Investors presentation FY 2019 Results April 2020 1 Disclaimer - - PowerPoint PPT Presentation

Investors presentation FY 2019 Results

April 2020

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Disclaimer

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CONFIDENTIAL AND PROPRIETARY THIS PRESENTATION IS NOT AN OFFER OR SOLICITATION OF AN OFFER TO BUY OR SELL SECURITIES. IT IS CONFIDENTIAL AND IT IS FOR INFORMATIONAL PURPOSES ONLY. This presentation and any related oral information is strictly confidential and has been prepared solely for use in this presentation. This presentation is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of, or located in, any locality, state, country or other jurisdiction where such distribution or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. This presentation may include unpublished price sensitive information that may constitute “insider information” for the purposes of any applicable legislation and each recipient should comply with such legislation and restrictions and take appropriate advice as to the use to which such information may lawfully be put. We do not accept any responsibility for any violation by any person of such legal restrictions under any applicable jurisdictions. This presentation may include financial information and/or operating data and/or market information regarding our business, assets and liabilities and the markets in which we are active. Unless indicated otherwise, such financial information may not have been audited, reviewed or verified by any independent accounting firm and/or such operating information is based on management estimates or on reports prepared by third parties which we have not independently verified. Certain financial data included in this presentation consists of “non-IFRS financial measures”. These non-IFRS financial measures may not be comparable to similarly titled measures presented by other companies, nor should they be construed as an alternative to other financial measures determined in accordance with IFRS. You are cautioned not to place undue reliance on any non-IFRS financial measures and ratios included herein. This presentation contains various forward-looking statements. All statements other than statements of historical fact included in this presentation are forward-looking

• statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future

performance, industry and business. These statements may include, without limitation, any statements preceded by, followed by or including words such as “target,” “believe,” “expect,” “aim,” “intend,” “may,” “anticipate,” “estimate,” “plan,” “project,” “will,” “can have,” “likely,” “should,” “would,” “could” and other words and terms of similar meaning or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond

• ur control that could cause our actual results, performance or achievements to be materially different from the expected results, performance or achievements

expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we will operate in the future. All information in this presentation is provided as of the date of this presentation, are subject to change without notice and we assume no responsibility to update the information included in this presentation. The information contained in this presentation is not for publication, release or distribution. This presentation should not form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. This presentation does not constitute a recommendation regarding our securities. The presentation has not been prepared and is not being distributed in the context of an offering of financial securities in any jurisdiction. This presentation is not an offer for securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act of 1933, as amended, or in any other jurisdiction absent compliance with the securities laws of such jurisdiction. Any public offering of securities to be made in the United States or elsewhere would be made by means of a prospectus to be obtained from the issuer or selling security holder and that would contain detailed information about us, as well as financial statements. There is no intention to conduct a public offering of the securities in the United States or to register the

• ffering with the United States Securities Exchange Commission.

By receiving and/or attending this presentation, you agree to be bound by the preceding limitations.

Key Highlights of FY 2019 results

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Dynamic growth of our Cash Revenues (+14%(1)) with increasing margins (+22%(1) in Attributable Cash EBITDA)

In Debt Purchasing, LTM Gross collections increased by 28% for the year ended December 31, 2019 versus the year ended December 31, 2018 thanks to a solid Backbook performance and a significant Frontbook contribution. In Debt Servicing, revenues grew by 1% for the year ended December 31, 2019 as compared with the year ended December 31, 2018, as new business performed more than offset run-off nature of some contracts Costs were well-controlled in the year ended December 31, 2019 (4% growth as compared with the year ended December 31, 2018) in spite of continuous investments to develop our French and Italian entities FY Attributable Cash EBITDA margin increased from 44% in the year ended December 31, 2018 to 47% in the year ended December 31, 2019 driven by (i) acquisitions synergies continuing to flow in our P&L and (ii) strong collections in our Debt Purchasing business.

In addition to positive FY 2019 results, we believe there are further market opportunities in both France and Italy

2019 showed continued signs of growing opportunities for our activities in our two core markets, France and Italy. We made significant debt portfolio purchases in 2019 in France (+€197 million o/w €128 million in Q4 2019) almost five times iQera’s acquisitions in 2018 (€42 million) thanks to robust market dynamics, while maintaining our focus on secured, complex products (SME loans, etc.) as well as our underwriting discipline in a competitive environment. Servicing activities in France were impacted by the run off structure of some of our large contracts, but our pipeline remains strong. In Italy, a greater level of

• pportunities led to significant servicing revenues growth (+11% in 2019 versus 2018(1)).

