Axactor SE — Investor Presentation 2021

Oct 27, 2021

Q3 2021

27 October 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 1,112 FTEs
• Geveran owns 46% 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 DOPEX + allocation of unallocated OPEX and Depreciation & Amortization (excluding amortization of NPL portfolios). DOPEX 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 Q3 2021

- Seasonally weak quarter further impacted by society re-opening

All numbers in EUR

YoY growth

• Debtors prioritizing private consumption over repayment
• Q3 2020 was relatively strong driven by rebound after Covid-19 first wave
• NPL investments increasing from EUR 12m in Q2 to EUR 32m in Q3
• Successfully placed 5-year, rated bond of EUR 300m in Q3

Weak quarterly result can be explained by two main factors

Illustration of main challenges for the quarter (EUR million)

EBITDA reported

• NPL collection underperformance compared to active forecast (CU1)
• NPL revaluations and net present value of changes in active forecast (CU2)

EBITDA excluding CU1 and CU2 25.1

• Debtors are prioritizing private consumption over repayment in a quarter of society re-opening
• Leads to NPL collection underperformance compared to active forecast and negative revaluations on NPL

1

2

Axactor strengthening the 3PC-position in Italy through the acquisition of Credit Recovery Service

"The acquisition will give a fantastic operational platform to enable future 3PC-growth" says Antonio Cataneo, Country Manager, Axactor Italy

• Successful bid to secure 100% of the shares in the Italian debt collection agency Credit Recovery Service (CRS)
• Top-5 independent 3PC-player in the Italian bank and finance segment with headquarter in Grosseto (Tuscany), contact center in Milazzo (Sicily) and in total 155 employees
• In line with Axactor's strategy
  • Strengthening the position in an existing country, improving capabilities on 3PC and preparing for post-pandemic volumes and new signed contracts in Italy
• CRS had a total income of EUR 6.2m in 2020, with an EBITDA of EUR 0.9m

Axactor placed a new bond in Q3 and is strengthening the financial position

• New 5-year rated bond of EUR 300m at EURIBOR + 5.35% successfully placed in Q3
• Reducing interest rate by 1.65%-points compared to the bond placement in December 2020
• Axactor is strengthening the financial position
  • 32% equity ratio
  • Material headroom to covenants leverage ratio of 3.3¹
  • EUR 249m in unutilized credit lines and EUR 39m in cash²

NPL investments significantly above previous quarters and slightly above replacement CAPEX

NPL investments (EUR million)

• NPL investments in 2021 expected to be in the region of EUR 150m, given attractive prices
• Replacement CAPEX of EUR 126m next twelve months
  • EUR 86m already committed through forward flow agreements
• Expect to invest more than replacement CAPEX going forward

Axactor is currently acquiring portfolios at attractive rates

- Expect current book gross IRR to improve over time

Gross IRR on NPL¹

(% and EUR million)

• Gross IRR on signed forward flow contracts 46% 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

12 1) Gross IRR is calculated using monthly cash flows over a 180-month period. Gross IRR is defined as the internal rate of return that makes the net present value of ERC equal to NPL book value 2) FF = Forward Flow

Expect IRR to converge to historic average

- Significantly above historic IRR for Axactor

Estimated IRR development 2016 - 2023

Comments

• Declining IRR's throughout 2021, but significantly above historic IRR for Axactor
• High number of deals, but smaller volumes due to lower 2020 and 2021 vintages
• Stronger competition on one-offs than on forward flows – probably driven by the need for instant new volumes among peers
• Significant price differences across markets

Cost reduction program ahead of plan

Cost reduction program, annualized1) (EUR million)

• Realized higher savings than estimated in Q3
  • Site consolidation in Norway
  • Higher impact of previously implemented initiatives
  • Various smaller improvement initiatives
• Cost reduction program expected to reach full P&L-effect in Q4

Agenda

Gross revenue impacted by a seasonally weak quarter with vacation period in Europe and society re-opening

Gross revenue (EUR million)

NPL segment with a seasonally weak quarter and net negative portfolio revaluations

