Axactor ASA

Good morning or good afternoon all and welcome to the Exactor ASA presentation of Q4 results. My name is Adam and I'll be your operator today. If you'd like to ask a question during the Q&A portion of today's call, you may do so by pressing star followed by one on your telephone keypad or by submitting a text question through the webcast. I will now hand the floor to Johnny Tsirilis, CEO to begin.

Good morning and welcome to Exactor's fourth quarter presentation. With me today, 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 financials before I go through our key focus areas going forward. We will round off with a Q&A session. Let us move to slide 3 and have a look at the highlights for the quarter. Before I start, please note that the numbers are affected by one-off effects, in particular portfolio sales in both 2024 and 2025. Reference is made to the footnotes. In Q4, Axtractor delivered revenue growth with positive contribution from both segments. NPL gross revenue grew by 3% year-over-year, and the 3PC growth was impressive 16%. Axtractor delivered a solid cash EBITDA of €54 million, up from €51 million last year. Cash EBITDA margin increased from 63% to 64%. Annualized return on equity to shareholders was 14%. We continued to see positive effects from both changes in the IBOR interest level and reduced net debt, resulting in a 15% year-over-year reduction in interest expenses on borrowings. During the quarter, we divested a couple of smaller-sized portfolios in Germany and Spain, and we did so at a solid premium-to-book value. The transaction strengthened the balance sheet and contributed to the strategy of renewing the NPL book. Let's move to slide 4 for more comments on collection performance. Aksakto delivered a strong reported collection performance of 106% for the quarter and a full year collection in line with expectations of 102%. Obviously, the collection performance was positively affected by the earlier mentioned portfolio sales, and excluding these, the collection performance for Q4 was 102% and 101% for the full year. Please move to the next slide for more comments on the portfolio sales we executed in Q4. During the quarter, we sold two small portfolios in Germany and Spain. The common denominator for the sales was that these were the oldest portfolios we had in the two respective countries. In Germany, the vintage was from 2016, and in Spain, this was the oldest remaining unsecured portfolio we had, and it was from an early 2018 vintage. The total perceived was approximately 15 million euros, and the transactions was done at a premium of more than 20% to book value. These transactions were a part of the strategy to renew our unsecured NPL book, and the buy effect is obviously the positive effect it had on Covenant, creating more Covenant headroom. Let's move to the next slide for more comments on the development within 3PC. The 3PC segment continues to deliver impressive results. In Q4, their revenue growth ended at 16% year-over-year. We saw double-digit growth in both Norway, Spain, and Germany. In Spain, the growth is fueled by a successful partnership with a major investment fund. The previously announced landmark agreement in Norway contributed with its first onboarded volume during the quarter. 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 positive foundation for further growth and margin expansions for 3PC, not only in Norway, but for the total group. Let's move on to slide 7 for a summary of the key highlights of the year. 2025 was a busy year for our sector, and I would like to highlight four areas where we saw significant improvements from previous years. Firstly, we delivered an impressive 19% organic growth in the 3PC area. This is one of the highest, if not the highest, growth for any collection company of a larger size in Europe. Secondly, our collection performance improved substantially from 24 to 25, supported by the negative revaluations performed on the backbook in 24. The full year performance was in line with expectations, ending at 102%. During the first half of 2025, we spent a lot of time on refinancing activities, and the maturity profile was de-risked through the prolongment of the RCF and the issuance of a new bond, ACR 05. And finally, we implemented a large cost initiative by changing our IT infrastructure supplier, taking down the cost for IT infrastructure by approximately 30%. All these four areas contributed to the improved financial results for our sector in 2025. Let's move on to the next slide and comment on where we are compared to our financial targets for 2026. Let me start on the left-hand side, NPL Investments. We anticipate NPL investments of 100 to 200 million euros annually. In 2025, we ended below the target range at 59 million euros. This is partly explained by the fact that in first half 2025, we were holding back on investments until we got the refinancing of the RCF and the ACR 03 executed. Regarding return on equity, we were at 10% reported ROE and 12% adjusted for non-recurring cost items in 2025. The target is to be at a minimum 12% ROE in 2026. When it comes to returns and leverage, it is important to view these two in combination. We have a dividend policy with a dividend payout ratio between 20 and 50%, and at the same time, we want to have a maximum leverage ratio of 3.5 times at the end of 2026. What has become evidently clear over the last couple of years is that the debt market profoundly rewards low leverage ratios with tight bond spreads. It is therefore the board's recommendation not to pay dividend based on the 2025 results to prioritize deleveraging and hence improve cost of funding. We have already seen a strong tightening of the margin on our bonds, and we hope that the trend will continue into 2026. With that, I will leave the word to Nina for the financial updates.

