Intrum AB (publ)

Welcome to the Intram Q3 2025 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing hash 5 on their telephone keypad. Now I will hand the conference over to President and CEO Johan Akerblom and CFO Massey Yazdi. Please go ahead.

Good morning everyone. Thank you for listening. It's great to have you back for another quarterly earnings call. Today we have a new setup. I am obviously in the new position and I also want to sort of say hello to Masi who's been with us now for What is it? Eight weeks, roughly, almost. And yeah, we will go through the Q3 results in normal order. We will take you through the presentation and then we'll open up for Q&A at the end. If we start with the quarterly, I think the quarter as such, it is a bit messy when you start looking at it. But a few things to highlight. I mean, on the underlying, we have a higher servicing income. The underlying business is in general performing well. The adjusted EBIT has been increasing 30% year on year. And we continue to report net profits. This is the third quarter in a row. And the leverage ratio is going in the right direction. And the investing volumes are increasing if we compare to Q1 and Q2 early this year. On the servicing side, we have now reached the 25% on an adjusted EBIT margin, rolling 12 months. And on the investing side, I think the collections, they are slightly above the forecast again. However, the income is down, but I mean, that is on the back of the lower, the book that we have, which is now at 22 and a half billion. If we go to the servicing a little bit more specific, I mean, this is the first quarter where we have an organic growth since 2022. I think it was Q3 2022 the last time. So we now are actually not only improving the margins, we're also having a top line that is going in the right direction. We did grow in 10 out of 16 servicing markets. The pipeline is increasing. So we've had a lot of focus on the top line. I think we discussed this earlier with you. And we continue to now see, hopefully, a bit of results from that. We're working closely with the entire sales organization. We're adding new people. We are upgrading. We are working with target lists, pipeline. We're working closely with churn. And the good thing is that there's still potential from our pricing program that should trickle through going into 2026. And we also see that the margin that we get on the new deals is higher than the current margin. On top of that, we also have now started and that will be something we'll probably speak about a little bit more when we get to the Q4. You know, what kind of ancillary business is there out there and what's the growth potential? Moving to the investing side, I think here it's a bit of a, I mean, the good thing is it's a quarter where we see the investments increasing. So we're now 303 million. The IRR remains at a very high and comforting level. And I think for us, it's very important that the discipline on price is always going to be more important than the volume as such. Of course, we want to increase the volumes, but we will never increase the volumes on the back of being undisciplined on the pricing. We see that we are successful in smaller deals, but on the bigger deals, I think there is an overall market pressure on the downward side. And we have not gone all the way to meet that where the market is. We'll see where the market takes us going forward. And we're also working closely with Cerberus. So half of the more than half of the deals has been done with them. we now have deployed 2.9 billion since we started in total um and and the good thing is i mean we continue to extract value out of the portfolio so performance index remains above 100 and if you compare to the original curve original forecast we're now at 109 in the quarter i think with that i'm handing over to masi he'll take us through the financials a little bit more details