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

• Portfolio amortization rate of 43%
• CM1 margin impacted by top line development and negative revaluation
  • CM1 margin excluding revaluation of 72%
• Net negative revaluations of EUR 5.6m reducing total income

A sharp decline in debtors' willingness to pay yielded collections below active forecast in Q3

NPL unsecured active forecast versus collection

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

• Unsecured collection performance in Q3 2021 of 89%

• Sharp decline in debtor willingness to repay in Q3 during society re-opening in Europe
• Reduced short-term visibility on collection performance

3PC development

- Margins are improving. Structuring organization to be positioned for volume ramp-up

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

• Market is improving with increasing pipeline
• 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 default rates increases again following society re-opening
  • Sales processes take longer time during the pandemic

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 %)

• Revenue upheld on a good level despite declining asset base and vacation period
  • Inventory down 42% since Q3 2020
  • 267 assets sold during Q3 2021
  • 1,773 assets in inventory at quarter-end
• Book value down to EUR 46m at quarter-end

Summary: A soft quarter, but Cash EBITDA upheld on a reasonable level despite challenges and low NPL investments in 2021

Positive trend on depreciations, financial cost and tax, but ending the quarter with losses after tax

-1

-2

Q1 21

7

-3

Q3 21

-2

-3

Q2 21

• Positive development in net financial items YoY
  • Interest expense of EUR 12.8m in the quarter (14.0)
  • Balance sheet restructuring in Q1 2021
  • Issued EUR 300m bond, partly used to refinance existing facilities
• Effective tax rate of -9% (47%)
  • Negative effective tax rate mainly caused by losses in the REO companies that are not tax deductible

Volatile RoE to shareholders during the pandemic

Return on Equity excl. non-controlling interest per quarter (annualized)

• Expect short term fluctuations in RoE driven by seasonality, Covid-19 and business performance
• Expect RoE to improve over time as the underlying business improves and as societies slowly defeat the pandemic

Agenda

Outlook

• Reduced short-term visibility on collection performance following a sharp decline in debtors' willingness to pay as societies re-opened
• 3PC volume expected to return to pre-pandemic levels over time as societies re-open and default rates increases again
• Increasing market activity for both 3PC and NPL
• Axactor strictly prioritizes the best NPL investments
  • NPL investment guiding of EUR ~150m for 2021 - but highly dependent on one-offs in Q4

Supporting information

NPL portfolio

Q3 2021

NPL segment with a seasonally weak quarter and net negative portfolio revaluations

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

• Portfolio amortization rate of 43%
• CM1 margin impacted by top line development and negative revaluation
  • CM1 margin excluding revaluation of 72%
• Net negative revaluations of EUR 5.6m reducing total income

Declining collection performance after a weak Q3

Actual collection vs. active forecast¹ (LTM, rolling)

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

• Q3 collection performance of 89%
  • LTM collection performance of 95%
• Long term average performance expected to fluctuate around 100%

NPL investment commitments of EUR 86m next 12 months

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

Quarterly NPL investments (EUR million)

• Expect significant one-off 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 1% YoY due to low NPL investment levels and net negative revaluations

FIN GER ITA NOR SPA SWE

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

Q3 2021

3PC development

- Margins are improving. Structuring organization to be positioned for volume ramp-up

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

• Market is improving with increasing pipeline
• 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 default rates increases again following society re-opening
  • Sales processes take longer time during the pandemic

3PC volumes by geographic region

3PC total income split by geographic region

• Spain generate majority of 3PC income
• Nordics accounting for 20% of revenue

REO portfolio (run-off segment)

Q3 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 %)

• Revenue upheld on a good level despite declining asset base and vacation period
  • Inventory down 42% since Q3 2020
  • 267 assets sold during Q3 2021
  • 1,773 assets in inventory at quarter-end
• Book value down to EUR 46m at quarter-end

REO portfolio moving towards the tail

• Total portfolio investments of EUR 287m*
• Last portfolio acquisition in Q3 2018
  • 79% decline in book value since peak

