Hello, and welcome to Axactor ASA presentation of first quarter 2026 results call. Please note that this call is being recorded. After the prepared remarks, there will be a question- and- answer session. If you would like to ask a question during that time, please press star followed by one on your telephone keypad. You can also ask questions via webcast platform by clicking the Q&A icon. I'd now like to hand the call over to Johnny Tsolis, CEO of Axactor. Please go ahead, sir.
Good morning, and welcome to Axactor's first quarter presentation. With me today, I have our CFO, Nina Mortensen. This presentation will be divided into four parts. First, I will take you through the highlights. Nina will present the financial update before I will go through the updated financial targets. We will round off with a Q&A session. Let us move to slide three and recap the most important event that actually happened after Q1 this time, the private placement we announced on April 28th. As you now know, approximately four weeks ago, we announced the transformational transaction where Fortress came in as a major shareholder in Axactor with an ownership stake of approximately 30%. The transaction consisted of three main elements. The first part was a EUR 200 million private placement that was subscribed at the price of NOK 4.70.
We also announced that we would do a subsequent offering and this has now been launched. More about this in a few minutes. Secondly, we have established a co-investment partnership with Fortress, which will ensure strong investment capacity going forward. This will also be a driver for capital-light revenue growth. Thirdly, as part of the transaction, the company will divest a seed portfolio that will generate approximately EUR 100 million in proceeds with closing in Q2. Please note that KPMG has issued a fairness opinion to the Board of Directors of Axactor ASA, stating that the transaction price is financially fair. In addition to these three elements, the company announced that Axactor's book value of NPL portfolios is to be assessed in Q2 2026. We have no further information on this point as of now, other than that the work has started.
As a last remark, the Fortress partnership enhances Axactor's underwriting capabilities through a separate agreement ensuring access to Fortress underwriting knowledge. On the next page, we will repeat the most important profit growth drivers that will occur as a result of the transaction. In principle, there are four major net profit drivers that will derive from the transaction. The first one is deleveraging. It will happen immediately, and the effect is instant. Both the interest burden and the balance sheet risk will be reduced. Second, the transaction offers improved opportunity to refinance and to optimize cost of funding. This will lead to structural savings on interest expenses. The third driver is the opportunity for substantially higher investment levels going forward. It will be a step change in investment capacity, generating higher revenues from portfolios. It will unlock the opportunity to purchase attractively priced portfolios available in the market.
Lastly, from day one, we will experience a 3PC uplift from servicing of the seed portfolio, and over time, the co-investment portfolios will contribute to growth in reoccurring asset-light revenue streams. To summarize, the transaction is vital in creating net profit growth going forward. In fact, the positive effects has already started to materialize. Please move to the next page. Already the week after the announcement of the private placement, we issued a new four-year, EUR 100 million bond. It was done at 390 basis points plus Euribor, which is more than 50% lower than the total cost of our largest outstanding bond, ACR04. We noted high interest for the new bond, which was more than 2x oversubscribed.
This bond issue confirms a strong confidence for Axactor in the bond market, and it is a testament to what we said when we announced the equity transaction, that the substantially lower leverage ratio will give a significant payoff in terms of lower interest expenses. Actually, for Axactor, this marks a step change in funding cost. More about this on the next page. I think it's worthwhile to develop it on what this will mean for Axactor going forward. As we replace the current bonds at improved margins, our interest expenses will be significantly reduced.
As an illustrative example, if we place two more bonds at the same terms as ACR06, 390 basis points plus Euribor, and remaining proceeds from the transaction to reduce the RCF draw and to repay ACR03, the quarterly pro forma interest expenses will be reduced with approximately 40%, from EUR 19 million a quarter down to EUR 11 million. This will, of course, have a significant impact on Axactor's profitability. Before I leave the word to Nina, I would like to remind you about the ongoing subsequent offering. Please move to the next page. As you are probably aware, the subsequent offering was launched earlier this week on Tuesday. The subscription period will end on June 8th, close of business. You can find detailed information on how to subscribe on our website, along with other useful information regarding the subsequent offering.
With that, I will leave the word to Nina for a 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 75 million in the quarter, down 3% compared to first quarter of 2025. The gross revenue decline comes mainly as a result of the portfolio sales in Spain and Germany last year and the low investment level in 2025.
The NPL segment reported a gross revenue of EUR 59 million. Excluding their portfolios sold last year, their gross revenue decreased 2% compared to Q1 2025. The 3PC segment continued to deliver solid top line of EUR 16 million, up 5% 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 total revenues in the first quarter of 2026 of EUR 37 million, down from EUR 50 million in the first quarter of 2025. The reduction comes mainly from negative net revaluations of EUR 9 million booked in the quarter. The effective NPL amortization rate increased to 21% in the first quarter, up from 17% in the first quarter of 2025. The NPL collection performance was 94% for the quarter, affected by challenging collection environments in several of Axactor's countries of operation.
