Good day and thank you for standing by. Welcome to the VEF AB second quarter 2025 earnings conference call and webcast. At this time, all participants will be in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, please press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please note that today's conference is being recorded. I will now like to turn the conference to the VEF AB speaker, Mr. David Nangle, CEO. Please go ahead, sir.
Thank you, Razia. Good morning and good afternoon, everybody, and specifically good morning to everybody in New York where I'm doing this call today. Welcome to our Q2 results presentation conference call off the back of our results, which were announced this morning. With me, as always, on the call is our CIO, Alexis Koumoudos. Quite a focused presentation for you today. We've got 14 slides in total with 10 active. We'll do that quite quickly and in a focused way, giving you the highlights and where we're thinking about everything in life at VEF and then happily open up for questions. Before I get into the deck itself, maybe just some general opening comments on what we're seeing at VEF and through the prism of the markets.
What I would say is that 2025 this year, it does continue the improving trend that we're seeing, that we have seen gradually come through since the 2022, early 2023 lows for both public markets and our industry specifically. These trends that we've seen evolve through 2024 into 2025, month on month, quarter on quarter, is something that I continue to talk about in forums, in the markets, and write about in our investment letters and in quarterly reports. Specifically, there has been a public market supportive backdrop year to date. You see that obviously in the main indexes out there. Specifically to emerging markets and risk assets, it's been even more so, and we've been accelerating and outperforming. That's a nice backdrop to everything that we do. Importantly within that, capital is flowing. Capital is flowing into funds that invest in private companies. Capital is flowing into private companies.
More rounds are happening. We see that through the prism of our portfolio. Finally, capital is flowing out via exits. This is something that was tumbleweed maybe two, three years ago, but has been picking up pace and momentum, even to the point where nearly IPOs are becoming a trend. Not to get ahead of ourselves, but IPOs, M&A, secondaries, more exits are happening. You see that at VEF. On a macro level, growth is picking up and interest rates are broadly falling in a lot of parts of the world. In FX, the currencies that we're exposed to are strengthening versus the US dollar year to date. A lot of positive trends happening in our world, incrementally building up momentum month- on-m onth, quarter- on- quarter. This is everything that we see. We see it through the prism of our portfolio and our daily business.
Against this, general comments. We're still early in the cycle. We're very open and honest about that. It's the best-in-class funds that are raising money, best-in-class fintechs that are exiting. That's the way it should be. We saw it with Juspay recently at VEF. I think the investment company universe, which is focused on this space like ourselves, has been a little bit lagged in catching up, but you can feel that momentum building now in everything we do. There are general comments on the backdrop of everything we see. Getting specific into the investor deck for the quarter, on slide number two, what we saw in Q2 from a NAV point of view, up 6%, 6.1% year to date, up high single digit, or 5% quarter- on- quarter.
The main drivers in this quarter, and it's different every quarter, were mainly on the market side, with multiples being a nice tailwind as were FX and key markets like Mexico and Brazil specifically, when you look at a name like Creditas. The portfolio, continued message on this front around the portfolio. One, the risk, generally the risk-rewarded portfolio is much better than it's been for a long time, with majority breakeven and growth is now back in focus. We've got a nice slide on this, focusing on our biggest companies. We expect 30%-35% revenue and gross profit growth aggregated across the portfolio over the next 12 months. This is all NAV tailwind effects that we expect going forward.
Specific to that and our biggest asset in Creditas, you see the lead generation fact of loan originations up 44% quarter- on- quarter or year- on- year for the Q1 numbers that came out recently. That then drives the loan growth up double digit year- on- year and accelerating. We'll see that into Q2. That then drives the income statement. There's always some volatility on a monthly quarterly basis, but the trends are very clear around putting the foot back down on managed cash flow positive growth. Exits continue, and I think this is very important for the industry and for VEF . We have a slide we focus on exits and IPOs within the industry at large, but it's only important when those broad market trends actually impact us here at VEF and our shareholders through the prism of everything we do.