• A total of 8,664 assets acquired*
• 6,891 assets sold

(EUR million)

Current book
Asset class	# assets	% of total	Book value	% of total
Housing	677	38 %	23 6	51 %
Parking, annex etc.	605	34 %	2 1	5 %
Land	227	13 %	3 7	8 %
Commercial	264	% 15	8 17	39 %
Eliminations	0	0 %	-1 1	-2 %
Total	1,773	100 %	46.0	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	872	10 %	66 5	23 %
Total	8,664	100 %	287.4	100 %

• Housing represent >50% of current book value
• Average book value per remaining asset EUR 26k
  • Average book value per sold asset of EUR 32k
  • Average sale price per sold asset of EUR 38k

Covenants

Q3 2021

Bond covenants (1/2)

Loan-to-value¹ - Covenant ≤75% (Total portfolio book value divided by net interest-bearing debt)

75%

Secured Loan-to-value¹ - Covenant ≤65% (Total portfolio book value divided by secured net interest-bearing debt)

41 1) From Q4 2020 NOK and SEK part of portfolio value, cash & cash equivalents and interest-bearing debt are adjusted to the last six months average FX rates

Bond covenants (2/2)

Interest coverage ratio¹ - Covenant ≥4.0x (Pro-forma adjusted cash EBITDA divided by net interest expenses)

Appendix

P&L statement

	For the end quarter		Year date to
EUR thousand	30 Sep 2021	30 Sep 2020	30 Sep 2021	30 Sep 2020
Interest income from purchased loan portfolios	41,238	41 497 ,	124 915 ,	121 335 ,
gain/(loss) Net purchased loan portfolios	-13,305	-624	-17 425 ,	-37 530 ,
Other operating revenue	18,797	21 457 ,	66 128 ,	62 679 ,
Other income	1	-50	3	49
Total income	46,731	62 280 ,	173 622 ,	146 533 ,
Cost of REO's sold incl impairment ,	-9,070	-4 749 ,	-33 599 ,	-46 956 ,
Personnel expenses	-14,584	-13 255 ,	-47 704 ,	-41 079 ,
Operating expenses	-12,674	-13 933 ,	-42 022 ,	-43 991 ,
Total operating expenses	-36,327	-31 937 ,	-123 325 ,	-132 026 ,
EBITDA	10,404	30 343 ,	50 297 ,	14 506 ,
Amortization and depreciation	-2,293	-2 633 ,	211 -7 ,	856 -7 ,
EBIT	8,111	27 710 ,	43 085 ,	6 650 ,
Financial revenue	334	337	1 344 ,	8 877 ,
Financial expenses	-13,437	-15 751 ,	-43 106 ,	-44 570 ,
financial Net items	-13,103	-15 414 ,	-41 762 ,	-35 693 ,
Profit/(loss) before tax	-4,992	12 296	1 323	-29 043
		,	,	,
Tax (expense)	-450	-5 795 ,	-5 779 ,	-5 402 ,
Net profit/(loss) after tax	-5,442	6 501 ,	-4 455 ,	-34 445 ,
Attributable to:
Non-controlling interests	-2,000	2 938 ,	-6 731 ,	-16 500 ,
Shareholders of the parent company	-3,442	3 563 ,	2 275 ,	-17 945 ,
Earnings per share: basic	-0.011	0 019	0 008	-0 099
Earnings per share: diluted	-0.011	0 018	0 008	-0 099

Balance sheet statement

EUR thousand	30 Sep 2021	30 Sep 2020	Full year 2020
ASSETS
Intangible non-current assets
Intangible Assets	18,426	20,885	19,989
Goodwill	55,496	53,784	54,879
Deferred tax assets	7,761	5,111	7,769
Tangible non-current assets
Property, plant and equipment	2,557	2,684	2,530
Right-of-use assets	4,596	5,332	4,826
Financial non-current assets
Purchased debt portfolios	1,102,066	1,115,480	1,124,699
Other non-current receivables	365	503	458
Other non-current investments	196	193	196
Total non-current assets	1,191,462	1,203,972	1,215,346
Current assets
Stock of Secured Assets	46,043	84,163	78,786
Accounts Receivable	6,121	5,743	7,124
Other current assets	13,417	13,632	11,645
Restricted cash	3,274	2,718	2,946
Cash and Cash Equivalents	38,984	33,083	47,779
Total current assets	107,840	139,339	148,281
TOTAL ASSETS	1,299,302	1,343,310	1,363,627

