Intrum AB (publ)

Good morning, everyone, from a sunny and seasonably warm Stockholm. As the operator said, this is Anders Rubio. I'm here with Johan Akerblom, our CFO. And thank you for joining us today to go through in a little bit more detail our results for Q2 2025. As usual, Johan and I will make comments based on the presentation, and then we will open it up for Q&A, which some have already lined up their questions. If we can turn to page three, please. Before I get into the specifics on the performance in the quarter that's outlined on this page, it is important, particularly for those of you who follow the company over the longer term, that we recognize that this quarter is the best ebit performance we've had since before we repositioned the company in 23 and actually since 22. it's important to note that back then our business had a very different configuration we then were primarily uh dependent upon our investing business and in fact our portfolio back then was approximately 40 billion today it's 23 billion So what we have over the last two to three years is really our repositioning is bearing fruit. Servicing has taken up the mantle and performed extremely strongly and replaced earnings from what was a business dependent upon borrowing and investing in assets. And we have reconfigured our investing as well to not only include our own investing, but also partnership capital. And so on all fronts, I think our repositioning is starting to really bear fruit. And this is a very important quarter demonstrating that. The other thing that happened, and I would not be I'd be remiss if I didn't mention it before we got into the details of the presentation. And many of you saw it is last night. I'm very happy to report that we closed the recapitalization. know looking back a year ago as to where we were from a delivery perspective where we were from a bond price perspective where we were from a shareholder price as well as uh ownership perspective we are in a much much better place uh today and it's incredibly personally gratifying and i think it's thanks to uh everyone at the company from the board to the management team to all the employees all our external stakeholders and the support you all demonstrated that we are in this much better place today than we were as recently as 12 to 15 months ago so let's jump into the quarter on page three overall numbers quite strong uh ebit increased nearly 30 percent driven by strong servicing, but also with improvement in EBIT across both businesses. More importantly, that EBIT is falling to the bottom line. $324 million SEC in the quarter is three times higher than what we produced in the first quarter of $100 million SEC. We expect that more and more of our EBIT improvement will fall to the bottom line and that net income will accelerate going forward. Our leverage ratio is structurally higher. That was expected as we flagged to the market, and many of the analysts have put into their reports. What we see now going forward is now that the comparability with disposed assets is out of the numbers, and we've closed our restructuring. We'll reflect that in next quarter's numbers. What you'll see is that 4.8 continuing to delever going forward as we dedicate our cash flow to two activities, investing and deleveraging. Going through the two businesses, servicing on the bottom left, income decreased 7%. We do have a picture on income overall that decreased 9% across the company. About 4% of that decrease is foreign exchange. Of the remaining 5% of the increase in aggregate or on a consolidated basis, roughly half come from servicing, half comes from investing. and really on the servicing side it comes down to a few markets in southern europe which have very large asset bases and that collect more than have new inflows so by definition their assets are declining until that stabilizes we manage them for cash flow of the remaining businesses i'm happy to report that we are growing but growing slightly and we'd like to improve that growth and i'll get into that a little bit later but we are growing in almost all of our other markets EBIT increased almost 50%, really driven by margin. We're at 24% compared to 17% a year ago. And I've been asked a number of times by both analysts and reporters, well, now that you're nearly 25%, are you going to be content and take your foot off the pedal? Absolutely not. We can deliver better results for our clients with a higher margin for our profitability and for our shareholders going forward. I'll get into a little bit more of that as we go through the presentation. On investing, we had a great quarter in collections, 106% of active forecast, 112% against our original forecast. Income was down 12% because our assets were down 12%, but our EBIT was actually up in the quarter. And our new investments were taking a very prudent approach, both because we were in the recapitalization, also because we don't see in some markets the risk or the return relative to the risk. We have been prudent. and discipline in our deployment. We deployed less than our target and less than last year, but at much higher IRRs. I think as you see us going forward and we continue to develop our partnership with servers in particular, you will see us invest at higher volumes and slightly more moderated IRRs going forward. And then the top right on strategic initiatives, I mentioned the recapitalization. I'll talk about it a little bit more, and then Johan will go through some details in his section. But this is an incredible milestone. We are turning the page on what was an important development, but it's one that now positions us to deliver on our business plan. We have a capital structure that's aligned with our business plan and that allows us to deliver on our business plan. We are, and I'll get into a little bit of this, engaging in active measures to improve our servicing top line in those markets, in all markets, but in particularly those markets which have more flow business and are not big asset business. And we continue to roll out technology. It's going to be a very important next leg in the improvement of our delivery, as well as the improvement of our margins. And we continue to roll out Ophelos, and I'll get into more details on that, but we dramatically increased the number of cases that we migrated to that platform from 30 000 in april to more than 200 000 in june we expect that migration pace to continue into the year end and as it as it covers a greater and greater level of our activity to then start delivering uh real profitability impact the next page please just to give highlights um you know overall top left Servicing margin, dramatic increase. We expect this to continue. And that's both on a quarter on quarter and an RTM basis. Great collections. You know, the vast majority of our P&L from investing comes from collecting in our back book. And then it's supplemented slightly by new investments. collecting at 106 is a great performance and we could only do that by virtue of the fact that we're combining our industrial collections platform with an investing platform if we were separate we would not have this strong performance and the strong p l performance and despite the fact that our as i said earlier but it's worth emphasizing again despite the fact that our book is down 12 and our income is down 12 our ebit is up uh in that business of investing overall our cost income ratio is something we're very focused on it is much lower johan will show later on our absolute cost base coming down we expect that trend to continue and are taking measures to make sure we continue to be more efficient and very important milestone recapitalization so it's been a very busy last few months and it's a very important turning point for our development and our journey next page Taking a bit of a look at the market, the market continues to be supportive of demand for our services. And as CEO of this company, I speak to all the top banks. I speak to all our top industrial clients. Every single one says that their customers are under stress and that they need us more and more. That's not surprising given the environment. Consumer credit remains elevated. The cost of that consumer credit remains elevated. Consumer confidence is on a negative trend. and there's still inflation in some markets. And then