Q1 2018 Axactor AB
May 3, 2018
Key highlights Q1 2018
- EUR 92m portfolio investments including EUR 45m REO assets in Spain
- ERC reached EUR 1 billion
- 34% growth in Cash EBITDA compared to last quarter, primarily driven by the REO investments in 2017
- Successful bond placement of EUR 150m in March
- Cash balance of approximately EUR 196m will be partly used to repay bridge financing for REO acquisitions
Axactor events post Q1 closing
- Signing of largest unsecured NPL forward flow contract ever:
- Komplett Bank (Norway)
- Expected annual capex of appx. EUR 60m when fully operational
- 18 month duration, plus 6 month extension option
- Signed term sheet and mandate letter with global bank*
- Refinance REOLux bridge loan
- Increase REO investment capacity
- Signed 24 month forward flow contract with a Swedish consumer bank
- Estimated annual outstanding balance EUR 3-4m
Standardization is used to reduce costs and to drive efficiency
1
2
3
4
- Intility (IT Infrastructure)
- Miratech partnership (AD/AM)
- ERP/Finance/HR
- Portfolio pricing
- Digitalization
- − Dialer
- − BI/DW
- − Core collection Systems
- − Debtor/Client Portals
- − Skill based collection
- CRM
- Branding
- Common KPIs
- Accounts Receivable Management (ARM)
Standardization - "One Axactor" Positive effects from "One Axactor"
IT & SG&A share of cost will continue to decrease year over year
Efficiency will increase as a result of best practise sharing
• Establishing CoE in different areas
Improved operational control through common KPIs
• Possibility to perform internal benchmarking
Building one "corporate culture", eliminate "negative legacy"
Axactor revenue mix – distribution per country
-5 0 5 10 15 20 25 30 35 40 45 Q3-17 Q1-18 41.0 Q4-17 34.5 18.5 Q2-17 19.7 23.6 Q4-16 24.9 Q1-17 ITA SWE NOR GER SPA *
Q1 revenue distribution per country
Gross revenue per quarter (EUR million)
5
Axactor revenue mix – distribution per business segment
Gross revenue development per segment (EUR million)
- 108% revenue growth y/y in Q1 2018 primarily driven by contracts signed in 2017
- REO established as a major business segment
- Capital light business segments (3PC and ARM) represent ~30% of total gross revenue in Q1 2018
- Stable Accounts Receivable Management (ARM) development
- Roll-out in Sweden, Germany and Italy ongoing
Profitability development – EBITDA and Cash EBITDA
- 507% EBITDA growth compared to the same quarter last year
- 8% EBITDA growth compared to last quarter
- Q1 and Q3 with negative seasonality effect
EBITDA per quarter (EUR million) Cash EBITDA per quarter (EUR million)
- REOs contributing significantly to cash EBITDA growth, and we are still in a transfer/build-up phase on REO assets
- Total of 551 assets sold since project start-up
- Gross margin of 44% in Q1-18, up from 39% last quarter
7 *Q2 2017 settlement with former IGE board members is excluded
EBITDA and cash EBITDA - quarter by quarter
• Increased volume improves profit margins through scale and skill benefits
EBITDA (EUR million) Cash EBITDA (EUR million)
• REO portfolios a significant contributor to growth in Cash EBITDA
Gross revenue and ERC - quarter by quarter
ERC (EUR million) Gross revenue (EUR million)
- Continued solid revenue growth leveraging on new business signed in 2017
-
REO is a significant contributor to the growth, however, still in build-up phase
-
ERC passed the EUR 1bn mark in Q1 2018
- Book value of NPL and REO portfolios has increased from EUR 471m in Q4 2017 to EUR 547m in Q1 2018
9
Collection on portfolios versus business case
• NPL collection performance stabilizing at ~100%
• High REO performance in 2017 based on moderate volume
- Conservative build-up in REO BC
- Assets still under notarial transfer
- Expect convergence towards business case over time
Portfolio Statistics NPL
Historical development ERC (EUR million)
- ERC increase of 70% compared to same quarter last year
- Two significant one-off investments in Spain in Q1-18, as well as a range of ongoing forward flow deals
ERC per year (EUR million)
- NPL portfolios with finance claims have long and stable cash flows (15 years+)
- Increase in Y2 mainly due to secured NPL portfolios in Spain
Portfolio Statistics NPL
Book value portfolios (EUR million) Capex (EUR million)
• More than EUR 350m of NPL stock
- Two major portfolios acquired in Spain during the quarter
- Continued build-up of FF deals securing monthly volumes
Portfolio Statistics REOs
Historical development ERC (EUR million)
- First REO portfolio acquired in Q2-17
- Major investments in Q4-17 and Q1-18 increased the ERC
SPA
- REO portfolios typically last 3-5 years before depletion
- REOs generally have a lower money multiple than traditional NPL, short payback time ensures very attractive IRR levels
Portfolio Statistics REOs
Book value portfolios (EUR million) Capex (EUR million)
• REO portfolios account for 35% of total portfolio balance
- Two new REO portfolios acquired in Q1 2018
- One of the new portfolios is a co-investment where Axactor acquired 75% of the portfolio, utilizing the existing setup
REO Portfolios KPIs*
- Average price per asset sold: EUR 33k
-
Number of assets in inventory per end Q1-18: 6,703
-
Total of 6 portfolios serviced by two different providers: GIA and Altamira
- Lifetime performance ahead of business case
- Quicker liquidation
- Higher money multiple
- Working with international bank to re-finance current stock and fund future investments
Opex profile REOs
*Excluding cost of sales
- REO opex consist of three main elements:
- Sales commission paid to servicer
- Servicing fee (maintenance, marketing etc.)