Leverage maintained within previous guidance despite significant investments

Record portfolio purchases and Sistemia’s acquisition in Italy led us to deploy €220 million(3) of Capital in 2019. Our leverage ratio on Attributable Cash EBITDA was at 3.4x(4) as of December 31, 2019 which is within previous guidance of 2.5 – 3.5x. Also, at the end of 2019, 61%(2) of our revenues stemmed from recurring, capital light servicing activities. Liquidity remained abundant with €43m of available cash and an extra €44m of undrawn RCF as of December 31, 2019.

(1) pro forma figures including Sistemia – LTM as of December 31, 2019 vs LTM as of December 31, 2018 (2) Ratio calculation based on iQera LTM pro forma figures including Sistemia as of December 31, 2019 (3) €220 million of capital combines c. €153 million of equity injected in portfolio acquisitions and C. €70 million on Sistemia acquisition (4) Net debt / Attributable Cash EBITDA pro forma ratio iQera including Sistemia as of December 31, 2019 and including expected synergies at end of 2020

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COVID-19 – Key impact and mitigating actions

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Operational response

• Staff protection in full force since Day 1: regular information update, increased sanitary protection in offices, restrictions on business travel and visits implemented
• Operations continue to function well across all jurisdictions thanks to wide telework implementation (limited staff on site to perform very specific essential tasks)
• Increased communication with clients and structured and proactive dialogue with various other stakeholders (e.g. lenders, suppliers, business partners)
• Decision to implement temporary changes to debt collection practices for third-party customers and own account

Preliminary views on operating performance is having some mitigated effects

• Preliminary views on operating performance impact:
• Debt purchasing: some collections expected to be delayed due to partial closure of the court system in France, but it is too soon to estimate the full impact of the

confinement and the related macroeconomics instability

• Debt servicing: good sector diversification offering protection as some sectors are less impacted by the crisis than others
• Most cash-flows are secured by an asset: though some cash-flows could be postponed depending on the severity of the crisis, the secured nature of the assets does
• ffer some buffer
• Mitigating actions were implemented to limit the expected impact on operating performance:
• Partial unemployment government scheme implemented in certain areas to adjust the workforce to the new environment
• Hiring processes put on hold
• Non-essential new projects and investments were reassessed in terms of priority to adapt to the new context
• Potential future business opportunities: we anticipate increased NPL opportunities at attractive pricing levels towards the end of 2020 and beyond

Liquidity and financing: strong financial position with good liquidity state

• €50m RCF fully drawn in March
• Ongoing discussions with French banks on a loan guaranteed by the French State
• Conducted severe stress tests on liquidity which yielded favourable outcomes
• We aim to maintain our ERCs and be able to seize investment opportunities where financial returns are adequate with the current environment

We quickly took decisive actions to protect our staff while maintaining operational capacity, adapting to client and business requirements, and preserving our liquidity

Significant growth of our Cash Revenues combined with increasing margins

iQera P&L including Sistemia

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KEY HIGHLIGHTS

• Compared to 2018, LTM collections increased by 28% with two main effects: (i) a solid performance

in our Backbook collections, and (ii) dynamic Frontbook collections (€42 million) following significant acquisitions

• Growth in Servicing was resilient (+1%), with (i) strong dynamics of our Italian subsidiaries being

partly offset by (ii) solid contribution of French market partly offset by run-off contracts

• Revenue mix balancing continues, with 61%(1) of our revenues now stemming from recurring, capital

light Servicing activities

• Attributable Cash EBITDA margin increasing by almost 3 p.p. to 47%

(2) for the year ended

December 31, 2019 driven by (i) synergies continuing to flow into P&L and (ii) very higher contribution of debt purchasing activities

Total Cash revenues Cash EBITDA & Cash EBITDA Margin(2) Total costs

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(1) Ratio calculation based on iQera LTM pro forma figures including Sistemia as of December 31, 2019 (2) Corresponds to LTM Attributable Cash EBITDA and LTM Attributable Cash EBITDA Margin - pro forma figures including Sistemia – LTM as of December 31, 2019 vs LTM as of December 31, 2018

