Intrum AB (publ)

Thank you. Good morning, everyone. My name is Anders Engdahl. I'm the CPO of Intrum, and with me I have Michael Ladonner, our CFO. Today, I'm very happy to present to you the results of the fourth quarter and the full year results of 2021. If we turn to page three of the presentation. As we summarize, looking back at 2021, I'm very pleased to see the progress that we made on the path that we laid out at the Capital Markets Day in 2020. We laid out two key strategic priorities, transformation and organic growth. And I'm happy to see the progress that we made during the first year of this three-year journey. First, we laid out our transformation journey, one interim, where we set out to build a common operating model based on a common technology platform and where we build a strong foundation for data and analytics in order to deliver superior value proposition to our clients and customers, to deliver efficiency benefits in order to gain a competitive advantage, supporting our ability to capture market share. Secondly, we set out to build a trajectory for organic growth and commercial success, building on the positive market conditions in the post-pandemic environment. As we look back at these achievements over the first year of this journey, it is worth noting a few highlights, starting with one interim. We can see that the program is already delivering value, and we are now in a position to scale up for further operating leverage. We have in the first 12 months built a common global front office footprint across four key locations, with now 343 agents serving 15 markets. We have migrated 20% of our case volume to our common technology platform, and we now have approximately 10% of our staff located in global centers of excellence, driving the standardization of our processes based on a common blueprint. So, we are on track to deliver the 1 billion SEK of operating cost savings supporting our competitiveness. Second, we built a strong trajectory for organic growth, including a number of high-profile client wins. In 2021, the value of newly signed contracts increased by 80% versus the previous year, corresponding to approximately 10% of the installed base of servicing revenues. Our pipeline has grown consistently and is now more than two times what we had pre-pandemic at the end of 2019. And we've just signed a transformational CMS deal in the UK with a large retail bank that will add approximately 2.5% to CMS growth once fully onboarded in the second half of 2022. At the same time, our investment business is back to deployment pace, which is consistent with a double-digit organic growth trajectory at attractive returns. And the benefits are now becoming clearly visible in the financial results. Comparing to pre-pandemic, we see improvements across all our key cash metrics, driven by the operating leverage in the business. You see cash revenues are up 10% compared to 2019. At the same time, cash spend is flat at 0%, which drives up our EBIT for replenishment capex to 20%. Our cash EBIT is up 37%. Our cash EPS up 96%. And this is also resulting in strong margin and profitability expansion where our cash margin has gone from 49% to 54%. And our cash ROIC is up from 6.5% 8.9 percent at the end of 2021. Return to page four. As indicated in the previous quarter, we have during the year seen a reversal to more normal seasonal pattern with a weaker Q1 and Q3 and a stronger Q2 and Q4, especially in the strategic markets. During Q4, we also saw a positive and supportive economic sentiment, despite challenges posed by concerns over inflation and increasing interest rates. But we also did not see any material negative impact from the Omicron variant during the quarter, despite the increasing restrictions across certain markets. Overall, this allowed us to finish 2021 with a strong performance across all markets and segments, with improvement in key cash and accounting metrics versus previous quarter, as well as year over year. Looking at the servicing businesses or segments, our servicing segments saw increases in new case inflows during the quarter, including also increases in higher value financial claims. Servicing revenues rose 12% and the CMS margin increased 3 percentage points versus the same quarter last year. In the portfolio investment segment, we saw broad-based outperformance on our backdoor portfolio with gross collections at 113% versus active forecasts. We also saw good growth in the volume of supplier portfolios for sale at attractive returns, which allowed us to invest 2.7 billion SEK in the quarter. And in the transformation program, we migrated 4 