellman of Nordea. Your line is now open. Please go ahead. Thank you.

You have a very strong growth in 3PC, which of course is very encouraging, but can you give some more flavour or meat on how you have been able to achieve this? if it's something special around it or any specific subsectors that you're targeting or other aspects of it.

So it's primarily two areas where we are growing in all countries double digit basically have done for a while but it's especially in Norway where we have been able to capture a large part of the bank finance market and especially the auto market but also with this huge win we have before summer This is giving, of course, tremendous growth in the Norwegian market. But it's not only this one large client. We are winning a lot of attractive bank finance clients. We are only in bank finance in most countries. In Norway, we are actually in SMEs as well. But the high growth is coming from bank finance. And I think here it's fair to say that some of our competitors have been struggling for a while with quality. So I think we have been able to deliver high quality at a reasonable price. So that seems to sell well in the Norwegian market. In Spain, we also mentioned it in one of the slides, we have, in addition to the very strong position we already have in Spain, having most of the large banks on our 3TC client list, we have also started to work together with a large investment fund. So where they are buying portfolios, we are helping them sometimes with the deal sourcing, cooperating on the underwriting, and they have been buying the portfolios. And then we have been getting the 3PC at favorable market terms. So it's Spain and Norway that is really driving the growth. And in the other markets, we have seen that it has been a potential to increase the prices, especially in Germany. And in Italy, the growth is steadily around 10%. And it's mostly up sale on existing clients. There's no new large clients, but it's up sale.

Okay. And a follow-up on that. As I understand it, I mean, with some large contracts and also, you know, the impact from this investment fund in Spain. But in generality, can you say, are you taking market share or do you see higher volumes from your customers?

So in Norway, we are definitely taking market shares. The volumes are not that... much higher than compared to last year, for example.

Okay. But this large contract in Norway, that has not impacted Q3. It's for Q4, isn't it?

Yeah, that's true. It started off now, 1st of October. So you haven't seen the volumes from that contract yet. And it's so large volumes that it will be gradually building up. and the largest product we will probably onboard in q1 maybe last part of q1 next year okay okay uh thank you very much thank you thank you at this time we currently have no further audio questions okay but then there's no other questions on the line here as well so then uh I just think I could close the call here. Thank you so much for calling in, everyone, and have a nice day. Bye-bye.

Thank you all for joining today's call. You may now disconnect your lines.