117.6 150.0 119.9 121.4

FY 2018 FY 2019

Gross collections Servicing revenues

(€m)

237.5 271.4

1% 28% 14%

132.5 137.2

FY 2018 FY 2019

(€m) 4%

103.7 126.8

FY 2018 FY 2019

• Attr. Cash EBITDA

44% 47% (€m)

• Attr. Cash EBITDA Margin

22%

In debt purchasing, we made the most of our market position and capitalised on positive market dynamics

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KEY HIGHLIGHTS

• Record volumes of debt portfolio sales in 2019 in the French market
• We maintained our disciplined portfolio acquisition standards with selective approach to underwriting in a competitive environment
• Record investments for iQera (+€197m) with an acceleration in Q4 2019 (+€128m)
• Significant subsequent increase of our ERC

Portfolio acquisitions 120M Gross ERC

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66.5 61.9 42.1 196.7

FY 2016 FY 2017 FY 2018 FY 2019

(€m)

X 5

403 400 383 398 542

Dec-18 Mar-19 Jun-19 Sep-19 Dec-19

34%

(€m)

Strong collections dynamics

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KEY HIGHLIGHTS

• Compared to 2018, LTM collections increased by 28% with two main effects:
• Solid performance in our Backbook collections - €108 million in collections – albeit starting from a reduced 2018 debt purchase activity
• A record-high performance of our FB collections (€42 million), driven by the significant volumes purchased this year

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27 26 22 26 24 24 23 25 1 2 3 2 1 17 22

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20 30 40 50 Q1-2018 Q2-2018 Q3-2018 Q4-2018 Q1-2019 Q2-2019 Q3-2019 Q4-2019 Backbook Frontbook

(1) iQera figures excluding Italy. Only present stocks excluding flows

94% 6%

2018

Backbook Frontbook

70% 30%

2019

Backbook Frontbook

Sustained underwriting discipline and continued overperformance

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KEY HIGHLIGHTS

• GMM at underwriting in 2019 was in line with 2018 at 1.7x, albeit in a buoyant and heated market environment
• Our recent acquisitions present strong better duration and pay-back perspectives:
• 2019 vintage average duration around one year shorter than for 2017 and 2018 vintages
• Global portfolio estimated remaining recovery duration decreased by three months at the end of 2019
• Our GMM actuals have been consistently higher than the returns at which we priced our portfolios, due to a conservative

approach to underwriting and strong collections performance

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We reduced our average recovery duration by

3 months

(1) Actuals corresponds to collections already made on the vintage MM DD corresponds to Due Diligence estimates per portfolio regrouped within a vintage 120m implied corresponds to actuals + additional ERC to make 120M from portfolio acquisition Actuals + 120M corresponds to Actuals as of December 31, 2019 and additional 120 M ERC as from December 31, 2019

2.1 2.3 2.4 3.1 2.9 2.5 2.0 2.0 1.7 1.3 1.0 0.9 0.5 0.2 3.0 2.7 2.3 2.4 2.2 1.9 1.8 1.9 1.7 1.7 2.1 2.4 2.5 3.3 3.3 2.9 2.6 2.6 2.3 2.0 1.8 1.9 1.8 1.7 1.9 1.5 1.7 1.9 1.6 1.8 1.9 1.8 1.8 1.7 1.8 1.8 1.7 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 Prior 2007 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

iQera: GMM at end of 2019 (1)

Actuals 120m implied Actuals+120M MM DD

Moderate growth in Debt Servicing with strong dynamics in Italy

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KEY HIGHLIGHTS

With the acquisition of Sistemia in 2019, servicing activities in iQera’s business mix increased to 61%(1)

• In France, we saw our ongoing activities perform in line with expectations although this was offset by the declining contribution of some run-off contracts. Our

business pipeline at year end remained high and promising.

• In Italy, revenues growth was sustained for both Serfin and Sistemia, which benefited from strong commercial traction in their respective markets.
• In 2020, we aim to generate new business perspectives in Italy through our increasing cooperation between its local subsidiaries by securing new mandates

thanks to joint commercial efforts between our Italian and French teams.