million cases to the Common Technology Platform with strong post-migration performance. Given we now have 20% of our cases on the Common Platform, it is now our single largest collection system, which does now allow us to start deploying our advanced analytics and automation roadmap, driving efficiency and competitiveness. Turning to page five. Looking at the market dynamics for our servicing segments, we see that the economic indicators are at historically high levels. It's a continued normalization of business and consumer behavior, and client activity and increasing outsourcing is growing the addressable market. However, at the same time, we see inflationary pressures and concern regarding interest rate increases gaining ground. For interim, this is a conducive market backdrop. We see that the inflationary pressures, especially the energy prices, is driving increased case inflow. Inflation and interest rate increases is likely to erode discretionary disposable income and affordability, which we expect will drive new MPE formation and new case inflow also medium term. And where Intum is well-positioned to capture more volume, driving operating leverage further, enhanced by our transformation program. Turning to page six. For portfolio investments, the market has been favorable during 2021. And we expect this to continue to prevail into 2022, with good continued supply of portfolios for sale, And a picture that will be further supported medium term in light of the inflationary pressures and interest rate increases. For Inter, this meant a return to deployment trajectory consistent with double-digit growth in 2021. And we also have been continuing to be able to mitigate the increasingly competitive environment, leveraging our broad footprint, our servicing franchise, and strong and deep client relationships, combined that with stringent deal selection criteria. The recent level of outperformance is expected to normalize towards the long-term average in light of the macro environment. Turn to page seven. As mentioned, the transformation program is progressing well, and it's according to plan. To date, we've spent approximately 74% of the total program budget, and in aggregate, we're about 5% below the total budget to date. Turning to page eight. During Q4, we successfully migrated four million cases with strong performance post-migration. And the past month, we've also re-planned the case migration timetable, focusing on accelerating migrations that deliver the greatest benefits earlier. This has led to a slightly different shape in the migration curve as laid out on the upper chart on page eight. Furthermore, we see a positive development in the cost to collect KPI, where the fourth quarter cost to collect was 5.7% compared to 6.6% in Q4 2020, demonstrating the positive early effects of the program delivery. Turning to page nine. Looking at the development versus pre-pandemic, we see significant benefits already visible in the results of 2021. Since 2019, we've increased cash revenues by 10%. And in the same period, the cash spend, so the sum of cash operating expenses in CapEx, is flat. Hence, the entire benefit of the revenue growth is reflected in the EBIT before replenishment CapEx, which is up 20%. And the cash margin is up 5%, demonstrating the strong operating leverage in the business. An important factor here is the benefit of the transformation program, which allows us to focus all our investments into technology towards the future state and the common technology platform, which has allowed us more than half the amount of capex required for the business compared to the previous situation where we had to spend significant capex in order to upgrade the legacy environment. Then turning to page 10. In 2021, we have made significant progress towards our ESG agenda. A few highlights include that Intrum now supports the TCFD, and we have started CDP reporting. We have revised our global traveling car policies, and we financed certain projects to offset our carbon footprint. Further, on the social domain, Intrum has developed a global trading customers fairly instruction, We implemented a harmonized measure of customer satisfaction, and we completed human rights due diligence. We've also made further improvements in our ESG targets, where our client satisfaction index increased from 75 to 77, and our employee engagement index increased from 79 to 80 during the year. And during 2021, we obtained sustainability ratings from Sustainalytics and MSCI, placing Interim among the top 5% of companies globally. So with that, I will hand it over to Michael for the financial review.

