KRUK Spólka Akcyjna

Good afternoon. My name is Michał Zasempa. I'm CFO at Krug. Welcome to the results presentation for the first quarter of 2026. You will have, as always, an opportunity to ask questions via chat. So please use this function. Let me now go through the presentation. The presentation is also available on our website. So let's start. In the first quarter of 2026, Krook had 262 million zloty of net profit. This is roughly what we expected for this quarter. However, the structure of the results was somewhat different than we budgeted. If you look at the top line, it was somewhat lower. than we planned. On the other hand, we also saw lower goals. But overall, we believe this was a decent result. And with this result, we, of course, need to concentrate more on recoveries in the following quarters to improve the revenues, possibly also continue to extract some cost efficiencies. but our target for this year profit is not changed. We don't give forecasts, but we do know that we have a target of at least 12% growth on the profit before tax in order to receive the allocation for the warrant program, and we would like to see it happen. This was a good quarter for deployment of money into new portfolios, 530 million zlotys, especially good in Italy, and it's double what we invested, more than double what we invested in the previous, in the quarter, first quarter of the previous year. The company continues to be well capitalized and with good access to the funding and moderate leverage level. If you If you look deeper, you can see that we exceeded on the total level by 4%. The accounting forecast, which is roughly what we expected, those differences will continue likely to be single-digit numbers. Most of the expenditures, as you see here, in the first quarter came from Italy, which is very good news, and usually the first quarter, the supply in this quarter is relatively modest, so we expect to see more investments in the following quarters. And our expectations for this year's investments does not change, and it's somewhere in the range between 2.5 to 2.8 billion zlotys. I will now go through the segment analysis to give you more flavor of the results. Let's start with Poland. Poland had a good quarter. Overall, on the recoveries, we were almost exactly on plan. However, we exceeded expectations on recoveries from corporate portfolios, and we were two point something percent below our operating target. on retail portfolios. But this two point something is already significant in terms of value, and it was a reason why we recognized somewhat lower positive revaluation on the portfolio than budgeted. Please remember, this is a quarterly exercise that we are doing. This revaluation will be higher in some quarters, lower in some quarters, as we will be reacting to what's going on in the current quarter in the coverage. So this is where we are after the first quarter. The game is on. The next quarters hopefully will be good and we'll be able to catch up, although this is of course not certain. The good information is March in Poland was a very good month. If we continue to see that, then the situation will be fine for the Polish market. Still, it was another year where we were very close. to our targets, and you see that the profitability of the business is stable. On the investment front, this quarter, we saw, as we saw in 2025, a relatively high level of competition and not so high supply yet, and we expect to increase our investments in the following quarter. If you look at the Romanian business, the performance was very good. We met fully our operating target for recoveries, and also we recognized revaluation with the level that we expected. Just as a reminder, this year we are expecting lower revaluation than in previous year. And we also added another $18 million to the investment market. The market continues to be competitive, both in Poland and Romania. Relatively fresh portfolios are offered for sale, which means that they have potential to see high success rates. 70, 80 percent, for which we are, in order to win them, and we can afford to pay relatively high percentage of the nominal value, sometimes 30, sometimes even 40 percent. Hence, you can see that this average price of this market will be relatively high. So overall, very good quarter for Romania, and we expect this trend to continue in the following quarters. In Italy, this quarter was good, but not as quite good as we planned. So, we missed a small 3% on the recovery on retail. On the other hand, on corporate, we exceeded significantly our target. Also, that's the reason why we didn't see a higher positive revaluation in that quarter, but hopefully, will be able to catch up in the following quarters. It was a very successful quarter in terms of deployment. We bought one very significant portfolio, which represents already a big chunk of our targeted investment plan for 2026. But maybe we will be able to exceed it since the beginning was very promising. And Spain, a market where you remember we suffered from changes in how Spanish courts function. The good news is that we see an improvement. We see an improvement in how our cases are going through the process. That's why we are more optimistic that we'll be able to go back to buying portfolios in the following quarters of of this year, and if that trend continues, we should already see more recoveries from the legal process already in the second quarter of this year and in the following, of course. And looking, seeing that situation, we also accelerated some of the cases in Spain, so this quarter results, this 30 million of EBITDA is also lowered by higher expenditures, higher spent on legal costs than we budgeted, which is good news because it means we see the potential and these investments should be repaid in the following quarter. So it's not yet a guarantee of success on Spanish market, but it's definitely a positive news that we saw over the past couple of months. And the rest of the markets where we continue on closing down, winding down our operations in Czech market and we continue to learn and work with our portfolios and small and buy small portfolios in France. But there is no major development in France. We continue to gather knowledge and experience and also test certain operational improvements in France in this mode where we are an investor and we work with a few that should continue for the following quarters. We continue to look at the UK and US market, but it's unlikely that we will make any significant move in those markets this year. We are continuing on the path of digital transformation, and there is additional capex and opex coming from that also this year likely higher than in previous year and as you may remember we're also during the process of reorganization to become especially a special investment company a regulated fund that process may last up to the second half of 2020 So, we are quite busy with tool reorganization and, of course, making sure that this year's target is realized. My summary for the situation is that the situation is good, but we see some minor weakness on the recoveries. We think it's possible that we'll see the We will be looking also to extract some