We've had three exits in the last 12 months. We've tapped the IPO market in India with BlackBuck. We've had a trade sale in Brazil with Gringo. We did a nice secondary sale or partial sale of our Juspay position recently in India. That $37 million comes in, it strengthens our balance sheet, and it gives us healthy options around capital management and capital position. What we've been doing with that, and this is consistent messaging, delivering on promises around exits, using that capital in a kind of an investment management 101. It's almost the playbook. It's the right thing to do. We're joined at the hip, I think, with most of our big investors in the actions that we're taking. You know, pay down almost half of our remaining debt, SEK 160 million.
In the quarter, it was nice to do that early partial pay down that we had obviously linked to our bond notes. We started our buyback program, doing $4 million of buybacks of our shares at these levels in the quarter, something we will continue to do and look forward to doing, when our shares trade at a healthy discount to NAV. One of the positives of trading at this discount is our ability to put capital to work in our own shares and our own portfolio at a NAV that's justified by the recent exits and fundraises that have been done across the board. A lot of that, I'll say, is investment management 101. You know, why people are with us on this journey, where is our strength, where's our IP and our edge? It's really in pipeline.
It's in finding the next Creditas, Juspay, EasyCo, Tinkoff for our portfolio for investors for long-term growth. That's where we're spending an increasing amount of our time because we are obviously delivering on the short-term value accretion via balance sheet management. We're very much looking to the medium to long-term value accretion by adding the next portfolio winners as we go. On slide three and four, very briefly before I hand over to Alexis, specific to numbers, the NAV for the quarter is approximately $375 million. That is up 6% year to date. We have a bit of a tailwind in where the NAV on a dollar basis is going, up slightly higher on a NAV per share US dollar given the buybacks that are coming through. That accretion is also helpful on a per share basis.
From the SEK side, the krona, there's been obviously strength in the SEK versus the dollar. We've got negative high single digit on SEK, both NAV and NAV per share year to date. On slide number four, what you're seeing from a dollar, we think in dollars when we're investing, and we're talking to our investors for the most part, we're seeing that NAV starting to, A, stabilize, but, B, pick up as we move from Q1 now into Q2. NAV per share, obviously, will have a nice kicker as we go, as we continue to buy back our shares at these levels for as long as they're at a decent discount. I think we'll continue to do that. From here, Alexis, I'm going to pass over to you so you can talk about the valuation metrics for the portfolio in the quarter and the key moving parts there.
Thanks, Dave. Hi, everyone. On slide five, we just showed the valuation approach and key takeaways for the portfolio in the second quarter. As you can see, 43% of the portfolio is valued at latest transaction, with the transactions in Juspay and Konfío making up the bulk of this, and the remaining 57% of the portfolio valued at mark-to-model. There's been no meaningful changes in the quarter to valuation methodologies, I'd say. The greater contribution from mark-to-model portion of the portfolio is just reflective of the value change in that side of the portfolio, whilst latest transactions by nature have stayed static, despite some of the market tailwinds. Moving on to slide six, this shows the NAV bridge and the breakdown of the growth in NAV in the quarter, which we've been showing for the last few quarters.
Overall, $17.5 million growth in NAV was fueled by, one, the strong equity market performance and the impact of that on comps for our mark-to-model portfolio. Secondly, as Dave mentioned, the FX tailwinds and particularly from the Brazilian real. I'd say one other point to point out here is, in the quarter, we baked some more conservatism into some of our modeling, given some of the macro uncertainty that we're seeing right now. Other things to point out, I think on the cash and corporate side, you can see Juspay and BlackBuck cash coming in, partly offset by $4 million of buybacks or so that we've done in recent time. The fewer number of shares outstanding, you'll see NAV per share growth of 6.9% versus the 4.9% in NAV growth quarter- on- quarter.
There's a small FX headwind on corporate cash, which is just the translation impact of SEK strengthening versus the dollar on our outstanding bond balance. Slide seven. Just to reiterate what I think David said in his opening comments as well, we remain confident in the high-quality portfolio that's now delivering profitable growth. The important message is that the portfolio is growing revenues and gross profit at 30% - 35% respectively from a self-sustaining base. By that, we mean the portfolio is almost entirely cash flow neutral positive. We're seeing this growth manifest in Creditas's reacceleration of originations that David mentioned, and also in some of the other key metrics across the portfolio. I think David in the next slide will cover some of that in Konfío and Juspay that we're seeing. The environment for fundraising is improving, and we've seen that in the Juspay and Konfío rounds.