Yes, thank you, Johan, and good morning to everyone. I thought I'd start with going through all the one-offs we have. I think it's natural, both me and Johan, you in our positions, to do a thorough analysis of the balance sheet. What we've tried to do here is to apply a more conservative approach, as well as trying to minimize items affecting comparability going forward. So therefore, this quarter, we have a pretty messy quarter in terms of write downs of impairments and goodwill and also some one-off tax items. So as you can see, the reported EBIT is almost minus 600 million. If you move that to the net income to shareholders, that is impacted by the gain we had on recapitalization of 2.3 billion. And we have underlying financial expense of 838 million. We have a couple of one-off tax items and underlying tax of 158, which takes you to the almost 400 million net profit. Then we have a goodwill impairment related to Spain, where the development has been more negative than was assumed in our goodwill calculations, and therefore we have that impairment. And then we have some other impairments, mainly of client contracts on the balance sheet that we have now written down. So overall, a messy quarter, a lot of one-offs, but as I said, we have taken a conservative approach on the balance sheet and we're hoping that you'll see much less of IECs going forward. If I move to the next slide, slide nine, and look at the key financials for the group, as you've probably seen, income is down 3% compared to a year ago. More than half of that is FX related. At the same time, the cost trend continues to be positive, as you can see, and the cash generation has improved compared to a year ago. The leverage ratio has been restated. Again, here a bit more conservative approach. We're looking at the nominal value of debt rather than the book value, which means that the leverage ratio is higher than it otherwise would have been had we used the old definition. With the old definition, it would be at 4.4. And I should also mention that full year 2024, without the discontinued operations, it would have been at 5.3. So we are moving in the right direction in terms of leverage. but obviously want to move this even further going forward. If I move to the next slide and look at the underlying cost trend, you can see that we've had a strong cost discipline also in Q3 and the run rate is now 12.5 billion in terms of costs and costs are down 10% compared to the same quarter last year. And that is mainly driven by a reduction of FTEs down about a thousand people compared to a year ago. Moving into servicing, as Johan said, encouraging to see that we have organic growth in the quarter. The total income is flat, but that is completely driven by FX of a 3% negative effect offset by organic growth of 3%. A lot of the one-offs is in the servicing business, so the EBIT is distorted by that. But if you look at the adjusted EBIT, it's up 27% and it's also up 30% so far in 2025 versus the same period in 2024. We want to double click on the leverage we have. What's happened in this company last couple of years is a quite large shift in the composition of the business. If you look at the bars, you can see that two years ago, 24% of the cash generation was coming from the servicing business. That has almost doubled to 43%. In our view, I think the general conception is that servicing is less risky than the investment business, which means that the cash flows generated from that business should be able to cope with a higher leverage. Here, we have assumed that our investment business has an LTV of 80% that should be financed by debt of 80%. And if we assume that the remainder of the debt on the balance sheet is in the servicing business, you can see that the leverage ratio for the servicing business is actually coming down quite a lot especially the last few quarters given the fact that the cash generation from the servicing business has improved quite a lot um i think if anything this this chart shows that we want to going forward take into account the riskiness of our business when we set our leverage targets so that it takes into account if we continue to de-risk and have a larger share of our revenues and profit coming from servicing. Moving into the next slide, slide 13, investing. You've seen this, but the income is down. This is partly FX, but largely due to the lower investments compared to the amortizations we have. So a smaller book value leads to lower income. We are collecting well on this portfolio, which means that income is down slightly less than the book value. Nevertheless, as Johan said before, we have done more investments this quarter. We want to do even more going forward. But we want to strike a good balance between pricing, discipline, and volumes. Moving to slide 14, looking at the depth and maturity profile, you can see that net debt is now at just below $45 billion. We have about $5 billion of cash. Two of that is restricted. It could be used to buy back assets. Bonds, the remaining cash is free will. And you can see the maturity profile with about 12 billion of maturities in 2027, of which about half is the new money and notes we've issued. I think with that, I'll hand back to Johan and he'll do a couple of final remarks before we open up for Q&A.

Okay, so I think, first of all, the quarter is a quarter where we see the underlying business performing well. It is positive to see a service and top line year on year organic growth. I mean, I think we discussed and talked about this a lot. We are really emphasizing the top line and we are putting a lot of effort in making sure that we get new business into the group. However, I think servicing business as such is a slow moving business. It comes with RFP processes, there's onboarding, there's ramp up, etc. But there's definitely an ambition to keep this top line growing. And the investing volumes, as we said, we will continue to have a balance between volumes and returns. But It's always good to see volumes going up when the returns remain high, and we will continue to focus on developing the partnership with Cerberus. The one-offs from the recap to the session, I'm sure we'll get a lot of questions on, so I'll leave that for the Q&A. And we have now reached a 25% margin. I think everyone expected us to reach it, but it's always good to reach a goal that everyone expects you to reach. So it's a tick in the box. we will come back when we present our full year results with the strategic review and also updated financial targets. So I think with that, I think we can open up for questions.

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. The next question comes from Jacob Heslevich from Seb. Please go ahead.

Good morning Johan and Marcie. So my first question is on the adjusted EBIT margin for servicing which reached 25% in Q3 which is up from 18% a year ago. It seems to be driven primarily by cost reduction. How sustainable is this margin expansion and what portion came from operational improvements versus one-time efficiencies?

I can start here. I mean, I think that the margin has proven to be sustainable. It's been proven to increase quarter by quarter. Given the focus that we now have on growing the top line, I think we will have to strike a balance between how much more margin improvements we want and how much do we want to actually put into our commercial proposition. in order to grow the top line. And if you ask me on the balance, I would say I'm quite happy with 25% margin if I can grow my business at the same time.

All right, perfect. And then if we move to investing side, collection performance was 101% in this quarter, slightly better than a year ago at 98%. But cash EBITDA from investing still declined to 1.35 billion from 1.5 billion a year ago due to a smaller book. When should we expect cash EBITDA to stabilize or grow again given your stated intention to increase investment pace?