when you look at the banks alone, and the banks are not our only clients because we have investors who own MPLs and we have industrial clients who need our services, but looking at the banks as an indication, despite the fact that everyone points to very low non-performing loan ratios, you're still talking about very large aggregate figures, 400 billion in stage three loans right now. So the environment continues to be supportive for our business and for our services, That being said, I think we do need to recognize that our journey over the last year and having gone through the recapitalization inevitably has probably muted our ability to expand our business. And I think with closing the recapitalization, we're turning the page on that. We should hopefully see some positive effects going forward. On servicing on page six, please. you see the trend uh dating back a few years our margin figures continue to improve The second quarter is a seasonally strong quarter, and we hit 24% in that margin. We have 23% on a trailing 12-month basis EBIT margin. Very strong performance. And it's broad-based. You see here the improvements in margins across regions, 11 percentage points in the north, 7 percentage points in the middle, southern Europe with 6 percentage point increase in margin. I think what that tells you is that we have a more diversified, stronger, higher quality of servicing earnings than we've ever had. When you do see the revenue picture here on organic growth basis, you see the drag in Southern Europe, which is principally driven by Spain, Greece, and to a lesser degree, the other Southern European countries. And then on the other ones, you see us basically flat on an RTM basis. In the quarter, we grew slightly. And that's where we want to really improve while stabilizing Southern Europe and managing that for cash flow until it stabilizes and then managing it for growth. So the picture in servicing is quite strong and quite broad-based. In terms of efforts on the next page, page seven, in terms of efforts to improve our top line development, it is something of prime focus for us. We are doing a number of things. We're strengthening our commercial teams. We are significantly expanding our sales force in all our markets. we want to do more for our existing clients we want to do new things for our existing clients we want to find new clients and we do that with more people on the ground delivering what we believe to be the best product in the marketplace we do have targeted growth initiatives in addition to just purely uh you know feet on the ground on sales we have this in our investing business with new asset classes we have it with new partners we have it also in our servicing business doing other things that can lead to higher conversion ratio on the same level of assets or greater New product sales are important. Our delivery is being transformed. It's going to be much more technological going forward. Technology delivery is fundamental to providing a solution to our clients. And as a result, we're not just adding salespeople, we're also adding product salespeople who have a more technical ability to liaise with our clients. And make sure that not just the sales process, but also the onboarding process, which typically takes three to six months. Hopefully with technology, we can shorten that and we can deliver more sooner for our clients. That means we have to be much more product oriented, as you've heard me say before. And we are doing that with not just the delivery of our product, but also the sales of our product. then the capital partnership it's a very important driver not just of our investing business in the first half of the year it's been a very important driver of our servicing business the performance on the asset on the deals we've done with service has been very good and that has then consequently led to an important contribution to what you already see here in terms of very good servicing numbers and as that capital partnership improves and scales up we're going to see that servicing benefit But we're also going to see investment management fees, which today are modest, but will become more meaningful going forward. And we're going to see our own investment, our own investment returns scale up. On the next page, on page eight, we look at a familiar graph which looks at our history. I mean, our business, our investing business is incredibly strong over the long term and in the latest quarter. Over the long term, we've been at 105 of active or current forecast, 107 of original forecast. During this past quarter, we're at 106 of current forecast and 112 of original forecast. And what this tells you is that the fact that we're combining an industrial capability that deals with $200 billion of assets on behalf of clients in 20 markets, 75,000 clients, and we're putting an investing business alongside it means we can drive growth. positive returns. We can look at returns on granular assets across all these markets in large scale with a high degree of certainty on our forecast, and therefore we can put money behind it, our own and our partners money behind it. That is, in my opinion, and I've been in this business a long time, even before I was at Interim, I've always said that long term, Those players, like interim, who have an industrial capability and capital alongside of their own and partnership capital, are going to, over the long term, do much better than purely opportunistic capital sources, as an example. Page nine is one of my favorite slides. As you've heard me say already before, we continue to deliver for society. We help four and a half million people in the last 12 months become debt free. These are individuals who are excluded from our financial system and can reintegrate as a result of dealing with these issues. We do so, and we deal with people at very delicate times, yet they give us a very good customer satisfaction rating. And it's important to point out that that customer satisfaction rating of 4.0 out of 5 is overall. When we employ technology, interestingly enough, we collect more and have lower costs, but we also have a higher customer satisfaction score. So we expect that as technology becomes a more important part of our interaction with customers to improve. And we deliver in large scale. We collected $121 billion in the last 12 months, of which eight is on our own portfolios. The remaining $113 approximately is for our clients. So we continue to deliver for clients while giving customers a good experience and helping them get out of what is a very difficult situation. The last page before I hand it over to Johan is page 10. It's about our technological rollout. During the quarter, we rolled out Ofelos to two additional markets, Portugal and Italy. Early results in both of them, in particular Portugal, are very positive. Higher collections, lower cost, higher customer satisfaction. um we will we are in eight markets now and by the end of the year we'll be in 11 or 12 markets that will cover the you know the majority majority being 60 plus percent of our revenue so what you will see is that ofellos will cover a big part of our industrial activity by the end of the year but to fully capture that value we need to migrate cases to it and we've made a big step during the last quarter in april we migrated 30 000 cases to the platform in june we migrated more than 200 000 cases that migration pace will continue to accelerate into the end of the year such that we have an increasing percentage of our total caseload that's on that platform and as that happens through the end of the year what we'll see going into next year is that those anecdotal impacts in specific markets of higher collections and lower cost are going to be bigger in scale and across more markets and produce a tangible profit impact for us going into next year and beyond genesis cloud is also a very important way that we're transforming our contact centers it's in 13 markets it's a state-of-the-art process that allows and gives our call center or contact center employees greater tools to be to deal with customers in a more efficient and effective basis and we continue to roll that out alongside our fellows and continue to make our collections process both more effective and efficient with that i'll turn it over for the financials to johan