We feel confident that other names in the portfolio will be able to attract capital from a position of strength at or above our NAV marks. Back to you, David.
Super. Thanks, Alexis. I've got three slides before I wrap up, but maybe just one overlay to what Alexis said. This is just, you know, off the back of, I mean, following the Shinevic results, for example, and how they reported and some conservatism baked in in their evaluation process. I think our end, you know, as you see the markets performing multiples, FX, you take one eye in your forecast and you can just bake in some more conservative estimates as you go, which is quite a nice thing to be able to do and watching your companies, you know, over-deliver what you're baking in. Also, with half of our companies marked the last funding round, some of those funding rounds were now nearly as long as 12 months ago. The valuations in those companies have not benefited clearly from a mark-to-model FX market's multiple tailwind.
We're feeling quite nice around the conservative bias and balance to our portfolio valuations at this point in the cycle. Moving forward to slide number eight, you know, growth is key. We are growth investors. We're quality investors. It is nice to see after a period of real focus on getting to cash flow positive sustainability and businesses, which I think was a very good exercise for all of our portfolio and the industry at large. Not everybody made it, but, you know, a very healthy exercise. It's important that you get back to growth and sustainable growth. This is our three biggest companies. This is all public information shared via a variety of sources. Creditas, obviously, I talked at start about that origination growth, loan origination growth picking up quarter on quarter and feeding into 44% year on year origination growth.
That feeds through to the 11% loan portfolio growth, which has been accelerating from single digit the quarter before. That will pick up again in Q2. That then feeds into the income statement with a lot of moving parts within that. This is what we want to see at this point in the cycle. It's not V-shaped. It's U-shaped. It's gradual. It picks up and it builds momentum. Juspay actually never really missed a beat around growth. It's a less cyclical payments business as opposed to the likes of Creditas and Konfío, who have got, you know, their businesses built around credit, which can be quite cyclical in nature in these markets.
The 60% year-on-year net revenue growth is indicative of the year-on-year trends happening at Juspay and their payments business, both from a volume point of view and an income statement point of view, both at home in India and now as they start to succeed abroad. Finally, Konfío, this is 40% portfolio growth and even faster on the origination growth. This is just Q1 data, all official source data that we're allowed to share. Just very good to see these. I'm in New York this week with Konfío. They've got a board meeting here tomorrow with the full board in town for that. It's just very good to see these companies having got through another stress window. We like our companies being stressed in downturns, coming out stronger, and then putting the foot back down on growth. Slide number nine.
We could have done five slides on capital in the system. There's so much data points out there, coming from the market, both globally and then domestically in a lot of our specific markets. As I did say, there's a lot of capital now coming into the markets again, whether it be international over U.S., whether it's EM within international, whether it's private versus public. We're not getting carried away. This is not a wall of money. We're not back to 2020 and 2021, which was unhealthy and too hyped. We're seeing a gradual return to normality, and we like that. What's incentivizing that or enticing that is that we're seeing capital be recycled via the exit system, IPOs, M&A, secondaries. The market generally gravitates towards IPO data for sentiment because it's the flashy IPO that you get. We did see some big fintech IPOs in the U.S.
in the first half of this year around Chime, eToro, and then Circle on the stablecoin front. Names which have been, you know, plenty of names are there, which have filed in close to Sweden, obviously Klarna in the U.S. on the wealth management front, Wealthfront. Very interesting to see IPOs coming out in size and shape, benchmark names performing post-IPO, and it's off the back of healthy markets. Specific to our markets on the IPO front, India is probably the healthiest IPO market in emerging markets and one of the healthiest in the world. We recently did an IPO of BlackBuck in our portfolio. Two payments companies, which have been, you know, either in the news or officially filed for IPO in Pine Labs and PhonePe. We look forward to these companies being listed.
More peers, more listed fintech in our world is always welcome, and welcome peers for companies like Juspay in our portfolio. Second last slide is around our balance sheet and the capital in. You know, once again, it's very nice when we can make promises to the market and we can meet them. Delivering exits is hard. Delivering exits in certain timeframes is hard, but we wanted to deliver exits. We've delivered three across different portfolio companies. The top left-hand chart, this is slide number 10, has allowed us to go from a cash position of $12.8 million at year-end to a cash position at $20.8 million at the end of Q2 at an $8 million uplift. Obviously within that, we put capital to work in paying down our debt and also buying back our shares.