I mean, it's a very tricky question to answer because I cannot predict how much we will invest over the next quarters. But the ambition is clearly that we want to get the investing business to flatten out. So if you think about the decay we've had over the last years in terms of portfolios going down, investment volume going down, now it's time to turn that around and stabilize. But we also said that we have a 2 billion target. Let's make sure that we reach the 2 billion target first and then we'll get sort of to the next level. And by then, I think also we will have our, let's say, Q4 report and we'll give more guidance on where we see a future portfolio.

Okay, thank you. And just finally, on the updated financial targets, you mentioned focusing on Improving profitability, driving growth and strengthening the balance sheet. These can sometimes conflict with each other, so which takes a priority if you face trade-offs? For example, would you sacrifice near-term growth investment to hit the three and a half times leverage target faster, or how should we think?

I think we need to address our leverage. That's the main priority. But then doing that, I think it's also important to always strike a balance between short-term sacrifices and long-term gains. But I think we will give you more clarity on that when we talk again in three months' time.

All right. Thank you very much.

The next question comes from Patrik Bratellius from ABG. Please go ahead.

Thank you. Can you hear me?

Yes.

Perfect. Thank you. So my first question is to Masi, as he comes in with a little bit of a new outsider's perspective. So in your new role, and given that you're new, can you talk a little bit how you view the sustainable and long-term capital structure in Intrum and how do you think that should look in terms of leverage ratio?

Thanks, Patrick, for that question. A sustainable balance sheet is a balance sheet that is in better shape than the current balance sheet. I think that's clear for everyone. We'll come back with actual targets on that when we present the Q4 results. But generally, I would say that we need to take into account what the composition of the business will be in the future, depending on how we grow our servicing and investing business and we'll take the different levels of riskiness of those two different business lines into account where we set new leverage targets. That's the hint I can give you in addition to what I started with saying that we need to be in better shape in the future than we are today. So that's a main priority of this company. That's going to be my main priority of myself as well, obviously. So yeah, you need to give it some time. We'll come back, but the direction is clear. We need to be in better shape.

Okay, thank you. And speaking of the balance sheet, you have some new money notes given out in connection with this restructuring. And to my understanding, those will partly be used to buy back bonds. So can you talk about how much you aim to buy back with this? And when should we start seeing these actions being taken?

Yeah, we can use that money to buy back. We'll do that if we believe that that's good for the company as a whole. We can't give you any timing of that. We will do that when we think that the timing is right, if we do it. But the whole purpose would be to make sure that we deal with the maturities we have in the sort of short term, the 2027s. But again, it's an opportunistic opportunity. action tactics from us, so we can't give you any timing on it. But if we feel that it's going to address the balance sheet to some extent, we'll do that.

Okay, thank you. And servicing, it's growing with 3%. It's, however, below a little bit the old target level. Do you see that you need to invest more in the cost side in order for this to ramp up? Or is there anything that you can do that wouldn't drive increased cost in the short term to ramp up income on this side?

I mean, I'll start here and then Masi can add. But in servicing, I think the cost trend will always be sort of on a relative basis going down. We need to become more efficient. We need to be more automated. We basically need to build on a scalable platform. Are there short-term investments we need to do to grow the servicing business? Nothing that is material from my perspective. but then i think one of the key questions that we have that we will have to address in the sort of strategic review is also how what what's the ancillary business that we can grow because right now we are involved in some very important processes with our clients and there could be opportunities to grow ancillary business out of that that would be sort of a nice add-on to the business we run today. And that could require CapEx, but I think that's something, again, we will have to come back to when we have done our own homework.

Yeah, I mean, if I add what's, I think, interesting with the servicing business is that there's a lot of legacy in that business, not just with Intrum, but with the whole business. And really, improving the offering has a lot to do with becoming more cost-efficient. It's actually the case that the more cost-efficient we become, the more automated we are in that business, the better the offering will be to our customers and the more deals we'll win at better margins. In that business, it is not really a conflict between investing more and you seeing more higher cost in our P&L and winning business. We're hiring salespeople now, but we're talking about 30 people. And we have almost 7,000 people working with collections within servicing. So it's nothing compared to the days we have to work with in terms of becoming more efficient.

Given that you were at the other seat of the table in your previous job, do you see any immediate actions that Interim could do in order to improve their service? the top line growth within servicing to a new inflow from for say banks?

There are things we're looking at in terms of how we price deals. We have a fairly large fixed cost base and obviously the more servicing revenue we have on the platform the smaller is the fixed cost base per per deal, so to say. So we are making some changes to how we price new deals. And I hope and we think that that change in financial steering will make us more competitive in new deals and still uphold or maybe even improve the margins from current levels. So, yeah, there are things we can do and we're looking into it and we're trying to apply it as quickly as possible.