Thank you, Anders, and good morning. I'm now turning to page 12, group key financials. Q4 was a seasonally strong quarter. With the continued normalization of the seasonality pattern, we saw significant improvement across all cash metrics in Q4 2021 compared to Q4 2020. Cash revenues increased 8% to 6.1 billion. Cash EBITDA increased 19% to 3.7 billion. Cash EBIT increased 43% to 2.2 billion. Cash EPS increased 55% to 13.9 crowns per share for the quarter. And cash return on invested capital increased to 12%, up more than three percentage points compared to Q4 2020. overall the strong development clearly highlights the continued normalization in the context of the ongoing pandemic the operating leverage inherent in our business and the progress made throughout 2021 also in terms of delivering on our one interim transformation Therefore, also when looking at the full year 2021 development, we see the same improvements across all cash metrics compared to full year 2020, as well as the pre-pandemic full year 2019. 2021 cash revenues came in at $22.2 billion, up 4% versus 2020. Cash EBITDA was $12.3 billion, up 6%. Cash EBIT was $6.3 billion, up 14%. For the full year 2021, we generated a cash EPS of 29 crowns per share and the cash return on invested capital of 8.9%, up 1.2 percentage points year over year. We also delivered on our deleveraging trajectory with a leverage ratio of 3.9 times, down 0.3 times from the end of Q3 and 0.1 times compared to Q4 2020. Looking at page 13, group cash earnings generation. The chart on the left illustrates the developments I have just described very clearly. We have organic growth in cash revenues of 4% year over year. We see operating leverage and cost control coming through with cash spent, cash expenses together with other capex down 2%. As a result, we have the increase in cash EBITDA of 6%, the increase in cash EBIT of 14%, and the increase in recurring cash earnings of 12% year over year. This growth trajectory is consistent with our medium-term financial targets of growing our recurring consolidated cash earnings per share by more than 10% each year. When we look at 2021 from a returns perspective, this result translates into recurring cash earnings yield on shareholders' equity of 15%, and based on adjusted net income, a return on equity of 17%. I'm now turning to the segments, starting with CMS on page 14. In CMS, we saw continued gradual normalization in UK's inflows. Compared to Q3, we also saw more higher value financial services claims in Q4, as well as an increase in utility claims on the back of the significant increase in energy prices. This progress is also due to formal moratoria with very few exceptions having expired and based on conversations with our clients, informal payment holidays previously granted being withdrawn. At the same time, We have also focused on cost control and facing out legacy systems in the context of our one-inch room transformation. This has enabled us to increase cash EBITDA by 13% to $444 million and cash EBIT by 56% to $437 million compared to Q4 2020, despite a small decrease in cash revenues of 4% to $1.1 billion. Similarly, for the full year 2021, even though cash revenues and cash EBITDA decreased, we were able to increase cash EBIT by 3% to 1.64 billion compared to full year 2020. Cash return on invested capital was up 3.3 percentage points to 9.1% compared to Q4 2020 and up 0.4 percentage points to 8.5% year over year. This progress can also be seen in the adjusted earnings margin for the segments, up 3 percentage points to 23% in Q4 2021 compared to Q4 2020. I'm now turning to page 15. In our strategic markets, we experienced a seasonally very strong Q4 across all three markets, Spain, Italy, and Greece, in the context of a broad-based, sharp recovery from the pandemic. The normalized seasonal pattern is particularly evident when comparing the results to Q4 2020, which at the time I described as more muted due to the pandemic. important to note is the timing of expenses versus revenues in strategic markets while expenses are more evenly distributed throughout the year revenues tend to be somewhat lumpier and more concentrated in q2 and particularly q4 when activities carried out throughout the year tend to come to fruition spain finished a year strongly across the board with real estate sales of 3.7 billion in q4 and 12.8 billion for the full year of particular notes in italy we saw further normalization of legal system effectiveness during q4 and during the course of 2021 we also added 53 billion sec of new assets under management to the platform In Greece, circa 70% of the claims, or 165 billion of gross book value, originally covered by the joint venture with Piraeus Bank, have now been securitized with interim as a servicer long-term and servicing economics maintained. In shifting towards a more broad-based platform anchored on strong strategic partnerships, the strategic market segment has benefited from certain transactional revenue items, such as advisory and sourcing fees. While such revenues are recurring in nature, they're less predictable from quarter to quarter. Going forward, we expect such transactional revenues to have a smaller impact and be replaced with more diversified and predictable revenues. As the question has been asked before and for the sake of clarity, strategic markets has not materially benefited from removal fees in Q4 2021 or the full year 2021. In terms of results for Q4, cash revenues came in at 1.8 billion and cash EBIT at 1.3 billion, both significantly up compared to Q4 2021. For the full year, cash revenues came in at 5.6 billion, up 4%, and cash EBIT at 3 billion, up 19%, compared to full