okay thank you andres so um if we move to page 12 um one of the key things that has it hasn't happened in the quarter but it happened yesterday is that we closed the transaction the recapitalization i think with that we've been asked many many times what's the cost of this process so i think here finally we are now showing uh the numbers these are not final because they're still a bit of moving parts, fairly minor, I would say. But all of this will go into our Q3 results. But just to give you sort of the high level, there's a debt derecognition. This is related to the haircut of 10%. That's roughly three and a half billion SEK. Again, these are all affected by FX fluctuations. Then we have a fair value gain debt recognition. This is related to the issuance of the new bonds. this one will be finalized once we have the prices on where the new bonds trade that's why it's a tbd then we have the cost for the equity issued which is 10 of the shares that is based on yesterday's market cap and then finally we have the transaction cost which is 2.1 billion it's a big number but i think we need to remember that there's basically three components in this The first one is that we have paid fees to the banks for basically supporting us with the reconstruction. We have then paid our advisors. And then finally, we have paid all the advisors to the creditors. So those are the three components. Net-net, this will all lead to a gain in the P&L that you will see when we publish the Q3 numbers. And I think it's also important here to mention that, I mean, first of all, now the new bonds have been exchanged uh they are uh should be uh tradable as of today the equity has been issued should be tradable as of today uh there is also a new rating that has just been released by standard and poor on the company and on the new money notes and on the exchange notes uh the corporate uh israel is rated at triple c plus the exchanges are they are rated at triple c plus and the new money nodes are rated b standard poor is sorry standard poor has released moody's are in progress of releasing ratings um and um i mean one thing that is just anecdotal i mean when we started this transaction which was probably know you can debate when it started but let's assume it's sort of end of q1 beginning of q2 last year i think our market cap was fundamentally lower than it is today um and if we look at sort of how all stakeholders are coming out i think it's a very balanced transaction and as we said from the beginning it's a proactive transaction has been very amicable and and now we finally are out and we can move on and we turn the chapter we turn into the next chapter uh moving on with um the financials for this quarter uh i think the way we phrase this it's another solid quarter um a few things that i think we like to highlight i mean cost income ratio is improving even though the income has decreased mainly driven by the fx So cost income has improved not only very via the last year, it has also improved via the last quarter. I think the EBIT increase is significant. And as Anders mentioned, this is the highest EBIT since, highest Q2 EBIT since 2022. And I think here again, the investment book was much, much higher and the company has fundamentally changed since then. And I mean, net income of 324 million in this quarter, that's three times what we had in Q1. It's also I think, again, a testament to that we're really focusing now on delivering profit. And the leverage ratio, this is just an effect of the discontinued business rolling out. And that's the increase. Otherwise, there's basically no change on the leverage ratio. But again, this is one of the key focus areas we will have and we've had going forward that the leverage ratio needs to continue to, it needs to start going down on a like for like basis. Moving to the next page, page 14. On the cost side, I mean, the trend continues. We're now on a Q2 run rate of 12 billion if we just extrapolate Q2 isolated. The rolling 12 months is at 12.9. FDs are down 14%. We're now at 8,855. And yeah, there's no sort of change in focus. Cost will be one of the key levers going forward. And we will continue to find new measures and continue with the existing measures to be more efficient and still deliver what our clients and our customers needs. On page 15, going into servicing, I think again, the EBIT margin, not only the adjusted EBIT margin, but also the EBIT margin is increasing and improving. When do we get to sort of a sustainable level on this? I think 25 is our target. I think we're getting very close to achieving that. Then the question is how far can we go? I think this comes back to our operational efficiency and how well we can run this and how automated we can make our platforms. So I think that's something we will explore going forward. Other than that, I think if you look at the external income, there's a decrease of 7%. I mean, a lot of that is actually on the back of FX. And what's interesting is I look at, we have basically main, some growth issues in three markets. If we just remove those markets, we are having growth, external growth in the rest of the markets combined. Let's move to investing. I think a lot of has already been said. I think again, highlighting that the income moves along with how the portfolio moves. The EBIT is, however, up on a year-on-year basis. We've seen good progress on our JV side. In particular, it's the front book and it's orange that has been delivering better than expected. Whereas the back book, the old JVs are delivering as expected, but not overperforming. And I think coming back to the investments, I mean, we have the discipline. But I also must say we have a promising pipeline. So we expect that the Q3 number will be higher than what we had in Q2. On the net depth on page 17, I mean, it's fairly flattish. There's a small decrease. I think on the underwriting side, we have slightly higher, again, displaying the discipline we have in our underwriting. And on the cost of funding, I mean, this is now increasing as per today. And we expect that the new cost of funds will be roughly 7%, depending, of course, where the reference rate sits. Some of it is still floating. And we don't expect that we will sort of make any major adjustments on our IRR levels for the new investments. We want to keep discipline. We want to invest high. but we also are carefully thinking about how we can increase the volumes. Page 18, I think we've shown this before. Just a reminder, this is the new maturity profile. We basically have pushed to depth B27 and beyond. and we have fairly equal maturities across the buckets, slightly higher in 27, 28. Then it comes down. The new money nodes is still there. We have some flexibility. It depends on how we see the bonds trading and what we can use them, make the best use out of them for. Cash and cash equivalents in the quarters stays at 3 billion flat versus Q1. And yeah, the sensitivity is pretty much the same. And then moving to the last page, which is the financial targets. So I think we have and will continue to emphasize we need to find new ways, better ways to address the income growth. That's definitely on the agenda. We are very confident around the 25% target on the margin. The question is how, if we can go beyond and what that would be. On the investing side, I mean, we rather see the book increase now than decrease further, but we also discipline in our investing. And we have said that 2 billion is the target to invest every year. That's not enough to do replenishing capital, but we do to get the leverage while we invest with our capital partner. And then lastly, in the leverage ratio,

