Axactor SE

Quarterly Report • Aug 17, 2021

Q2 2021

17 August 2021

Agenda

Axactor is an established European debt collection company that has grown rapidly in targeted markets

• Established in Q4 2015 with headquarters in Oslo, Norway, and is one of Europe's top-ten debt collectors
• Main focus on collection and acquisition of unsecured non-performing loans ("NPL") and third-party collection ("3PC")
• Operations in six countries; Finland, Germany, Italy, Norway, Spain and Sweden, with 1,062 FTEs
• Geveran owns ~44% of Oslo-listed Axactor SE

Strategic focus has shifted from growing scale during the start-up phase to growing return on equity

Start-up (2016-2020)

Grow scale

• Aggressive growth
• Market entries
• Establish IT and operations

Established player (2021-2024) Steady state (2025→)

Grow return on equity

• Grow size in existing markets
• Operational excellence
• Initiate dividend payments
• Take part in consolidation of the NPL industry

Grow presence

• Steady state
• Competitive cash return to shareholders
• Use superior operations to enter new markets and segments

Axactor is pursuing a niche strategy to disrupt the industry on cost-to-collect

NPL Cost-to-Collect for selected peers in 2020¹ (EURm)

• Axactor incepted to disrupt the industry on cost-to-collect
• Continued innovation and growing economies of scale to fuel further improvements
• Niche strategy supporting long-term competitiveness
• Countries: Organic growth in current countries
• Products: NPL & 3PC
• Debt origination: Bank and finance
• Debt type: Fresh, unsecured, business to consumer

5 1) Cost is calculated as total segment OPEX + allocation of unallocated OPEX and D&A. Segment OPEX is used as allocation key. Income is calculated as Total income adjusted for revaluations to show income excluding one-time effects based on changes in future expectations. Additional adjustments made on two peers to make numbers comparable, e.g. due to reporting numbers as a bank

Agenda

Key financial highlights Q2 2021

• Positive development in Q2 both QoQ and YoY on all numbers, except investments
• Q2 is seasonally a strong quarter
• Weak Q2 last year heavily affected by "first wave" of Covid-19

Axactor has obtained credit rating from Moody's and S&P to attract a larger investor base and reduce cost of funding

Rating agency	Rating1	Outlook	Comments
	B1	Positive	• Dual rating obtained from leading credit rating agencies
			• Important step to reduce future funding cost
			• Access to a larger investor base
			• Access to less costly funding through ratings
	B	Stable	underlining solid financial position

Cost reduction program on track

Cost reduction program, annualized1) (EUR million)

• Realized savings ahead of plan in Q2
• Outsourced car repossession service in Germany
• Home shoring back-office functions in Finland
• Various other improvement initiatives
• Cost reduction program expected to reach full P&L-effect in Q4

Axactor is currently acquiring portfolios at attractive rates - Expect current book gross IRR to improve over time

Gross IRR on NPL – current and on forward flows¹ (% and EUR million)

• Gross IRR on signed forward flow contracts 47% higher than on the current book
• Expect prices to stabilize at 18% 22% gross IRR in our markets over time
• Estimated cost-to-collect is comparable to current level

In Q2 we are rated second best on ESG within consumer finance globally and signed UN Global Compact

• Ranked as second best of 151 companies within consumer finance and among top 5% globally¹

• In Q2 Axactor signed up on the world's largest corporate sustainability initiative – UN Global Compact

Agenda

Gross revenue with a positive development on the back of a seasonally strong quarter with tax returns for debtors

Gross revenue (EUR million)

NPL segment with continued gross revenue growth and increasing CM1 margin

NPL Gross Revenue and CM1% (EUR million and %)

• All-time high gross revenue on NPL
• 27% YoY gross revenue growth
• Despite marginally declining book value
• Increased portfolio amortization rate to 40%
• Strong CM1 margin

14 Note: Please note that negative revaluations and negative amortization will appear as positive numbers in the graph

NPL active forecast aligned with current performance

Active forecast versus cash collected1

• Unsecured NPL collection performance in Q2 2021 of 99%
• Historic underperformance assumed lost – prudent approach
• Expect long-term performance to fluctuate around 100%

-20 -24 -24 -21 -20 -20 -22 -20 -21 -21 -21 -25 -22 -22 -25 -24 -22 -23 -23 -23 -23 -24 -25 -25

Active forecast Cash Collected

NPL investments at a historic low of EUR 12m

- Investments expected to exceed replacement CAPEX over the next 12 months

NPL investments in the quarter

• Low portfolio investment of EUR 12m for the quarter
• Expect investments of EUR ~200m in 2021, but highly dependent on volumes in Q4
• Replacement CAPEX of EUR 133m over the next 12 months

3PC development

-Total income and margins are improving. Expected to continue improving as society reopens

