Hello and welcome to the Axactor ASA Q3 2025 results presentation. My name is Alex and I'll be coordinating today's call. If you'd like to ask a question at the end of the presentation, please press star followed by one on your telephone keypad. If you've joined us via the webcast, please type your question into the Q&A text box. I'll now hand it over to Johnny Tsolis, CEO, to begin. Please go ahead.
Good morning and welcome to Axactor's third 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 Q3 highlights. Then Nina will present the financials before I give an updated outlook. We will round off with a Q&A session. Let us move to slide three and have a look at the highlights for the quarter. In Q3, Axactor delivered double-digit revenue growth with solid contributions from both segments. Gross revenue grew by 11% year-over-year, and total revenue growth was 12%. It was also positive to see that the contribution margin increased by two percentage points. The numbers are adjusted for the divested portfolios in Spain and a positive one-off effect from court cash bookings that we had in Spain in Q3 last year.
EBITDA ended at EUR 33 million, up from EUR 27 million last year. The 23% EBITDA growth is driven by increased revenue in combination with strict cost control. Annualized return on equity to shareholders was 11%. We now see the positive effects from both changes in the IBOR interest levels and the reduced net debt, resulting in a 23% year-over-year reduction in financial expenses. One last item to mention is that we have secured the option to utilize our RCF to refinance the residual outstanding balance on our bond ACR03. This gives us high flexibility in terms of refinancing when it matures in September next year. Let us move to slide four for more comments on the collection performance. Q3 ended on the soft side regarding collections. Both July and September were good months, but August was slower than anticipated.
The collection performance landed at 98% for the quarter and 100% year to date. Going forward, we expect collections in line with the forecast. Moving on to slide five and more comments on the strong development in the 3PC segment. The 3PC segment continues to deliver impressive results. NPL is still the largest part of our business, but 3PC is a very important part of Axactor's business model. 3PC, which is a capital-like model, offers low risk and generates strong cash flows at healthy margins. In Q3, the revenue growth ended at 19% year-over-year. We saw growth in all markets, but still it is Norway and Spain where we can observe the strongest trend. In Spain, the growth is fueled by a successful partnership with a major investment fund.
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 expansions for 3PC, not only in Norway but for the total group. Let us move on to the next topic, refinancing on page six. As you are well aware, 2025 has been a year where Axactor has focused a lot on the balance sheet. The RCF is extended and matures mid-2028. Given normal circumstances and the long-lasting relationship we have with our RCF banks, renewal processes are doable at fair terms. In Q2, we placed our last bond, ACR05, at more than 3% better total interest rate than the previous bond. As mentioned earlier, we can use our RCF to refinance the remaining part of ACR03.
Axactor has now full flexibility with regards to the refinancing of the last EUR 65 million outstanding in ACR03. This means that we don't have any substantial maturities before towards the end of Q3 2027. We are continuing to work on our maturity profile, and the target is still to have more frequent and smaller bond placements than we have had historically. With that, I'll leave the word to Nina for the financial update.
Thank you, Johnny. Now I'll take you through the Q3 financial performance, starting with an overall figure and then a bit more context on what is behind the numbers. Gross revenue for the group ended at EUR 78 million in the quarter, down 9% compared to the third quarter of 2024. The decline was mainly a result of the sale of portfolios in Spain last year and a low investment level during recent quarters. Excluding the portfolios sold and a positive one-off effect from court cash bookings in Spain last year, the underlying like-for-like growth year on year was 11%. The NPL segment reported a gross revenue of EUR 63 million. Excluding the sale of the Spanish portfolios last year and the positive one-off, the gross revenue increased 9% compared to Q3 2024, driven by improved collection performance.
The 3PC segment continued to deliver a strong top line of EUR 15 million, up 19% from the third quarter in 2024. 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 10% compared to the third quarter of 2024, with a total revenue of EUR 46 million. Collection performance continues to fluctuate around 100% and ended up at 98% for the quarter. Year to date, the collection performance is at 100%. This affirms the collection forecast we provided after the Q4 revaluation last year, with adjusted ERC curves. The improvement in total revenues was also supported by lower net negative revaluations and a lower effective NPL amortization rate. The amortization rate was reduced to 22%, down from 33% in the third quarter of 2024.