Thank you. A very last question from my side is just on slide 12. On that change composition of cash flows, you showed the total leverage. The dotted line there, the servicing leverage, which we don't see a number for, can you please share the detail what that level would be in Q3 2025? Do we get the reference?

Yeah, I think if you look at where that dash line was a year ago, so it was above 10 times and now it's around seven times. So it's a pretty strong deleveraging if you allocate some of the debt to the servicing business. So it pretty much follows, obviously, the improved cash generation from that business. I see.

Thanks so much.

The next question comes from Airman Carrick from DNB Carnegie. Please go ahead.

Good morning. Thanks for taking my questions. And I will continue on slide 12. Thank you for that. I've asked for it for a long time, so I appreciate it. And just to hear a little bit how you're reasoning with the 80% LTV you're assuming on the investment, as opposed to the Cerberus. Project Orange, you had 60%. If I remember correctly on the entire size, BVA was 60%. Why do you feel 80% would be the kind of fair level to assume for investing?

I mean, you can argue whether it could be 60, 70, 80 or 90. I don't think that's the main point. I think the main point is to show that irrespective of how much you allocate to it, if you allocate the remaining debt we have on the balance sheet to the servicing business, with stronger cash generation in the servicing business, you would have seen a declining leverage for that business. Coming from the banking world, a comparison I would make is that if you have a bank that is only doing consumer lending and then a few years later it's only doing mortgages, you should probably view that bank as being less risky and therefore would be allowed to have more leverage. And I think it's a fair comparison with our business as we are more and more moving towards servicing, which we believe is less risky and therefore should be allowed to have a higher leverage on. This doesn't mean that we will set leverage targets in the future that are less ambitious than the ones we've had. We just think it's important to take into account how the composition of our business changes.

But if I can follow up on that, maybe I'm thinking about it the wrong way, but can't you argue the opposite? If you were a bank, when you have a lending book, you can have some leverage. If you just have commissions, you would have less leverage.

Well, I mean, if you take a bank, it's typically the case that you have risk rates for the lending business and the riskier the lending is, the higher is the risk rate. And therefore, the more capital you have to have. That's the way I would look at it.

Yeah. And I wouldn't compare. I mean, remember when we do the servicing business, I mean, the contracts that we run are usually sort of three to five years. It's a long term relationship. And it's also it creates quite a lot of stickiness. So I think that's where we're coming from. Whereas on the investing side, in the end, it very much depends on what's your investment appetite and how much can you invest to continue to either replenish your portfolio, increase your portfolio or decrease your portfolio. So it's going to be more sensitive in the short run in terms of your investment appetite. And then also there's always a, I think, a question mark, at least from the market, when you invest into these type of portfolios, will they actually yield the returns that you put up when you made the investment?

Fair enough. Thank you. Then moving over to the servicing side, organic growth. Now you're back to organic growth again, which I think is, of course, highly positive. Is around the 3%, is that a new baseline we should think about? And maybe extending the question a little bit, I suppose getting back to organic growth has been a focus for several years. What have you tweaked now that's making it possible to do that while also doing it in a profitable manner. And maybe lastly on that question, the 1.8 billion pipeline you mentioned, how should we think about that? What's your typical win rate? I suppose that's a gross number. How should we think about the underlying churn you have? So how much from that 1.8 should we think about adding to your

future income uh if we start with your first question which is is this a new sort of baseline um i think that one we will have to refer to when we come back in q4 uh then we'll try to if we articulate something it will be then um hopefully answering your question I think there were many questions in one, but churn, I mean, in general, we tend to manage churn in a good way. So we actually don't lose that many contracts. And then there might be always, I mean, you know, contract could also be amended. So there could be, you know, Part of what was in scope before is not in scope in the future. I mean, a lot of clients, they usually use two or three providers to have benchmarks. So the composition might change. When it comes to new business, I mean, as I said, we have a very high focus on this. This is now about sort of moving the organization from a very margin sort of focused type of effort to something that is much more forward leaning and thinking about new business. So coming back to your question around the pipeline, a lot of those businesses, a lot of those businesses, tenders will materialize in Q4. It doesn't mean that that will bring income from the 1st of January. It means that we will start ramping up the new contracts during 2026. And for bigger contracts, the ramp up here can be as long as 6 to 12 months. especially if it's with a banking client where you do sort of gradual steps. So, you know, I think that the 1.8 should be just seen as a, there's a big amount out there. We're trying to get the biggest share out of it as possible. But I wouldn't sort of, I wouldn't expect that just means that we suddenly add, you know, all these revenues from the 1st of January on top of what we have today. It's a bit more complicated than that.

