2025 results. My name is Becky, and I'll be your operator today. During the presentation, you can register a question by pressing star followed by one on your keypad. If you change your mind, please press star followed by two. I will now hand over to your host, Johnny Tsolis, CEO, to begin. Please go ahead.
Good morning and welcome to Axactor's first quarter presentation. By my side, I have Nina Mortensen, our CFO. This presentation will be divided into four parts. First, I will take you through Q1 highlights. Then Nina will present financials before I give an updated outlook. We will round off with a Q&A session. Let's move to slide three and have a look at the highlights for the quarter. Collection performance was 101% for the quarter, which affirms the updated curve forecast after the revaluations done in Q4 last year. Total gross revenue ended at EUR 77 million in a seasonally weak quarter. Here, it is important to remember that we sold off approximately 6% of our total backbook in the Spanish portfolio sale at the end of last year. Adjusting for this, the gross revenue was up 7% year- over- year.
We also delivered an impressive 28% growth in the 3PC segment. On top, we managed to increase the margin. I will come back with more details. The EBITDA ended north of EUR 32 million, which was an increase of 23% year- over- year. The solid EBITDA margin of 50% was driven by margin expansion and cost reductions. Annualized return on equity to shareholders reached 12%, which is all-time high and on par with 2026 financial targets. Axactor has a very solid balance sheet with close to EUR 350 million in equity, which gives an equity ratio of 27%. Let's move to slide four for more comments on collection performance. I'm pleased to see that we are now back to the expected level on collection performance. This level is, of course, supported by the Q4 revaluations, but we can also observe positive signals in the underlying performance in certain markets.
For example, we can observe more larger payments in the Norwegian market and even stronger collections in the Spanish market for secured assets, both likely to be explained by positive development in housing prices. The Q1 collection performance was affirming that our new forecast assumptions were correct for the period, and we expect collections in line with the forecast going forward. Moving to slide five and more comments on the positive development we saw in the 3PC segment for the quarter. Although NPL counts for the largest part of Axactor's P&L, 3PC is still a significant and important part of our business. It is a capital-light business model, offers lower risk, but still generates a strong cash flow at healthy margins. It is also an important part in building the relationship with our banking customers.
Q1 was a very strong quarter for our 3PC business, showing an impressive 28% increase in revenue year- over- year, and at the same time, the contribution margin was increasing. What is equally positive is that we see a broad improvement for the segment with double-digit growth in all of our four 3PC markets. We see a clear trend that the customers are more willing to pay for high-quality collection services, and the growing pipeline with solid prospects gives a very positive foundation for further growth and margin expansion for 3PC. Let's move on to the next topic, refinancing, on page six. Over the last couple of weeks, we have announced two important elements in addressing our loan maturities. Firstly, and maybe most importantly, we have agreed with our RCF banks to extend the RCF with two more years. A new maturity will be June 2028.
The terms and conditions will not be changed. This is a pure extension exercise. We consider the terms both to be fair and attractive, and this shows continued strong support for our two main banks. Secondly, we have repurchased a substantial amount of bonds at significant discounts during Q1. In the quarter, we acquired bonds for EUR 49 million at 97.3% of par. We continued to buy a little bit more in the ACR03 bond in April, so the current outstanding amount on ACR03 is EUR 180 million. In total, we have acquired bonds for approximately EUR 100 million during the last two quarters. Let us move on to the next slide for more comments on how we plan to continue the bond refinancing. First, it is important to say that we are on track to refinance the ACR03 bond.
It is 16 months left to maturity, and normally, we have done refi closer to the bond maturity. However, we recognize that the market has put a significant spread on our bonds and has therefore started the refinancing by acquiring bonds worth EUR 120 million in the market at substantial discount. Our aim is to refinance the remainder of ACR03 during 2025, and the main element of this refi would be to place a new EUR 100 million-EUR 150 million bond in combination with cash flow generation in the period until refinancing. This continued reduction in bond debt is expected to further fuel reduced interest expenses. We have also several other options for cash generation, such as portfolio sales. Regarding covenants, we have comfortable head rooms on all covenants, and many of them actually improved during Q1.