The contribution margin ended at 79% for the quarter, up from 76% in the third quarter last year. The margin is supported by both rising total revenues and lower operating costs. Total operating expenses for the NPL segment decreased 5% compared to the third quarter last year. The decrease in cost level reflects the impact of our ongoing cost reduction and efficiency improvement initiatives. 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 19%. All countries with 3PC business delivered solid growth, with Norway and Spain being the main contributors. The 3PC growth is tightly linked to the quality of services we provide. During the third quarter, Axactor won approximately 80% of benchmarks they participated in.
The solid benchmark performance means that Axactor has allocated a high share of the volumes going forward. Axactor's quality focus confirms the company's intention to continue investing in competence and improved solutions. The contribution margin was 36%, down from 37% in the third quarter 2024. The decline in margin year-over-year is related to the implementation and build-up phase of new contracts. Further expansion in the 3PC segment is expected going forward based on the strong momentum across all four geographies, supported by a solid pipeline for new business and the implementation of recently signed contracts. 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 62 million, up from EUR 55 million in the third quarter in 2024, up 12% year-over-year.
The reported EBITDA ended at EUR 33 million, with a strong EBITDA margin of 53%. We continue to see results from our cost reduction and revenue growth initiatives. Cash EBITDA ended at EUR 49 million for the third quarter, compared to EUR 59 million in the corresponding quarter in 2024. The reduction is mainly due to the sale of the Spanish portfolios last year. Now on to the next slide for a look at the development in return on equity. The annualized return on equity for the first nine months reached double digits, coming in at 10%, increasing to 11% when excluding NRIs. This result was mainly achieved through improvements in total revenue and lower financial expenses. With lower interest rates, improved NPL collection performance, strong 3PC growth, and a continued focus on cost, Axactor expects to maintain a healthy return on equity.
With that, I'll now hand it back to Johnny for some comments on the outlook.
Thank you so much, Nina. As I've already mentioned, regarding refinancing, Axactor is well positioned with no major maturities in the next two years. We expect the collection performance to continue to be around 100% going forward. We will now shift focus from refinancing to investments, and we expect a pickup in accretive NPL investments going forward. We believe, however, that the Q4 investments will be a bit more moderate than normal, and we expect to invest EUR 50 million-EUR 100 million for 2025. The reason for the relatively modest investment level is that we were holding back on investments in the first half of the year as we were safeguarding until we had the refinancing of ACR03 in place.
We continue to see strong momentum in the 3PC segment with several large new 3PC agreements secured during the quarter, and we will ensure continued double-digit growth for the next 12 months. One last point to mention is that we are in advanced discussions with regards to a smaller-sized portfolio backbook sale. We will revert with more details in due course. With that, we open up for questions.
Thank you. As a reminder, if you'd like to ask a question and have joined via the telephone lines, please press star followed by one on your telephone keypad. If you have joined us via the webcast for today, please type your question into the Q&A text box. Our first question for today comes from Ulrik Zürcher of Nordea. Your line's now open. Please go ahead.
Thank you. Thank you for taking my questions. I have a couple. First, I was just wondering if you are guiding or indicating that 100% collection performance, but I was just wondering, have the uncertainty increased in any sort of like fundamental way? By that, I mean, like are there any regulation, cost of living budgets, or stuff that was challenging last year? Maybe that's on the horizon, or is it a stable operating environment?
Yeah. The only thing that comes to mind is that in Finland, we were expecting a reversal of, or at least a partial reversal of payment-free months, and we were expecting new legislation from January. That has been postponed, and it's uncertain when and if that will happen. That is the only thing that I can say in regards to regulations. Yeah, I think that at least is the most important one.
Okay, that's great. Just two questions on the NPLs. Do you have any indication or expectation for the investment target range for 2026? I'm just wondering how the IRR that you're seeing on available volume compares to your backbook.
Yeah. I think the target range should be the EUR 100-EUR 200 million that we also have in our financial targets. I think that is the best estimate that we have for 2026. Regarding IRRs, I think it's fair to say that there is some pressure on IRRs in the wrong direction for us, not substantially. Compared to the backbook, it's still accretive.
Okay. The last one, I was just wondering about the potential sale of the small backbook portfolio. Is that to release some RCF capacity for potential refinancing, or why are you doing it?