focus there's a big focus on this this is where we have to see the leveraging going forward quarter by quarter that's it and then handing over to andres for final closing excellent thank you johan and thank you everyone uh on page 21 just some recap um starting with the recapitization recapitization completed The highest second quarter EBIT since 22, really showing that our repositioning is bearing fruit. We continue to accelerate technology to deliver more and more efficiently at a better margin for our clients. And as a result of that positive servicing margin development for the fifth quarter in a row, we expect that to continue. and investing collections continue to be our forecast, which all means we will continue to deliver not just for our clients, but also for our shareholders and for our creditors. So with that, we can wrap up the presentation and immediately go to the Q&A operator.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. Next question comes from Jacob Heslevich from Seb. Please go ahead.

Good morning, Andreas and Johan. So last quarter you beat the margins while top line was bigger than expected, which was recurring in this quarter too. Have you become more disciplined and selective when choosing your portfolios? Or is it Cerberus that's holding back as it seems a bit weird for me that you're not scaling up your revenues quicker if your cost control now results in higher margins?

Yeah, I mean, I think you're, good morning, Jakob. Nice to hear your voice and thank you for asking the question. I think you're mixing investing and servicing. You have to look at them separately, I believe. On the servers joint venture, it is still scaling up. We have been very successful in some regions, Southern Europe, and not as successful in other regions where we're probably adapting more our relationship to familiarize servers with other areas such as Northern Europe. We have also not pushed it hard because we want to be prudent and disciplined with our deployment of capital, particularly while we were still in the recapitalization. I think what you'll see now going forward is getting back to that 2 billion or slightly higher and then using all excess cash flow above that to de-lever. And that does impact top line. But I think what's interesting also is that the top line in investing is pretty much in line with portfolio. We dropped 12% versus last year. Our top line is dropped 12%. But our EBIT is actually higher because we're collecting more and we're being better on an industrial basis. So the investing side, I feel good where we are. And yes, we have a good start, but we do need to continue to scale up the servers partnership. On the servicing side, it's a different picture. When you look at our servicing side, about a big percentage of both sides of the decline in top line is FX oriented, as Johan indicated earlier. but at the same time it really is driven as you saw on my page by southern europe and a couple of big markets until those markets stabilize we will manage them for cash flow we will still have top line headwinds of the remaining markets more slightly more than half are growing slightly more than half didn't grow as much in the last quarter so overall they did grow slightly but we want them to grow more and that's why i mentioned my the tactical initiatives as well as the fundamental initiatives We want to put more feet on the ground talking to clients. Given the quality of our product, we think that will yield results. I do think that while we haven't lost any clients during the recapitalization, I think it would be naive to think that the recapitalization hasn't impacted some on some level, new business as well as new volumes being attributed to us. And I think we will continue to do other things about new products. I think Ophelos is not just an efficiency, it's also a new product. It positions us differently with clients. We're already winning mandates with specifically Ophelos, as well as our voice AI product. In the last quarter, we've won a couple of mandates with our voice AI product, as well as several clients who come to us purely because of Ophelos. So when all of this is put together, we need to regain control of the top line and regain a positive trajectory to the top line while stabilizing those two markets that are in structural decline. I mean, it is much more of an involved picture than the top line indicates, but I hope I've addressed your question.

