Axactor SE — Investor Presentation 2020

Aug 14, 2020

Company presentation and effects of Covid-19

Nordea Small Cap Days Johnny Tsolis, CEO

Axactor in brief

• Established in Q4 2015 with headquarter in Oslo, Norway
• Main focus on collection and acquisition of non-performing loans ("NPL") from financial institutions
• Management team with strong track record from purchased debt and debt collection industry
• Operations in six European countries; Spain, Germany, Italy, Norway, Sweden and Finland with 1,135 FTEs
• Portfolio acquisitions north of EUR 600m for 2019 and 2020 combined
• Geveran owns ca 32% of Oslo-listed Axactor SE

3

Market capitalisation	Equity	NIBD
~EUR 130m	EUR 363m	EUR 887m

Our core business areas

Non-Performing Loans (NPL) Third-party collection (3PC)

• Buy defaulted debt at discount to face value
• Price variations between markets, age and type of debt
• Example: Credit card, personal loans
• Use own highly trained personnel and systems to collect over a 15-year period
• Money multiple typically between 1.7-2.5x

Estimated remaining collection	EUR 2 153m
Book value	EUR 1 107m

Buy defaulted debt at discount to face value • Price variations between markets, age and type of debt Example: Credit card, personal loans Use own highly trained personnel and systems to collect over a 15-year period Money multiple typically between 1.7-2.5x				• Traditional debt collection on behalf of external customers • Typically a fixed fee or a commission to Axactor on the collected amount
		Total revenue, LTM	EUR 110m
Estimated remaining collection	EUR 2 153m			Contribution margin (CM1), LTM	EUR 17m
Book value	EUR 1 107m			CM1 margin, LTM	34%

Axactor positioned in the value chain from debtor default

We are one of the fastest growing companies at Oslo Stock Exchange

• Focus on financial institutions, both in NPL and 3PC
• Targeting combined 3PC and forward flow deals
• Product synergies in business origination, collection execution and data generation
• REO is not part of the strategy going forward
• Last REO portfolio acquisition in Q3 2018

We have been able to establish a significant revenue stream in all our markets

• Targeting sound markets for owning and collecting on non-performing loans
• Increased the Nordic exposure through 2019 and 2020
• Synergies to be extracted from cross-border deals

Where are we on our journey? - Just about to enter phase II with focus on ROE-growth

segments ▪ M&A

Covid-19 effect on Axactor ROE drivers

	Drivers	Q2 2020	Covid-19 impact	Outlook
•	NPL portfolio prices	• Portfolios acquired at attractive IRRs in the Nordic market	Positive	• Improved IRR levels to be blended in over time
•	Economies of scale	• EBITDA margin significantly affected by write downs in the quarter	Neutral	• Volume growth through 2020 and into 2021, with strong cost discipline
•	Tax rate	• Effective tax rate not relevant for Q2 2020	Neutral	• Expect ~25% over time
•	Funding cost	• Current level of ~5%	Negative (1-year delay)	• Refinancing and continued improvement of capital structure
•	Business mix	• Significant increase in combined 3PC and NPL deals	Positive (3PC will increase)	• Leveraging on 3PC and NPL synergies

Lockdowns and impairments significantly affected first half 2020 financials

Total revenue development (EUR million)

EBITDA and EBITDA-margin (EUR million and %)

Cash EBITDA (EUR million)

Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020

Q2 2020 NPL revaluation and REO impairment accrual

11 *Excluding NPL revaluation in Q2 2020 **Adjusted for NPL revaluation and REO impairment accrual in Q2 2020

April and May significantly impacted by Covid-19, strong pick-up in June expected to continue

Gross revenue (EUR million)

Prudent revaluation and impairment of EUR 53m following Covid-19

REO book value (EUR million)

• Net negative revaluation of EUR 27m of NPL portfolio
• Based on estimated short-term financial impact of Covid-19
• Estimated impairment of EUR 26m on REO assets
• Based on updated commercial analysis taking a prudent view of current trends in the market

Axactor has aligned costs with market activity throughout the crisis

Actions to align costs to activity level

Site consolidation to increase efficiency

EUR ~25m estimated annual savings for 2020

Further cost saving initiatives depends on activity level

• Temporary workforce reductions of ~400 employees during Q2

• Executive team salary reductions in Q2 extended through Q3

• Temporary price reductions from IT vendors

• Norwegian operation reduced from five to two sites
• Sweden closing one of two sites
• Further consolidation under consideration
• EUR ~13m expected in H2 2020
• EUR 1.2m restructuring costs in Q2 2020
• Legal costs driven by activity in notary offices and bailiffs
• Scalable setup to take advantage of further reopening of the economies
• Potential new lockdown may significantly impact return to normality

Covid-19 long term effects for the collection industry

1

Portfolio prices – a supply overhang of NPLs cause pressure on portfolio prices

2

Increased 3PC volumes – capital constraints and lower prices increase focus on 3PC servicing

3

Industry consolidation – expected to increase medium to long term

4

Regulatory changes – challenges and opportunities

Why invest in the debt collection industry?

The prices on NPL portfolios has come down significantly since 2017 ¹

The NPL market will continue to grow over the next years ²

• From 10% IRR or below in 2017/early 2018 to 12-14% IRR in all Axactor markets
• Significant imbalance in demand and supply of unsecured NPLs (will also increase 3PC volumes)
• Regulatory environment continues to put pressure on financial institutions to offload their balance sheets
• Banks are to an even larger extent not regarding collection as core business
• ³ Capital still available for the industry Allektum successfully raised SEK 900m this week (August 2020)
• Intrum successfully raised EUR 600m in July
• ⁴ Underpriced industry Market overreaction to fear of Covid-19 effects
• Repricing of the industry just started

Axactor with six key competitive advantages - The combination makes Axactor unique

Axactor competitive advantages…

1	Strong niche focus	▪ Strong focus on becoming best in Europe on unsecured consumer finance ▪ Not trying to be best on "everything"
2	Most attractive markets	▪ All six markets carefully chosen with regards to size, risk profile and legal environment
3	Access to the best talents	▪ Highly attractive to join a company with a flat organizational structure, entrepreneurial spirit and a culture for fast decision processes
4	Proven track record	▪ Established as one of the top 10 leading debt collection companies in Europe in less than five years
5	Superior collection platform	▪ Practically no legacy, company created from "clean sheets" ▪ World class IT-infrastructure and operational setup standardized across all countries
6	Supportive cornerstone investor	▪ Geveran has a strong industry track record ▪ Contributes with both competence and capital

Why invest in Axactor? Our competitive advantages will unlock company value going forward