Thank you, Johnny. So, now I'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 the group ended at 99 million euros in the quarter, down 39% compared to the first quarter of 2024. The gross revenue was strongly affected by the sale of portfolios in both Q4 2024 and Q4 2025. Excluding the portfolios sold, the underlying life-for-life growth year-on-year was 6%. The MPRO segment reported a gross revenue of €80 million. The underlying growth this quarter was 3% when adjusting for the sale of portfolios. The growth was mainly driven by improved collection performance. The CPC segment continued to deliver a strong top line of 19 million euros, up 16% from the fourth 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 Enpel segment delivered total revenues in the fourth quarter 2025 of 49 million euros. When doing the year-on-year comparison, it's important to note that in Q4 2024, the company adjusted DRC curves and reported a net negative valuation of 104 million euros, resulting in negative total revenues for that quarter. Total revenues for Q4 2025 were positively impacted by the improved collection performance. Collection performance continues as expected to hold steady at around 100% and ended up at 106% for the quarter and 102% for the full year 2025. When excluding the sale of portfolios in Germany and Spain, the collection performance came in at 102% for the quarter. The contribution margin ended at 74% for the fourth quarter 2025. The contribution margin was slightly down compared to previous quarters due to higher legal activation in Italy in the quarter. This year, Axato will resume full focus on building a solid NPL investment pipeline consisting of attractively priced accretive portfolios. The market NPL portfolios remain active with numerous opportunities expected through the coming year. The estimated replacement capex for 2026 is 75 million euros and based on expected investments for the year of 100 to 200 million euros, we would likely see a growth in the NPEL book value. Please turn to the next slide for comments on development in the CCC segment. The Q4 2025 performance for the CCC segment was all-time high with solid revenues of 19 million euros. We reported double-digit growth in Norway, Spain, and Germany, and the year-over-year growth ended at 16%. The contribution margin was 48%, up from 44% in the fourth quarter of 2024. This represents the highest margin since 2019, even when we include the significant ramp of costs related to the landmark agreement signed in Norway during 2025. The CPC segment continues to show strong momentum with ambitious new sales targets. The Norwegian-Denmark agreement will have a gradual ramp up throughout the year, supporting over significant growth expectations for 2026. 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 68 million euros for a quarter, Total revenue for the fourth quarter in 2024 ended negative due to the derailations made at year-end. The reported EBITDA ended at 35 million euros with a strong EBITDA margin of 52%. So we continue to see results from our cost reduction and revenue growth initiatives. Cash EBITDA ended at 67 million euros for the fourth quarter compared to 130 million euros in the corresponding quarter in 2024. The reduction was driven by the large portfolio divestment in the fourth quarter in 2024 compared to the smaller portfolio sales in the fourth quarter in 2025. Now on to the next slide for a look at the development in return on equity. The return on equity for the year came in at 10%. The ROE is increasing to 12% and excluding cost-related NRIs. A return on equity of 12% is in line with the communicated financial target for 2026. This result was mainly achieved through improvements in collection performance, strict cost control, and lower financial expenses. We continue to accelerate our operational automatization program to help maintain a healthy return on equity going forward. This concludes a positive year with a stable financial performance. With that, I'll now hand it back to Johnny for some comments on the focus areas going forward.

Thank you so much, Nina. I would like to wrap up this presentation by emphasizing our key focus area going forward. We believe this area will be important in order to secure a creative growth for 2026 and beyond. Firstly, we will resume full focus on building an attractive MPL investment pipeline. Most, if not all, of our portfolio acquisitions will be a creative on leverage ratio. Secondly, we will continue to fight for new, attractive, large-sized bank and finance customers in the 3PC segment. We target to place a 100 million euro bond to refinance ACRO3 and to secure additional investment capacity and, at the same time, of course, not lose focus on daily operations and operational excellence, despite the rapid growth that we are experiencing. With that, we will open up for questions.

Thank you. As a reminder, if you'd like to ask a question on today's call, please press star followed by 1 on your telephone keypad, or if you joined us via the webcast, you may submit a written question there. Star 1 or the webcast. We have a question from Kyle Coco from Arctic Securities. Kyle, please go ahead. Your line is open.

Could you walk through, you might have mentioned it, the net financial items and why those were slightly higher, I guess, during this quarter versus the year before. Could you talk a little bit more about those? I recognize that there's a deferred payment that was made. Can you help bridge this a little bit for us?

Yes, sure. on the financial items, it's correct that we have a one-time in the financials in the Q4 this year, and it's also correctly stated that it's related to deferred payment. This is a portfolio in Spain where we have a profit-sharing agreement, and this portfolio has been quite over-performing lately, so that's why we have made an accrual for deferred payment. So it's not a cash effect as such, it's an accrual for future payments.

Great, thanks. And it seems on the investment side that we didn't quite see the large pickup in the fourth quarter, but obviously highlighting that you see a good pipeline and expected a large pickup in 2026. Could you just talk about maybe the competitive environment you saw in the fourth quarter and what you're seeing potentially so far in the first quarter that gives you that confidence in that pickup?

Yes, we can do that. I would say that Q4 deal flow was more or less at a normalized level, but we also saw that some of the processes were delayed into Q1. So I would say that Q1 deal flow is a little bit higher than what we normally see. And we don't see a pipeline longer than Q1, Q2, other than that we know that the annual processes from certain banks will always come in there. The competitive environment is more or less the same as it has been for a while. We see less competitors than what we saw maybe one to two years ago. But the ones we see, they are relatively aggressive. And that is also the reason why we did not overinvest or invest on the low side in Q4. we don't have unlimited investment capacity. So we are in a situation where we can select transactions where we see attractive IRs. So we are thinking that is the most important in what we do and not aiming to necessarily push investments to the 100 mark that we were actually hoping for, but we could not do it, unfortunately, in 2025.

