Axactor SE — Interim / Quarterly Report 2021

Apr 30, 2021

Q1 2021

30 April 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 nonperforming loans ("NPL") from financial institutions and third-party collection ("3PC")
• Operations in six countries; Finland, Germany, Italy, Norway, Spain and Sweden, with 1,095 FTEs
• Portfolio acquisitions north of EUR 600m for 2019 and 2020 combined
• Geveran owns ~40% of Oslo-listed Axactor SE

Unique strategic direction to drive profitable growth

Markets

• Organic growth in existing markets
• Carefully selected attractive markets

Products

• Core products: NPL and 3PC
• Fresh unsecured consumer debt

Industries

• Focus on Bank and Finance segment

Platform

• Cloud based IT platform with unified operational processes and BI with low legacy cost
• Focus on standardization, cross-border cooperation and efficiency

NPL Cost-to-Collect vs. income per market¹ (EUR million and %)

Key factors to improve return on equity

- Leveraging scale benefits as Axactor continue the growth journey

Agenda

Key Financial Highlights Q1 2021

YoY growth

Restructuring of balance sheet finalized in Q1

Main deal components:

• ✓ EUR ~50m equity raise
• ✓ Axactor Invest I roll-up
• ✓ All major credit facilities refinanced

Key effects:

• ✓ Reduced complexity
• ✓ Extended maturities
• ✓ Reduced funding cost
• ✓ Increased investment capacity
• ✓ Increased equity ratio

Cost reduction program targeting EUR ~5m in savings

- Further improving our competitive advantage

• Site-consolidation in Spain:
• Sevilla, Bilbao and Zaragoza to be closed
• Large number of smaller initiatives:
• Optimizing the organization
• Evaluating and renegotiating vendor contracts
• Outsourcing non-core tasks
• Most initiatives implemented during H1 2021
• Full savings impact from Q4 2021
• All restructuring cost taken in H1 2021

3PC market improving, although slower than anticipated

• High customer retention through the pandemic
• Lower volumes received expect reversion as societies reopen
• Moratorium in Italy extended until June 2021
• Building strong 3PC pipeline across all markets
• Advanced negotiations over significant deals
• Further improvement expected towards H2 2021
• 3PC/forward flow combo deals signed in Norway
• One in Q1 and one in April

Improving ESG ratings step-by-step

- Independent rating agencies Vigeo.Eiris and Sustainalytics cover Axactor

Axactor score

Industry average 2021

11 1) Vigeo.Eiris rating scale is 0-100, where a higher score indicates better performance in terms of ESG 2) Sustainalytics rating scale indicates the risk level in terms of ESG: 0-10 Negligible risk, 10-20 Low risk, 20-30 Medium risk, 30-40 High risk, 40+ Severe risk

• Focus on ESG related topics from inception

• Sustainability report implemented in AR 2019, significantly improved in AR 2020
• 2021 score do not fully reflect 2020 AR improvements
• Will continue to drive improvements and raise the bar for the industry

Agenda

Main events Q1 2021

Financial highlights

• Operating segments
• Return on equity

Q1 normally a seasonally weak quarter

- Continued NPL growth, lower 3PC volumes through Covid-19 pandemic

Further improving the industry leading cost level

- Cost cutting initiative to drive additional improvements over coming quarters

• Industry leading cost-to-collect is a key element of Axactor's strategy
• Cost position further improved YoY in Q1, adjusted for restructuring cost
• Cost cutting initiative expected to drive further improvements through 2021

NPL with continued gross revenue growth

- Supported by portfolio investments north of EUR 200m through 2020

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

• 17% YoY gross revenue growth
• Driven by continued investments in NPL portfolios
• Seasonally slow quarter and still negatively impacted by Covid-19 implications
• Maintained high margin

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

NPL active forecast aligned with current performance

- Stronger seasonality in the second quarter

Active forecast versus cash collected1

• Unsecured NPL collection performance in Q1 2021 of 98%
• Historic underperformance assumed lost – prudent approach
• Expect long-term performance to fluctuate around 100%

Q2 -25 Q4 -21 Q1 -20 Q2 -21 Q2 -20 Q4 -20 Q4 -24 Q3 -20 Q3 -24 Q1 -21 Q3 -21 Q1 -22 Q1 -24 Q2 -22 Q3 -22 Q4 -22 Q1 -23 Q2 -23 Q3 -23 Q4 -23 Q2 -24 Q1 -25 Q3 -25 Q4 -25

Active forecast Cash Collected

3PC Development

- Restructuring cost of EUR ~3m included in a seasonally slow quarter

3PC income and CM1% (EUR million and %)

