VEF AB (Publ)

Good day and thank you for standing by. Welcome to the VEF third quarter 2025 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there will be a question and answer session. To ask a question during the session you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1, 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Nangle, CEO of the company. Please go ahead.

Thank you very much, Heidi. Good morning and good afternoon, everybody. And thank you once again for attending our results call this time for Q3. My apologies to our investors and followers in the U.S. We started a bit earlier this time around, but can't be helped because of travel plans. But thank you for dialing in, nonetheless. And going straight into, and joining me on the call, as per always, will be our CIO, Alexis Koumoudos, who will join us for the valuation section and portfolio update. But going straight into the deck, going to slide two, and I guess this, you know, event of the quarter, but more really, areas worth highlighting from today's release and what we're seeing. And it's really fourfold. One is NAV continues to trend higher. It shouldn't be a surprise given the capital market trends, macro trends and everything we're seeing, but we're also seeing it through the prism of our portfolio. We end the quarter at nearly $406 million of NAB, up 8.3% quarter-on-quarter and nearly 15% year-to-date. And that's just a nice supportive trend for markets, multiples, FX, But most importantly, it's really around the portfolio, which is now in a, I like to think of it as a lower beta mode, break even, reigniting growth, better risk reward, and that's feeding through to the numbers that we're seeing in the portfolio that come through every month and every quarter as we see it. Point two is around credit tasks, clearly our largest holding still in the portfolio. Two aspects on this, one fundamental to its performance, this re-acceleration of growth that we're seeing in Creditas. It's not V-shaped, it's U-shaped, it's gradual, it's picking up, but we're seeing the loan growth year on year from Q1 at 11%, it was very little year before year on year, to 14% in Q2 and picking up again in Q3, given everything we see at the company. But then you cross-reference that with quality FinTech companies attracting capital, and Creditas just announced Its latest bond closure raised $50 million. Its senior bond, 10.5%, three and a half year bond, but also made announcements, very high level announcement about a month ago around a planned equity round of about a hundred million, minimum of a hundred million dollars at an indicative valuation of $3.3 billion. So it's an early high stage or high level announcement that will be followed up upon, which we obviously press release, but it's just a sign that quality FinTech companies are once again attracting the right kind of capital. Point three, and this kind of touches on the first two points, is around fintech markets. They just are strong at the moment, and this is capital markets into fintech markets, and this is capital flowing in as well as capital flowing out. I think everybody grabs on the high-level announcements around Klarna IPO or Chime IPO in the US, and that's what grabs the front page of the financial press. Within our world and within the broader FinTech ecosystem, we're seeing a lot of capital flowing into companies across early to late stage rounds. Once again, we're getting back to healthy capital inflow markets, as well as capital flowing out, not just with IPOs, but also M&A and secondaries. And we see that in our portfolio, and there's plenty of examples, and it's just coming through from the broader ecosystem. And at point four, the final point, not on this slide, but it's really around pipeline. This is an area that we're really spending more and more time on we're getting more focused on a select number of quality em tar fintech targets and just positioning ourselves and our shareholders older capital for the right moment with the right asset at the right time to put the next credit pass easyco and into our portfolio to work for medium to long-term value accretion and for all Moving on to slide three, just a quick highlight on the numbers. As I said, from a dollar point of view, we tend to focus on NAV, total NAV. We're now back over $400 million, given the performance year to date, $405.7 million, up 8% quarter on quarter, as I said. From a SEC point of view, on a per share basis, we end the quarter at 3.75 NAV per share in SEK terms. Still trading at a a fairly robust discount to that from a trader point of view, but that is starting to close in the markets. And finally, from my side, slide number four, just a general path since inception of VEF and our NAV, not NAV for share, but it's overall NAV. And what we're seeing is an evolution of what we've been talking about for the last few quarters. mainly at the back end of last year. We talked about the reset and things starting to grow again, macro, micro factors working nicely in our favor, and that just gets reflected in your NAV as you start to grow again, and then that happens to feed through to share price and your market cap. And in markets like this, the discount tends to close as well, and it all kind of works in a nice manner once the trends continue. I will stop from my side at this point and come back at the end, but I'm going to pass over to Alexis, our CIO, who's going to talk you through some of the valuation moves and approaches we had in this quarter and some of the detail behind that.

