Axactor SE — Investor Presentation 2018

Jul 25, 2018

Q2 2018 Axactor AB

July 25, 2018

Key highlights Q2 2018

• Continued margin expansion EBITDA margin of 20% in Q2 2018
• Cash EBITDA of EUR 41m, illustrating the strong cash flow from the REO segment
• More than 1.000 REO units sold (since entering this market segment in 2017)
• EUR 23m portfolio investments, as well as several large forward flow deals with start date later in the year
• Optimization of co-investment structure with Geveran completed
• Completed reverse share split in the ratio of 10:1

2

Axactor events post Q2 closing

• New funding line for REOs with Nomura International plc
• Will release approximately EUR 100m in cash
• Lowering funding cost for REOs significantly
• Subject to final documentation. Signing/closing within 3 weeks
• Signed important forward flow contract in Germany
• Expect acquisition cost of EUR 20m over a 12 month period
• Complements the large forward flow contract closed in June
• Signing a of large unsecured claims from Banco Sabadell:
• Conditional to formal authorization of the contract
• Outstanding balance of EUR 875m
• Added two new outsourcing contracts in Spain
• Servicing contracts for secured debt

Axactor will establish new credit line for funding of REOs

• Axactor will establish a new funding line for REOs with Nomura International plc
• The transaction will release cash of approximately EUR 100m and will be used to pay down intercompany loan to Axactor AB
• The released funds will be available for Axactor to allocate freely within the group, providing increased flexibility for future investments
• The new loan facility will significantly reduce the REO portfolios funding cost
• Axactor expects the funds to be available in approximately 3 weeks

Standardization is used to reduce costs and to drive efficiency

Standardization - "One Axactor" Positive effects from "One Axactor"

• Intility (IT Infrastructure)
• Miratech partnership (AD/AM)
• ERP/Finance/HR
• Portfolio pricing
• Digitalization
• − Dialer robot
• − Business Intelligence (BI)
• − Data Warehouse (DW)
• − Core Collection Systems
• − Debtor/Client Portals
• − Skill based collection
• CRM
• Branding
• Common KPIs
• Accounts Receivable Management (ARM)

Axactor revenue mix – distribution per country

• Significant growth in Spain driven by the REO segment
• Growth compared to Q1-18 in all geographies

Q2 Revenue Distribution per Country

• REO segment in Spain driving the shift in business mix compared to Q1-18
• Expect large forward flow contracts to increase the relative size of Germany and Norway the next quarters

6

Axactor revenue mix – distribution per business segment

Gross revenue development per segment (EUR million)

• 148% revenue growth y/y* in Q2 2018 primarily driven by REO and NPL portfolios
• Ramp-up of the REO segment continues, and REOs represented 33% of total gross revenue in Q2 2018
• 3PC with 30% growth y/y
• Growth in all segments compared to Q1 2018

Profitability development – EBITDA and Cash EBITDA

• 158% EBITDA growth compared to the same quarter last year*
• 74% EBITDA growth compared to last quarter
• 20% EBITDA margin in Q2-18

8

• Q2 and Q4 are seasonally strong quarters
• *Q2 2017 settlement with former IGE board members is excluded

EBITDA per quarter (EUR million) Cash EBITDA per quarter (EUR million)

• Strong REO cash flow ramping up the Cash EBITDA
• Good performance on NPL portfolios
• Gross margin of 61% in Q2-18, up from 44% last quarter

EBITDA and cash EBITDA - quarter by quarter

• Continued significant growth
• Increased EBITDA margin to 20%

EBITDA (EUR million) Cash EBITDA (EUR million)

• Maintained strong cash flow development
• Gross margin at a record high 61%

Gross revenue and ERC - quarter by quarter

ERC (EUR million) Gross revenue (EUR million)

• The good development continues in Q2-18 with 168% gross revenue growth compared to last year*

• Significant growth across all segments

• ERC growth supported by investments of EUR 114m during the first half of 2018

• ERC is slightly down from Q1-18 due to the high liquidation of REO portfolios

Collection on portfolios versus business case

LTM Performace vs. Business Case

• NPL collection performance stabilizing at ~100%, with a strong LTM performance of 105% in Q2-18
• High REO performance in Q4 2017 based on moderate volume
• Conservative build-up in REO BC
• Expect convergence towards business case over time

Portfolio statistics NPL

Historical development ERC (EUR million)

• ERC increase of 48% compared to same quarter last year
• Modest growth from Q1-18 due to the relatively low portfolio investments during the quarter

ERC per year (EUR million)

• NPL portfolios with finance claims have long and stable cash flows (15 years+)

Portfolio statistics NPL

Book value portfolios (EUR million) Capex (EUR million)