Yep. Thank you. That's actually very clear. Second, on your liquidity position, it's 3 billion now at the end of the quarter, which you mentioned. And you're now down with chapter 11, and you mentioned 2.1 billion on cost on slide 12. To make it more clear, can you comment anything on how your liquidity will develop in Q3, or can you give us a Q2 number on a pro rata level when including the US and Swedish risk construction? Is it 3 billion minus 2.1, or does the 2.1 include an already paid bill cost?

yeah so i mean the three billion uh first of all it includes uh quite a lot of costs that we've already taken okay so we've taken a lot of cost along the way because i mean we capitalize we still need to pay the advisors so the majority of the almost the majority, I think, out of the 2.1 has been paid during the process. Then the 3 billion of cash, what you don't see here is, and maybe if you look at the balance sheet a bit more carefully later on in a cash flow statement, you see that we have not repaid that, but we have not fully drawn some of the capacity we have because we've had excess cash and then we basically use that to draw down some or sort of draw up some of the capacity we have so at closing we have enough capacity to make the final payments so when you look at the cash at the end of Q3, I'm not going to speculate, but we have enough cash to close the transaction because we closed the transaction yesterday. And on top of that, if you remember, as part of the transaction, we also redefined that 75 million of the new money notes would go for general corporate purposes. So I think that's basically the quick story on the liquidity side.

And I think, Jakob, if I may just capitalize on the fact that you asked about this figure just to put it in some greater context for the benefit of all listeners, because I'm sure people have questions. It is a big number, the 2.1, just to expand a little bit and put some context around it. Expanding on what Johan said earlier, about 0.5, 0.6 or so is fees to the banks. And then of the remaining amount, which are advisory fees, half is our own advisors. Half is because the way these processes work is we pay for everyone else's advisors. I think when you look at the 2.1, even including those fees, in the context of our 49 billion SEC capital structure that we had when we started this process, it's a little bit over 4%. If you purely look at the advisory fees, it's a little bit under 3%, 2.7, 2.8%. And I think you need to look at this because I'm sure many people have questions of this number relative to other restructurings in our industry, other restructurings here in Sweden. I think it's important to point out that these percentages are kind of modest in terms of a percentage of the total capital structure. We do have a complicated capital structure with three different types of securities, three different jurisdictions, three clearing systems, etc. So the process is complicated. and then more importantly we're the only process of the ones that i know in our industry or recently in sweden where while the shareholders suffered dilution they still have a meaningful uh stake in the business and they're in a much better situation today than they were a year ago if you look at our bond prices and our equity prices today versus a year ago, you see that this recapitalization is not just generating the book benefits that Johan actually outlined, but it's generating real benefits for our bondholders and our shareholders in the form of bond prices that are much higher and approaching kind of 90 to a par, and shareholders who are at multiples of a year ago.

and i think also being out of the recapitalization it also means that we can plan our capital much much better right because beforehand we had to weigh in how long will the process take what's the opposition you know what's our how much do we want to invest in parallel so right now that just being away from the picture just makes it much easier for us to manage the liquidity and optimize how we use the proceeds of cash going forward

Yeah, I know you didn't ask that, Jaco, but I want to just take advantage and provide that context.

Thank you so much. That's very clear and all for me. I wish you both a great summer.

Yeah, likewise. Thank you.

Next question comes from Marcus Sandgren from Kepler Shoebrew. Please go ahead.

Yeah, good morning, guys. So I just had, starting with the recapitalization, so does it work like that that you haven't taken any of the 2.1 billion in the P&L so far and secondly is the net tax deductible

So on the first question, yes, we haven't taken anything through the P&L. It will be in our Q3 because it closed now. And when it comes to tax deductibility, the vast majority we assume is tax deductible, but there are bits and pieces that will not be tax deductible.

Yeah, but that is of the net of everything that still is out there.

There is a difference between some of them, because some of them are related to interest. So no, it's not everything. But if you look at the pure advisory costs, except for some of the fees, that's what we look at that's being tax deductible. But in general, just to be clear, any gain or loss, or if you make a gain in a restructuring under Swedish law, All of that is tax deductible, but then the costs associated with it, transaction costs, you need to just look at how they are fitting into your VAT key. But in general, restructuring is tax deductible.