No, it's just a smaller one. No, it's just if we do this, this is a mature old backbook in one of the countries, and we will only do it if we get a good price for it. It's just more like a normal adjustment of the portfolio, basically. It's not going to be anything near the size that you saw last year, for example.
Okay, got it. Yeah, thank you so much.
Thank you, Ulrik.
Thank you. I'll hand it over to the management team for any written questions.
Yes, thank you. We have the first question here: could you elaborate on how covenants would have looked if we adjust the Q3 figures for the positive impact from the Spain sale in Q4 2024?
To be honest, we haven't done that calculation, but I would expect that we would have been compliant.
Next question is, bond spreads have tightened significantly recently. Do you have any comments on what your spread required to issue a new bond prior to September?
I don't have a fixed number, but I still think that even though we have tightened, I think there's still potential. If you compare our spreads to others in the industry, we are still paying way more. I think that by delivering a few good quarters, hopefully, our spreads could be even more fair. I think that is what could lead to a bond placement during next year before it expires in September, the ACR03.
Yes. The next question here, how will the smaller backbook sale impact covenants?
I don't have a separate calculation for it, but obviously, it will impact positively.
I can just also add that a small backbook sale will have a positive impact both on the cash EBITDA and also then reducing the net interest rate and debt, which are two very important parameters when we calculate the covenants. As you said, Johnny, it will have quite a positive impact.
Yeah.
Next question, do you expect portfolio purchases to pick up in 2026? Listening to Hoist, there seems to be no shortage of portfolios for sale.
I can agree on that. There's a lot of portfolios, but it also has to be a good business case. I think it will pick up because this year, as we have said, this is on the low side because we had to hold back on investments for the first half of the year because of the refinancing process that we were focusing on before the summer. We expect the investments to be in the area of up to EUR 200 million next year.
What plans do you have for dividends to shareholders?
We don't have any plans for it. This is up to the board to decide. Based on the financials for 2024, they will decide whether or not to pay dividends.
That was all the questions we have here. Are there anyone else on the audio?
Yes, we have a question from Rickard Hellman of Nordea. Your line's now open. Please go ahead.
Thank you. You have a very strong growth in 3PC, which is, of course, very encouraging. Can you give some more flavor or meat on how you have been able to achieve this? Is it something special around it or any specific subsectors that you are targeting or other aspects of it?
It's primarily two areas where we are growing in all countries. Double-digit, basically, have done for a while. It's especially in Norway where we have been able to capture a large part of the bank finance market and especially the auto market. With this huge win we had before summer, this is giving, of course, a tremendous growth in the Norwegian market. It's not only this one large client. We are winning a lot of attractive bank finance clients. We aren't only in bank finance in most countries. In Norway, we are actually in SMEs as well. The high growth is coming from bank finance. I think here it's fair to say that some of our competitors have been struggling for a while with quality. I think we have been able to deliver high quality at a reasonable price. That seems to sell well in the Norwegian market.
In Spain, we also mentioned it in one of the slides. In addition to the very strong position we already have in Spain, having most of the large banks on our 3PC client list, we have also started to work together with a large investment fund. Where they are buying portfolios, we are helping them sometimes with the deal sourcing, cooperating on the underwriting, and they have been buying the portfolios. We have been getting the 3PC at favorable market terms. It's Spain and Norway that is really driving the growth. In the other markets, we have seen that it has been a potential to increase the prices, especially in Germany. In Italy, the growth is steadily around 10%. It's mostly upsell on existing clients. There's no new large clients, but it's upsell.
Okay. I'll follow up on that. As I understand it, with some large contracts and also the impact from this investment fund in Spain, in generality, can you say, are you taking market share or do you see higher volumes from your customers?
In Norway, we are definitely taking market shares. The volumes are not that much higher than compared to last year, for example.
Okay. This large contract in Norway has not impacted Q3 for Q4, isn't it?
Yeah, that's true. It started off now, 1st of October. You haven't seen the volumes from that contract yet. It will gradually, it's so large volumes that it will be gradually building up. The largest product we will probably onboard in Q1, maybe last part of Q1 next year.
Okay, okay. Thank you very much.
Thank you.
Thank you. At this time, we currently have no further audio questions.
Okay, but there's no other questions on the line here as well. I just think I could close the call here. Thank you so much for calling in, everyone, and have a nice day. Bye-bye.
Thank you all for joining today's call. You may now disconnect your lines.