Got it. Thanks. That's helpful. Then just one final question on cost. How much more is left to be done there? And I suppose common costs looked very strong this quarter, down almost 100 million quarter on quarter. Is that a sustainable level that we should think about going forward? And I suppose generally with cost, have you compromised the service and quality to any extent? Or have you been able to add more technology usage already now?

Yeah, I can start with that. I think there is a lot more to be done on the cost side when I'm talking about the mid to long term. And that has to do with applying new tech and making the manual processes more automatic. So I think this business over time should have a clearly lower cost base than it has at this point. How quickly that goes obviously depends on how quickly we apply. best practice from different markets we work in, but also use tech in a higher degree than we have today. In terms of the central costs, I think that most of the work there has been done, but I still think that there is some more to be done. I would also add that if you look at the impairments we've taken in the quarter, those will just in itself lead to about 300 million less costs in 2026 than otherwise would have been the case. So we are obviously moving into 26 with a positive momentum on the cost side, given the FTEs we have today compared to a few quarters ago. And we think that this is a long game where the cost trend should be downwards in the mid to long term. Then the question is, to what extent do you use that to reinvest in your business and grow top line even more? And to what extent do you allow it to improve margins? And that's a balance we need to sort of try to strike in the future.

Very good. Thank you very much.

The next question comes from Marcus Sandgren from Kepler Shoebrew. Please go ahead.

Yeah, good morning. So I had one one, starting with one technical question, the gains you're making on the debt that you that has been written down, it seems like there is an element of mark to market of the outstanding debt. Is that something new? Or because you did write it down by three and a half billion, right?

Yeah. It is a market.

Yeah.

Which happens when you do the recapitalization. So you use the bid price, basically, that establishes just after the recapitalization and the difference between that nominal value of the debt and the bid price leads to a gain for us as the bid price was lower than the nominal level.

Exactly. So it's like a fair value adjustment.

Okay, but that is not going to be fair value going forward from here. No. Okay. And then secondly, I was thinking about the aging back book in investments. What's your take on collection performance over time when the portfolio gets older? Is it kind of constant or is it gradually degrading?

I mean, if your question is if we will continue to collect according to our forecast or better, I think we have taken in, I mean, when you do the portfolio and you put out the forecast, you obviously take into account the decay. And we have an ambition to continue to collect above the index. But I mean, any portfolio or not any, but most portfolios, they have a high collection rate in the beginning rather than the end. But that's also why I think we emphasize that our investment pace should continue to increase because we need to replenish.

OK, thanks. And then lastly, regarding the market now, now we've been through a rate hike cycle and rates are coming down. What's your take? feeling on your markets that, I mean, how much should we expect the market to grow when rates are much lower now in the coming years?

You're talking about the servicing business?

Yeah, servicing, yeah, right.

I mean, I think there's a few trends in the servicing business. I mean, one is obviously the macro has an impact on, you know, especially, you know, banks, utilities, telcos. But there's also a lot of new kind of business verticals that has had an impact on the market as such. I'm thinking about buy now, pay later. you know, the steady state of increase of consumer lending, new interest, all of that. And then you have in many parts of Europe, you also have some of the traditional business that we see in the north. It doesn't even exist. So, you know, I think we will continue to see this market sort of growing, but not growing massively. And then, as I said, I think in a previous interview, when we plan, we have to plan for a normal business cycle, which means that we cannot plan for another euro crisis, real estate crisis, financial crisis. That's when things sort of shift around, but we should be able to replenish and grow the servicing business, just basically capitalizing on the fact that we are in every country, we meet every different dynamics. And then on top of that, We hope we can also figure out what's the next step when it comes to ancillary business, because we are closely tied to many clients, and there are services that we don't provide today that we can probably provide tomorrow.

Okay, thank you. That's all from me.

The next question comes from Agheliki Bhairaktari from JP Morgan. Please go ahead.

Good morning, and thank you for taking my questions. Just four questions for me as well. First of all, with regards to the servicing pipeline of 1.8 billion that you mentioned, can you give us some color on where those new clients could be coming from in terms of industry? Are we talking mostly about banks or other type of clients? And secondly, with regards to the organic servicing revenue growth, can you break the 2% down into regions like Northern Europe, Middle Europe and Southern Europe, like you've done in the past?