Okay, thanks. And then I was thinking about the, I think you mentioned before that on the investment side, the collection is deteriorating the older portfolio gets. And now it looked very good this quarter. So how does that look going forward? What's your expectation and also what do you expect in terms of investment pace going forward?

Sure. Um, it is true that if you look at our investment portfolio in three different buckets are a hundred percent owned back book, which is the oldest piece of the portfolio. Then there's the disposed of what we call project orange that we sold the Cerberus a little bit more than a year ago that we jointly own now. And then all of the new investments in what we call project blue, which is the new investments in the capital partnership. The, the latter two are more fresh and they collect at higher levels. But the old book continues to perform well and continues to extract a significant amount of capital above and beyond the original forecast. I think it's very important to look at over the history of our company. We have consistently produced much higher than active forecast and much higher than original forecast. we continue to extract more from what we believed originally to be X to be more than X. So that trend will continue, less so the older things get. That's just the nature of the business. The older the claim, the more difficult it is to collect. But this is why what I said earlier is so important, that when you connect and have under the same roof, so to speak, an industrial collections capability as well as an investing capability, you lead to these higher outcomes. your your trend is correct and but we continue to believe we can outperform going forward um in terms of the pace we have the two billion pace um a year we are going to work towards that In fact, we had a very small amount of new investments in the quarter, but we have about a half a billion or so of investments that didn't close that we've agreed that we've signed, but just haven't closed for timing purposes that are closing now in July or definitely during the third quarter. So these things do not move in a straight line. We expect to get to the two billion figure as soon as possible.

Okay, very good. So just to interpret you right, would you say then that the current collection level is representative or is it going down the further out we go from here?

I cannot tell you that 106% of active forecasts is going to be something that we do on a recurring basis. No, that is a very, very good outcome. Long term, if we do it right, we should be around 100% of active forecast. We normally go to 101, 102. That you see more regularly, but 106 is not a recurring.

Yeah. Maybe to add to that, if we perform one or two quarters in a row, let's say 106, 107, we have to revalue up, which means that your active forecast will be reset.

and then you should collect at a hundred so it's not really fair to sort of compare in that way uh you need to look at it sort of from the revaluation standpoint yeah okay okay and then the last question when you mentioned the seven percent in funding cost is that based on ibor plus credit spread or or is that the fixed rate to a large degree or how does it work

I mean, this is a mix and this is the funding mix. I mean, the RCF is based on reference plus margin and then the bonds are fixed. So it's the blended that should run around seven, depending on Ivor, of course. But that's what the latest.

Yeah. Yeah. And you don't swap the bonds to short rates or.

We have that's something we haven't discussed yet that might be happening, but right now they're sitting on fixed and we'll see how we will manage our interest rate risk.

Okay, very good. Thanks. That's everything from me, and have a good summer.

Thank you. Thank you, Markus.

Next question comes from Ermin Karik from Carnegie. Please go ahead.

Are you there, Ermin?

Ermin Karik, your line is now unmuted. Please go ahead.

Okay, maybe we can come back to Erman.

Next question comes from Lars Dueser from Deutsche Bank. Please go ahead.

Yeah, hello. Good morning, guys. Two quick questions from my side. First of all, going back to the transaction costs, I'm interested in the cash cost there because I think some of the fees are capitalized. So maybe you can just tell us again, what will be the total cash cost excluding the accrued interest, just the cash fees? How much have you paid out so far? How much cash outflow is still to come in Q3? Basically the performer cash balance compared to the 3 billion you reported in Q2.

So as I said, I think out of the cash, that will go out in Q3 or has gone out in Q3 is roughly, it's the majority of the fees to the banks, which we said was sort of 600 million. And then it's roughly, it's a little bit less than half of the rest of the transaction cost.

Okay. So the 2.1 billion number also includes some non-cash fees. Is that correct? Fees you capitalize?

That is cash, but some of it has been paid already before.

Already paid. Okay. Got it. Got it. Okay. No, thank you for that, Jan. And then the RCF drawing will be in accordance with that, right? Because your minimum cash need, you like to run the business at maybe two to two and a half billion of cash. Is that fair?

I'm absolutely we I mean, we want to minimize the cash users. And basically, we want to minimize the usage of our RCF, if we can, and then we don't have a lot of cash.

Right, right. And then, last but not least, on the cost-saving side, look, you have done a good job, I think that's fair to say, on the cost-saving side, especially if I look into adjusted servicing EBIT, right? In 23, I think we were still at, you know, 2 billion, now LPM, we are 3.3 billion, so well over 50% growth there in the last 18 months. Now, I think people are really interested, you know, to understand, Can you give us a more quantitative update on the incremental cost savings to come from here, whether through renewed FTE cards or the run rate benefits from Ophelos and the automating of operational processes? Is that something we can expect in the next quarter or two?