3PC Total income CM1 %

• High customer retention during the pandemic, but lower volumes – expect volume reversion as societies reopen

particularly for Spain and Italy

• Sales processes take longer time during the pandemic

• Negative impacts related to Covid-19 continue,

• Market is improving with increasing pipeline
• Margin driven down by EUR 0.7m restructuring cost in Q2

REO development (run-off segment)

- Good sales momentum on a declining asset base, but with negative margins

REO total income and CM1% (EUR million and %)

Q1-19 Q3-19 Q1-21 Q2-19 Q2-20 Q4-19 Q1-20 Q2-21 Q3-20 Q4-20

• Revenue upheld on good level despite declining asset base
• Inventory down 42% since Q2 2020
• 361 assets sold during Q2 2021
• 2,039 assets in inventory at quarter-end
• Book value down to EUR 55m at quarter-end
• Remaining debt facilities of EUR 16m with Nomura repaid ahead of the plan

Summary: Growth on total income, margin expansion and second highest cash EBITDA ever

All-time high net profit after tax to equity holders

• Cost discipline materializing in lower depreciation for the quarter
• Positive development in net financial items
• Includes a positive one-time effect of EUR 1.5m in unrealized FX gain
• Includes a negative one-time effect of EUR 0.6m in write-down of amortized loan fees²
• Tax rate of 28% excluding REO
• Expect reduced tax rate going forward

RoE to shareholders back on pre-pandemic levels

- Aim to initiate dividend payments as return on equity gradually improves

Return on Equity excl. minorities per quarter (annualized)

• Expect RoE to improve over time as the underlying business improves and as societies slowly defeat the pandemic
• Expect short term fluctuations in RoE driven by seasonality and business performance

Agenda

Outlook

ROE expected to increase over time, but with short term fluctuations

• 3PC volume expected to return to pre-pandemic levels as societies re-open
• Cost reduction program targeting EUR 1.2m additional annualized savings by year-end
• Increasing market activity for both 3PC and NPL
• Axactor strictly prioritizes best NPL deals
• NPL investment guiding of EUR ~200m for 2021, but highly dependent on market activity in Q4
• Credit rating expected to reduce interest cost on potential future bonds
• Q3 is seasonally weaker than Q2 and the pandemic continue to affect our business environment

Supporting information

NPL portfolio

Q2 2021

NPL segment with continued gross revenue growth and increasing CM1 margin

NPL Gross Revenue and CM1% (EUR million and %)

• All-time high gross revenue on NPL
• 27% YoY gross revenue growth
• Despite marginally declining book value
• Increased portfolio amortization rate to 40%
• Strong CM1 margin

26 Note: Please note that negative revaluations and negative amortization will appear as positive numbers in the graph

Improving collection performance

Actual collection vs. active forecast¹ (LTM, rolling)

100%	101%	108%	112%	106%	101%	98%	92%	93%	97%	96%	98%	98%
Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2
-18	-18	-18	-19	-19	-19	-19	-20	-20	-20	-20	-21	-21

• Q2 collection performance of 99%
• LTM collection performance of 98%
• Curves for 2021 aligned with current performance
• Long term average performance expected to fluctuate around 100%

Investment commitments are increasing

- Prioritizing high IRR portfolios, and expecting significant volumes to be offered in Q4 2021

Quarterly NPL investments (EUR million)

• Increasing forward flow commitments
• Expect significant volumes to be offered in Q4 2021
• Commitments decrease towards the end of the period as contracts expire – expect to sign new volumes offsetting the decline

FIN DEU ITA NOR ESP SWE Committed Forward flow investments (est.)

ERC decreasing by 2% YoY due to low investment levels

Forward ERC profile by year (EUR million)

ERC split on estimated yield and amortization

- Axactor uses the IFRS industry standard, the effective interest method, to calculate amortization

ERC next four quarters (EUR million)

ERC next 15 years (EUR million)

Yield Amortization

3PC

Q2 2021

3PC Development

-Total income and margins are improving. Expected to continue improving as society reopens

3PC Total income CM1 %

• Negative impacts related to Covid-19 continue, particularly for Spain and Italy
• High customer retention during the pandemic, but lower volumes – expect volume reversion as societies reopen
• Sales processes take longer time during the pandemic
• Market is improving with increasing pipeline
• Margin driven down by EUR 0.7m restructuring cost in Q2

3PC volumes by geographic region

3PC total income split by geographic region

• Spain generate majority of 3PC income
• Nordics accounting for 19% of revenue

REO portfolio (run-off segment)

Q2 2021

REO development (run-off segment)

- Good sales momentum on a declining asset base, but with negative margins

REO total income and CM1% (EUR million and %)