• Book value increased 54% compared to Q2 2017

• Modest growth of 1% from Q1 2018 due to the modest investment level during the second quarter

• One portfolio acquired in Sweden in Q2-18

• Forward flow contracts signed during the quarter will start during Q3 and Q4
• Several potential deals delayed to Q3

Portfolio statistics REOs

Historical development ERC (EUR million)

• First REO portfolio acquired in Q2-17
• Reduction in Q2-18 due to the quick liquidation of the REO portfolios

ERC per year (EUR million)

• 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 33% of total portfolio balance

Q2-17 Q3-17

0

Q1-17

SPA

• No new portfolios acquired in Q2-18

8.1

• Capex in the quarter represent activated costs on assets in inventory and transfer of remaining assets from one of the portfolios announced in Q1-18

0.4

Q4-17 Q1-18 Q2-18

5.2

REO portfolios lifetime KPIs*

• Average price per asset sold: EUR 46k

• Number of assets in inventory per end Q2-18: 6,153

• Lifetime performance ahead of business case

• More than 1.000 units sold
• Quicker liquidation
• Higher money multiple
• Total of 6 portfolios serviced by two different providers: GIA and Altamira
• New funding line for REOs announced in July
• Re-finance current stock and release cash to be deployed where Axactor sees fit

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

Q2 income statement

Income statement Key comments

	2Q	2Q	2Q LTM	Jan - Dec
EURO thousand	2018	2017	2018	2017
Income	66 696 ,	26 922 ,	165 813 ,	104 ,734
of portfolios Amortization debt	-12 310 ,	-3 290 ,	-26 901 ,	-14 948 ,
Net revenue	54,386	23,632	138,912	89,785
Cost of secured sold assets	-17 353 ,		-24 921 ,	-1 445 ,
Personnel expenses collection	-7,975	-6 640 ,	-30 111 ,	-26 ,578
Personnel expenses other	-5,170	-3 918 ,	-20 900 ,	-18 378 ,
Operating expenses	-13 278 ,	-6 929 ,	-38 605 ,	-28 ,569
EBITDA	10,610	6,145	24,373	14,815
Amortization and depreciation	-1 476 ,	-1 148 ,	-5,569	-5,327
EBIT	9 134 ,	4 997 ,	18 805 ,	9 488 ,
Financial revenue	473	1 849 ,	1 ,775	3 070 ,
Financial expenses	-8 994 ,	-1 633 ,	-22 381 ,	-10 ,585
Net financial items	-8 ,521	216	-20 607 ,	-7,515
Profit/(loss) before tax	613	5,213	-1 802 ,	1 974 ,
Tax expense	-442	-582	585	611
Net profit/(loss) from continued operations	172	4,631	-1,217	2,585
CASH EBITDA	40,566	9,401	78,359	32,695

• Net financial items were negative EUR 8.5m for the quarter:
• Interest cost of EUR 8.4m of which EUR 0.9m in amortized loan fees
• Amortized warrant cost of EUR 0.4m
• Positive net FX impact in the quarter of EUR 0.4m

Balance sheet structure

• Portfolio book value is EUR 539m, including REO
• Available cash at end of Q2 is EUR 121m
• Equity ratio of 41%

Forward flow build-up

• Significant forward flow contracts have been signed during the first half of 2018 in Germany, Italy, Norway and Sweden
• Some of the new contracts started late in Q2, while the rest are due to start later in the year
• With the new contracts, total annual forward flow investments will be in the region of EUR 175m
• Contracted forward flow volume will double NPL collections for Germany and Norway in 2019
• The forward flow pipeline is still strong

Axactor funding capacity

• Axactor with approximately 450 mEUR in funding capacity (after closing the Nomura agreement)
• Additional capacity
• Axactor has close to 200 mEUR in accordion options with the Nordic banks
• Bond tap option of 100 mEUR
• Full utilization of additional capacity must be matched by approximately 40% equity

Outlook

• REO market in Spain remains strong
• Rapid growth in Spanish market for secured NPL
• Continued high volumes of unsecured NPL forward flow portfolios from Nordic consumer banks
• Solid 3PC pipeline in Spain
• Expect high cash flow generation to continue in the second half of 2018

Summary Q2 presentation

• Significant ramp-up of cash generation (Cash EBITDA of EUR 41m)
• 20% EBITDA margin in Q2
• Signed significant forward flow portfolios in Germany, Italy, Norway and Sweden
• Establishing new funding line for REO portfolios with Nomura, releasing approximately EUR 100m in cash at lower cost
• Continue to drive efficiency and cost initiatives through One Axactor
• Strong momentum into 2H 2018