cost efficiencies to increase the chance that we will be hitting the target for the full year for net profit this year. We believe the business is in good condition. We continue to have very good access to funding. The fact that we made a very successful issue of a large homes issue this year in Poland The effective tax rate for this year will be relatively low because we already have 600 million zloty sitting at the matter company. We need less money to be taken from our investment companies during which process of transfer they are taxed. And as I said, it's likely that we see somewhat lower costs than we anticipated both operating and overhead this year. So, overall, we are optimistic about the coming quarters, but there's quite significant, you know, initiatives that we are carrying on the currency, apart from the business as usual. Lending business is more common. This is a year where we expect the business to, to produce lower EBITDA than last year. There's a few reasons for that. First, there was an extra gain in revenues in Q1 2025 coming from revaluation of the recovery curve. We don't think it will repeat this year. And second, the sales are somewhat lower than planned, and the products that we sell are the products that have will be recognized over a longer term period of time and that's already visible in Q1 of 2026. We continue here to develop the startup operations in Romania and of course the bulk of the business remains in Poland. Looking at the funding, we are in a very good situation. The demand for our bonds exceeded our expectations in this first half of the year, and also we received positive feedback from the banks who continue to be open to increase their involvement into food. If you look at the projected recoveries on this slide, we show the change. This estimated remaining recoveries increased to 27 billion. That's a target we need to exceed, as you may know. And just to remind you that these were the expected returns on the investments we made. You may see again that we continue to show the investment discipline. as we are showing, as we're keeping also this year. I think this is the most important news, part of this commentary, and I'll be now very happy to take your questions. There's a question about the bond issues this year. We don't plan new bond issues in the immediate future of the next couple of months, as we also expect to have good access to bank funding, but we don't exclude it, of course, in the wider, in the longer horizon of the next few quarters. And also, you may have seen that we've done the first call for one series of bonds in Poland, it may be that it would be profitable for the company to call some other bonds, but we don't at this point have immediate plans to do it yet. You're also asking what are our plans for entering new markets. So, as I mentioned, we continue to look at UK and US, but it's unlikely that we'll make any significant entry this year. But the plans to change those two markets are of our interest. You also asked about the progress of the digital transformation. The project is going on plan. A very important milestone for second half of this year is the Minimum Viable Product in Poland, which means there will be a framework of the system that should be already operational and there will be first cases that will be going through it on a test mode, which will allow us to check the development that was done so far. But just to remind you, the whole of the business, our bank book, shall be transferred to the new system only sometime in 2029. Before that, there will be some portfolios, newly booked portfolios, going through the newer system. and there will be some higher system that will be that will be still the the legacy systems so at this point in this year or the next years we don't we will not see any efficiency gains yet but but we'll be making hopefully good progress to see to see the results and build this this improvement potential for 2029 and for following years There is a question also about the reorganization that is already undertaken this year. Just to remind you, this is something we announced in January in 2026, and this concerns our plan to become the special investment company, so a regulated fund under the specific legislation. as a mother company for the group that entails certain regulatory steps, regulatory clearance, tax clearance. The reasons for this reorganization were explained by me and earlier this year, and this process should not affect shareholders nor bondholders. It should strengthen the company. give us better access to funding and safeguard potential cost of interest and be finalized in the second half of 2027. But it's a major reorganization of the group in Poland. So, in a nutshell, it means that the current company Kruk SA will be divided in three, the investment fund, the servicing company that will have the service functions like HR, IT, and Kruk Collection Company. Those will be all three separate companies. The mother company, the Kruk ASI, the Special Investment Fund, will be the owner of all of the companies in the group, as Kruk ASI is today. There is a question on April and also on Q1 that it seems it was mostly retail portfolios slightly lagging in terms of collections in QI and a color of lateral. So, yes, there was a few small percent of a lag in retail portfolios in Q1. However, the performance is improving, so March was better than February overall for retail portfolios. I don't have final numbers for April. We will have it only in the first days of May. Expectation is that April will be a good month for retail portfolios overall. Also, maybe for some of you, it will be useful information if you look at the quarterly recoveries. Q1 usually is lower in terms of recoveries than the Q2 or Q4 because of systemality, because of the amount of working days. And an additional comment. The revenues, you saw that there was some decline in revenues, Q1 versus Q4 versus Q1 2025. Please remember that in Q1 2025, there was a one-off of $21 million coming from release of provisions in Wuhan. If you account for that, the revenues did not decline. You also asked if we see an increased competition for portfolios, especially in Poland. The answer is no. We see roughly equally competitive market as we saw in 2025, but it means a competitive market. Of course, we're losing most of the transactions, and we are overall targeting somewhere between 25 for Romania more about 50% market share. So it's a similar market environment as we observed last year. You're asking about the structure of ERC. I believe we have that information in the financial report. for a QR, so I ask you to browse for that. Roughly, okay, maybe not for the full ERC, but you may have it for the realized recoveries. I think in the Q1, and overall for a year, it should be around 10, maybe 9, 8% of recoveries will be coming from non the other assets than the consumer unsecured, and it should be roughly similar for the ERC.

Looking if there's any other questions. If you have any, please ask them.

Okay, I see no further questions. Thank you very much for your time today. If you have any follow-up issues, please contact the IR and have a good day. Thank you. Goodbye.