So, yeah, on the first one, I think some of the bigger clients or potential clients in the pipeline are bank related. because that's usually when you have sort of bigger size. But it is a mix, but the bigger contracts are bank-related. I think when it comes to the growth, I don't have the numbers in my head. I don't know if you remember, Marcy, but I think we – yeah, let us come back to that. We'll just get the numbers.

Thank you. And if I just may ask a couple of questions on the leverage ratio and the debt. So first of all, you mentioned, I think, in your remarks that you have restated the debt in the leverage ratio to now take into account the market value of the debt. Can you give us some more details? Maybe I misunderstood that. And why are you doing that? Because I thought the typical definition of leverage ratio for every company is just the the nominal value of the debts divided by the 12 months EBITDA. So if you can just give us some more color with regards to the stated calculation. And then second question on the debt. How do you plan to refinance the 2027 maturities at the moment? I appreciate that this may change, but based on where we currently stand, what would be the plan? Thank you.

Yeah, we haven't used the market value when it comes to the leverage ratio. So we are using nominal value. The market value was referring to the effect of the recapitalization and that net gain we had. So when calculating the leverage ratio, we do it exactly the way you described it. We look at the nominal value and the 12-month running cash EBITDA. And on the refinancing for 2027, obviously, we have a few quarters to go before we need to deal with that. The whole purpose is to put the company in a better position so that refinancing goes well. So it's about continuing to improve the business, generating more cash. improving the top line, continuing to reduce costs. So we can only sort of focus on the company and how we're doing operationally to put ourselves in a good position before we need to deal with that maturity.

Thank you. If I just may come back to the leverage ratio.

On the growth, just to answer your question, most of the growth is from middle Europe, but we also have some growth in selected markets in the south, in particular Italy, and then the north is fairly sort of neutral.

Thank you. Sorry, just to come back to the leverage ratio, because I think you mentioned in the beginning that you have obviously reported 4.7, consensus was looking for 4.5, and I think you mentioned that under the old definition it would be 4.4, so I'm not sure what you have changed. If you can just explain what you have restated, if there's something that has been restated in the calculation.

Yeah, so now we're looking at the nominal value of the debt, whereas with the old definition was the book value, and the nominal value is a higher number, and therefore the new definition leads to a higher leverage ratio than would have been the case with the old definition.

Right, and is that because in your covenants you have to use the nominal value of the debt, or what is the reason behind the change?

Well, it is more in line with the covenants. So it's not a perfect, but it's a very, very close proxy to how the covenants are set up.

And we also did change because if we would have done the old method, we would basically take a benefit out of this accounting adjustment. And that's why we say with the old definition, it should have been 4.4. But we think it's more right to actually look at the nominal value and then talk about 4.7.

Thank you.

The next question comes from Alexander Kofod from Nordia. Please go ahead.

Yeah, hi. Can you hear me? Yes. Oh, great. Thanks for taking my question. Just coming back again there to the leverage ratio. Sorry if you get tired of it. this view that you can level the company more on service as opposed to investing. I think that has some would challenge that view, although I agree and appreciate that lower risk, everything else equal would be possible to finance. But again, yeah, I think Ermin alluded to it as well. Having investable assets on balance sheets would also be So that view, has any of that been cleared with credit groups out of curiosity, or is that strictly your own view? That would be my first question. And then maybe secondly, if I can ask on your non-recurring items, and I think 2 billion SEC and one also related to the restructuring, is there any of that actual payments bills you need to pay from that? How much of that is ahead? And when is those costs expected to be completely over and done with also in your cash flow statement? Thank you.

Yeah, if I start with the first question, as I said before, this analysis of looking at the leverage for the different parts of our business will not mean that we will set a leverage target in the future that is less ambitious than we otherwise would, which we just think it's fair for ourselves to look at the riskiness of the business when we do set that target. So I think we're just basically alluding to that we will probably look at having different leverage targets for the two types of business that we operate. what that lands in terms of aggregate leverage, whether that's gonna be a target that's at the 3.5 times that we have today or what is gonna be more ambitious than that and what the timeframe of that will be, we'll come back with in Q4, which we just think for ourself and how to operate the business, it's good to look at different targets for the different business lines that we operate and take into account how we think that those business lines will develop

uh going forward a few years from now um on your second question yeah uh hey and it's annie here um on your second question regarding the uh costs that went through uh from cash in in the third quarter around 550 million sec uh went through uh as cash. And then I think you also asked about the tail, if there's anything more to come through. It's very, very small. I don't think there is anything.