Alexis, over to you. Great. Thanks, Dave. Hi, everyone. Yeah, just running through the major valuation approach and changes in the quarter. I think the biggest change in the quarter is really Confio that had been marked at latest transaction for about a year. And we rolled it into a mark-to-model valuation methodology now. And that was a big contributor to our quarter-on-quarter NAV change. Another driver, as you can see on slide five, being Creditas. Overall now with Confio joining the mark-to-model portion of the portfolio, the mark-to-model methodology accounts for 79% of the valuation methodology for the portfolio and 21% is now valued at latest transaction. Moving on to slide six, so on this slide we just break down the third quarter NAV evolution. And you can see there are three big contributors to the quarter-on-quarter $31 million growth in our NAV. The first and biggest is Portfolio Company Performance, which contributed around $20 million in the quarter. The second, and that's a factor of our portfolio companies growing and executing on their business plans. The second is strong equity market performance and the impact of it on our comps for the mark to model valuation methodologies in the portfolio. And that contributed $15 million. And with the further appreciation of the Brazilian Rai and the Mexican Peso in the quarter, contributing another $6 million or so. And there are some small offsetting factors like our OPEX and coupon payments here, but all in all, those were the biggest drivers in the $31 million quarter-on-quarter growth in our NAV. Moving on to slide seven, because of the size of the change in Confeo valuation, we just wanted to walk you through the key contributors to this and why there was a 39% uplift in Confeo's valuation quarter on quarter. And there are three key components to this. So first of all, we have the company growth. What we've broken out here and shown is Confio's loan portfolio has grown 30% year-on-year from August 24 when the last transaction happened to August this year. And then we've broken down some of the key comps that we use for Confio here and you can see that there was broad appreciation over the year that Confio was held at latest transaction in share price and therefore valuation of the comps. I think the biggest portion of that gain as well was felt in the last quarter where a lot of these stocks performed pretty well. Then the third component to it is the peso appreciation over the year. The peso appreciated 7% versus the dollar over the year. And when we stitch these together, these elements combined with the outlook that we have for Confeo and the business plan that we keep, this results in a 39% uplift over the course of the year for Confeo. And just moving on to slide eight. So to reiterate, we continue to feel confident in our high quality portfolio and its ability to compound from here. We see our portfolio growing around 30% year on year from a profitable and self-sustaining base. And Dave is going to talk a little bit about Creditas' re-acceleration in an upcoming slide. We also definitely feel that we are entering a new cycle, as Dave alluded to at the beginning of the presentation. We're seeing a real pickup in fundraising activity across our core geographies and ecosystems with rounds like Creditas' upcoming that are taking shape. And this increased interest, we feel, will definitely benefit our portfolio. I'm handing back to you, Dave.