Q1-19 Q3-19 Q1-21 Q2-19 Q2-20 Q4-19 Q1-20 Q2-21 Q3-20 Q4-20

• Revenue upheld on good level despite declining asset base
• Inventory down 42% since Q2 2020
• 361 assets sold during Q2 2021
• 2,039 assets in inventory at quarter-end
• Book value down to EUR 55m at quarter-end
• Remaining debt facilities of EUR 16m with Nomura repaid ahead of the plan

REO portfolio moving towards the tail

• Total portfolio investments of EUR 287m*
• Last portfolio acquisition in Q3 2018

• 75% decline in book value since peak

• A total of 8,663 assets acquired*

• 6,624 assets sold

(EUR million)

Current book
Asset class	# assets	% of total	Book value	% of total
Housing	810	40 %	29 6	54 %
Parking, annex etc.	683	33 %	2 5	4 %
Land	237	12 %	3 8	7 %
Commercial	309	15 %	20 3	37 %
Eliminations	0	0 %	-1 2	-2 %
Total	2,039	100 %	55.0	100 %

Originally acquired
Asset class	# assets	% of total	Book value	% of total
Housing	4 040 ,	47 %	195 7	68 %
Parking, annex etc.	3 395 ,	39 %	15 8	6 %
Land	357	4 %	9 4	3 %
Commercial	871	10 %	66 4	23 %
Total	8,663	100 %	287.3	100 %

• Housing represent 54% of current book value
• Average book value per remaining asset EUR 27k
• Average book value per sold asset of EUR 32k
• Average sale price per sold asset of EUR 38k

Appendix

P&L statement

	For the end quarter		Year to	date
EUR thousand	30 Jun 2021	30 Jun 2020	30 Jun 2021	30 Jun 2020
Interest income from purchased loan portfolios	41,779	40 511 ,	83 677 ,	79 838 ,
Net gain/(loss) purchased loan portfolios	-2,084	-28 147 ,	-4 120 ,	-36 906 ,
Other operating revenue	26,161	16 219 ,	47 331 ,	41 222 ,
Other income	3	71	2	99
Total income	65,859	28 654 ,	126 891 ,	84 253 ,
Cost of REO's sold incl impairment ,	-14,144	-32 033 ,	-24 530 ,	-42 207 ,
Personnel expenses	-14,252	-12 923 ,	-33 120 ,	-27 824 ,
Operating expenses Total	-15,313 -43,709	-13 663 , -58 619	-29 348 , -86 997	-30 058 , -100 089
operating expenses		,	,	,
EBITDA	22,150	-29 965 ,	39 893 ,	-15 836 ,
Amortization and depreciation	-2,325	-2 612 ,	-4 919 ,	-5 224 ,
EBIT	19,826	-32 577 ,	34 975 ,	-21 060 ,
Financial revenue	1,565	201	1 010	9 934
Financial expenses	-13,391	-14 558 ,	, -29 669 ,	, -30 213 ,
Net financial items	-11,826	-14 357 ,	-28 659 ,	-20 279 ,
Profit/(loss) before tax	8,000	-46 934 ,	6 316 ,	-41 339 ,
Tax (expense)	-3,619	2 538 ,	329 -5 ,	393
profit/(loss) Net after tax	4,380	-44 396 ,	987	-40 946 ,
Attributable to:
Non-controlling interests	-2,771	-17 722 ,	-4 730 ,	-19 438 ,
of Equity holders the parent company	7,152	-26 674 ,	5 717 ,	-21 508 ,
Earnings per share: basic	0.024	-0 144	0 020	-0 120
Earnings per share: diluted	0.023	-0 144	0 019	-0 120

Balance sheet statement

EUR thousand	30 Jun 2021	30 Jun 2020	Full year 2020
ASSETS
Intangible non-current assets
Intangible Assets	19,064	21,184	19,989
Goodwill	55,527	54,087	54,879
Deferred tax assets	7,766	11,776	7,769
Tangible non-current assets
Property, plant and equipment	2,509	2,787	2,530
Right-of-use assets	3,704	5,765	4,826
Financial non-current assets
Purchased debt portfolios	1,104,079	1,107,257	1,124,699
Other non-current receivables	416	530	458
Other non-current investments	196	193	196
Total non-current assets	1,193,260	1,203,579	1,215,346
Current assets
Stock of Secured Assets	55,012	88,625	78,786
Accounts Receivable	5,975	6,468	7,124
Other current assets	12,832	11,797	11,645
Restricted cash	2,909	2,891	2,946
Cash and Cash Equivalents	44,429	31,398	47,779
Total current assets	121,157	141,179	148,281
TOTAL ASSETS	1,314,417	1,344,758	1,363,627