A lot of value accretion and balance sheet management, classic investment management 101, which we're very happy about. Obviously we're in a net deposition as a net positive deposition as a result of that. A little slight negative in terms of what we owe to the market, cash versus debt outstanding. Very happy around this. As I kind of say to the team, a lot of this is, it's a lot of work to get to this position to deliver all these outcomes, but this is investment management 101. If you had the book from Buffett or anybody else, we are doing the playbook, obviously suited to work the best business model. What we should be doing around shareholder value accretion, balance sheet management, capital management at this point in the cycle with the capital we have, with our shares trading where they are.
Where our IP and our real edge is, is really in investing. The pipeline work is getting very interesting. We're very happy with some of the names you see at the top of our portfolio, very much focusing in on doing more work so that we're ready for capital to work in the next future winners in our portfolio as and when the time is right and our capital position is right, which we're foreseeing is not too far away. Final slide, just to wrap up, and it's kind of reiterating these points again, but we're, it's a very simple business. We're in a very clear place. Momentum is behind us. We reiterate and then we execute on the clear plan of what we're doing. We add something in each quarter as something becomes more important. It's always all about the portfolio.
Without a strong portfolio as an investment company, you're nothing. It's the lifeblood of your company, quality companies that are growing, that are profitable, that are able to raise capital. They can grow, they grow your NAV, they have an ability to exit. You can then, the exit front, the exit markets are back globally. They're alive, they're well. They can be healthier for sure. It's still early in the cycle, but we are turning NAV into dollars at NAV levels. We've done it in three companies. We look forward to doing more. We've got a lot of workstreams going on on that front, but we're under no stress to sell any of our companies at the wrong price. That's the position I want to be in as an investment manager.
We're doing the right things on capital allocation, or at least we feel we are, and more to be done. More capital in from any exits goes straight to buying back our shares at these levels, ultimately trade at a healthier level to NAV. We're going to get there. That is our plan and our focus of the firm. The pipeline is the medium to long-term value accretion at VEF and for us and for our shareholders. I will stop there, operator. I'm very happy to answer any questions from the market at this point.
Thank you. As a reminder to ask a question, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Once again, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We are now going to proceed with our first question. The questions come from the line of Linus Sigurdsson from DNB Carnegie. Please ask your question. Your line is opened.
Good afternoon, guys. Thanks for taking my questions. Could you perhaps start with giving some more color on this negative contribution from portfolio performance in the mark-to-model holdings? I appreciate you talking about this conservatism in the presentation, but is this more of a general haircut or is it baking in, say, a negative macro scenario? How should we think about this?
Yeah, thanks, Linus. How are you doing? Let me start, Alexis, and then you can overlay with detail if you don't mind. I think this is just logical. What we're seeing in the markets is a lot of volatility on the macro front. It hasn't really impacted our company so far, be that in Mexico, India, and Brazil and the key ones. When you see volatility, whether it's the tariffs, whether it's the potential impacts on rates, whether it's, you know, volatility around trade flows, you want to be a little bit more conservative in what you're forecasting just in case. Nothing we're seeing in the numbers so far makes us concerned. One, it's emerging markets in the globe that we live in today. You cross-reference that with tailwinds that we have around FX and multiples in the portfolio.
You've got a nice buffer of tailwinds of valuations being uplifted from the strength and performance of these metrics through your valuation models. You sit down as a team and you just bake into more conservatism for the quarter. I don't think it's anything more than that. It's not case specific. We're worried about a certain company or market specific. We're worried about a certain, you know, macro in this environment. I think it's just healthy conservatism, you know, at a point where we've got a number of forces, either volatility on macro or nice strength in tailwinds from multiples in FX. Alexis, do you want to jump in on that or are you happy with what I said?
Yeah, I mean, I don't think I've got anything more specific to add other than I would say the macro uncertainty we're referring to is mostly around rate outlook and the impact of that on credit, like across the portfolio, basically.
Got it. Thanks for that clarity. A question on Juspay. You highlight the strong growth momentum here on page eight. Could you give perhaps some more color on operations, like what's working well, what are the main challenges at the moment, et cetera?