You're going to see this going forward. Johan's page indicated that we've come down to roughly call it 12 plus billion cost base in total for the company. We'll finish the year this year a little bit below that on a run rate basis. I was asked this morning, actually, by another reporter, actually, now that we've gotten to where we are, are we taking our foot off the pedal? Are we content? We're not. We will continue to improve our efficiency. That will include, as I said earlier, automating and standardizing our processes, which doesn't involve technology. It's process design. Some of our markets, we've achieved significant activities-based cost reductions just on automating and standardizing processes. We have been too customized in the past in our processes. That's one element. The other element is what you indicated, which is Ophelos and also other AI products such as Voice AI. When Ophelos goes into a market, we have a technological handling of cases, which is higher collections, lower cost to collect, but also less necessity of human agents. That will be an important element as we end this year and go into next year, which, as you said, will imply FTE reductions in our contact centers. And then the other element is voice AI, which when we bought Ophelos was not even on horizon on what we didn't even contemplate it. Today, we have a fantastic voice AI product. We're already winning mandates with clients to use this with them. This voice AI product effectively takes the place of a human being in dealing with a customer in a phone conversation. We make over 30 million outbound phone conversations a year. These are conversations, not calls. We can do the vast majority of them with voice AI. And today we do them with humans. So what I'm trying to tell you with all of this is I'm not going to give you a specific number, but we believe that there is still a significant room to continue in our margin improvements.

So, Andres, is it fair to say that based on the 3.3 billion LTM adjusted servicing EBITs compared to the over 4 billion target you communicated at the CMD, you're 700 million or so away now from that threshold. Cost savings, efficiency gains will continue to play a very, very important role and a role, I should say, which is in your control. It's not like you are solely dependent now on organic servicing revenue growth.

I think that's completely fair. I think it's the lever that we control, as you correctly say, and we will continue to emphasize. And if we stabilize and improve our top line, it's all the better. That adds a second leg to our EBIT improvement, which will contribute to us getting to our targets. Yes.

Got it. Got it. Very helpful. Thank you. Thank you.

Next question comes from Airman Carrick from Carnegie. Please go ahead.

Good morning. Do you hear me this time?

We do, Airman. Sorry for the technical difficulties if it was on our side.

I'm sure it was on my side. It's perfectly fine. Thanks for taking the question. So maybe just if we would start on the leverage situation, do you think you are within your target to be below three and a half times by 2026? Or how long do you think it will take?

Okay, so we are at 4.8. Our target remains 3.5 by the end of next year. As I said earlier, this is a structural high point for that leverage ratio. And from now going forward, you'll see it not just as a result of the recapitalization, which will bring it down a bit, but also the dedication of cashflow to deleveraging, you'll see it declining. until now until now uh up until now that remains our target we will revisit it in the coming quarters and we will come back to you with a revised target if necessary over the coming quarters and so thanks how should we think about the new investment piece it sounds like you would want to accelerate it beyond the 2 billion

And I suppose there's a balancing act there between using organic cash flows to deliver, but if you invest, you're also accelerating your earnings growth or you're kind of offsetting the decay on the investment side from the book shrinking. But then that perhaps has a little bit longer run rate before it actually impacts the leverage ratio, given that you need to invest and then ramp up collections, et cetera. So how are you thinking between those two and which one to prioritize?

You've articulated it very well because that's the balancing act that we play on a continual basis. We want to continue to invest and invest at good margins. Although the leverage effect is immediate, the investments return and the EBITDA comes in over time, so it does have an impact. We, as a result of our recapitalization, have significant leeway from our creditors to invest above 2 billion. We actually have an ability to invest all the way up to replenishment capital, which is well above 3 billion. They've given us that flexibility because they understand the importance of the investments to our profitability and also to their security. so we play that balancing act i think right now we stick to the 2 billion when we get to it we will reevaluate whether we want to go higher it'll be selective it'll probably be deal by deal but ultimately all other free cash flow will be used to deleverage yeah i mean i would add to that to say i mean until we are the 2 billion this is not really an issue because i mean the issue right now is that we're not investing all the way uh because we've just been disciplined and also to be fair i mean

we have been very careful on how we deploy our CapEx. So going forward, we want to get to the 2 billion. We want to continue to focus on the deleveraging, and then we'll see if and when we get to the 2 billion if we want to reprioritize.

Got it. Then on the servicing side, impressive margin expansion for sure. But if we're thinking about the top line, you have your target of organic growth there as well. What surprised you since you set that target? Because I suppose the decay you're seeing in Southern Europe, that's quite natural given the structure of that business. And it seems like you're kind of implementing an up or out approach to existing clients in the other markets that either margins need to get up or you're willing to churn some customers as well. So did you expect that you would have more net additions or what surprised you that's led to being below that target currently on the organic side?