Understood. Thanks very much. Maybe just one more on the three PC items. Obviously, you know, continuing to have pretty big growth in that segment. You'd mentioned earlier that the larger contract in Norway was coming on as, you know, contributing as of the fourth quarter. Is there any way that you can Give us any color on the amount of the growth that was driven by that particular client versus broad growth in the segment.

To be honest, I don't have that number in front of me. But obviously, it's a certain contribution. But what I can say is that the contract consists of several product areas, and the largest one has not been onboarded yet. It will be onboarded late Q1, early Q2. So there's still a lot of upside potential from that contract. And the volume gradually picks up.

Great. So just understanding that, you know, it's relatively broad-based growth, obviously not just, you know, that being the main driver is what I'm understanding.

Yes, that is correct. As you can see that we have double-digit growth in three out of four countries. So it's not only the contract in Norway, for sure.

Yeah. Sounds good. Thanks very much.

Thank you. We have no further questions from the phone line, so I'll hand back to the team for text questions.

Very good. Yes, we have a few questions here online. So the first one goes as follows. The 3PC fees in Norway have been fixed since 2017, but will be higher from 26 onwards. My estimation is that this will increase the acceptor EPS with about 5 euro, taking the landmark contract in Norway into account. Is my assumption correct? And if so, if not, am I in the ballpark? And first of all, I can say that the fee structure is a bit more complex than just the fixed fee. So especially there's an element of success commission. So it's not so straightforward to calculate. And also, we cannot answer detailed questions regarding a specific customer contract but what i can say that the key changes in that has been done or will be done will definitely be positive also for for this contract Second question is, were there any one-offs in the net financials and costs? I think we have already answered this partly. I don't know, Nina, if you have anything to add on it.

I think it's great we already answered it on the financial outcomes, but I can also add that on the more operational costs. I do also have some smaller one-offs relating to the transactions of selling the portfolios in Spain and Germany, and also some legal fees in Spain.

Yeah.

Third question, do you believe that your AI is better than the average competitors? And I think the question is that, no, to be honest, I think we are more or less on average for now. We are preparing. We are still not using AI to a large extent. We are doing it in some areas. It's under implementation. We have started to see some effects, but I also noticed that During the Arctic NPL seminar earlier in January, very few competitors are talking a lot about AI. It's a lot about automation and scorecards and so on. But pure AI, I think everyone has more or less the same. A lot of us are using the same, for example, the same dialer system, which opens up for a lot of the same AI tools. So no, I don't think that we are far ahead of competitors. So next one, how do you assess the outlook for collection performance for 2026? Several peers have indicated that the positive collection trends seen in 2025 and expected to continue into 2026 do observe a similar development. So that is question number one. As you can see, we have been more or less right on our collection forecast for 2025. We believe to be close to this, but please remember that there are risks in our curves going forward. It's affected by a macro chance. It's a regulatory environment. There's a lot of risks built into the curves. so um so i don't have any more comments to give on this this early in the year we'll have to see after if you want to see how all the air starts Second, you have delivered strong 3PC growth recently at a high level. What level of 3PC growth should we expect in 2026? So we don't guide a specific level, but we have said that we expect also strong growth into 2026. And since we also have announced this one large agreement, but we also signed other large 3PC agreements during 2025 that is building up, we see that the growth will be I would say more than the market growth is what I can say, but we're not going to give a specific number for it. Third part of the question, could you provide some indications of the expected impact of the IT migration of operating expense? We're not guiding any on the total. We have said that just The change of IT infrastructure was 30%. And I think in some of the previous quarterly presentations that we had last year, we gave some more numbers on it. But unfortunately, I don't have that in front of me right now. Question number five, did the portfolio sale impact the collection performance? Yes, and it's also thoroughly described in both the report and the presentation, and you can see the difference with and without the sales on the collection performance. Next question. uh will you do a bond in euro uh given the performance of the new bond from credit nor why not take advantage of the very strong market in nook so no decision has been taken of in what currency we will do the balls but normally i can say normally we do euro bonds and um It's also important to remember that the bond price consists of two price elements. So one is the underlying interest element, which then for NOK would be the Norwegian interest rate level, which is substantially higher than the Uribor. And the second part is the margin. So we will come back to what kind of currency this will be issued in, and it also depends on the market conditions at the time we are addressing the market. Next question, what would the leverage ratio have been adjusted for the portfolio sale? That is a number that we don't have, that we will not share. And then going back to the TPC fees, I think that the question was misunderstood. Will the increase from 700 to 750 NOK increase your EPS with about 500? Point one, I don't have the calculation, so I cannot comment on it. And point two, we will not also comment on this specific issue. That was all the questions we have received so far. I don't know if we have any more online questions on the phone. I mean, nothing. Nothing more from the phone, so I'll hand it back to yourself. Okay, thank you so much, and thank you all for participating, and have a great day. Bye-bye.

This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.