Cool. I think the question line is how long have you got? Alex, why don't you summarize the good stuff?
Yeah, I would say, so Juspay is made up of two core businesses. One is like the merchant business, which is serving very large enterprise clients in India predominantly. We're seeing a real reacceleration of the growth in that business. I'd say in the past year, the second business is the UPI business. The UPI business was growing much faster and the mixed impact. You can see in that slide that TPV was growing faster than revenues. That was the mixed effect of the UPI business growing much faster. We're starting to see a real reacceleration of the merchant business. Actually, I think the merchant business is going to be growing quicker than the UPI business this year.
The other trend that we're starting to see is real traction on the international front. Still coming from a very low base of revenues, we're talking about low single-digit percentage contribution on revenues. We are starting to see contracts being signed with some benchmark names in other international markets that can become quite meaningful and really start to gain traction in those markets. We're really excited about that. I'd say those are the overarching themes and what's kind of happening at Juspay today.
Yeah, I think it's clear, Alexis, and just to follow up, Linus, a lot of our companies do tend to succeed in their home market, and that's where they have the edge. We're always a little bit nervous of companies going outside their home market to conquer a neighboring market or the world. It's fraught with more difficulty as much as delivering at home is hard. Juspay has been very logical about their expansion strategy and what they've done, going with partners to markets of Southeast Asia, by going to markets like Brazil, which have a very similar payment system with PIX versus India and UPI. I guess without baking in any upside to international in our forecast, we've been, as Alexis said, we've been positively surprised by the early signs of what they're doing.
All right, that's much appreciated. My final question is around capital allocation, just some clarity. I mean, now that you've executed on some debt pay down, you've started doing buybacks, you're spending a lot of time talking about the investment pipeline. How should we think about prioritizing between these three just in the near term?
Yeah, thanks. We do talk about it a lot because it's super important. We tend to reiterate a lot because it's just to get good, clear to get the message out there. I think there has been, you know, we weren't even talking about pipeline a couple of quarters ago when we talked to the market. We were very much talking about exits and then delivering the balance sheet and buying back our shares. We couldn't see beyond that.
Now that you deliver three exits, you've paid down the chunk of debt that you say we've got low level, single digit debt to NAV, it's 5% or 6% from memory or even less. You're looking at, you know, you're looking for your shares and all those obvious capital work and bringing back all the portfolio. You probably don't believe in NAV, but we believe in when we talk about conservatism and buying back our shares consistently through these windows is just the most obvious thing to do. We also see the share price moving. We also see more, you know, we're starting to get things are moving in the right direction on those fronts. As those things start to move, you start to think more about the medium and long term. Not that we stop, we start to allocate more time to them.
Pipeline had always been building in the background, but it's a window whereby, and I think it's two or three names, and not to get too specific, that really have us on the hook that we're focused on, that we're excited about, that we're getting deeper and deeper on so that we can get to a point where we have conviction one way or the other on a name or two names or three names. These things work in parallel with your share price, with the capital income exits, and how you manage them things.
I would still say, I think of the three parts of that capital allocation aspect, I think the priority in my head right now, this is today, and these things move because of the moving parts, is the share buyback because that's the most obvious IRR value accretive thing we can do given the recent pay down in a chunk of the debt and given where the pipeline is today versus where it's going. I think it's going to be quite fluid, Linus. I think we'll continue to make real-time decisions. We'll let math be a key driver in the short term, buybacks, but strategy will obviously overlay as we look towards pipeline.
Okay, thank you very much. Those are all my questions.
Super, thanks.
As a reminder to ask a question, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We have no further questions at this time. I will now hand back to you for closing remarks.
Yeah, super, Razia. Thank you very much. Thank you everybody for supporting us, for following us, for being on this call. We are appreciative of your patience with us through this journey and how we've got ourselves to this position of strength and momentum. I won't reiterate what we said about five times on the call. I think our messaging is very clear about where we're at and where we're going. If you need any clarification, you want to speak to us directly, any interest in VEF , obviously just reach out to one of us, myself, Alexis Koumoudos, or call, obviously, and we'll be happy to speak. Otherwise, have a great summer. Thank you very much.
This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.