LTM Servicing revenues1

(1) All figures are consolidated on a pro forma basis including Sistemia

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Servicing

61%(1)

• f Group Net

Revenues

FY 2019

(1) Ratio calculation based on iQera LTM pro forma figures including Sistemia as of December 31, 2019

82.0 78.9 37.8 42.6

119.9 121.4 Q4 18 Q4 19

France Italy Total

In €m

Continued improvements of our cost structure

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KEY HIGHLIGHTS

• Limited cost increase (+4%) in 2019 despite solid growth in revenues
• As a consequence, C/I ratio improved by 5 p.p in a single year
• Secured synergies following MCS&DSO merger commitment reached 105% of our initial plan including:
• 106% of our objectives secured on costs savings to reach €3.9m
• 100% of our objectives secured on revenues synergies (+€1m)
• 45% of our costs and revenues secured synergies already impacting our 2019 accounts

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105%

• f our 2019/2020

Synergies plan secured

17% 39% 56% 13% 38% 51% 0% 10% 20% 30% 40% 50% 60% Variable costs Fixed costs C/I Ratio

Cost Income ratio evolution

2018 2019

53% 47% 30% 35% 40% 45% 50% 55% C/I Ratio

Cost income ratio evolution France

2018 2019 70% 69% 40% 50% 60% 70% C/I Ratio

Cost income ratio evolution Italy

2018 2019

4%

increase in costs between 2018 & 2019

iQera Group consolidated cash flows – FY 2019

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KEY HIGHLIGHTS

• 2019 saw investment activity at a peak, driven by the acquisition of Sistemia in Italy for c. €70 million – we now own 75% of Sistemia - and a

high level of portfolios purchases in France (€197m).

• This increase in capital deployment was supported by additional financing means of which (i) additional HY Bond for €55 million, (ii) a +€25

million loan following the acquisition of Sistemia, (iii) +€44 million from additional non-recourse financing on portfolio acquisitions, and (iv) +€6 million in RCF drawings end of December 2019. Net cash from financing activities is also including HY bonds interest expenses for the year ended December 31, 2019.

€104m

Net cash flows from operating activities

FY 2019

€43m

Net closing cash excluding restricted cash (2)

FY 2019

(2) Cash excluding restricted cash and including Sistemia and DSO Italia pro forma cash

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(1) FY-2019 is full IFRS including Sistemia only for the last six months of 2019

€m December 31, 19(1) Net cash flows from operating activities 103.7 Net cash flows for investment activities (260.4) Net cash from financing activities 103.4 Net change in cash and cash equivalents (53.3) Opening cash and cash equivalents 104.0 Closing cash and cash equivalents (o/w restricted cash) 50.7

• /w restricted cash

8.2

Year ended

Capital structure & leverage position – FY 2019

iQera including Sistemia combination

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3.4x

Leverage on Attributable Cash EBITDA incl. Synergies

Dec-19

KEY HIGHLIGHTS

Despite record investments in 2019, Leverage Ratio on Attributable Cash EBITDA was 3.4x(3)

• In 2019, we partly financed our biggest portfolio acquisition with specific non-recourse financing. Since related collections will be – during an initial period - mainly

dedicated to co-investors debt reimbursement, this will temporarily lead to a greater gap between Cash EBITDA and Attributable Cash EBITDA. For better transparency, we will therefore communicate on Attributable Cash EBITDA from now on, for the sake of a more accurate representation of our intrinsic financial performance.

• Our leverage ratio on Attributable Cash EBITDA, remains among the lowest in the industry and within previous guidance of 2.5x – 3.5x
• Since the acquisition of Sistemia, 61%(4) of our revenues come from capital light servicing activities
• Our liquidity position was strong as of December 31, 2019 including our available cash at €43m (excluding restricted cash) combined with our remaining €44m

undrawn RCF (as of 31 December 2019)

(1) Includes DSO (BPI), Serfin loans, two additional loans of €8.7 million & €35 million for portfolios acquisition (2) Includes profit sharing accruals and EFFICO put for €6.1m (3) Adjusted pro forma Cash EBITDA represents pro forma Cash EBITDA for the twelve months ended December 31, 2019, including the full-year effect of synergies plan figures to be generated from 2020 from which synergies already materialized have been restated. Total synergies secured end of 2019 reached €4.9 million. (4) Ratio calculation based on iQera LTM pro forma figures including Sistemia as of December 31, 2019

(4)

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Currency: € m Dec-19 Synergies impact (3) Dec-19 with synergies

High Yield Bonds

433.2

• 433.2

Other loans (1)