The last point I will mention before I leave the word to Nina is the development in interest expenses. Please move to slide eight. The favorable development we saw at the end of last year has continued with even more strength into Q1. The reason for the positive development is the double positive effect from reduced IBOR rates in combination with the effect from bond buybacks since we are using cash in combination with RCF, which has a lower interest margin. In numbers, the reduction is 15% of interest expenses last two quarters. Also, we believe the positive trend will continue the next two quarters, although at a bit slower pace. Still, a 7% reduction is expected until the end of Q3. Please note that the 7% reduction is assuming a constant level of interest-bearing debt. With that, I'll leave the word to Nina for the financial update.
Thank you, Johnny. Now I'll take you through the Q1 financial performance, starting with the overall figures and then a bit more context on what is behind the numbers. Gross revenue for the group ended at EUR 77 million in the quarter, down 2% compared to the first quarter of 2024. Excluding the portfolio sold in Spain in Q4 last year, the increase in gross revenue was a healthy 7%. The NPL segment reported a gross revenue of EUR 62 million. The segment gross revenue, excluding the sold Spanish portfolios, increased 2% compared to Q1 2024. The 3PC segment delivered revenues of EUR 15 million, up 28% from the first quarter last year. Let's look a bit more into details on each of the business segments, starting with NPL on the next slide.
The NPL segment delivered an increase of 11% compared to the first quarter of 2024, with total revenue of EUR 50 million. The reported collection performance ended at 101% for the quarter, affirming the active forecast after a Q4 revaluation with adjusted ERC curves. The improvement in total revenues was also supported by lower net negative revaluations and lower effective NPL amortization rate. The amortization rate was reduced to 17%, down from 26% in the first quarter of 2024. The contribution margin ended at 77% for the quarter, up 1 percentage point from Q1 2024. The margin is supported by both rising total revenues and lower operating costs. Please turn to the next slide for comments on the development in the 3PC segment. The 3PC revenues ended at EUR 15 million for the quarter, equal to a growth of 28%.
All markets delivered double-digit growth this quarter, with especially good results in Norway and Spain. The contribution margin also increased this quarter to 33%, up from 32% in the first quarter 2024, driven by healthy volume growth. Further expansion in the 3PC segment is expected throughout the year, with strong pipelines for new business in several markets. Let us move on to the next slide, where I'll present more details on the reported financials. Total revenue at group level ended at EUR 65 million, up from EUR 57 million in the first quarter in 2024. The reported EBITDA ended at EUR 32 million, with a strong EBITDA margin of 50%. We continue to see results from our cost reduction and revenue growth initiatives. Cash EBITDA ended at EUR 47 million for the first quarter, compared to EUR 49 million in the corresponding quarter last year.
The reduction is due to the large portfolio divestment in the fourth quarter 2024. Now on to the next slide for a look at the development in return on equity. The annualized return on equity for the first quarter climbed to 12%. The increase was driven by improvements in total revenue and lower financial expenses. The reported return on equity is all-time high in Axactor's history and is on par with the announced 2026 financial goal. With lower interest rates, improved NPL collection performance, strong 3PC growth, and a continued focus on cost, Axactor expects to deliver a return on equity at a healthy level throughout 2025. With that, I'll now hand it back to Johnny for some comments on the outlook.
Thank you so much, Nina. As previously mentioned, we expect the collection performance to continue to be around 100% going forward, and we expect the 3PC growth to continue with healthy margins. Declining interest expenses from bond buybacks and falling IBOR rates will continue, and it is worth mentioning that quarterly OpEx is expected to be reduced by approximately EUR 700,000 post-IT migration to a new infrastructure platform. We expect full revenue rate on IT savings from Q3. We will continue to see strong cash flow generation that will be used for both buying portfolios and to conclude the refinancing process. As I mentioned earlier, we expect to refinance ACR03 in 2025 well ahead of maturity, which is September 26. With that, we open up for questions.
