Q2 2019 presentation 24 July, 2019
Q2 2019 - Key highlights Gross revenue EBITDA and margin Cash EBITDA ERC (EUR million) (EUR million and %) (EUR million) (EUR million) 100 +37% 1 939 +146% 90 +61% 36% +98% 217 80 70 60 979 50 20% 250 1 721 40 30 20 729 67 91 11 26 41 65 10 0 Q2 2018 Q2 2019 Q2 2018 Q2 2019 Q2 2018 Q2 2019 Q2 2018 Q2 2019 NPL REO • Continued strong margin expansion – more than doubling of EBITDA • Earnings before tax of EUR 10 million • Strong and profitable growth for the 3PC business • Additional EUR 85 million funding released in Q2 • EUR 149 million invested in NPL Portfolios in Q2 2
First half 2019 - Key highlights Gross revenue EBITDA and margin Cash EBITDA ERC (EUR million) (EUR million and %) (EUR million) (EUR million) 33% 1 939 +69% +189% +112% +98% 217 979 250 1 721 19% 729 108 182 17 48 59 124 H1 2018 H1 2019 H1 2018 H1 2019 H1 2018 H1 2019 H1 2018 H1 2019 NPL REO • Significant revenue growth and strong margin increase • Earnings before tax of EUR 18 million, up from zero in the first half 2018 • Book value of NPL portfolios up more than 150% from June 2018 • Additional EUR 235 million funding released during first half 2019 • Capex of EUR 218 million invested in NPL portfolios – reiterating the EUR 400-450 million 2019 Capex level 3
Attractive market development • EUR 149m of NPL Portfolio acquisitions in Q2 • Attractive opportunities in all Axactor markets – trading at solid IRRs • Forward flow agreements renegotiated on more favourable terms - or cancelled • New forward flow clients expected to come onboard on healthy terms in Q3 • 3PC market becoming more active – part of Axactor total value proposition 4
Three key enablers of value creation People Systems Funding Standardize systems across collection Secure diverse, competitive financing Attract and retain high platforms - driving low cost base, high and attractive co-investments quality employees efficiency and no legacy 5
Revenue growth and margin improvement Gross revenue development EBITDA and EBITDA-margin Cash EBITDA (EUR million) (EUR million and %) (EUR million) 36% 91 91 26 30% 29% 65 22 75 59 67 20 21% 20% 57 45 41 33 11 10 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 6
Balancing the geographical footprint REO portion declining over time REO; 11% REO; 27% FIN; 10% ESP; 32% ESP; 31% Q2-2019 Q2-2019 Gross revenue ERC ITA; 9% EUR 91.3m EUR 1,938.5m FIN; 6% SWE; 13% ITA; 5% NOR; 12% NOR; 13% SWE; 7% DEU; 12% DEU; 11% 7
Year-on-year growth in all areas Gross revenue development • NPL collection up 60% from Q2’18 (EUR million) • 3PC up 19% from Q2’18 91 91 • 3PC and ARM combined with effect from Q2’19, historic figures restated 3PC & 75 ARM • REO sales up 14% from Q2’18 67 57 REO portfolios NPL portfolios Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 8
NPL port rtfo folio io
NPL – Slight Q2/Q1 decline - growth set to resume in Q3 NPL gross revenue development (EUR million) • Slight decline from Q1 • Q1 revenue effect from one-off payments and strong initial collection on Axactor Invest 1 portfolios acquired in Q4’18 52 50 • Negative Easter-effect in Q2 this year 40 • Sequential growth expected to resume in Q3 31 25 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 10
Continued solid collection performance Actual collection vs. active forecast • Changed reporting from ‘business case’ to (LTM, rolling) ‘active forecast’ – in line with industry standards • Active forecast reflects changes made to the 112% ERC curves on an ongoing basis 108% 106% • Active forecast is in line with the P&L reporting • Adjustments to portfolio values have been taken over 101% 100% the P&L on an ongoing basis as deviations have occurred Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 11
NPL: Investment uptick Quarterly NPL investments • Acquired several new portfolios in Q2: (EUR million) • Three Spanish NPL portfolios with combined outstanding balance of EUR 717m 329 • Acquired one-off portfolio from existing forward flow client in Sweden, with principal value of EUR 26m • Invested EUR 80m in forward flow volumes in Q2 149 • New forward flow contracts coming in on improved terms 69 69 17 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 ESP NOR DEU SWE ITA FIN 12