EUR thousand EQUITY AND LIABILITIES	30 Jun 2021	30 Jun 2020	Full year 2020
Equity attributable to equity holders of the parent
Share Capital	158,150	97,040	97,040
Other paid-in equity	269,907	236,454	236,562
Retained Earnings	-1,956	-19,354	-16,036
Reserves	-9,570	-24,684	-15,999
Non-controlling interests	12,365	73,595	74,113
Total Equity	428,896	363,052	375,680
Non-current Liabilities
Interest bearing debt	695,658	802,240	579,282
Deferred tax liabilities	6,395	15,409	6,436
Lease liabilities	2,078	3,395	2,804
Other non-current liabilities	1,567	1,334	1,433
Total non-current liabilities	705,698	822,378	589,955
Current Liabilities
Accounts Payable	6,145	3,584	6,147
Current portion of interest bearing debt	135,737	116,225	356,903
Taxes Payable	16,944	9,535	12,002
Lease liabilities	1,866	2,613	2,282
Other current liabilities	19,132	27,371	20,657
Total current liabilities	179,824	159,328	397,992
Total Liabilities	885,522	981,706	987,947
TOTAL EQUITY AND LIABILITIES	1,314,417	1,344,758	1,363,627

Legal organization June 2021

*50% of the shares in Reolux Holding S.à r.l. is held by Geveran Trading Co. Limited (Cyprus).

*Geveran Trading Co. Limited also holds shares of Axactor SE 41

Terms and abbreviations

APM / KPI definition

	EBITDA adjusted for change in forward flow derivatives, calculated cost of share option program, portfolio	Terms and abbreviations
Cash EBITDA	amortizations and revaluations, REO cost of sales and REO impairments
CM1 Margin	Total operating expenses (excluding SG&A, IT and corporate cost) as a percentage of total income	3PC	Third-party collection
Debt-to-equity ratio	Total interest bearing debt as a percentage of total equity	APM	Alternative Performance Measures
Discount	The rate of discount of original debt balance used to negotiate repayment of debt	ARM	Accounts Receivable Management
EBITDA margin	EBITDA as a percentage of total income	B2B	Business to Business
Economic growth	GDP (Gross Domestic Product) growth	B2C	Business to Consumer
Efficient Legal system	Governmental bailiff exchanging information electronically	BoD	Board of Directors
Equity ratio	Total equity as a percentage of total equity and liabilities	CGU	Cash Generating Unit
	Estimated Remaining Collection express the expected future cash collection on own portfolios (NPLs) in nominal	CM1	Contribution Margin
ERC	values, over the next 180 months.	Dopex	Direct Operating expenses
	The internal rate of return that makes the net present value of ERC equal to NPL book value. Calculated using	EBIT	Operating profit, Earning before Interest and Tax
Gross IRR	monthly cash flows over a 180-month period	EBITDA	Earnings Before Interest, Tax, Depreciation and Amortization
Gross margin	Cash EBITDA as a percentage of gross revenue	ECL	Expected Credit Loss
	3PC revenue, REO sale, cash collected on own portfolios and other revenue, excluding change in forward flow	EPS	Earnings Per Share
Gross revenue	derivatives	EUR	Euro
House pricing	House price index, development of real estate values	FTE	Full Time Equivalent
Interest changes	The interest charged to debtors on active claims	IFRS	International Financial Reporting Standards
Interest level	Lending rate in the market	NCI	Non-controlling interests
	Net Interest Bearing Debt means the aggregated amount of interest bearing debt, less aggregated amount of	NOK	Norwegian Krone
NIBD	unrestricted cash and bank deposits, on a consolidated basis	NPL	Non-performing loan
Opex ex SG&A, IT and corp.cost	Total expenses excluding overhead functions	OB	Outstanding Balance, the total amount Axactor can collect on claims under management, including outstanding
Payment agreement	Agreement with the debtors to repay their debt		principal, interest and fees
Recovery rate	Portion of the original debt repaid	PCI	Purchased Credit Impaired
Return on Equity, excluding minorities,	Net profit/(loss) to equity holders as a percentage of total average equity in period excluding Non-controlling	PPA	Purchase Price Allocations
annualized	interests, annualized based on number of days in period	REO	Real Estate Owned
Return on Equity, including minorities,	Net profit/(loss) after tax as a percentage of total average equity in period, annualized based on number of days in	SEK	Swedish Krone
annualized	period	SG&A	Selling, General & Administrative
Settlements	One payment of full debt	SPV	Special Purpose Vehicle
SG&A, IT and corporate cost	Total operating expenses for overhead functions	VIU	Value in Use
	Accumulated paid principal amount for the period divided by accumulated collectable principal amount for the	WACC	Weighted Average Cost of Capital
Solution rate	period. Usually expressed on a monthly basis	WAEP	Weighted Average Exercise Price
Total estimated capital commitments for	The total estimated capital commitments for the forward flow agreements are calculated based on the volume
forward flow agreements	received over the last months and limited by the total capex commitment in the contract.
Total income	Gross revenue minus portfolio amortizations and revaluations
Tracing activity	Finding and updating debtor contact information

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