• 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 2.8m restructuring cost
• Expected to generate significant savings going forward

REO Development (run-off segment)

- Good sales momentum on a declining asset base

REO income and CM1% (EUR million and %)

• Revenue upheld on good level despite declining asset base
• Inventory down 36% since Q1 2020
• 304 assets sold during Q1 2021
• 2,391 assets in inventory at quarter-end
• Book value down to EUR 68m
• Axactor exposure of ~40% due to minority interest

Summary: YoY income growth and margin expansion

- Despite EUR ~3m restructuring cost included in the quarter

Earnings hit by unrealized FX loss

Figures EUR million in	Q1-21	Q1-20
EBITDA	17 7	14 1
Depreciation & amortization	2 6 -	2 6 -
EBIT	15 1	11 5
Net financial items	16 8 -	5 9 -
Profit before tax	-1 7	5 6
Tax expense	1 7 -	2 1 -
Net profit after tax	-3 4	3 4
of which attributable non-controlling interests to	2 0 -	1 7 -
of which attributable holders equity to	1 4 -	5 2
Return Equity , excluding non-controlling on
interests , annualized (%)	-1 6	7 2

• Net financial items include unrealized FX loss of EUR 4.0m
• Q1-20 included unrealized FX gain of EUR 9.6m
• Net tax expense despite negative profit before tax
• Unrealized FX loss not tax deductible
• Return on equity, excluding non-controlling interests, of negative 1.6%
• Minority interests solely related to Reolux and its subsidiaries as of Q1 2021

Two significant items affecting Q1 result

		Restructuring	FX impact	Excluding
Figures EUR million in	Reported	(A) cost	(B)	(A)-(B)
Gross revenue	84 9	0 0	0 0	84 9
NPL portfolio & revaluation amortization	-23 5	0 0	0 0	-23 5
Change of forward flow value derivatives in	-0 4	0 0	0 0	-0 4
Total income	61 0	0 0	0 0	61 0
REO of sale (incl impairment) cost	-10 4	0 0	0 0	-10 4
Other	-32	3	0	-29
operating	9	2	0	7
expenses
Total	-43	3	0	-40
operating	3	2	0	1
expenses
EBITDA	17	3	0	20
	7	2	0	9
Depreciation	-2	0	0	-2
&	6	0	0	6
amortization
EBIT	15	3	0	18
	1	2	0	3
Net	-16	0	3	-13
financial	8	0	2	6
items
Profit	-1	3	3	4
before	7	2	2	7
tax

Two items affecting Q1 2021 result

• EUR 3.2m restructuring cost primarily related to a site consolidation in Spain
• Unrealized FX loss of EUR 4.0 million and net realized gain of EUR 0.7m
• Profit before tax excluding restructuring cost and net FX impact of EUR 4.7m

Our number one goal is to increase Return on Equity

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

Return on Equity excl. minorities per quarter (annualized)

• 2020 heavily affected by the pandemic
• Q1 2021 reflect restructuring cost and unrealized FX loss
• Expect RoE to improve over time as underlying business improves and as societies slowly defeat the pandemic

22 1) Calculated by excluding Reolux which is our investment vehicle for REO's (certain intercompany eliminations and other consolidation effects have not been considered)

Agenda

Outlook

• Covid-19 impact on business stabilized do not anticipate sudden movements in either direction
• 3PC volume expected to return to pre-pandemic levels as societies re-open
• Cost reduction program targeting EUR 4.8m annualized savings by year-end • EUR ~1.0m restructuring cost expected in Q2 2021
• Increasing market activity for both 3PC and NPL
• Expect overhang of volumes released to market in H2 2021
• Axactor strictly prioritizes best NPL deals
• NPL investment guiding of more than EUR 200m reiterated

Supporting information

NPL portfolio

Q1 2021

NPL with continued gross revenue growth

- Supported by portfolio investments north of EUR 200m through 2020

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

• 17% YoY gross revenue growth
• Driven by continued investments in NPL portfolios
• Seasonally slow quarter and still negatively impacted by Covid-19 implications
• Maintained high margin

27 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)

95%	100%	101%	108%	112%	106%	101%	98%	92%	93%	97%	96%	98%
Q1 -18	Q2 -18	Q3 -18	Q4 -18	Q1 -19	Q2 -19	Q3 -19	Q4 -19	Q1 -20	Q2 -20	Q3 -20	Q4 -20	Q1 -21

• Q1 collection performance of 98%
• LTM collection performance of 98%
• Curves for 2021 aligned with current performance
• Long term average performance expected to fluctuate around 100%