Yeah, I mean, I think the reality is that whenever you are bottom line and margin focused, you can improve that. But it does have a top line impact. There's no doubt about it in general. Secondly, we are, as you correctly identified, selectively managing clients to a higher level of profitability. And if they don't get to that profitability, we are trying to manage them out. And that actually creates dislocation at the top line. And I also think what I said earlier is a factor. I think we're somewhat naive if we don't believe that being in the recapitalization, when there's another two recapitalizations happening in our industry, as well as two or three high profile ones even having here in Sweden, it does impact a client's confidence in giving us volumes. We haven't seen it explicit, but I think the reality is that has to have happened. And so all of that probably has led to the phenomenon you've described. I think we are trying to address it head on going forward. The trends of the kind of managing clients will run its course. We are addressing it directly and trying to regain organic growth where we can, not in those structural markets, but in the other markets, which is the vast majority of our business. And the recapitalization is done. So we suspect that we will regain meaningful organic growth going forward.

Excellent. That's all for me. Thank you, and have a nice summer.

Thank you, Ermin.

Next question comes from Mikel Luzma from Bain. Please go ahead.

Hi. Thank you for the presentation. I wanted to ask what are the plans regarding the mandatory tender for the ones?

I think there will be information coming. I mean, we have 60 days post-RED to launch it. and we intend to keep that promise to be continued.

Yeah, I mean, that's an obligation, but we're going to fulfill that obligation.

Exactly. We closed yesterday. I mean, today is the first day.

Yeah. But do you plan to launch it earlier on the 60 days or later? Sorry?

I said when we decide, we will announce.

Okay. What was the current gross multiple for the purchases?

Sorry, I didn't follow the question. Could you repeat it, please?

what was the current gmm for the for the for the purchases in q2 so as you saw in q2 we invested around a 19 irr i think that translates over the life to a money multiple in the high ones one eight one nine something like that okay that's uh significantly lower than q1 at 2.4 or not uh

Sorry, 2.3 and we had 2.38 in Q1 and 2.33 in Q2. That's gross money multiple.

Sorry, I was thinking on a net basis. I apologize. That's correct.

Okay, okay. Okay. And those around 500 million that you said that you committed to what you didn't close in Q2, are those at similar multiples too? Yes. Okay. Where are you seeing the most attractive multiples and how is supply evolving in different regions?

I think the investing business, as I said earlier, we have been very successful and had some very good outcomes in Southern Europe. We have done 17 deals in the last year with Cerberus in eight different markets and committed about 2.7 billion of about which half a billion is pending closing. It's been across all regions. but more skewed towards Southern Europe. And the better deals have been in Southern Europe that we've leaned into and actually extracted even more cash. And some of those deals have outperformed very, very nicely. Where we've struggled a bit, as I said earlier, I alluded to earlier, is a bit more in the north of Europe. And we're continuing to address that and look at the market more specifically. We will maintain discipline. The last thing, and you've heard me say this before, the last thing I ever want to do on investing is chase volume. because that leads to mistakes on the underwriting. We will maintain discipline. We'll be commercial. We will rely on our ability to predict and collect along the lines of our collection curve estimates when we invest, which we have a very long track record on, but we will continue to be disciplined.

Okay, perfect.

That makes sense. Thank you. Thank you.

Next question comes from Okana Kin from Alliance Bernstein. Please go ahead.

Hi, guys. I have a quick question. When you put your business model on the Chapter 11 filing for 2025 onwards, if you look at your first half results this year, it looks like you need to, in the second half, you need to increase your revenue and EBITDA by like 25%, 30%. Is it achievable or do you need to basically adjust your business model going forward, the business plans going forward? Thank you very much.

Yeah, no problem. Thank you for the question. The second half of the year and in particularly the fourth quarter is the strongest quarter of the year. The second quarter is the second strongest quarter. And then there's the first and the third, which the first is the, sorry, the third quarter is the weakest quarter. So when you look at the second half, we do have higher ambition. historically we've always performed in the second half. All you have to do is look at the EBIT chart that was on Johan's page in his presentation that shows over the last three years, quarter on quarter and annually, we've dramatically improved our EBIT. And we suspect that trend will continue in the second half.

Correct. And if you refer to the indoor plan, which I think you are, which was published last year, I mean, if you look at the results now, we basically deliver on the bottom line, but the composition of the P&L looks different. But so far, we've been able to compensate the income uh decay on the cost line and we expect that that will continue going into q3 and q4 but as we also said we're now re-emphasizing a lot on the top line thank you thank you for the explanation thank you next question comes from kevin joyas from goldman sachs please go ahead

Hi, Andres, Johan. Thank you for the presentation. I just have a quick question on the RCF. It seems that the RCF was drawn at 10.5 billion at the end of June. Could you please give us a more up-to-date number? What is the RCF drawing as of today?

Sorry, but we will publish this when we publish our Q3 results. I think we have just published Q2, so that's not a number that we will disclose.

Okay, understood. Thank you.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Thank you very much, and thank you to everyone for listening, for providing your questions. And also for accompanying us on this journey. It was a very important quarter for the last quarter, not only in terms of delivery of business results, but also closing the recap and continuing to look forward in terms of technological development and business development. We look forward to interacting with you in the quarters to come. And I hope everyone gets some time off and some rest during the summer. Thank you.