Super. Thanks, Alexis, for that. Cool. Moving on to slide number nine, just to focus on credit tasks because it's been a busy year to date, in fairness, for the company. But I think on a fundamental point of view, this whole idea of reigniting growth is nice to talk about, but it's actually great to see in the numbers. And I guess when you talk about reigniting growth, there's elements of the market and people expect a V-shaped recovery. You go back to strong double-digit growth from no growth. But what you're seeing here is a gradual U-shaped recovery in the trends as the machine starts to reignite and the lending machine, the underwriting process, which is great because there was a real focus in the years of 2022 and 2023 of efficiency, of margins, of asset quality, of getting to that break-even point and that sustainability point. And then you switch gears and you balance a better risk-reward model. And you're seeing the year-on-year trends on top of the slide, the loan portfolio year-on-year trends on a quarterly basis, Now, going from 1% year-on-year to 7%, to 11%, to 14%, that's a very simple, clear trend. And we see it, once again, going up, feeding through to Q3 of this year, given the data that we're seeing on a monthly basis. So it's a nice trend. It's a gradual trend. Getting to 20% to 30% growth level, the credit house feels it's a sustainable level. It can compound at a cash flow neutral positive baseline as it moves forward over the next couple of years. And the revenues obviously feed off that balance sheet growth. And then the flip side of that, or, you know, linked to that is, you know, capital does tend to flow towards companies that are performing in better environments. And Credit House is no exception of that. They've just closed another bond, a $50 million Euro bond. Quite nice to see them closing that. But obviously a month ago, they did, as I said at the start, they announced the plan's fundraise, $100 million indicative valuation, $3.3 billion, which they believe is coming their way. And we keep that very high level on full teams are firm and concluded, but you know, it's very clear that we welcome any fundraise debt equity that strengthens Credit Passive Capital position from good news to the company, good news for us and where the company is growing. And when all those details become firm finalized, we will clearly communicate them to the market A and B and reflect them in our NAV. Moving on to slide 10, just getting a little bit more micro on these healthy markets. One can't go too far on overdoing how healthy they are, but just versus 2022 when the music stopped and 2023 when it was tumbleweeds, there's just been a gradual pickup in activity through 24 and 25 across. We see both sides, private, public, entries, exits. We see it emerging. We look at developed for lead indicators. You know, in emerging, the benchmark, we play a lot in Mexico, Brazil, and India. There's a lot of strong double-digit million and triple-digit million fundraisers happening across benchmark fintech names, which, you know, some of ours are benefiting. We talk about credit tasks. just now, but also JustPay earlier this year. So our portfolio companies are benefiting with capital coming in. It also helps us with capital going out. We did a bit of secondary in JustPay. You know, the IPO markets are very healthy and getting healthier, sorry. And in the US, the US tends to lead and the world tends to follow. Although India has been healthy and we IPO'd BlackRock in that market. But we know there are a number of companies getting ready for IPO across a number of scale emerging markets following the US lead. So it gives you just good trends capital flowing in and out of the industry is good for our business and for our companies and what we do on a kind of a macro bigger picture level and then slide 11 before i wrap up and just the whole cash and balance you've been keeping the market up to date on this I think we've been very focused on getting cash in. We've been talking a lot about it through 24 into early 25. I think the three exits we did, which you've talked, maybe over-talked about at this stage, have put us in a very solid position from a balance sheet point of view and from a debt leverage point of view. We end the quarter at $17.6 million of cash on balance sheet. Our debt position, after paying down approximately half our debt earlier this year, is just over 5% of our NAV at $25 million. We're in a very comfortable debt position. And we've also used the opportunity here today to be buying back our shares when the discount actually touched nearly 60% at one point. It was just the most obvious thing to do with our capital. We bought back over 2% of our shares with $5.3 million. So it's been a good, It's been a good exercise in capital in delivering exits that are made at the NAD. And then, you know, the most logical capital allocation tools as you work through your debt and be leveraging buying back your shares. You know, and now we're into a, it's nice to be getting to a point where you can sit back and have a good, healthy debate at team and board level around capital allocation strategy, where we're going from here with an extra incremental dollar in, you know, cross-referencing our debt position, which is a lot lower, our equities, which is the discounts closing with the pipeline that we're seeing. And it's a much more robust debate as opposed to one-dimensional obvious, we'll pay down our debt, we'll buy back our shares, then we'll get back to investing. So it's a nice evolution of that. And finally, just to wrap up, And pretty similar to last time, and we are a beast of consistency, but we try and do that and then we tweak as we go. And look, it's always been about the portfolio. We talk a lot about Creditas, Compio and JustPay because they dominate. They're over 80% of our NAV, so it's natural we do so. And the reigniting growth we're seeing at Creditas and Compio is clear. JustPay continues to compound at a healthy level and hence it was able to raise capital earlier this year and we were able to take money off the table and fresh capital is coming into our company, which is great. But there is a number of companies coming through and maybe that's a point for next quarter's update. You know, I lose to companies like Abbey, growing triple digit percentage growth and a lot of key metrics. It's a company that's doing exceptionally well in Pakistan, now into the Middle East. You know, Rupeek, Goldback Lending in India is getting a very strong tailwind from the gold price and its core business. JustPay, which is solar. panel ecosystem distribution into lending and producing record results month on month for August into September. And it's feeling very good about itself again. So a lot of this is macro markets, capital trends, but then it feeds into the micro level of delivery and it spits out results. So maybe that's one for next quarter is a little bit deeper into behind the big tree, which we tend to over-focus on. I think the exits we've done so far the last 12 months have been good. and we have no pressure to push anything out the door at the wrong price and we do have offers for different names as we go and we're selective in what we do right asset right time right check right price and we're pretty confident that we could get more out the door in the next you know three to 15 months and as we look ahead and capital allocation has become a broader debate of what is the next most important thing I think it's a healthy debate but and quite obvious we've been doing the most obvious next thing with our debt into our equity. And it's just nice to be in a capital comfortable position with options on the table, and we'll continue to do what's best for shareholders, both from a short-term value accretion point of view, but also a long-term growth point of view. And that kind of touches on pipeline. And this is probably a bit like some of the smaller names in our portfolio, which is worthy of a slide or two in the next time we give an update. Pipeline work is getting a lot more focused. We're enamored by a very focused number of fintechs that we've been very close to over the last three to five years, tracking them in scale emerging markets, staying close to the founders and their shareholders, watching them trend positive as they come out of the last cycle. And we're just positioning ourselves as we have always done in the past. to make sure that we are the capital allocator of choice for best-in-class fintechs who want capital to be with them for their next part of the journey. So, you know, these are healthy work streams, the base that we're having at the moment, but it's taking a lot more of our time as we go. But I will stop there, and maybe, Heidi, operator, if you want to open up to any questions there are from the floor.