Thank you. If you wish to ask a question, please press star followed by One on your telephone keypad now. If for any reason you want to remove your question from the queue, please press star followed by Two. When preparing to ask a question, please ensure your device is unmuted locally. Our first question comes from Gustav Larsson from Arctic Securities. Your line is now open. Please go ahead.
Good morning, and thank you for taking my question. First question regarding servicing: double-digit growth in all markets and 3PC revenue up now 28% year- over- year. Is this a temporary boost from soft Q1 last year, or can we expect this growth to continue throughout 2025?
First of all, I will not promise 28% growth going forward because that is an enormous number, but we expect 3PC to grow substantially also in the coming quarters. What we see here is that we are winning large market shares, especially in the Norwegian market, and also Spain is doing particularly well. We expect the growth to continue.
Thank you. Can you say anything about the potential contribution margin that can be reached in 3PC, given that you are signing more attractive contracts and I assume some operating leverage there as well?
We're not guiding specifically on the contribution margin, but it's obvious that if we continue to grow double-digit, we will be able to take out more scale effects. We expect the margin also to continue to gradually improve.
Okay, thank you. On investing then in the NPL segment, CapEx is still low. You are guiding for an increase towards the end of the year. Where do you think that you—in which geography are you expecting to buy most NPLs during this year?
We believe that it's like it was last year. We believe that Spain will be the market that we invest most. And like you say, it will be mostly towards the end of the year. It is correct. We have low investments in Q1, EUR 5 million, but we also had only EUR 11 million last year. So it's not a big difference. Q1 is very slow. We expect a little uptick in Q2, and then the majority of the investments will be later in the year, probably in Q4. That's when the majority comes in Spain. We also hope to be able to invest in the Norwegian market. We are open to invest in all of our markets, of course, but Spain will definitely be the biggest one.
Okay, thank you. Regarding refinancing, can you elaborate a little bit? You're saying you expect to issue bonds EUR 100 million-EUR 150 million. Will that be in NOK, or are you trying to do it in euros?
We haven't taken any decision on that, but the hypothesis now is that it will be euros.
Okay, thank you. That's all from me now.
Thank you, Gustav.
Thank you. As a reminder, to ask a question, please press star followed by one on your telephone keypad. We have no further audio questions, so I'll hand back to Johnny for any written questions.
Yes, we have a couple of questions here. The first one is personal expenses increased quarter- over- quarter with approximately EUR 1.5 million. Could you please comment which factors that contribute to this cost increase? There are two main explanations for this. First of all, the number of FTEs has gone a little bit up since we are increasing so much on 3PC. That is one of the main drivers. We have salary increases from Q1 that increase. If you compare this year over year, you will see that 2025 was actually lower on personal cost than compared to 2024. We have other operating costs. Is there any cost items to mention that drive up the total cost in the quarter? Yeah, as you know, we are in the middle of this migration for a new IT platform.
There are some one-off costs that are included in the numbers. I think we also mentioned in the presentation the level that we expect and when the full IT cost savings will start kicking in, and that is from Q3.
I think we also just added, Johnny, also on the total operating cost, that also the business mix between 3PC and NPL, since the share of 3PC is higher, it also has a higher share of cost, is also contributing to driving the total cost up in the quarter if we look at the nominal numbers. If we then again also look at the increase in total revenue of 15%, the increase in total operating expenses is only 8%. We are still having a quite good cost focus.
Thank you, Nina. That's correct. Next question. Can you elaborate a bit more about your decision to focus more on secured NPL investments? What risk do you see? Is it more OpEx-heavy? First of all, we have not a decision that says that we will focus a lot more on secured. I think it's around between 5% and 10% of our total book, closer to 5%. That is secured assets. We only do secured assets in Spain. We are also having a really quick recovery on the secured assets. I would say that the book is more or less constant in size on secured, and we need to invest quite substantially this year just to keep the secured book constant. I don't expect that the secured book will increase a lot relatively to the unsecured.