- Cost of sale reversal of book value upon sale (no cash impact)
- Sales commission generally fixed percentage of sales
- Servicing fee generally based on volume under management by the servicer
- Opex to sales ratio declining with volume as the portfolio liquidates
Q1 Income statement
Income statement Key comments
CASH
EBITDA |
18
089 |
3
590 |
47
194 |
32
695 |
Net
profit/(loss)
from
continued
operations |
-996 |
-1
653 |
3
242 |
2
585 |
Tax
expense |
-303 |
-136 |
445 |
611 |
Profit/(loss)
before
tax |
-693 |
-1
517 |
2
798 |
1
974 |
|
|
|
|
|
expenses
Net
financial
items |
-5
450 |
-1
094 |
-11
870 |
-7
515 |
revenue
Financial |
541
-5 |
-1
105 |
-15
021 |
-10
585 |
| Financial |
91 |
10 |
3
151 |
3
070 |
| EBIT |
4
757 |
-423 |
14
667 |
9
488 |
Amortization
and
depreciation |
-1
341 |
-1
427 |
-5
241 |
-5
327 |
| EBITDA |
6
097 |
1
004 |
19
909 |
14
815 |
Operating
expenses |
-10
219 |
-6
531 |
-32
256 |
-28
569 |
Personnel
expenses other |
-5
274 |
-4
004 |
-19
648 |
-18
378 |
Personnel
expenses collection |
-8
086 |
-5
888 |
-28
776 |
-26
578 |
Cost
of
secured
sold
assets |
-6
123 |
|
-7
568 |
-1
445 |
Net
revenue |
35
800 |
17
428 |
108
158 |
89
785 |
Amortization
of
debt
portfolios |
214
-5 |
-2
281 |
-17
881 |
-14
948 |
| Income |
41
014 |
19
709 |
126
039 |
104
734 |
EURO
thousand |
2018 |
2017 |
2018 |
2017 |
|
1Q |
1Q |
LTM
1Q |
Jan
- Dec |
|
|
|
|
|
- Net financial items were negative EUR 5.4m for the quarter:
- Interest cost of EUR 4.8 million, of which EUR 1.0m in amortized loan fees
- Amortized warrant cost: EUR 0.4m
- Waiver fee LuxCo Invest I facility: EUR 0.2m
- Other expenses: EUR 0.1m
Balance Sheet structure
- Portfolio book value is EUR 547m, including REO
- Available cash at end of Q1 is EUR 196m
- Equity ratio falls to 35% in wake of the bond issue in Q1
Outlook
- Solid 3PC pipeline
- Nordic consumer unsecured NPL market appears strong
- REO market in Spain still highly active
- German NPL market shows positive trend
- Axactor with significant ramp-up of cash flow and margin expansion in 2018
Summary Q1 Presentation
- Continued strong growth in revenue and earnings
- Cash EBITDA of EUR 18m
- Successfully raised EUR 150m in a bond issue
- Acquired portfolios for EUR 92m (o/w EUR 45m in REOs)
- ERC past the EUR 1bn mark
- Continue to drive efficiency and cost initiatives through One Axactor