Modest investment commitments

- Prioritizing high IRR portfolios, and expecting significant volumes to be offered in H2 2021

Quarterly NPL investments (EUR million)

• Stable forward flow volume
• Improving pipeline, but expect majority of 2021 volume in H2
• Increased focus on one-off transactions to reduce liquidity risk

Stable ERC level

ERC development

(EUR million)

Forward ERC profile by year (EUR million)

3PC

Q1 2021

3PC Development

- Restructuring cost of EUR ~3m included in a seasonally slow quarter

3PC income and CM1% (EUR million and %)

• 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 2.8m restructuring cost
• Expected to generate significant savings going forward

3PC volumes by geographic region

3PC total income split by geographic region

• Spain generate majority of 3PC income
• Germany share of revenue continue to increase
• Nordics accounting for 21% of revenue

REO portfolio (run-off segment)

Q1 2021

REO Development (run-off segment)

- Good sales momentum on a declining asset base

REO income and CM1% (EUR million and %)

• Revenue upheld on good level despite declining asset base
• Inventory down 36% since Q1 2020
• 304 assets sold during Q1 2021
• 2,391 assets in inventory at quarter-end
• Book value down to EUR 68m
• Axactor exposure of ~40% due to minority interest

REO portfolio moving towards the tail

• Total portfolio investments of EUR 286m*
• Last portfolio acquisition in Q3 2018
• 69% decline in book value since peak
• Limited tail risk

• Axactor owns ~40% of the REO book

• A total of 8,654 assets acquired*

• 6,263 assets sold

REO statistics*

(EUR million)

Current book
Asset class	# assets	% of total	Book value	% of total
Housing	960	40 %	36 5	53 %
Parking, annex etc.	797	33 %	3 0	4 %
Land	258	11 %	4 4	6 %
Commercial	376	16 %	25 8	38 %
Elimination	0	0 %	-1 2	-2 %
Total	2,391	100 %	68.5	100 %

Originally acquired
Asset class	# assets	% of total	Book value	% of total
Housing	4 033 ,	47 %	194 8	68 %
Parking, annex etc.	3 394 ,	39 %	15 8	6 %
Land	356	4 %	9 3	3 %
Commercial	871	10 %	66 4	23 %
Total	8,654	100 %	286.3	100 %

• Housing represent 53% of current book value
• Limited exposure to commercial assets
• Average book value per remaining asset EUR 29k
• 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		For the quarter	/ end YTD
EUR thousand	31 Mar 2021	31 Mar 2020	31 Mar 2021	31 Mar 2020
from portfolios Interest income purchased loan	41,898	39 326 ,	41 898 ,	39 326 ,
Net gain/(loss) purchased loan portfolios	-2,036	-8 758 ,	-2 036 ,	-8 758 ,
Other operating revenue	21,170	25 003 ,	21 170 ,	25 003 ,
Other income	0	28	0	28
Total income	61,031	55 599 ,	61 031 ,	55 599 ,
Cost of REO's sold incl impairment ,	-10,386	-10 175 ,	-10 386 ,	-10 175 ,
Personnel expenses	-18,867	-14 901 ,	-18 867 ,	-14 901 ,
Operating expenses Total	-14,036	-16 395 , -41 470	-14 036 , -43 289	-16 395 , -41 470
operating expenses	-43,289	,	,	,
EBITDA	17,743	14 129 ,	17 743 ,	14 129 ,
Amortization and depreciation	-2,594	-2 612 ,	-2 594 ,	-2 612 ,
EBIT	15,149	11 517 ,	15 149 ,	11 517 ,
Financial revenue	904	9 733	904	9 733
Financial expenses	-17,737	, -15 654 ,	-17 737 ,	, -15 654 ,
Net financial items	-16,833	-5 922 ,	-16 833 ,	-5 922 ,
Profit/(loss) before tax	-1,684	5 595 ,	-1 684 ,	5 595 ,
Tax (expense)	-1,709	-2 145 ,	-1 709 ,	-2 145 ,
Net profit/(loss) after tax	-3,394	3 450 ,	-3 394 ,	3 450 ,
Attributable to:
Non-controlling interests	-1,959	-1 716 ,	-1 959 ,	-1 716 ,
Equity holders of the parent company	-1,434	166 5 ,	-1 434 ,	166 5 ,
Earnings per share: basic	-0.005	0 030	-0 005	0 030
Earnings per share: diluted	-0.005	0 028	-0 005	0 028