NPL: Forward flows Estimated FF investments from signed contracts • Total estimated forward flow volume of EUR (EUR million) 274m from signed contracts in 2019, o/w EUR 28 127m in 2H’19 27 25 25 • More selective approach given the upwards trend 23 23 22 22 22 22 in IRRs 19 • Contracts are renegotiated or discontinued at expiry date. 16 Expect to see contracts with new clients coming in on improved terms • Prioritizing new 3PC clients to capture synergies Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Actual FF investments Estimated FF investments 13
NPL: Increasing and balanced portfolio ERC development Forward ERC profile by year (EUR million) (EUR million) 2 000 300 1 721 256 275 1 800 250 1 473 220 1 600 1 388 225 1 400 181 200 165 1 200 175 139 1 000 150 821 120 729 108 125 800 96 86 100 77 600 69 61 75 54 48 400 40 50 200 25 0 0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 Y11 Y12 Y13 Y14 Y15 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 ESP NOR DEU SWE ITA FIN ESP NOR DEU SWE ITA FIN 14
3PC
Growing the third-party collection business Gross revenue 3PC • 3PC & ARM sales up 19% y/y (EUR million) • 3PC platforms established in all six markets – ARM gradually being rolled out in more markets 18 • Increasing synergies with the NPL business 16 16 15 14 • Product synergies in business origination, collection 14 13 execution and data generation 12 12 10 8 6 4 2 0 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 16
Strengthening the Nordic 3PC business 3PC revenue split by geographic region • The finance sector accounts for three quarters of the 3PC revenue • Strong position in Spain • 9 of the top 10 banks as clients DEU/ITA; 20% • Sharpening the focus on the Nordic bank/finance market • Synergies to be extracted from cross-border deals • Signed one new banking client in Sweden, pipeline for Nordic; ESP; new contracts in Norway and Finland 19% 61% • Seeking combined 3PC and forward flow deals to improve collection performance and profitability 17
Standardization across markets generating scale benefits Client Axactor Efficiency Innovation & Relationships Model 2.0 (Operations & IT) Digitalization • New debtor portal launched in Spain and Italy, launch in remaining markets in Q3 • Standard dialer implemented in all markets with centralized traffic control team in Spain • Investing in new data warehouses and business intelligence systems • Benchmarking test to assess collection procedures in Italy • Cost efficiency programs in Spain and Germany 18
REO port rtfo folio io
Stable REO sales on declining asset base REO gross revenue development • Revenue +2% from Q1 - on a lower asset base (EUR million) • Change in sales mix with more parking and storage 8 000 7 388 30 spaces sold in Q2 7 000 6 323 6 161 • No. of units sold: Up from 555 in Q1 to 657 in Q2 5 773 6 000 • Average sales price declined from 44k to 38k 5 130 20 5 000 • Continuing to prioritize margins over volumes 4 000 • Less focus on bulk sales, as individual sales carry higher margin 3 000 10 2 000 1 000 22 19 20 25 25 0 0 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 REO sales No. of assets in inventory 20
REO: Remaining ERC of EUR 217m per Q2 REO: ERC profile • Remaining ERC lowered by EUR 2m (~ 1%) (EUR million) • 50% of the REO ERC is expected to be realized over 120 109 the next 12 months 100 • REO represents 11% of Group ERC, and declines 74 rapidly 80 • Axactor has approximately 40% of the total exposure 60 • Minority shareholders in both Reolux and its subsidiaries 40 26 • No new REO investments going forward 20 9 0 Y1 Y2 Y3 Y4 21
Fin inancials
Contribution per segment Contribution per segment 1 • NPL: (EUR million) - Excluding unallocated overhead cost • Stable gross collection from previous quarter with slightly higher portfolio amortization 4 • 80% contribution margin 8 5 3 2 • 3PC: 4 4 • Strong sales improvement: y/y and q/q 2 27 2 26 25 • 50% contribution margin 13 12 -1 • REO: • Stable sales level Q2 2018 Q3 2018 Q4 2018 Q1-19 Q2-19 • Q2 contribution margin at 9% NPL portfolios REO portfolios 3PC 23 1 Contribution before allocation of local SG&A and IT cost, management fee, central administration costs, other gains and losses or finance costs Segment contribution margin = Segment contribution/Segment net revenue Total segment contribution less unallocated cost = EBITDA
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