The contribution margin was 71% for the first quarter 2026, down from 77% in the first quarter 2025. Reduction was driven by the lower total revenues. Total operating expenses for the NPL segment were reduced by 7%, driven by lower costs related to the sale of repossessed assets. As Johnny mentioned earlier, there will be a step change in investment capacity going forward, enabling solid future growth from the NPL segment. Please turn to the next slide for comments on the development in the 3PC segment. The 3PC revenues ended at solid EUR 16 million for the quarter, up 5% from the corresponding quarter last year. The first quarter 2025 saw positive one-offs impacts on a specific contract in Spain, limiting the growth for the quarter. Adjusted for a one-off impact, the underlying year-over-year growth was 12%.
The Norwegian business continues to grow on the back of recently signed contracts, and the German market is also performing well. The contribution margin ended at 37%, up from 33% in the first quarter 2025. The contribution margin is improving through the revenue growth, along with stable operating expenses. Further growth in the 3PC segment is expected going forward based on a strong underlying momentum across countries, supported by a solid pipeline for new business and the ramp-up of recently implemented contracts. Let us move on to the next slide, where I will present more details on the reported financials. Total revenue at group level ended at EUR 53 million compared to EUR 65 million in the first quarter of 2025. The decline is driven by lower gross revenue and negative revaluations made during the quarter.
The reported EBITDA ended at EUR 22 million with an EBITDA margin of 42%, impacted by the revaluations made during the quarter. Total operating expenses were down 5% compared to first quarter in 2025. We are able to maintain lower operating expenses as a result of both our ongoing cost initiatives and benefiting from a continued cost-conscious approach across the company. The total operating expenses as a percentage of gross revenue ended at 41% for the quarter, down from 42% in the first quarter 2025. We uphold the cash EBITDA at a good level for the quarter, ended at EUR 45 million. With that, I'll now hand it back to Johnny for additional remarks on the new financial targets.
Thank you so much, Nina. As we announced in connection with the private placement, we have introduced a new set of financial targets. Since these were thoroughly introduced as part of the transaction, I will keep this short. We target to invest between EUR 200 million and EUR 400 million annually in NPL portfolios. Further, we target to deliver an annual average growth of 10% on 3PC. We aim for a return on equity that exceeds 15%. Regarding leverage, we will focus on keeping a moderate leverage ratio to create an optimal capital structure. The target is to have a leverage ratio between 2.25x and 2.75x. When it comes to total shareholder distribution, we aim to pay a minimum of 50% of adjusted net profits distributed through cash dividends and/or share buybacks. We target the first shareholder distribution in June 2027, when we expect all current outstanding bonds to be refinanced.
With that, we open up for questions.
We are now opening the floor for question- and- answer session. If you would like to ask a question, please press star and then one on your telephone keypad. You can also ask questions via webcast platform by clicking the Q&A icon. Again, if you'd like to ask a question, please press star followed by one on your telephone keypad. Thank you. We will pause for a brief moment to wait for the questions to come in. If you'd like to ask a question, please press star followed by one on your telephone keypad. Thank you. As of right now, we don't have any pending questions in the conference line. I'd now like to hand the call back to Johnny Tsolis to address the Q&A webcast questions.
Thank you for that. Yes, not so many questions here either. We have one. Probably not the big surprise since the Q1 numbers were already released one month ago. We have one here. It says outlook for 2026 were positive and collections were above 100%, then they suddenly dropped dramatically for Q1. Did all the problems occur after the presentation of Q4? What was the collection performance per month, and what was the collection April? Let me start with the easiest one. We don't disclose collection data per month. I have to say, there is no dramatic drop in the actual collection. We have a normal decay in the collections of 2026. However, as described in the Q4 report, the 2026 curves did rely upon some improvements on certain relevant macroeconomics parameters that has not materialized.
In every quarter, we have disclosed the curve shape, and there it's for everyone to see that we have expected an increase in collection in 2026, which we are unfortunately currently not reaching. This is the main explanation for the drop in the reported collection performance. How can your collection be so poor relative to Hoist and B2? You are in the same markets. It's impossible to just compare like this. We have some overlapping markets, but we are also very different as companies and in terms of segments and when the debt is bought, and it's also on how you book the portfolios, at what IRRs you book it on and so on. It's not a very relevant comparison, to be honest. That was the questions that we have received.
With that, thank you all for calling in, and I wish all of you a good day.