year 2021. Strategic markets had a cash flow of 34.3% in Q4 and 19.2% for the full year 2021. I'm now focusing on portfolio investments on page 16. In Q4, we saw continued growth-based outperformance across our entire footprint. Portfolio investments exceeded collection expectations, the active forecast, by 13% for Q4 and 11% for the full year 2021. We increased our investments to 2.7 billion for the quarter and 8.1 billion for the full year, in line with pre-pandemic investment volumes and consistent with a double-digit growth trajectory. Cash revenues for the segment increased by 5% to 3.2 billion compared to Q4 2020 and 8% to 12.5 billion versus full year 2020. Similarly, cash EBITDA increased by 6% to 2.4 billion in Q4 and 8% to 9.2 billion for the full year 2020. Cash EBIT also improved by 8% to $901 million in the fourth quarter and 12% to $3.6 billion year over year. Segment cash return on invested capital was slapped compared to Q4 2020 and increased 0.8 percentage points to 9.8% year over year. We have also now successfully completed the refinancing of our Italian SPV that we flagged in Q3. I'm now turning to page 17 for some additional details on the refinancing. While the basic investment structure has remained unchanged, Intram has recycled refinancing proceeds and thereby increased its stake in the transaction to 59%. Intram has invested no new money into the transaction. In aggregate, the investment vehicle that interim joint controls with Carvalho Investors has increased its stake in the junior and mezzanine notes issued by the underlying securitization vehicle from 51% to 95%. Overall, the outcome of the refinancing is very much in line with the guidance given in the Q3 presentation. The estimated remaining collections profile has been reshaped and delayed, with the ERC increasing from 5.8 billion to 7.1 billion. Senior debt has increased from $7.3 billion to $10.1 billion, with the implied deal level leverage ratio up to three times from 2.2 times. The senior debt is now also rated A-minus and intended to be GAAPs eligible. From a book value perspective, the carrying value has decreased from $5.2 billion to $5.1 billion due to a $40 million value adjustment in the context of the refinancing. Financing and performance expectations are in line with current best estimates of the pandemic and post-pandemic environment. Now looking at page 18. The difference between our cost of funds and the last 12-month average unlevered underwriting IRR now stands at 3.9 times, very much in line with pre-pandemic levels and stabilizing. At the end of Q4, we had available liquidity of 20 billion, up circa 1 billion from Q3. We also have no significant upcoming death maturities before 2024. I'm now turning to page 19 and the progress towards our medium-term financial targets. And looking at the charts on the left, we have made significant progress both compared to 2020, but also compared to pre-pandemic levels at year-end 2019. CashRoy is continuously improving and now stands at 8.9%, up 1.2 percentage points compared to Q4 2020, and up 2.4 percentage points compared to Q4 2019. Recurring consolidated RTM cash EPS is exhibiting strong growth and now stands at 29 crowns per share, up 15% from Q4 2020, and with a compound annual growth rate of 23% from Q4 2019. This is very much in line with our target of more than 10% growth on average per annum. Deleveraging is progressing with a leverage ratio of 3.9 times as of year end 2021, down 0.1 times compared to Q4 2020, and 0.4 times compared to Q4 2019. We are on track towards achieving our medium-term financial targets. And on that note, back to you, Anders, for some final remarks.

Thank you, Michael. So we can turn to page 21 in the presentation. So to summarize, we saw a strong performance in the fourth quarter, and we're encouraged by the positive outlook into 2022. I also want to say that we do expect the seasonality pattern that we highlighted will prevail also into 2022, where we expect to have seasonally weaker first and third quarters but seasonally stronger second and fourth quarters looking at the segments for cms we expect to see a normalizing new case inflows also for financial claims in addition we expect to see a positive contribution from new client signings supporting revenue growth in the coming quarters as well as operating leveraging leverage supporting revenue positive margin trajectory gradually throughout the year for strategic markets we expect to continue to have a positive operating environment supporting continued improvement in underlying operating efficiency we expect that new aum signing to contribute positively to underlying organic growth at the same time we expect to reduce the contribution from transactional fee revenues In portfolio investments, we expect a favorable supply environment with stable and attractive underwriting returns. We also expect the gradual reversion of our backlog outperformance levels towards the long-term average. And for our one interim transformation program, we're also very pleased with the progress made during the first year, and we will continue our journey on building our global operating model, the global technology platform, and analytics capabilities. You can already now see the potential benefits our data and analytics and automation roadmap can bring above and beyond the scope and timeframe of the program. And I expect to continue to update you as we progress. As we deliver on the program into 2022 and 2023, we expect that the operating leverage and scalability benefits will become even more apparent and supporting our competitiveness and organic growth ambitions. And with that, we will open up for questions.