Yeah, I mean, I would say, as per Q3, the recap is closed. And yeah, going forward, it's sort of business as usual.

OK, not fine. I was just curious. I appreciate that. Maybe a third question, if I can. And so just, it appears that, Mark, My interpretation of what you're saying is that growth ahead might be a tad difficult for you. I mean, also on lower FTE base, that for you to capture any growth, maybe underlying growth seen in Europe, for you to really capture that, you need to sort of invest in automations, et cetera, to actually release capacity with your employee base to actually capture this top line. Otherwise, it will be more or less a lost opportunity for you because there's not so much capacity left with the current FGE base. Is that a fair way to say it like that?

No, I mean, I think what we're saying is we have room to grow with the current capacity. We think that if we can be even more efficient going forward, we will naturally win even more business. The more efficient you are, the more attractive value proposition you have. I think we have a different take on that. Today we can grow. We have capacity to grow in every market, but the more efficient we become, the higher likelihood is that we can grow even more.

Yeah, okay. That's fair enough. Understood. I think there is some comments in the market that buy now, pay later loans are perhaps seeing particular growth. Would you capture any of that? Or with this bank-related clients coming in, would that be more to larger ticket items, maybe not for the same growth? Or would you comment on that?

I think Buy Now, Pay Later is a very interesting segment, and we're already working with it, and we have been successful to actually onboard more Buy Now, Pay Later volumes just in the last two quarters. And it's a segment that we will continue to target, and I think it's a segment that in particular fits with our digital collection platform. And, yeah, so, yeah, I don't see any – it's a big opportunity.

Okay, thanks so much. Appreciate it.

The next question comes from Rickard Hellman from Nordia. Please go ahead.

Hello, Rickard. Hi.

Hi, can you hear me?

Yes.

Great, thank you. So to start with, yeah, you know, To be sure, looking at the cash flow, we have very high interest paid in Q3. And I assume this is related to accumulated interest from the capitalization. And you said that we're more or less done with all the cash flow now. Is that also from interest? So we don't see any more tails out of this on the financial side?

Yeah, all the accrued interest was paid in Q3.

Super. We talked a lot about the growth in PPC. Just to follow up on that also, have you seen any changes from your bank customers around handling its non-performing loans in terms of volumes and signs of earlier collections or earlier divestments of portfolios?

no nothing that is particular for the quarter i mean this continues to evolve differently depending on market depending on the situation i mean for now now you have a situation in germany where you see the stage twos going up so it's very there's no sort of a coherent trend across europe okay thank you

And then, of course, also, I'm not sure if you would like to also, and it has been discussed a lot around this page 12 about leverage, but if you would have a fully service business, I mean, without any investing vehicle at all, what would you say a total leverage would be for such business?

I think, again, I think that's something we will leave for the future. I think the point we're trying to make is not that, you know, I think the point we're just trying to show that our business has fundamentally changed and the two legs, they have a very different type of business. And we will have to come back to this when we come with our Q4 review and explain more how we see the future. But all things equal, we definitely have an ambition to become a much more resilient company when it comes to leverage. But we don't have a number for you yet.

So, but as you also understand, I mean, all this kind of discussion on leverage, probably they have a lot of attention among investors and analysts.

Of course. So I think the message that we, if we want to conclude one message is that the leverage has to go down and it has to continue to go down and it needs to be sustained. And we will tell you more in Q4 how we'll make it happen. Great.

I'll end there. Thank you very much.

Okay. Thank you.

The next question comes from Wolfgang Felix from Saria. Please go ahead. Wolfgang Felix, your line is now unmuted. Please go ahead.

Hello, can you hear me?

Yes.

Hello?

Yes.

Okay, excellent. Excuse me. Well, thank you very much for taking my questions. I have two remaining, really, only. One is regarding a 2 billion target that you were mentioning earlier in the context of your investment division bottoming out. I'm not really sure what target you were referring to there. If you could just repeat that again, that'd be fantastic. And then, you know, obviously you've just restructured. And if you're looking across to your competitors, say in the UK, for instance, after the restructuring can be before the restructuring. And so I guess if you're looking at your own balance sheet and given your restructuring has also just been a very light restructuring, despite the complexion perhaps, how would you rate your options today to manage liabilities perhaps a little further?