EUR thousand EQUITY AND LIABILITIES	30 Sep 2021	30 Sep 2020	Full year 2020
Share Capital	158,150	97,040	97,040
Other paid-in equity	269,900	236,502	236,562
Retained Earnings	-5,398	-15,791	-16,036
Reserves	-10,013	-27,843	-15,999
Non-controlling interests	8,702	74,958	74,113
Total Equity	421,341	364,866	375,680
Non-current Liabilities
Interest bearing debt	661,554	585,094	579,282
Deferred tax liabilities	6,331	11,142	6,436
Lease liabilities	3,044	3,056	2,804
Other non-current liabilities	1,644	1,324	1,433
Total non-current liabilities	672,574	600,616	589,955
Current Liabilities
Accounts Payable	6,885	3,099	6,147
Current portion of interest bearing debt	152,568	339,953	356,903
Taxes Payable	17,443	9,547	12,002
Lease liabilities	1,779	2,533	2,282
Other current liabilities	26,712	22,697	20,657
Total current liabilities	205,387	377,829	397,992
Total Liabilities	877,962	978,445	987,947
TOTAL EQUITY AND LIABILITIES	1,299,302	1,343,310	1,363,627

Legal organization September 2021

Terms and abbreviations

Abbreviations

WACC Weighted Average Cost of Capital WAEP Weighted Average Exercise Price

	3PC	Third-Party Collection
	APM	Alternative Performance Measures
	ARM	Accounts Receivable Management
	B2B	Business to Business
	B2C	Business to Consumer
	BoD	Board of Directors
Terms Active forecast	BS	Consolidated Statement of Financial Position (Balance Sheet)
	CF	Consolidated Statement of Cash Flow
	CGU	Cash Generating Unit
	CM1	Contribution Margin
	D&A	Depreciation and Amortization
	Dopex	Direct operating expenses
	EBIT	Operating profit/Earnings before Interest and Tax
	EBITDA	Earnings before Interest, Tax, Depreciation and Amortization
		Expected Credit Loss
		Earnings Per Share
		Estimated Remaining Collection
		Full Time Equivalent
		International Financial Reporting Standards
		Loan to value
		Non-Controlling Interests
		Non-Performing Loan
	OB	Outstanding Balance, the total amount Axactor can collect on claims under management, including outstanding
		principal, interest and fees
Solution rate Yield Interest income from purchased NPL portfolios including net gain/(loss) on the NPL portfolios	P&L	Consolidated Statement of Profit and Loss
	PCI	Purchased Credit Impaired
		Purchase Price Allocations
		Real Estate Owned
		Return on Equity
		Selling, General & Administrative
		Special Purpose Vehicle
	VIU	Value in Use
	Forecast of estimated remaining collection on NPL portfolios Cash EBITDA as a percentage of gross revenue Total operating expenses (excluding SG&A, IT and corporate cost) as a percentage of total income Collection on own NPL portfolios in relation to active forecast Total equity as a percentage of total equity and liabilities Agreement for future aquisitions of NPLs at agreed prices and delivery The credit adjusted interest rate that makes the net present value of ERC equal to NPL book value, calculated using monthly cash flows over a 180-months period NPL amortization divided by NPL gross revenue Aquisition of a single portfolio of NPLs Total operating expenses Portion of the original debt repaid Aquisitions of new NPLs to keep the same book value of NPLs from last period Total operating expenses for overhead functions, such as HR, finance and legal etc Accumulated paid principal amount for the period divided by accumulated collectable principal amount for the period. Usually expressed on a monthly basis	ECL EPS ERC FTE IFRS LTV NCI NPL PPA REO ROE SG&A SPV

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