Balance sheet statement

EUR thousand	31 Mar 2021	31 Mar 2020	Full year 2020
ASSETS
Intangible non-current assets
Intangible Assets	19,450	21,216	19,989
Goodwill	55,874	52,965	54,879
Deferred tax assets	7,760	9,665	7,769
Tangible non-current assets
Property, plant and equipment	2,328	2,818	2,530
Right-of-use assets	4,477	5,475	4,826
Financial non-current assets
Purchased debt portfolios	1,123,596	1,064,619	1,124,699
Other non-current receivables	467	556	458
Other non-current investments	196	193	196
Total non-current assets	1,214,148	1,157,507	1,215,346
Current assets
Stock of Secured Assets	68,463	120,346	78,786
Accounts Receivable	7,229	10,371	7,124
Other current assets	11,531	11,796	11,645
Restricted cash	2,921	2,640	2,946
Cash and Cash Equivalents	47,131	46,165	47,779
Total current assets	137,276	191,318	148,281
TOTAL ASSETS	1,351,424	1,348,825	1,363,627

EUR thousand EQUITY AND LIABILITIES	31 Mar 2021	31 Mar 2020	Full year 2020
Equity attributable to equity holders of the parent
Share Capital	158,150	97,040	97,040
Other paid-in equity	269,839	236,289	236,562
Retained Earnings	-9,108	7,319	-16,036
Reserves	-6,137	-36,690	-15,999
Non-controlling interests	17,361	92,449	74,113
Total Equity	430,105	396,408	375,680
Non-current Liabilities
Interest bearing debt	714,283	464,350	579,282
Deferred tax liabilities	6,566	15,458	6,436
Lease liabilities	2,390	3,103	2,804
Other non-current liabilities	1,606	1,385	1,433
Total non-current liabilities	724,845	484,296	589,955
Current Liabilities
Accounts Payable	6,832	4,418	6,147
Current portion of interest bearing debt	151,577	419,784	356,903
Taxes Payable	13,275	9,990	12,002
Lease liabilities	2,342	2,582	2,282
Other current liabilities	22,449	31,347	20,657
Total current liabilities	196,474	468,121	397,992
Total Liabilities	921,319	952,418	987,947
TOTAL EQUITY AND LIABILITIES	1,351,424	1,348,825	1,363,627

Legal organization March 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

Cash EBITDA	EBITDA adjusted for change in forward flow derivatives, calculated cost of share option program, portfolio amortizations and revaluations, REO cost of sales and REO impairments	Terms and abbreviations
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
Gross margin	Cash EBITDA as a percentage of gross revenue	EBIT	Operating profit, Earning before Interest and Tax
	3PC revenue, REO sale, cash collected on own portfolios and other revenue, excluding change in forward flow	EBITDA	Earnings Before Interest, Tax, Depreciation and Amortization
Gross revenue	derivatives	ECL	Expected Credit Loss
House pricing	House price index, development of real estate values	EPS	Earnings Per Share
Interest changes	The interest charged to debtors on active claims	EUR	Euro
Interest level	Lending rate in the market	FTE	Full Time Equivalent
	Net Interest Bearing Debt means the aggregated amount of interest bearing debt, less aggregated amount of	IFRS	International Financial Reporting Standards
NIBD	unrestricted cash and bank deposits, on a consolidated basis	NCI	Non-controlling interests
Opex ex SG&A, IT and corp.cost	Total expenses excluding overhead functions	NOK	Norwegian Krone
Payment agreement	Agreement with the debtors to repay their debt	NPL	Non-performing loan
Recovery rate	Portion of the original debt repaid	OB	Outstanding Balance, the total amount Axactor can collect on claims under management, including outstanding
Return on Equity, excluding minorities,	Net profit/(loss) to equity holders as a percentage of total average equity in period excluding Non-controlling		principal, interest and fees
annualized	interests, annualized based on number of days in period	PCI	Purchased Credit Impaired
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	PPA	Purchase Price Allocations
annualized	period	REO	Real Estate Owned
Settlements	One payment of full debt	SEK	Swedish Krone
SG&A, IT and corporate cost	Total operating expenses for overhead functions	SG&A	Selling, General & Administrative
	Accumulated paid principal amount for the period divided by accumulated collectable principal amount for the	SPV	Special Purpose Vehicle
Solution rate	period. Usually expressed on a monthly basis	VIU	Value in Use
Total estimated capital commitments for	The total estimated capital commitments for the forward flow agreements are calculated based on the volume	WACC	Weighted Average Cost of Capital
forward flow agreements	received over the last months and limited by the total capex commitment in the contract.	WAEP	Weighted Average Exercise Price
Total income	Gross revenue minus portfolio amortizations and revaluations
Tracing activity	Finding and updating debtor contact information

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