Thank you. As a reminder, to ask a question, you will need to press star 1, 1 on your telephone, and wait for your name to be announced. To withdraw your question, please press star 1, 1 again. We will take our first question, and the question comes from the line of Linus Sidgerton. Please go ahead. Your line is open.

Good afternoon, guys. Thank you for taking my questions. Starting off, is there anything at all you can say about how the capital raise for credit is progressing? And just on a high level, any indication on what we should expect in terms of a timeline around a potential outcome?

Hey, Linus, how are you? No, look, it's the right question to ask, and I'd do the same if I was in your seat. We're a little bit or a lot restricted in what we can and can't say for obvious reasons. I guess what I would say is that they wouldn't have made an announcement unless they thought it was real, and then we wouldn't have followed up unless we thought it was real. So that's just probably point number one. And timing is just difficult. It's difficult because these things can take time and because there's parties involved and there's structuring and there's legals. But I guess the indication that they actually felt confident enough to put it out there in the first place would give you the shorter than longer feel in terms of timeline.

Okay, thanks. That's helpful. And my second question was on Confio. You mentioned how the comp set has come up mainly in the last quarter, but can you say anything about how operational momentum has progressed sequentially throughout this past year?

Yeah, no, it's fair. And obviously the core delivery of these companies is key for them and for us. And actually the reason why I called a little bit earlier is I'm off to DC for a Compio board meeting. So we're doing a good session there with all key shareholders. in place. But now they started off the year super strong. Loan growth really picked up. So whereas the kind of credit has performance has been a gradual reacceleration and credit has clearly more transparent information. So I guess I always apologize when we can't show what we want to show. Confio front loaded a lot of its growth to the first half. and it's slowing a bit now. But overall, we're probably going to end the year in a very similar outlook for credit assets and Compio, where they both end up in that 20% to 30% credit growth for the year. Margins are holding strong. Asset margins at about 50%. Pricing is not under pressure in the market that it's playing in. And it's getting more and more efficient on the cost base. Actually, Compio is probably one of the more impressive companies in our portfolio with impact already of AI tools. and it is cash flow positive, so it's building a little bit of cash. One focal point, and we've talked about this, Linus, before, and it's been something that I've talked about for a number of quarters is around the licensing, the bank license applications. It's very clear and transparent for Compio and will be a fundamental game changer in terms of franchise value, as well as a cost of funding game changer in terms of how they fund themselves. That's just an ongoing process. For me, it's a It's a when, not if scenario. I'd like to think it's in the bag by year end, given what we've seen with other fintechs like Revolute, Plata. And there's been a number over the last two or three years who've been received their banking license. And I fully believe we're next in line. But, you know, I hate to put timing on these things because you're dealing with regulators. So I think operationally, Directionally positive, a bit like credit cards, albeit more front-loaded. For this year anyway, next year will be different. And then, you know, regulatory rise and fundamentally to the valuation of the business and where it's going, the bank license is key.