Regardless of that, the risks are more or less—there are no particular risks other than in the unsecured. You could claim it's less risk because you actually have security behind the claim. The price difference is, of course, different, but we believe that the risk-reward is even better in many of the secured portfolios that we are buying. It's, of course, a bit more OpEx-heavy because you need to go legal on some of the claims, and the legal process could be cumbersome and expensive. This is, of course, reflected in the acquisition price. Next question. Can you comment on the timeline for introducing dividends or repurchase of stocks? The earliest possible timeline, I assume, will be approximately one year from now if the board decides to give dividends based on the 2025 numbers.
Yes, those were the questions that we have received. Unless there are any new ones on the line, I think, yeah, there.
No, we have no further audio.
We got another one here. How can you describe the competitive situation on NPLs in different geographies? I would say that if you start with Spain, which is the most important for us, it is quite an active market. In general, we see less bidders in the auctions, and that goes for all the markets. Spain is competitive, but still the IRRs are better than a few years back. Italy, we have not been very active, and I also feel that there are less deals in the market. We have not done any large acquisitions lately. We did one in Q4, but we have not bought anything there in Q1. In the Nordics, I would say that there are, like I said, fewer participants.
We see maybe the market that we see the largest change is Sweden, where it used to be very, very active and a lot of bidders in the processes. Now we see far less. I think it will be easier to achieve reasonable IRRs in the Swedish market going forward. Finland, I would say due to legislation reasons, we are not active in the Finnish market. It is in many ways uninvestable until we are getting more clarity on how the Finnish government will handle payment-free months going forward and so on. We also see less activity in the Finnish market. In the Norwegian market, we have two to four bidders normally in unhealthy competition, but still we see that the price level is fair, and it is possible to achieve an okay IRR, I would say. Let's see. Here we have another one. It was a long question.
Axactor has reported strong revenue growth of 15% and improved EBITDA margin of 50%. That is not correct. The EBITDA margin is 50%, not improved too, but that is the level that we have normally seen when we have not done revaluations. How sustainable do you believe these assumptions are? Do you see any opportunities for continued profitability in the coming quarters? Yeah, we believe that the level we see now is more or less the level that we will continue to be at. Of course, this depends on collections going forward, but as long as we are able to deliver around 100% on collection performance, which we believe we can do, I do not see any large risks in the profitability.
We know that interest expenses will come down the next couple of quarters, and we believe 3PC revenues to continue to grow, and we have really good cost control. I would say that we are very confident when it comes to the margin as long as we are able to reach the collection curves. Here it says Axactor acquired NPL portfolio worth of EUR 5.2 million. Do you expect NPL investments to increase throughout? Yes. We stay at our current guiding. We believe it will be at least EUR 100 million. We have said in our annual guiding, it is not specifically for 2025, but it is in our financial targets. Over time, we would like to invest between EUR 100 million and EUR 200 million.
Like I said earlier, yes, it was a low amount in Q1, but the same was the case for last year, and last year ended up at EUR 128 million. Q1 is not decisive for where we end up in investment levels, so to speak. Yes, and I think I have touched upon this last part of the question. In our view, how would the market for such investment move forward? We believe that there will be ample opportunities. There are several deals in the market. We see the normal annual processes in more or less all markets are going as they usually do. I would say there is not a boom in volumes, but we also see that there has been, and we know that there are some large secondary portfolios in the market. It should not be a challenge to invest EUR 100 million at attractive IRRs.
Again, we also have said that we will make sure to prioritize the bond maturity. That is why we are holding a little bit extra back here in the first half until we have been able to refinance the ACR0 3 bonds. Okay, that was the last question we have received. Thank you so much for calling in, and I wish all of you a good day. Bye-bye.
This concludes today's call. Thank you for joining us. You may now disconnect your lines.