So first one, I mean, we have I think we mentioned before that we have an ambition to invest two billion sec per year. So roughly five or five hundred million sec per quarter. That's the two billion I'm referring to. And then I think on your question on leverage, I think Masi did answer that before. I mean, the way we see is that we need to continue to operate our business in an improving fashion. We need to continue to become more efficient. We need to continue to improve our servicing business and adding top line growth. And then on the investing side, we need to, in the first instance, reach the two billion per year as replenishing. And then we'll see what the next step is in terms of investment volumes. And that's the organic path on how we can deliver.

And so you're not currently looking at anything, we shouldn't be expecting anything inorganic, so to speak, over the next, say, year?

I mean, when we do a strategic review, we will look at all options and we will see which one creates the most value. But the base case is obviously always that we move on organic path.

Okay, thank you.

The next question comes from Ines Charfee from Napier Park. Please go ahead. Hi, can you hear me?

Yes.

Thank you. Just going back to the one off, so can you talk about the impairment, the goodwill impairment and what kind of, what does that mean basically for the future?

Yeah, I mean, there are a few different impairments. The big one is the goodwill impairment we have done for Spain. As I said previously, it's related to what we thought would happen with that business and the actual performance. And we could see that the actual performance had been worse in the short term and therefore we felt that it would be conservative to do a goodwill impairment there. The other impairments mainly relate to client contracts we've had on the balance sheet where you do the same kind of assessment of what kind of revenues you think you're going to generate from those customers going forward and again we've taken a conservative approach and have a lower assessment on those revenues and therefore we've done impairments there. And the remaining impairments relate to software we've had on the balance sheet that we've written down. And I said before, what this means is that DNA will be lower than otherwise would have been the case going forward. And for 2026, we're talking around 300 million lower DNA expense.

OK. But just to understand that a bit more, does that mean Should we expect kind of less... I was trying to understand the impact in terms of collections, et cetera, going forward. Would the impact be for the short term, in the next quarter? How should I think about that?

There's no impact on collections. It's just an impact on the cost line. Everything else equal will be lower in Q4 and also lower in 2026. But this is not related to how collections will perform going forward.

Okay, and then just looking at the maturity profile, page 14. Just to be clear, you still have ascending in 2025?

That's a term loan that we're paying back to some extent and it has been extended. So it's nothing you need to be concerned about.

So that has been extended?

We're currently in negotiations on that.

Well, it should be done fairly short, fairly soon. And it's not fully being, I mean, it's partly paid, partly extended, and it's just to give us a bit more flexibility going forward.

Okay, so I guess it will be dealt with.

Before we, when we announce it before it's fully dealt with.

So partly extended, partly paid down.

Correct.

And just looking at the RCF, what's the drawn amount as a 3Q?

RCF.

Should we say that again? What is the drawn amount of the RCF? It's around 11 point.

10.

Yeah.

10 points. Yeah. I mean, it's almost fully drawn.

Okay. Thank you.

The next question comes from Wolfgang Felix from Saria. Please go ahead.

Yes, thank you. One follow-up question really quickly. Can you give us some guidance on your sort of speed of collection going forward? Are you going to maintain the same rate of collection? Do you think you're going to maybe slow it down a little bit? What should be sort of a stable case from here all else equal?

When you talk about our collection rate, in what context do you think about our investing portfolios or?

Yes, I'm sorry. Only the investing portfolio. Thank you. Sorry.

I mean, the investing portfolios, it's hard to predict, but historically we've been collecting slightly more than our forecast. And I think that's the ambition going forward as well. And then obviously the amount of collections depends on the size of the book and the profile.

So I'm trying to picture it like this. If you are maintaining as many people as you were before, but you have a smaller book, then you would be churning that book or turning it over a little bit more quickly. Is that the idea or is the idea to shrink your collection engine, if I can call it like that, to maintain the same speed of working out the smaller book?

I mean, we're always trying to collect as much as possible. And then at the same time, we're trying to be more efficient in every collection. So I think your analogy is not really the way it works in reality. But of course, if you have lower volumes, you need less people. But I mean, out of our 7,000 people working in collections, serving our own portfolios is just one part of it. a much bigger book with our clients where we operate.

Yes, now that I understand. But I think I understand your answer. Thank you very much. Okay, thank you.

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

So thank you for a lot of questions today. I hope we've been able to clarify what is a little bit of a difficult quarter to understand, given all the one-offs. But I think as we pointed out, we're happy with the underlying. We're making progress. We're leveraging. Cost continues down. We see a bit of servicing income growth. And the investing portfolios are collecting slightly better than planned. And the investing volumes are higher than before. And obviously, we want to further improve going forward. And we hope to see you when we present the Q4 and talk more about the way forward. Thanks a lot and have a great day.