Thanks. That's very much appreciated. And then I wanted to ask on your other investments line in your NAV keeps getting larger. And is there anything you can say about the general direction of travel in that end of the portfolio in terms of operating performance?

Yeah, like I alluded at the end of the presentation, what we'll do is we'll do a session in the next results deck where we get into some of the names beyond the top three because even though the top three dominate over 80%, they're still a big state that's not the top three. And there are names like Abhi. It's really grown exceptionally fast. It's the only fintech in Pakistan with a banking license, which gives an exceptional position to enable growth and value creation, but it's also doing very well in the Middle East and the interaction between the two regions. As I said with Sol Facil, the solar lender and ecosystem play in Brazil, once again, their trends are picking up very strong, strong double-digit growth in that name. And Nebo is another one I didn't mention in the accounting stats from software, but like Fort Knox for Brazil, we're seeing this kind of 30% to 40% compounding profitable growth now. Or be it from a small base, don't get me wrong, these aren't scale-like credit tasks. There's some which are going less exciting in there, as you would expect, but I think we're going to see some breakout names coming out of there into the top end of the portfolio that will be highlighting a more consistent basis as we go forward.

Okay, thanks a lot. And then my final question, could you comment anything about how you think about exits in your term in terms of should we think more like full sales or more like your partial exit in JustPay? Thank you.

Yeah, no, it's fair. We think about it a lot. What we've learned, you know, you learn a lot doing this over time, but you should always be trying to exit. You should always be looking for the dollar in and you should all, you know, and you're not forcing anything, but it just should be constant. And so we have a number of work streams and people owning those work streams across different areas, M&A, IPO, secondaries, and across key individual names. And more likely than not, it'll be splicing of positions like what we did with JustPay. So you stay in the game with company X or company Y. You take a sliver off the table, $10, $20 million of one of our top three, for example, and as you go, as they raise money or somebody leans in versus a wholesale exit of a company. So I think historically people tended to think about exits as your IPO or maybe your M&A. investors are getting more and more comfortable and used to is that the secondary market for private companies is becoming a more real thing and we're seeing obviously daily flow in big global private companies like stripe for example and spacex there's daily markets in them but that trend and theme is actually flowing down to you know smaller markets emerging markets and smaller stocks albeit it's less liquid at the gray market but it's more and more happening and Doing them around events when a company's raising, like Just Pay Did areas here, is easy, but around that there's a lot of conversations going on constantly. And that's also from the shopping and the investment side. So when we're looking at a pipeline of five companies or ten companies, yes, you're waiting for the next fundraiser to be part of that, lead it, or be part therein. But in between funding rounds, there's always areas where you can clean up cap tables, buy secondary, buy employee shares, the founder might want to take some money off the table. So it's becoming a much more intricate area of capital in, capital out, as opposed to the plain vanilla series A, B, C, D, that is the way in, and M&A and IPO is the way out.

Okay, that's very clear. Thank you so much.

Super, Linus, thanks.

Thank you. There are no further questions. I would like to hand back for closing remarks.

Super. Thank you, Heidi. And thank you, everybody, for dialing in at a slightly earlier time this time around. We're pretty happy where we're at from a business point of view year to date and how everything's going. But there's a hell of a lot more work to do. We're quite excited. We're working hard. And it's not just the short term in terms of what we're doing, the exits, the buybacks, the pay down debt, but it's also you know, reigniting growth in our portfolio companies, but also in our pipeline engine for putting more capital to work in the medium term into the next gen winners at best, because we're 10 years old or young at this stage, but we're looking forward to the next 10 to 20 years of doing more of the same, but obviously bigger, better, faster. Thank you very much.

This concludes today's conference call. Thank you for participating. You may now disconnect.