41.6

• 41.6

Co-investors' Debt

38.7

• 38.7

Others (2)

7.4

• 7.4

Gross Debt (IFRS)

521.0

• 521.0

Cash including restricted cash

50.7

• 50.7

Restricted cash

8.2

• 8.2

Cash and cash equivalents excL. restricted cash

42.6

• 42.6

Net Debt (IFRS)

478.4

• 478.4

LTM Cash EBITDA (3)

134.2 2.7 136.9

Leverage on Cash EBITDA

3.6x 3.5x

Net Debt excluding co-investors debt

439.7

• 439.7

LTM Attributable cash EBITDA

126.8 2.7 129.5

Leverage on Attributable Cash EBITDA

3.5x 3.4x

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Appendix

Conservative leverage profile vis-a-vis pan-European peers

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(4)



Prudent target leverage ratio of 2.5x – 3.5x

Servicing revenue contribution (as % of net revenues) 22% 10% 28% 56% 3% 23% 61%(1)

Net Debt / Cash EBITDA (LTM) as of Dec-19

(1) Ratio calculation based on iQera LTM pro forma figures including Sistemia as of December 31, 2019 (2) Estimated ratio based on Company reporting

3.4x 2.6x 2.9x 3.7x 4.3x 4.4x 4.8x

Q4 2019 Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6

(2) (2) (2) (2) (2) (2)

Towards a more cash-generative business model

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126.8 2.7

• 10.0

10.0 30.0 50.0 70.0 90.0 110.0 130.0 150.0

Cash EBITDA (2) Cash interest (3) Cash Tax (4) Capital expenditure (5) Cash after debt service ERC replenishment rate (6) Free Cash Flow Generation

129.5

• 23.5
• 3.4
• 6.5
• 60.1

96.2 36.1

(1) (1) Additional synergies of c.€2.7million expected to be fully-phased in within 2020 12 months (2) LTM Cash EBITDA pro forma for iQera including Sistema as of December 31, 2019 (3) Based on the €445 million Senior Secured Notes, co-investment loan €39 million, other loans €36 million, €50 million undrawn RCF (3.25% with a commitment fee on the undrawn amount equal to 35% of the margin). (4) Income tax expense pro forma estimate for iQera Group including Sistemia based on LTM results as of December 31, 2019 (5) Capital expenditure for iQera in LTM pro forma including Sistemia as of December 31, 2019 (6) Represents the ERC replenishment rate, calculated as Year 1 pro forma estimated collections less estimated Year 11 collections as of Dec 31, 2019, divided by a 120m 2.0x Gross Money Multiple

KEY HIGHLIGHTS

• Improved cash conversion with 2019

Free Cash Flow Generation accounting for 28% of Cash EBITDA vs. 27% in 2018

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Financial Performance iQera - FY 2019

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Highlights

KEY HIGHLIGHTS

• +14% increase in total cash revenues

 +28% increase in gross collections  Slightly increasing servicing revenues despite CIF servicing slowdown

• +4% costs increase

 Professional fees and services decreased by +€4.8 million essentially due to alignment of iQera allocation rules in Italian’s branches (-12%)  Personnel costs increased by €3.9 million (+6%) less quickly than revenues growth linked to servicing activity and support staffing catch up following two years of significant growth  Committed costs increased by €5.5 million (+19%) with an impact of €6.3 million in Italy following high local development in 2019 and including an impact of allocation alignment for €5.4 million with overheads. Considering only France, committed costs decreased by 10% impacted both by a good level of costs control and the impact of our synergies plan in 2019.

(1) Figures from Q1 2019 include IFRS 16 related to leases.

€m 2018 2019 Variation (%) Gross Collections 117.6 150 28%

• Attr. Gross Collection

116.4 142.6 23% Non Attr. Gross Collection 1.2 7.4 499% Servicing Revenues 119.9 121.4 1% Total Cash Revenues 237.5 271.4 14% Professional fees and services (39.9) (35.1)

• 12%

Personnel costs (63.3) (67.2) 6% Committed costs (29.4) (34.9) 19% Total costs (132.5) (137.2) 4% Cash EBITDA 105.0 134.2 28% Cash distributions to SPV co-investors (1.2) (7.4) 499% Attributable Cash EBITDA 103.7 126.8 22% Attributable Cash EBITDA Margin 44% 47% Year ended December 31, 2019(1)

(1)